ACCOUNTING QUESTIONS

Print by: Sadu Singh FUNDAMENTALS OF ACCOUNTING II: 352923 / Project

*Problem 13-4A The following financial information is for Cheaney Company.

CHEANEY COMPANY Balance Sheets December 31

Assets 2012 2011 Cash $ 71,500 $ 65,100 Short-term investments 54,800 39,200 Receivables 103,400 89,200 Inventories 238,900 168,400 Prepaid expenses 29,800 27,500 Land 134,400 134,400 Building and equipment (net) 259,100 183,300

Total assets $891,900 $707,100

Liabilities and Stockholders’ Equity Notes payable $170,600 $107,100 Accounts payable 68,600 54,100 Accrued liabilities 39,200 39,200 Bonds payable, due 2015 249,900 171,800 Common stock, $10 par 199,800 199,800 Retained earnings 163,800 135,100

Total liabilities and stockholders’ equity $891,900 $707,100

CHEANEY COMPANY Income Statements

For the Years Ended December 31 2012 2011

Sales $893,300 $797,500 Cost of goods sold 644,900 575,600 Gross profit 248,400 221,900 Operating expenses 191,400 159,700

Net income $ 57,000 $ 62,200

Additional information:

1. Inventory at the beginning of 2011 was $115,500. 2. Receivables (net) at the beginning of 2011 were $89,100. 3. Total assets at the beginning of 2011 were $638,700. 4. No common stock transactions occurred during 2011 or 2012. 5. All sales were on account.

*(a)

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Compute the liquidity and profitability ratios of Cheaney Company for 2011 and 2012. (Round all answers to 2 decimal places, e.g. 1.83 or 12.61%. If % change is a decrease show the numbers as negative, e.g. -12.61% or (12.61%).)

2011 2012 % Change

LIQUIDITY

Current :1 :1 %

Receivables turnover times times %

Inventory turnover times times %

2011 2012 % Change PROFITABILITY Profit margin % % %

Asset turnover times times % Return on assets % % %

Earnings per share $ $ %

*(b) Given below are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2012, and (2) as of December 31, 2013, after giving effect to the situation. Net income for 2013 was $51,300. Total assets on December 31, 2013, were $904,200. (Round all answers to 2 decimal places, e.g. 1.83 or 12.61%. If % change is a decrease show the numbers as negative, e.g. -12.61% or (12.61%).)

Situation Ratio 1. 18,100 shares of common stock were sold at par on July 1, 2013. Return on common

stockholders’ equity 2. All of the notes payable were paid in 2013. Debt to total assets 3. The market price of common stock was $9 and $12 on December 31, 2012

and 2013, respectively. Price-earnings

2012 2013 % Change Return on common stockholders’ equity

% % %

Debt to total assets % % %

Price earnings ratio times times %

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1.94 1.79 -7.73

8.94 9.28 -3.80

4.05 3.17 -21.73

7.80 6.38 17.95

1.19 1.12 -5.88 9.24 7.13 -22.84 3.11 2.86 8.04