Busi 320 Dev Shell – 2012 Fall B Assignment 1

$40.00

Description

Busi 320 Dev Shell – 2012 Fall B

Foundations of Financial Management ( Block , 14th ed.)

assignment: Homework 1

1.Problem 2-1 Income statement [LO1]

Frantic Fast Foods had earnings after taxes of $1,200,000 in
the year 2009 with 322,000 shares outstanding. On January 1, 2010, the firm
issued 30,000 new shares. Because of the proceeds from these new shares and
other operating improvements, earnings after taxes increased by 24 percent.

(a)

Compute earnings per share for the year 2009. (Round your
answer to 2 decimal places. Omit the “$” sign in your response.)

Earnings per share

(b)

Compute earnings per share for the year 2010. (Round your
answer to 2 decimal places. Omit the “$” sign in your response.)

Earnings per share

2.Problem 2-3 Gross profit [LO1]

Hillary Swank Clothiers had sales of $428,000 and cost of
goods sold of $260,000.

(a)

What is the gross profit margin (ratio of gross profit to
sales)? (Round your answer to the nearest whole percentage. Omit the
“%” sign in your response.)

Gross profit margin

(b)

If the average firm in the clothing industry had a gross
profit of 35 percent, how is the firm doing?

The firm is .

3.Problem 2-4 Operating profit [LO1]

A-Rod Fishing Supplies had sales of $2,160,000 and cost of
goods sold of $1,550,000. Selling and administrative expenses represented 10
percent of sales. Depreciation was 6 percent of the total assets of $4,450,000.

What was the firm’s operating profit? (Omit the
“$” sign in your response.)

Operating profit

4.Problem 2-6 Income statement [LO1]

Given the following information, prepare an income statement
for the Dental Drilling Company. (Input all amounts as positive values. Omit
the “$” sign in your response.)

Selling and administrative expense

$

72,000

Depreciation expense

71,000

Sales

536,000

Interest expense

45,000

Cost of goods sold

179,000

Taxes

53,000

5.Problem 2-7 Income statement [LO1]

Given the following information, prepare an income statement
for Jonas Brothers Cough Drops. (Input all amounts as positive values. Omit the
“$” sign in your response.)

Selling and administrative expense

$

326,000

Depreciation expense

196,000

Sales

1,600,000

Interest expense

124,000

Cost of goods sold

551,000

Taxes

167,000

6.Problem 2-11 Depreciation and earnings [LO1]

Stein Books, Inc., sold 2,300 finance textbooks for $200
each to High Tuition University in 2010. These books cost $170 to produce.
Stein Books spent $12,300 (selling expense) to convince the university to buy
its books.

Depreciation expense for the year was $15,500. In addition,
Stein Books borrowed $102,000 on January 1, 2010, on which the company paid 17
percent interest. Both the interest and principal of the loan were paid on
December 31, 2010. The publishing firm’s tax rate is 30 percent.

Prepare an income statement for Stein Books. (Input all
amounts as positive values. Omit the “$” sign in your response.)

7.Problem 2-15 Development of balance sheet [LO3]

Arrange the following items in proper balance sheet
presentation (Be sure to list the assets in order of their liquidity. Input all
amounts as positive values. Omit the “$” sign in your response):

Accumulated depreciation

$

347,000

Retained earnings

46,000

Cash

14,000

Bonds payable

137,000

Accounts receivable

51,000

Plant and equipment—original cost

668,000

Accounts payable

38,000

Allowance for bad debts

6,000

Common stock, $1 par, 100,000 shares outstanding

100,000

Inventory

71,000

Preferred stock, $52 par, 1,000 shares outstanding

52,000

Marketable securities

28,000

Investments

24,000

Notes payable

39,000

Capital paid in excess of par (common stock)

91,000

8.Problem 2-16 Earnings per share and retained earnings
[LO1, 3]

Okra Snack Delights, Inc., has an operating profit of
$241,000. Interest expense for the year was $35,800; preferred dividends paid
were $34,100; and common dividends paid were $39,600. The tax was $61,400. The
firm has 23,700 shares of common stock outstanding.

(a)

Calculate the earnings per share and the common dividends
per share. (Round your answers to 2 decimal places. Omit the “$” sign
in your response.)

Earnings per share

Common dividends per share

(b)

What was the increase in retained earnings for the year?
(Omit the “$” sign in your response.)

Increase in retained earnings

9.Problem 2-17 Earnings per share and retained earnings
[LO1, 3]

Quantum Technology had $644,000 of retained earnings on
December 31, 2010. The company paid common dividends of $30,100 in 2010 and had
retained earnings of $524,000 on December 31, 2009.

(a)

How much did Quantum Technology earn during 2010? (Omit the
“$” sign in your response.)

Earnings available to common stockholders

(b)

What would earnings per share be if 42,700 shares of common
stock were outstanding? (Round your answer to 2 decimal places. Omit the
“$” sign in your response.)

Earnings per share

10.Problem 2-18 Price-earnings ratio [LO2]

Botox Facial Care had earnings after taxes of $325,000 in
2009 with 200,000 shares of stock outstanding. The stock price was $95.60. In
2010, earnings after taxes increased to $407,000 with the same 200,000 shares
outstanding. The stock price was $104.00.

(a)

Compute earnings per share and the P/E ratio for 2009. The
P/E ratio equals the stock price divided by earnings per share. (Enter only
numeric values.Round your intermediate calculations and final answers to 2
decimal places. Omit the “$” sign in your response.)

Earnings per share

P/E ratio

(b)

Compute earnings per share and the P/E ratio for 2010.
(Enter only numeric values.Round your intermediate calculations and final
answers to 2 decimal places. Omit the “$” sign in your response.)

Earnings per share

P/E ratio

(c)

Why the P/E ratio changed? (Round your intermediate
calculations and final answers to 2 decimal places. Omit the “%” sign
in your response.)

The stock price % while EPS only

11.Problem 2-21 Depreciation and cash flow [LO5]

The Jupiter Corporation has a gross profit of $726,000 and
$337,000 in depreciation expense. The Saturn Corporation also has $726,000 in
gross profit, with $48,300 in depreciation expense. Selling and administrative
expense is $220,000 for each company.

(a)

Given that the tax rate is 40 percent, compute the cash flow
for both companies. (Omit the “$” sign in your response.)

Jupiter

Saturn

Cash flow

(b)

What is the difference in cash flow between the two firms?
(Omit the “$” sign in your response.)

Difference in cash flow

12.Problem 2-22 Free cash flow [LO4]

Coastal Pipeline, Inc., anticipated cash flow from operating
activities of $9 million in 2010. It will need to spend $6.0 million on capital
investments in order to remain competitive within the industry. Common stock
dividends are projected at $1.20 million and preferred stock dividends at $.65
million.

(a)

What is the firm’s projected free cash flow for the year
2010? (Enter your answer in millions of dollars rounded to 2 decimal places.
Omit the “$” sign in your response.)

Free cash flow

$ million

(b)

What does the concept of free cash flow represent?

13.Problem 2-24 Book value and market value [LO2, 3]

The Rockford Corporation has assets of $418,000, current
liabilities of $126,000, and long-term liabilities of $131,000. There is
$38,700 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. Omit the “$” sign in your response.)

Book value per share

$

(b)

If there is $32,300 in earnings available to common
stockholders and Rockford’s stock has a P/E of 21 times earnings per share,
what is the current price of the stock? (Do not round intermediate
calculations. Round your answer to 2 decimal places. Omit the “$”
sign in your response.)

Current price

$

(c)

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

Ratio

14.Problem 2-25 Book value and market value [LO2, 3]

Amigo Software, Inc., has total assets of $820,000, current
liabilities of $181,000, and long-term liabilities of $210,000. There is
$90,000 in preferred stock outstanding. Thirty thousand shares of common stock
have been issued.

(a)

Compute book value (net worth) per share. (Round your answer
to 2 decimal places. Omit the “$” sign in your response.)

Book value per share

$

(b)

If there is $52,800 in earnings available to common
stockholders and the firm’s stock has a P/E of 26 times earnings per share,
what is the current price of the stock? (Do not round intermediate
calculations. Round your answer to 2 decimal places. Omit the “$”
sign in your response.)

Current price

$

(c)

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

Ratio

15.Problem 2-27 Construction of income statement and balance
sheet [LO1, 3]

On December 31, 2009, the balance sheet of Baxter
Corporation was as follows:

Current Assets

Liabilities

Cash

$

13,000

Accounts payable

$

15,000

Accounts receivable

18,000

Notes payable

23,000

Inventory

28,000

Bonds payable

53,000

Prepaid expenses

12,300

Fixed Assets

Stockholders’ Equity

Plant and equipment (gross)

$

253,000

Preferred stock

$

23,000

Less: Accumulated depreciation

50,600

Common stock

58,000

Paid-in capital

28,000

Net plant and equipment

202,400

Retained earnings

73,700

Total assets

$

273,700

Total liabilities and stockholders’ equity

$

273,700

Sales for 2010 were $235,000, and the cost of goods sold was
60 percent of sales. Selling and administrative expense was $23,500.
Depreciation expense was 11 percent of plant and equipment (gross) at the
beginning of the year. Interest expense for the notes payable was 9 percent,
while the interest rate on the bonds payable was 15 percent. This interest
expense is based on December 31, 2009, balances. The tax rate averaged 20
percent.

$2,300 in preferred stock dividends were paid and $9,560 in
dividends were paid to common stockholders. There were 10,000 shares of common
stock outstanding.

During 2010, the cash balance and prepaid expenses balances
were unchanged. Accounts receivable and inventory increased by 9 percent. A new
machine was purchased on December 31, 2010, at a cost of $38,000.

Accounts payable increased by 35 percent. Notes payable
increased $6,300 and bonds payable decreased $11,500, both at the end of the
year. The preferred stock, common stock, and paid-in capital in excess of par
accounts did not change.

(a)

Prepare an income statement for 2010. (Round EPS answer to 2
decimal places. Input all amounts as positive values. Omit the “$”
sign in your response.)

(b)

Prepare a statement of retained earnings for 2010. (Input
all amounts as positive values. Omit the “$” sign in your response.)

(c)

Prepare a balance sheet as of December 31, 2010. (Be sure to
list the assets and liabilities in order of their liquidity. Input all amounts
as positive values. Omit the “$” sign in your response.)

16.Problem 2-28 Statement of cash flows [LO4]

Given is the Income Statement for the year ended December
31, 2010, Statement of Retained Earnings for the year ended December 31, 2010
and Comparative Balance Sheets for 2009 and 2010 of Jeter Corporation:

JETER CORPORATION

Income Statement

For the Year Ended December 31, 2010

Sales

$

4,240,000

Cost of goods sold

2,810,000

Gross profits

1,430,000

Selling and administrative expense

738,000

Depreciation expense

236,000

Operating income

456,000

Interest expense

88,000

Earnings before taxes

368,000

Taxes

173,000

Earnings after taxes

195,000

Preferred stock dividends

10,000

Earnings available to common stockholders

$

185,000

Shares outstanding

150,000

Earnings per share

$

1.23

Statement of Retained Earnings

For the Year Ended December 31, 2010

Retained earnings, balance, January 1, 2010

$

320,500

Add: Earnings available to common stockholders, 2010

185,000

Deduct: Cash dividends declared and paid in 2010

181,000

Retained earnings, balance, December 31, 2010

$

324,500

Comparative Balance Sheets

For 2009 and 2010

Year-End

2009

Year-End

2010

Assets

Current assets:

Cash

$

113,000

$

481,600

Accounts receivable (net)

563,000

607,000

Inventory

602,000

664,000

Prepaid expenses

60,900

30,900

Total current assets

1,338,900

1,783,500

Investments (long-term securities)

91,600

89,600

Plant and equipment

2,520,000

2,640,000

Less: Accumulated depreciation

1,940,000

2,176,000

Net plant and equipment

580,000

464,000

Total assets

$

2,010,500

$

2,337,100

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

342,000

$

581,000

Notes payable

548,000

548,000

Accrued expenses

75,000

51,600

Total current liabilities

965,000

1,180,600

Long-term liabilities:

Bonds payable, 2015

135,000

242,000

Total liabilities

1,100,000

1,422,600

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

320,500

324,500

Total stockholders’ equity

910,500

914,500

Total liabilities and stockholders’ equity

$

2,010,500

$

2,337,100

Prepare a statement of cash flows for the Jeter Corporation.
(Amounts to be deducted should be indicated with a minus sign. Omit the
“$” sign in your response.)

17.Problem 2-32 P/E ratio [LO2]

Given is the Income Statement for the year ended December
31, 2010, Statement of Retained Earnings for the year ended December 31, 2010
and Comparative Balance Sheets for 2009 and 2010 of Jeter Corporation:

JETER CORPORATION

Income Statement

For the Year Ended December 31, 2010

Sales

$

4,190,000

Cost of goods sold

2,820,000

Gross profits

1,370,000

Selling and administrative expense

685,000

Depreciation expense

319,000

Operating income

366,000

Interest expense

89,300

Earnings before taxes

276,700

Taxes

227,000

Earnings after taxes

49,700

Preferred stock dividends

10,000

Earnings available to common stockholders

$

39,700

Shares outstanding

150,000

Earnings per share

$

.26

Statement of Retained Earnings

For the Year Ended December 31, 2010

Retained earnings, balance, January 1, 2010

$

45,900

Add: Earnings available to common stockholders, 2010

39,700

Deduct: Cash dividends declared and paid in 2010

25,000

Retained earnings, balance, December 31, 2010

$

60,600

Comparative Balance Sheets

For 2009 and 2010

Year-End

2009

Year-End

2010

Assets

Current assets:

Cash

$

173,000

$

60,000

Accounts receivable (net)

549,000

573,000

Inventory

645,000

686,000

Prepaid expenses

61,600

37,800

Total current assets

1,428,600

1,356,800

Investments (long-term securities)

90,100

84,700

Plant and equipment

2,240,000

2,930,000

Less: Accumulated depreciation

1,990,000

2,309,000

Net plant and equipment

250,000

621,000

Total assets

$

1,768,700

$

2,062,500

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

307,000

$

555,000

Notes payable

558,000

558,000

Accrued expenses

72,800

50,900

Total current liabilities

937,800

1,163,900

Long-term liabilities:

Bonds payable, 2015

195,000

248,000

Total liabilities

1,132,800

1,411,900

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

45,900

60,600

Total stockholders’ equity

635,900

650,600

Total liabilities and stockholders’ equity

$

1,768,700

$

2,062,500

If the market value of a share of common stock is 3.2 times
book value for 2010, what is the firm’s P/E ratio for 2010? (Round your
intermediate calculations to 2 decimal places. Enter only numeric value rounded
to the nearest whole number.)

P/E ratio

18.Problem 3-14 Du Pont system of analysis [LO3]

The King Card Company has a return-on-assets (investment)
ratio of 19 percent.

(a)

If the debt-to-total-assets ratio is 60 percent, what is the
return on equity? (Round your answer to 2 decimal places. Omit the
“%” sign in your response.)

Return on equity

(b)

If the firm had no debt, what would the return-on-equity
ratio be? (Omit the “%” sign in your response.)

Return on equity

19.Problem 3-15 Du Pont system of analysis [LO3]

Using the Du Pont method, evaluate the effects of the
following relationships for the Lollar Corporation.

(a)

Lollar Corporation has a profit margin of 5.5 percent and
its return on assets (investment) is 8.75 percent. What is its assets turnover
ratio?(Enter only numeric value rounded to 2 decimal places.)

Assets turnover ratio

(b)

If the Lollar Corporation has a debt-to-total-assets ratio
of 65 percent, what would the firm’s return on equity be? (Round your answer to
2 decimal places. Omit the “%” sign in your response.)

Return on equity

(c)

What would happen to return on equity if the
debt-to-total-assets ratio decreased to 60 percent? (Round your answer to 2
decimal places. Omit the “%” sign in your response.)

Return on equity

20.Problem 3-16 Du Pont system of analysis [LO3]

Jerry Rice and Grain Stores has $4,670,000 in yearly sales.
The firm earns 4.5 percent on each dollar of sales and turns over its assets
3.5 times per year. It has $193,000 in current liabilities and $374,000 in
long-term liabilities.

(a)

What is its return on stockholders’ equity? (Do not round
intermediate calculations. Round your answer to 2 decimal places. Omit the
“%” sign in your response.)

Return on stockholders’ equity

(b)

If the asset base remains the same as computed in part a,
but total asset turnover goes up to 4.00, what will be the new return on
stockholders’ equity? Assume that the profit margin stays the same as do
current and long-term liabilities. (Do not round intermediate calculations.
Round your answer to 2 decimal places. Omit the “%” sign in your
response.)

New return on stock holders’ equity

21.Problem 3-17 Interpreting results from the Du Pont system
of analysis [LO3]

Assume the following data for Cable Corporation and
Multi-Media, Inc.

Cable

Corporation

Multi

Media, Inc.

Net income

$

30,700

$

139,000

Sales

314,000

2,120,000

Total assets

468,000

925,000

Total debt

194,000

478,000

Stockholders’ equity

274,000

447,000

(a-1)

Compute return on stockholders’ equity for both firms.
(Round your answers to 2 decimal places. Omit the “%” sign in your
response.)

Return on

stockholders’ equity

Cable Corporation

Multi Media, Inc.

(a-2)

Which firm has the higher return?

(b)

Compute the following additional ratios for both firms.
(Enter only numeric values rounded to 2 decimal places. Omit the “%”
sign in your response.)

Cable Corporation

Multi-Media, Inc.

Net income / Sales

Net income / Total assets

Sales / Total assets

Debt / Total assets

22.Problem 3-22 Overall ratio analysis [LO2]

The balance sheet for the Bryan Corporation is shown below.
Sales for the year were $3,680,000, with 75 percent of sales sold on credit.

BRYAN CORPORATION

Balance Sheet 201X

Assets

Liabilities and Stockholders’ Equity

Cash

$

21,000

Accounts payable

$

222,000

Accounts receivable

324,000

Accrued taxes

93,000

Inventory

244,000

Bonds payable (long-term)

194,000

Plant and equipment

461,000

Common stock

100,000

Paid-in capital

150,000

Retained earnings

291,000

Total assets

$

1,050,000

Total liabilities and

stockholders’ equity

$

1,050,000

Compute the following ratios (Enter only numeric values
rounded to 2 decimal places. Omit the “%” sign in your response):

(a)

Current ratio

(b)

Quick ratio

(c)

Debt-to-total-assets ratio

%

(d)

Asset turnover

(e)

Average collection period

days

23.Problem 3-24 Debt utilization and Du Pont system of
analysis [LO3]

Using the income statement for J. Lo Wedding Gowns, compute
the following ratios:

J. LO WEDDING GOWNS

Income Statement

Sales

$

281,000

Less: Cost of goods sold

169,000

Gross profit

112,000

Less: Selling and administrative expense

44,800

Less: Lease expense

17,500

Operating profit*

$

49,700

Less: Interest expense

8,100

Earnings before taxes

$

41,600

Less: Taxes (30%)

16,640

Earnings after taxes

$

24,960

*Equals income before interest and taxes.

(a)

Compute the interest coverage ratio. (Enter only numeric
value rounded to 2 decimal places.)

Interest coverage

(b)

Compute the fixed charge coverage ratio. (Enter only numeric
value rounded to 2 decimal places.)

Fixed charge coverage

(c)

The total assets for this company equal $211,000. Compute
the return on assets (investment). (Round your answer to 2 decimal places. Omit
the “%” sign in your response.)

Return on assets

24.Problem 3-25 Debt utilization [LO2]

A firm has net income before interest and taxes of $135,000
and interest expense of $27,500.

(a)

What is the times-interest-earned ratio? (Enter only numeric
value rounded to 2 decimal places.)

Times-interest earned

(b)

If the firm’s lease payments are $43,700, what is the fixed
charge coverage? (Enter only numeric value rounded to 2 decimal places.)

Fixed charge coverage

25.Problem 3-28 Trend analysis [LO4]

Quantum Moving Company has the following data. Industry
information also is shown.

Company data

Industry data on

Year

Net income

Total assets

Net income/Total assets

2008

$

447,000

$

2,899,000

13.5

%

2009

429,000

$

3,262,000

9.2

2010

442,000

$

3,826,000

7.0

Year

Debt

Total assets

Industry data on

debt/Total assets

2008

$

1,639,000

$

2,899,000

54.2

%

2009

1,748,000

$

3,262,000

44.8

2010

1,943,000

$

3,826,000

33.0

(a)

Calculate the company’s data in terms of (Round your answers
to 1 decimal place. Omit the “%” sign in your response):

2008

2009

2010

Net income / Total assets

%

%

%

Debt / Total assets

%

%

%

(b)

As an industry analyst comparing the firm to the industry,
are you likely to praise or criticize the firm in terms of:

Praise/Criticize

Net income / Total assets

Debt / Total assets

26.Problem 3-31 Inflation and inventory accounting effect
[LO5]

The Canton Corporation shows the following income statement.
The firm uses FIFO inventory accounting.

CANTON CORPORATION

Income Statement for 2010

Sales

$

141,600

(11,800 units at $12.00)

Cost of goods sold

82,600

(11,800 units at $7.00)

Gross profit

59,000

Selling and administrative expense

8,496

Depreciation

12,300

Operating profit

38,204

Taxes (30%)

11,461

After tax income

$

26,743

(a)

Assume in 2011 the same 11,800-unit volume is maintained,
but the sales price increases by 10 percent. Because of FIFO inventory policy,
old inventory will still be charged off at $7.00 per unit. Also assume selling
and administrative expense will be 6 percent of sales and depreciation will be
unchanged. The tax rate is 30 percent. Compute after tax income for 2011.
(Round your answer to the nearest whole number. Omit the “$” sign in
your response.)

After tax income

$

(b)

In part a, by what percent did after tax income increase as
a result of a 10 percent increase in the
sales price? (Round your answer to 2 decimal places. Omit the “%”
sign in your response.)

Gain in after tax income

%

(c)

Now assume that in 2012 the volume remains constant at
11,800 units, but the sales price decreases by 15 percent from its year 2011
level. Also, because of FIFO inventory policy, cost of goods sold reflects the
inflationary conditions of the prior year and is $7.50 per unit. Further,
assume selling and administrative expense will be 6 percent of sales and
depreciation will be unchanged. The tax rate is 30 percent. Compute the after
tax income. (Round your sales price to 2 decimal places and final answer to the
nearest dollar amount. Omit the “$” sign in your response.)

After tax income

$

27.Problem 3-33 Using ratios to construct financial
statements [LO2]

The Shannon Corporation has credit sales of $957,600.

Total assets turnover

2.85

times

Cash to total assets

1.20

percent

Accounts receivable turnover

20

times

Inventory turnover

14

times

Current ratio

1.70

times

Debt to total assets

35

percent

Using the above ratios, fill in the balance sheet. (Round
your intermediate calculations and final answers to the nearest dollar amount.
Omit the “$” sign in your response.)

28.Problem 3-36 Comparing all the ratios [LO2]

SNIDER CORPORATION

Balance Sheet

December 31, 2010

Assets

Current assets:

Cash

$

52,500

Marketable securities

22,500

Accounts receivable (net)

178,000

Inventory

290,000

Total current assets

$

543,000

Investments

66,200

Plant and equipment.

611,000

Less: Accumulated depreciation

(272,000)

Net plant and equipment

339,000

Total assets

$

948,200

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

95,100

Notes payable

78,700

Accrued taxes

12,000

Total current liabilities

185,800

Long-term liabilities:

Bonds payable

159,400

Total liabilities

$

345,200

Stockholders’ equity

Preferred stock, $50 par value

100,000

Common stock, $1 par value

80,000

Capital paid in excess of par

190,000

Retained earnings

233,000

Total stockholders’ equity

603,000

Total liabilities and stockholders’ equity

$

948,200

SNIDER CORPORATION

Income Statement

For the Year Ending December 31, 2010

Sales (on credit)

$

2,067,000

Less: Cost of goods sold

1,323,000

Gross profit

744,000

Less: Selling and administrative expenses

516,000

*

Operating profit (EBIT)

228,000

Less: Interest expense

30,100

Earnings before taxes (EBT)

197,900

Less: Taxes

83,000

Earnings after taxes (EAT)

$

114,900

*Includes $39,600 in lease payments.

Using the above financial statements for the Snider
Corporation, calculate the following ratios. (Enter only numeric values rounded
to 2 decimal places. Omit the “%” sign in your response.)

(a)

Profitability ratios

Profitability ratios

Profit margin

%

Return on assets (investment)

%

Return on equity

%

(b)

Assets utilization ratios

Assets utilization ratios

Receivable turnover

Average collection period

days

Inventory turnover

Fixed asset turnover

Total asset turnover

(c)

Liquidity ratios

Liquidity ratios

Current ratio

Quick ratio

(d)

Debt utilization ratios

Debt utilization ratios

Debt to total assets

%

Times interest earned

Fixed charge coverage

29.Problem 3-37 Ratio computation and analysis [LO2]

Given the financial statements for Jones Corporation and
Smith Corporation:

JONES CORPORATION

Current Assets

Liabilities

Cash

$

29,700

Accounts payable

$

166,000

Accounts receivable

88,500

Bonds payable (long term)

82,100

Inventory

51,300

Long-Term Assets

Stockholders’ Equity

Fixed assets

$

542,000

Common stock

$

150,000

Less: Accumulated depreciation

(154,700)

Paid-in capital

70,000

Net fixed assets*

387,300

Retained earnings

88,700

Total assets

$

556,800

Total liabilities and equity

$

556,800

Sales (on credit)

$

1,914,000

Cost of goods sold

771,000

Gross profit

1,143,000

Selling and administrative expense†

325,000

Less: Depreciation expense

59,600

Operating profit

758,400

Interest expense

9,200

Earnings before taxes

749,200

Tax expense

102,300

Net income

$

646,900

*Use net fixed assets in computing fixed asset turnover.

†Includes $7,900 in lease payments.

SMITH CORPORATION

Current Assets

Liabilities

Cash

$

39,800

Accounts payable

$

76,500

Marketable securities

12,200

Bonds payable (long term)

225,000

Accounts receivable

74,600

Inventory

77,700

Long-Term Assets

Stockholders’ Equity

Fixed assets

$

509,000

Common stock

$

75,000

Less: Accumulated depreciation

(252,600)

Paid-in capital

30,000

Net fixed assets*

256,400

Retained earnings

54,200

Total assets

$

460,700

Total liabilities and equity

$

460,700

*Use net fixed assets in computing fixed asset turnover.

SMITH CORPORATION

Sales (on credit)

$

1,150,000

Cost of goods sold

687,000

Gross profit

463,000

Selling and administrative expense†

281,000

Less: Depreciation expense

59,200

Operating profit

122,800

Interest expense

27,100

Earnings before taxes

95,700

Tax expense

54,200

Net income

$

41,500

†Includes $7,900 in lease payments.

(a-1)

Compute the following ratios. (Use 360 days for a year.
Enter only numeric values rounded to 2 decimal places. Omit the “%”
sign in your response.)

(a-2)

To which one would you, as credit manager for a supplier,
approve the extension of (short-term) trade credit?

(b)

In which one would you buy stocks?

Reviews

There are no reviews yet.

Be the first to review “Busi 320 Dev Shell – 2012 Fall B Assignment 1”

Your email address will not be published. Required fields are marked *

Busi 320 Dev Shell – 2012 Fall B Assignment 1

$32.00

Description

1.Problem 2-1 Income statement [LO1]






Frantic Fast Foods had earnings
after taxes of $1,200,000 in the year 2009 with 322,000 shares outstanding.
On January 1, 2010, the firm issued 30,000 new shares. Because of the
proceeds from these new shares and other operating improvements, earnings
after taxes increased by 24 percent.








(a)



Compute earnings per share for the
year 2009.
(Round your answer to 2 decimal
places. Omit the “$” sign in your response.)








Earnings per share










(b)



Compute earnings per share for the
year 2010.
(Round your answer to 2 decimal
places. Omit the “$” sign in your response.)








Earnings per share




2.Problem 2-3 Gross profit [LO1]






Hillary Swank Clothiers had sales
of $428,000 and cost of goods sold of $260,000.








(a)



What is the gross profit margin
(ratio of gross profit to sales)?
(Round your
answer to the nearest whole percentage. Omit the “%” sign in your response.)







Gross profit margin









(b)



If the average firm in the
clothing industry had a gross profit of 35 percent, how is the firm doing?







The firm is .


3.Problem 2-4 Operating profit [LO1]






A-Rod Fishing Supplies had sales
of $2,160,000 and cost of goods sold of $1,550,000. Selling and
administrative expenses represented 10 percent of sales. Depreciation was 6
percent of the total assets of $4,450,000.







What was the firm’s operating
profit? (Omit the “$” sign in your
response.)







Operating profit



4.Problem 2-6 Income statement [LO1]






Given the following information,
prepare an income statement for the Dental Drilling Company. (Input all amounts as positive values. Omit the
“$” sign in your response.)
















































Selling and
administrative expense



$



72,000



Depreciation expense





71,000



Sales





536,000



Interest expense





45,000



Cost of goods sold





179,000



Taxes





53,000






5.Problem 2-7 Income statement [LO1]






Given the following information,
prepare an income statement for Jonas Brothers Cough Drops. (Input all amounts as positive values. Omit the
“$” sign in your response.)













































Selling and
administrative expense



$



326,000



Depreciation expense





196,000



Sales





1,600,000



Interest expense





124,000



Cost of goods sold





551,000



Taxes





167,000






6.Problem 2-11 Depreciation and earnings [LO1]















Stein Books, Inc., sold 2,300
finance textbooks for $200 each to High Tuition University in 2010. These
books cost $170 to produce. Stein Books spent $12,300 (selling expense) to
convince the university to buy its books.



Depreciation
expense for the year was $15,500. In addition, Stein Books borrowed $102,000
on January 1, 2010, on which the company paid 17 percent interest. Both the
interest and principal of the loan were paid on December 31, 2010. The
publishing firm’s tax rate is 30 percent.





Prepare an income statement for
Stein Books. (Input all amounts as positive
values.
Omit the “$”
sign in your response.)


7.Problem 2-15 Development of balance sheet
[LO3]






Arrange the following items in
proper balance sheet presentation (Be sure to
list the assets in order of their liquidity. Input all amounts as positive
values. Omit the “$” sign in your response)
:





























































































Accumulated depreciation



$



347,000



Retained earnings





46,000



Cash





14,000



Bonds payable





137,000



Accounts receivable





51,000



Plant and
equipment—original cost





668,000



Accounts payable





38,000



Allowance for bad
debts





6,000



Common stock, $1 par,
100,000 shares outstanding





100,000



Inventory





71,000



Preferred stock, $52
par, 1,000 shares outstanding





52,000



Marketable securities





28,000



Investments





24,000



Notes payable





39,000



Capital paid in excess
of par (common stock)





91,000






8.Problem 2-16 Earnings per share and retained
earnings [LO1, 3]






Okra Snack Delights, Inc., has an
operating profit of $241,000. Interest expense for the year was $35,800;
preferred dividends paid were $34,100; and common dividends paid were
$39,600. The tax was $61,400. The firm has 23,700 shares of common stock
outstanding.








(a)



Calculate the earnings per share
and the common dividends per share.
(Round
your answers to 2 decimal places. Omit the “$” sign in your
response.)























Earnings per share





Common dividends per
share














(b)



What was the increase in retained
earnings for the year?
(Omit the
“$” sign in your response.)







Increase in retained
earnings



Reviews

There are no reviews yet.

Be the first to review “Busi 320 Dev Shell – 2012 Fall B Assignment 1”

Your email address will not be published. Required fields are marked *