ACCT 212 Connect Homework 13 Financial Statement Analysis Assignment solutions complete answers

ACCT 212 Connect Homework 13 Financial Statement Analysis Assignment solutions complete answers 

 

Compute trend percents for the above accounts, using 2017 as the base year. For each of the three accounts, state whether the situation as revealed by the trend percents appears to be favorable or unfavorable.

 

Express the following comparative income statements in common-size percents. Using the common-size percents, which item is most responsible for the decline in net income?

 

Common-size and trend percents for Roxi Company's sales, cost of goods sold, and expenses follow.
 

 
Common-Size Percents
Trend Percents
Current Year
1 Year Ago
2 Years Ago
Current Year
1 Year Ago
2 Years Ago
Sales
100.0%
100.0%
100.0%
104.7%
103.5%
100.0%
Cost of goods sold
63.2
61.0
57.7
114.7
109.4
100.0
Operating expenses
14.3
13.8
14.1
106.3
101.3
100.0
 
Determine the net income for the following years. Did the net income increase, decrease, or remain unchanged in this three-year period?

 

Simon Company's year-end balance sheets follow.
 

At December 31
Current Year
1 Year Ago
2 Years Ago
Assets
 
 
 
Cash
$ 32,876
$ 38,429
$ 40,026
Accounts receivable, net
94,331
66,578
53,896
Merchandise inventory
116,208
88,867
56,843
Prepaid expenses
10,481
10,390
4,447
Plant assets, net
303,322
276,096
245,088
Total assets
$ 557,218
$ 480,360
$ 400,300
Liabilities and Equity
 
 
 
Accounts payable
$ 137,360
$ 81,181
$ 52,311
Long-term notes payable
105,805
110,483
88,466
Common stock, $10 par value
163,500
162,500
163,500
Retained earnings
150,553
126,196
96,023
Total liabilities and equity
$ 557,218
$ 480,360
$ 400,300
 

For both the current year and one year ago, compute the following ratios: 

1. Express the balance sheets in common-size percents.
2. Assuming annual sales have not changed in the last three years, is the change in accounts receivable as a percentage of total assets favorable or unfavorable?
3. Assuming annual sales have not changed in the last three years, is the change in merchandise inventory as a percentage of total assets favorable or unfavorable?

 

The company’s income statements for the Current Year and 1 Year Ago, follow.
 

For Year Ended December 31
Current Year
1 Year Ago
Sales
 
$ 724,383
 
$ 571,628
Cost of goods sold
$ 441,874
 
$ 371,558
 
Other operating expenses
224,559
 
144,622
 
Interest expense
12,315
 
13,147
 
Income tax expense
9,417
 
8,574
 
Total costs and expenses
 
688,165
 
537,901
Net income
 
$ 36,218
 
$ 33,727
Earnings per share
 
$ 2.23
 
$ 2.08
 
Additional information about the company follows.
 

Common stock market price, December 31, Current Year
$ 30.00
Common stock market price, December 31, 1 Year Ago
28.00
Annual cash dividends per share in Current Year
0.22
Annual cash dividends per share 1 Year Ago
0.11
 
For both the current year and one year ago, compute the following ratios:
 
1. Return on equity.
2. Dividend yield.
3a. Price-earnings ratio on December 31.
3b. Assuming Simon's competitor has a price-earnings ratio of 7, which company has higher market expectations for future growth?

 

Simon Company’s year-end balance sheets follow.
 

At December 31
Current Year
1 Year Ago
2 Years Ago
Assets
 
 
 
Cash
$ 24,940
$ 29,153
$ 30,678
Accounts receivable, net
89,400
62,300
50,300
Merchandise inventory
113,000
84,000
58,000
Prepaid expenses
8,032
7,653
3,409
Plant assets, net
195,975
188,745
173,813
Total assets
$ 431,347
$ 371,851
$ 316,200
Liabilities and Equity
 
 
 
Accounts payable
$ 105,257
$ 61,586
$ 40,904
Long-term notes payable
79,471
83,815
68,483
Common stock, $10 par value
162,500
162,500
162,500
Retained earnings
84,119
63,950
44,313
Total liabilities and equity
$ 431,347
$ 371,851
$ 316,200
 
The company’s income statements for the current year and one year ago follow. Assume that all sales are on credit:
 

For Year Ended December 31
Current Year
1 Year Ago
Sales
 
$ 560,751
 
$ 442,503
Cost of goods sold
$ 342,058
 
$ 287,627
 
Other operating expenses
173,833
 
111,953
 
Interest expense
9,533
 
10,178
 
Income tax expense
7,290
 
6,638
 
Total costs and expenses
 
532,714
 
416,396
Net income
 
$ 28,037
 
$ 26,107
Earnings per share
 
$ 1.73
 
$ 1.61
(1-a) Compute days' sales uncollected.
(1-b) For each ratio, determine if it improved or worsened in the current year.

(2-a) Compute accounts receivable turnover.
(2-b) For each ratio, determine if it improved or worsened in the current year.

(3-a) Compute inventory turnover.
(3-b) For each ratio, determine if it improved or worsened in the current year.

(4-a) Compute days' sales in inventory.
(4-b) For each ratio, determine if it improved or worsened in the current year.

 

Simon Company’s year-end balance sheets follow.
 

At December 31
Current Year
1 Year Ago
2 Years Ago
Assets
 
 
 
Cash
$ 28,687
$ 33,875
$ 35,646
Accounts receivable, net
85,689
61,676
48,969
Merchandise inventory
103,471
77,544
51,645
Prepaid expenses
9,427
9,251
4,081
Plant assets, net
268,871
245,365
223,359
Total assets
$ 496,145
$ 427,711
$ 363,700
Liabilities and Equity
 
 
 
Accounts payable
$ 122,305
$ 74,452
$ 48,488
Long-term notes payable
91,410
97,390
78,770
Common stock, $10 par value
162,500
162,500
162,500
Retained earnings
119,930
93,369
73,942
Total liabilities and equity
$ 496,145
$ 427,711
$ 363,700
 
The company’s income statements for the current year and one year ago, follow.
 

For Year Ended December 31
Current Year
1 Year Ago
Sales
 
$ 644,989
 
$ 508,976
Cost of goods sold
$ 393,443
 
$ 330,834
 
Other operating expenses
199,947
 
128,771
 
Interest expense
10,965
 
11,706
 
Income tax expense
8,385
 
7,635
 
Total costs and expenses
 
612,740
 
478,946
Net income
 
$ 32,249
 
$ 30,030
Earnings per share
 
$ 1.98
 
$ 1.85
 
 

rev: 09_07_2021_QC_CDR-376

(1) Compute debt and equity ratio for the current year and one year ago.

(2-a) Compute debt-to-equity ratio for the current year and one year ago.
(2-b) Based on debt-to-equity ratio, does the company have more or less debt in the current year versus one year ago?

(3-a) Compute times interest earned for the current year and one year ago.
(3-b) Based on times interest earned, is the company more or less risky for creditors in the Current Year versus 1 Year Ago?

 

Simon Company’s year-end balance sheets follow.
 

At December 31
Current Year
1 Year Ago
2 Years Ago
Assets
 
 
 
Cash
$ 30,600
$ 35,250
$ 38,000
Accounts receivable, net
87,600
64,000
49,500
Merchandise inventory
111,500
83,600
53,000
Prepaid expenses
10,850
9,250
4,500
Plant assets, net
280,000
259,000
235,000
Total assets
$ 520,550
$ 451,100
$ 380,000
Liabilities and Equity
 
 
 
Accounts payable
$ 128,400
$ 73,500
$ 50,200
Long-term notes payable
96,500
101,000
82,000
Common stock, $10 par value
161,500
161,500
161,500
Retained earnings
134,150
115,100
86,300
Total liabilities and equity
$ 520,550
$ 451,100
$ 380,000
 
The company’s income statements for the Current Year and 1 Year Ago, follow.
 

For Year Ended December 31
Current Year
1 Year Ago
Sales
 
$ 745,000
 
$ 550,000
Cost of goods sold
$ 447,000
 
$ 346,500
 
Other operating expenses
230,950
 
132,000
 
Interest expense
11,300
 
13,300
 
Income tax expense
9,550
 
8,850
 
Total costs and expenses
 
698,800
 
500,650
Net income
 
$ 46,200
 
$ 49,350
Earnings per share
 
$ 2.86
 
$ 3.06
 
For both the Current Year and 1 Year Ago, compute the following ratios:

(1-a) Compute profit margin ratio for the current year and one year ago.
(1-b) Did profit margin improve or worsen in the Current Year versus 1 Year Ago?

(2) Compute total asset turnover for the current year and one year ago.

(3-a) Compute return on total assets for the current year and one year ago.
(3-b) Based on return on total assets, did Simon's operating efficiency improve or worsen in the Current Year versus 1 Year Ago?

 

In the current year, Randa Merchandising Incorporated sold its interest in a chain of wholesale outlets, taking the company completely out of the wholesaling business. The company still operates its retail outlets. A listing of the major sections of an income statement follows.
   

 
Item
Debit
Credit
1.
Net sales
 
$ 4,500,000
2.
Gain on state's condemnation of company property
 
357,000
3.
Cost of goods sold
$ 2,297,000
 
4.
Income tax expense
337,000
 
5.
Depreciation expense
360,000
 
6.
Gain on sale of wholesale business segment, net of tax
 
1,203,000
7.
Loss from operating wholesale business segment, net of tax
689,000
 
8.
Loss of assets from meteor strike
993,000
 
rev: 09_08_2021_QC_CDR-376

Prepare the December 31 year-end income statement. (Loss amounts should be indicated with a minus sign.)

 

Selected comparative financial statements of Korbin Company follow.
 

KORBIN COMPANY
Comparative Income Statements
For Years Ended December 31
 
2021
2020
2019
Sales
$ 494,703
$ 378,983
$ 263,000
Cost of goods sold
297,811
240,275
168,320
Gross profit
196,892
138,708
94,680
Selling expenses
70,248
52,300
34,716
Administrative expenses
44,523
33,351
21,829
Total expenses
114,771
85,651
56,545
Income before taxes
82,121
53,057
38,135
Income tax expense
15,275
10,877
7,741
Net income
$ 66,846
$ 42,180
$ 30,394
 

KORBIN COMPANY
Comparative Balance Sheets
December 31
 
2021
2020
2019
Assets
 
 
 
Current assets
$ 54,171
$ 36,257
$ 48,467
Long-term investments
0
400
4,450
Plant assets, net
100,604
91,914
53,604
Total assets
$ 154,775
$ 128,571
$ 106,521
Liabilities and Equity
 
 
 
Current liabilities
$ 22,597
$ 19,157
$ 18,641
Common stock
64,000
64,000
46,000
Other paid-in capital
8,000
8,000
5,111
Retained earnings
60,178
37,414
36,769
Total liabilities and equity
$ 154,775
$ 128,571
$ 106,521
rev: 09_08_2021_QC_CDR-376, 10_13_2021_QC_CDR-376

Required:
1. Complete the below table to calculate each year's current ratio.

2. Complete the below table to calculate income statement data in common-size percents. (Round your percentage answers to 2 decimal places.)

3. Complete the below table to calculate the balance sheet data in trend percents with 2019 as base year. (Round your percentage answers to 2 decimal places.)