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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
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