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Problem 14-1A (Part Level Submission)
Comparative statement data for Lionel Company and Barrymore Company, two competitors, appear below. All balance sheet data are as of December 31, 2014, and December 31, 2013.
| Â | Â |
Lionel Company |
 |
Barrymore Company |
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| Â | Â |
2014 |
 |
2013 |
 |
2014 |
 |
2013 |
|
Net sales |
 |
$1,549,035 |
 |  |  |
$339,038 |
 |  |
|
Cost of goods sold |
 |
1,053,345 |
 |  |  |
237,325 |
 |  |
|
Operating expenses |
 |
278,825 |
 |  |  |
77,979 |
 |  |
|
Interest expense |
 |
7,745 |
 |  |  |
2,034 |
 |  |
|
Income tax expense |
 |
61,960 |
 |  |  |
8,476 |
 |  |
|
Current assets |
 |
401,584 |
 |
$388,020 |
 |
86,450 |
 |
$Â 82,581 |
|
Plant assets (net) |
 |
596,920 |
 |
575,610 |
 |
142,842 |
 |
128,927 |
|
Current liabilities |
 |
65,015 |
 |
75,507 |
 |
19,618 |
 |
14,654 |
|
Long-term liabilities |
 |
102,500 |
 |
84,000 |
 |
16,711 |
 |
11,989 |
|
Common stock, $5 par |
 |
578,765 |
 |
578,765 |
 |
137,435 |
 |
137,435 |
|
Retained earnings |
 |
252,224 |
 |
225,358 |
 |
55,528 |
 |
47,430 |
Â
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Your answer is correct. |
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Prepare a vertical analysis of the 2014 income statement data for Lionel Company and Barrymore Company in columnar form. (Round percentages to 1 decimal place, e.g. 12.1%.)
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Your answer is correct. |
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Compute the return on assets and the return on common stockholders’ equity ratios for both companies. (Round percentages to 1 decimal place, e.g. 12.1%.)
Problem 14-2A
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Your answer is correct. |
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The comparative statements of Larker Tool Company are presented below.
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Larker Tool Company |
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| Â | Â |
2014 |
 |
2013 |
|
Net sales |
 |
$1,818,500 |
 |
$1,750,500 |
|
Cost of goods sold |
 |
1,011,500 |
 |
996,000 |
|
Gross profit |
 |
807,000 |
 |
754,500 |
|
Selling and administrative expense |
 |
516,000 |
 |
479,000 |
|
Income from operations |
 |
291,000 |
 |
275,500 |
|
Other expenses and losses |
 |  |  |  |
|
   Interest expense |
 |
15,000 |
 |
14,000 |
|
Income before income taxes |
 |
276,000 |
 |
261,500 |
|
Income tax expense |
 |
84,000 |
 |
77,000 |
|
Net income |
 |
$Â 192,000 |
 |
$Â 184,500 |
Â
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Larker Tool Company |
||||
|
Assets |
 |
2014 |
 |
2013 |
|
Current assets |
 |  |  |  |
|
    Cash |
 |
$60,100 |
 |
$64,200 |
|
    Short-term investments |
 |
69,000 |
 |
50,000 |
|
    Accounts receivable (net) |
 |
105,750 |
 |
102,800 |
|
    Inventory |
 |
110,950 |
 |
115,500 |
|
      Total current assets |
 |
345,800 |
 |
332,500 |
|
Plant assets (net) |
 |
600,300 |
 |
520,300 |
|
Total assets |
 |
$946,100 |
 |
$852,800 |
|
Liabilities and Stockholders’ Equity |
 |  |  |  |
|
Current liabilities |
 |  |  |  |
|
    Accounts payable |
 |
$160,000 |
 |
$145,400 |
|
    Income taxes payable |
 |
43,500 |
 |
42,000 |
|
      Total current liabilities |
 |
203,500 |
 |
187,400 |
|
Bonds payable |
 |
200,000 |
 |
200,000 |
|
      Total liabilities |
 |
403,500 |
 |
387,400 |
|
Stockholders’ equity |
 |  |  |  |
|
    Common stock ($5 par) |
 |
300,000 |
 |
300,000 |
|
    Retained earnings |
 |
 242,600 |
 |
165,400 |
|
      Total stockholders’ equity |
 |
542,600 |
 |
465,400 |
|
Total liabilities and stockholders’ equity |
 |
$946,100 |
 |
$852,800 |
All sales were on account.
Compute the following ratios for 2014. (Weighted-average common shares in 2014 were 60,000.) (Round Earnings per share, Current ratio, and Acid-test ratio to 2 decimal places, e.g.1.65, and all others to 1 decimal place, e.g. 6.8 or 6.8% .)
Problem 14-3A
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Your answer is correct. |
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Condensed balance sheet and income statement data for Clarence Corporation appear below.
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Clarence Corporation |
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| Â | Â |
2014 |
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2013 |
 |
2012 |
|
Cash |
 |
$Â 25,000 |
 |
$Â 20,000 |
 |
$Â 18,000 |
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Receivables (net) |
 |
50,000 |
 |
45,000 |
 |
48,000 |
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Other current assets |
 |
90,000 |
 |
95,000 |
 |
64,000 |
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Investments |
 |
75,000 |
 |
70,000 |
 |
45,000 |
|
Plant and equipment (net) |
 |
400,000 |
 |
370,000 |
 |
358,000 |
| Â | Â |
$640,000 |
 |
$600,000 |
 |
$533,000 |
|
Current liabilities |
 |
$70,000 |
 |
$75,000 |
 |
$70,000 |
|
Long-term debt |
 |
80,000 |
 |
85,000 |
 |
50,000 |
|
Common stock, $10 par |
 |
345,000 |
 |
315,000 |
 |
300,000 |
|
Retained earnings |
 |
145,000 |
 |
125,000 |
 |
113,000 |
| Â | Â |
$640,000 |
 |
$600,000 |
 |
$533,000 |
Â
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Clarence Corporation |
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| Â | Â |
2014 |
 |
2013 |
|
Sales revenue |
 |
$740,000 |
 |
$700,000 |
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Less: Sales returns and allowances |
 |
40,000 |
 |
60,000 |
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Net sales |
 |
700,000 |
 |
640,000 |
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Cost of goods sold |
 |
420,000 |
 |
400,000 |
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Gross profit |
 |
280,000 |
 |
240,000 |
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Operating expenses (including income taxes) |
 |
238,000 |
 |
208,000 |
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Net income |
 |
$Â 42,000 |
 |
$Â 32,000 |
Additional information:
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1. |
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The market price of Clarence’s common stock was $4, $5, and $8 for 2012, 2013, and 2014, respectively. |
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2. |
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All dividends were paid in cash. |
Compute the following ratios for 2013 and 2014. (Round Earnings per share to 2 decimal places, e.g.1.65, and all others to 1 decimal place, e.g. 6.8 or 6.8% .)
Problem 14-5A
Selected financial data of Target and Wal-Mart Stores, Inc. for a recent year are presented here (in millions).
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Target |
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Wal-Mart |
| Â | Â |
Income Statement Data for Year |
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Net sales |
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$67,390 |
 |
$405,046 |
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Cost of goods sold |
 |
45,725 |
 |
304,657 |
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Selling and administrative expenses |
 |
13,469 |
 |
79,607 |
|
Interest expense |
 |
757 |
 |
1,884 |
|
Other income (expense) |
 |
(2,944) |
 |
2,576 |
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Income tax expense |
 |
1,575 |
 |
7,139 |
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Net income |
 |
$ 2,920 |
 |
$ 14,335 |
|
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 |  |  |  |
| Â | Â |
Balance Sheet Data (End of Year) |
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Current assets |
 |
$17,213 |
 |
$ 48,331 |
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Noncurrent assets |
 |
26,492 |
 |
122,375 |
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Total assets |
 |
$43,705 |
 |
$170,706 |
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Current liabilities |
 |
$10,070 |
 |
$ 55,561 |
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Long-term debt |
 |
18,148 |
 |
44,396 |
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Total stockholders’ equity |
 |
15,487 |
 |
70,749 |
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Total liabilities and stockholders’ equity |
 |
$43,705 |
 |
$170,706 |
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 |  |  |  |
| Â | Â |
Beginning-of-Year Balances |
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Total assets |
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$44,533 |
 |
$163,429 |
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Total stockholders’ equity |
 |
15,347 |
 |
65,285 |
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Current liabilities |
 |
11,327 |
 |
55,390 |
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Total liabilities |
 |
29,186 |
 |
98,144 |
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 |  |  |  |
| Â | Â |
Other Data |
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Average net accounts receivable |
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$ 6560 |
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$ 4,025 |
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Average inventory |
 |
7,388 |
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33,836 |
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Net cash provided by operating activities |
 |
5,271 |
 |
26,249 |
Assume that net sales given are the net credit sales.
For each company, compute the following ratios. (Round all answers to 1 decimal place, e.g.1.6, or 1.6% .)
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Ratio |
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Target |
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Wal-Mart |
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(1) |
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Current |
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 :1 |
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 :1 |
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(2) |
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Accounts receivable turnover |
 |
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(3) |
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Average collection period |
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(4) |
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Inventory turnover |
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(5) |
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Days in inventory |
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(6) |
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Profit margin |
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 % |
 |
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 % |
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(7) |
 |
Asset turnover |
 |
|
 |  |
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 |
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(8) |
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Return on assets |
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|
 % |
 |
|
 % |
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(9) |
 |
Return on common stockholders’ equity |
 |
|
 % |
 |
|
 % |
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(10) |
 |
Debt to total assets |
 |
|
 % |
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 % |
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(11) |
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Times interest earned |
 |
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Problem 14-6A
The comparative statements of Beulah Company are presented below.
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BEULAH COMPANY |
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| Â | Â |
2014 |
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2013 |
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Net sales (all on account) |
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$500,000 |
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$420,000 |
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Expenses |
 |  |  |  |
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    Cost of goods sold |
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315,000 |
 |
254,000 |
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    Selling and administrative |
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120,800 |
 |
114,800 |
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    Interest expense |
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7,500 |
 |
6,500 |
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    Income tax expense |
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20,000 |
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15,000 |
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      Total expenses |
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463,300 |
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390,300 |
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Net income |
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$Â 36,700 |
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$Â 29,700 |
Â
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BEULAH COMPANY |
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Assets |
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2014 |
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2013 |
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Current assets |
 |  |  |  |
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    Cash |
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$Â 21,000 |
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$Â 18,000 |
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    Short-term investments |
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18,000 |
 |
15,000 |
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    Accounts receivable (net) |
 |
85,000 |
 |
75,000 |
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    Inventory |
 |
80,000 |
 |
60,000 |
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      Total current assets |
 |
204,000 |
 |
168,000 |
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Plant assets (net) |
 |
423,000 |
 |
383,000 |
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Total assets |
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$627,000 |
 |
$551,000 |
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Liabilities and Stockholders’ Equity |
 |  |  |  |
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Current liabilities |
 |  |  |  |
|
    Accounts payable |
 |
$122,000 |
 |
$110,000 |
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    Income taxes payable |
 |
12,000 |
 |
11,000 |
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      Total current liabilities |
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134,000 |
 |
121,000 |
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Long-term liabilities |
 |  |  |  |
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    Bonds payable |
 |
120,000 |
 |
80,000 |
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      Total liabilities |
 |
254,000 |
 |
201,000 |
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Stockholders’ equity |
 |  |  |  |
|
    Common stock ($5 par) |
 |
150,000 |
 |
150,000 |
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    Retained earnings |
 |
223,000 |
 |
200,000 |
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      Total stockholders’ equity |
 |
373,000 |
 |
350,000 |
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Total liabilities and stockholders’ equity |
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$627,000 |
 |
$551,000 |
Additional data:
The common stock recently sold at $19.50Â per share.
Compute the following ratios for 2014. (Round Earnings per share and Acid-test ratio to 2 decimal places, e.g. 1.65, and all others to 1 decimal place, e.g. 6.8 or 6.8% .)
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(a) |
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Current ratio |
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|
 :1 |
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(b) |
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Acid-test ratio |
 |
|
 :1 |
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(c) |
 |
Accounts receivable turnover |
 |
|
 times |
|
(d) |
 |
Inventory turnover |
 |
|
 times |
|
(e) |
 |
Profit margin |
 |
|
 % |
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(f) |
 |
Asset turnover |
 |
|
 times |
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(g) |
 |
Return on assets |
 |
|
 % |
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(h) |
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Return on common stockholders’ equity |
 |
|
 % |
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(i) |
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Earnings per share |
 |
$
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(j) |
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Price-earnings ratio |
 |
|
 times |
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(k) |
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Payout ratio |
 |
|
 % |
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(l) |
 |
Debt to total assets |
 |
|
 % |
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(m) |
 |
Times interest earned |
 |
|
 times |
Problem 14-8A
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Your answer is correct. |
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Violet Bick Corporation owns a number of cruise ships and a chain of hotels. The hotels, which have not been profitable, were discontinued on September 1, 2014. The 2014 operating results for the company were as follows.
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Operating revenues |
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$12,900,000 |
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Operating expenses |
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8,700,000 |
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Operating income |
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$Â 4,200,000 |
Analysis discloses that these data include the operating results of the hotel chain, which were: operating revenues $2,000,000 and operating expenses $2,500,000. The hotels were sold at a gain of $300,000 before taxes. This gain is not included in the operating results. During the year, Violet Bick suffered an extraordinary loss of $700,000 before taxes, which is not included in the operating results. In 2014, the company had other expenses and losses of $200,000, which are not included in the operating results. The corporation is in the 30% income tax bracket.
Prepare a condensed income statement.
Problem 14-9A
The ledger of Gower Corporation at December 31, 2014, contains the following summary data.
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Net sales |
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$1,600,000 |
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Cost of goods sold |
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$1,100,000 |
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Selling expenses |
 |
70,000 |
 |
Administrative expenses |
 |
90,000 |
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Other revenues and gains |
 |
22,000 |
 |
Other expenses and losses |
 |
28,000 |
Your analysis reveals the following additional information that is not included in the above data.
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1. |
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The entire puzzles division was discontinued on August 31. The income from operations for this division before income taxes was $15,000. The puzzles division was sold at a loss of $80,000Â before income taxes. |
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2. |
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On May 15, company property was expropriated for an interstate highway. The settlement resulted in an extraordinary gain of $100,000Â before income taxes. |
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3. |
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The income tax rate on all items is 30%. |
Prepare an income statement for the year ended December 31, 2014.
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