The holtzman corporation has assets of

Assignment 1

Question 1

1. Prepare an income statement for Franklin Kite Co. Take your calculations all the way to computing earnings per share. (Round EPS answer to 2 decimal places.)

Sales

$

1,380,000

Shares outstanding

115,000

Cost of goods sold

600,000

Interest expense

28,000

Selling and administrative expense

49,000

Depreciation expense

31,000

Preferred stock dividends

85,000

Taxes

117,000

Franklin Kite Company

Income Statement

0

0

0

0

0

0

0

0

0

0

0

Earnings available to common stockholders

0

Shares outstanding

0

Earnings per share

0

Question 2

The Rogers Corporation has a gross profit of $792,000 and $277,000 in depreciation expense. The Evans Corporation also has $792,000 in gross profit, with $43,300 in depreciation expense. Selling and administrative expense is $188,000 for each company.

a. Given that the tax rate is 40 percent, compute the cash flow for both companies.

Rogers

Evans

CashFlow

$

$

b. Calculate the difference in cash flow between the two firms.

Difference in Cash Flow

$

Question 3

The Holtzman Corporation has assets of $441,000, current liabilities of $105,000, and long-term liabilities of $147,000. There is $31,500 in preferred stock outstanding; 20,000 shares of common stock have been issued.

a. Compute book value (net worth) per share. (Round your answer to 2 decimal places.)

Book Value per share

b. If there is $32,700 in earnings available to common stockholders, and Holtzman’s stock has a P/E of 24 times earnings per share, what is the current price of the stock? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Current Price

c. What is the ratio of market value per share to book value per share? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Market value to book Value

Times

Question 4

Refer to the following financial statements for Crosby Corporation:

CROSBY CORPORATION Income Statement For the Year Ended December 31, 20X2

Sales

$

4,240,000

Cost of goods sold

2,640,000

Gross profit

$

1,600,000

Selling and administrative expense

700,000

Depreciation expense

300,000

Operating income

$

600,000

Interest expense

89,000

Earnings before taxes

$

511,000

Taxes

211,000

Earnings after taxes

$

300,000

Preferred stock dividends

10,000

Earnings available to common stockholders

$

290,000

Shares outstanding

150,000

Earnings per share

$

1.93

Statement of Retained Earnings For the Year Ended December 31, 20X2

Retained earnings, balance, January 1, 20X2

$

80,300

Add: Earnings available to common stockholders, 20X2

290,000

Deduct: Cash dividends declared and paid in 20X2

150,000

Retained earnings, balance, December 31, 20X2

$

220,300

Comparative Balance Sheets For 20X1 and 20X2

Year-End 20X1

Year-End 20X2

Assets

Current assets:

Cash

$

112,000

$

185,900

Accounts receivable (net)

556,000

602,000

Inventory

633,000

641,000

Prepaid expenses

64,900

32,000

Total current assets

$

1,365,900

$

1,460,900

Investments (long-term securities)

92,300

85,000

Gross plant and equipment

$ 2,120,000

$ 2,870,000

Less: Accumulated depreciation

1,870,000

2,170,000

Net plant and equipment

250,000

700,000

Total assets

$

1,708,200

$

2,245,900

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

304,000

$

635,000

Notes payable

536,000

536,000

Accrued expenses

74,900

56,600

Total current liabilities

$

914,900

$

1,227,600

Long-term liabilities:

Bonds payable, 20X2

123,000

208,000

Total liabilities

$

1,037,900

$

1,435,600

Stockholders’ equity:

Preferred stock, $100 par value

$

90,000

$

90,000

Common stock, $1 par value

150,000

150,000

Capital paid in excess of par

350,000

350,000

Retained earnings

80,300

220,300

Total stockholders’ equity

$

670,300

$

810,300

Total liabilities and stockholders’ equity

$

1,708,200

$

2,245,900

a. Prepare a statement of cash flows for the Crosby Corporation: (Amounts to be deducted should be indicated with parentheses or a minus sign.)

CROSBY CORPORATION

Statement of Cash Flows

For the Year Ended December 31, 20X2

Cash flows from operating activities:

Adjustments to determine cashflow from operating activities:

Total adjustments

Net cash flows from operating activities

Cash flows from investing activities:

Net cash flows from investing activities

Cash flows from financing activities:

Net cash flows from financing activities

b. Compute the book value per common share for both 20X1 and 20X2 for the Crosby Corporation. (Round your answers to 2 decimals places.)

Book value

20X1

20X2

Question 5

Jim Short’s Company makes clothing for schools. Sales in 20X1 were $4,490,000. Assets were as follows:

Cash

$

110,000

Accounts receivable

864,000

Inventory

493,000

Net plant and equipment

504,000

Total assets

$

1,971,000

a. Compute the following: (Round your answers to 2 decimal places.)

Turn over Ratio

1

Account receivable turnover

Times

2

Inventory Turnover

Times

3

Fix Asset Turnerover

Times

4

Total Asset turnover

Times

c. Is there an improvement or a decline in the total asset turnover?

·

Decline

·

Improvement

Question 6

The balance sheet for Stud Clothiers is shown next. Sales for the year were $3,490,000, with 75 percent of sales sold on credit.

STUD CLOTHIERS Balance Sheet 20X1

Assets

Liabilities and Equity

Cash

$

38,000

Accounts payable

$

262,000

Accounts receivable

292,000

Accrued taxes

148,000

Inventory

248,000

Bonds payable (long-term)

178,000

Plant and equipment

500,000

Common stock

100,000

Paid-in capital

150,000

Retained earnings

240,000

Total assets

$

1,078,000

Total liabilities and equity

$

1,078,000

Compute the following ratios: (Use a 360-day year. Do not round intermediate calculations. Round your answers to 2 decimal places. Input your debt-to-total assets answer as a percent rounded to 2 decimal places.)

a

Current ratio

Times

b

Quick Ratio

times

c

Debt-to-total-asset ratio

%

d

Asset turnover

times

e

Average collection period

days

Question 7

Jolie Foster Care Homes Inc. shows the following data:

Years Net income Total Assets Stockholders' Equity Total Debt’s

20X1

138,000

2,650,000

796,000

1,854,000

20X2

140,000

2,300,000

1,280,000

1,016,000

20X3

160,000

2,280,000

1,500,000

780,000

20X4

255,000

2,640,000

2,510,000

130,000

a-1. Compute the ratio of net income to total assets for each year. (Input your answers as a percent rounded to 2 decimal places.)

Year

Return on Assets

20X1

%

20X2

%

20X3

%

20X4

%

a-2. What is the trend in the net income to total assets ratio?

·

Strong downward movement

·

Strong upward movement

b-1. Compute the ratio of net income to stockholders' equity for each year. (Input your answers as a percent rounded to 2 decimal places.)

Year

Return Stockholder’s Equity

20X1

%

20X2

%

20X3

%

20X4

%

b-2. What is the trend in the net income to stockholders' equity ratio?

·

Strong downward movement

·

Strong upward movement