E14-17 The income statement of Minerals Plus, Inc. follows:
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Minerals Plus, Inc.
Income Statement
Year Ended September 30,2012
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Revenues:
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Service revenue
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$235,000
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Expenses:
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Cost of goods sold
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$97,000
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Salary expense
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$57,000
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Depreciation expense
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$26,000
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Income tax expense
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$4,000
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$184,000
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Net income
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$51,000
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Additional data follow:
a. Acquisition of plant assets is $118,000. Of this amount $100,000 is paid in cash and $18,000 by signing a note payable.
b. Cash receipts from sale of land totals $28,000. There was no gain or loss.
c. Cash receipts from issuance of common stock total $29,000.
d. Payment of note payable is $18,000.
e. Payment of dividends is $8,000.
f. From the balance sheet:
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Sept. 30
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2012
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2011
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Current Assets:
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Cash
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$30,00
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$8,000
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Accounts receivable
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$41,000
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$59,000
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Inventory
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$97,000
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$93,000
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Current Liabilities:
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Accounts payable
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$30,000
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$17,000
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Accrued liabilities
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$11,000
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$24,000
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Compute DVD's net cash provided by (used for) operating activities during July. Use the indirect method.
Financial Statement Analysis
E15-18 Large Land Photo Shop has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2012. To answer this question, you gather the following data:
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2012
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2011
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Cash
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$58,000
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$57,000
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Short-term investments
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31,000
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Net receivables
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110,000
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132,000
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Inventory
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247,000
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297,000
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Total assets
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585,000
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535,000
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Total current liabilities
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255,000
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222,000
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Long-term note payable
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46,000
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48,000
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Income from operations
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180,000
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153,000
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Interest expense
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52,000
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39,000
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1. Compute the following ratios for 2012 and 2011:
a. Current ratio
b. Acid-test ratio
c. Debt to equity ratio
P15-26A Using ratios to evaluate a stock investment Comparative financial statement data of Danfield, Inc., follow:
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Danfield, Inc.
Comparative Income Statement
Years Ended December 31, 2012 and 2011
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2012
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2011
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Net sales
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$467,000
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$428,000
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Cost of goods sold
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237,000
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218,000
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Gross profit
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$230,000
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$210,000
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Operating expenses
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136,000
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134,000
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Income from operations
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$94,000
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$76,000
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Interest expense
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9,000
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10,000
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Income before income tax
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$85,000
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$66,000
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Income tax expense
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24,000
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27,000
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Net income
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$61,000
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$39,000
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Danfield, Inc.
Comparative Income Statement
Years Ended December 31, 2012 and 2011
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2012
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2011
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2010*
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Current assets:
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Cash
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$97,000
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$95,000
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Current receivables, net
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112,000
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118,000
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$102,000
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Inventories
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145,000
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163,000
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203,000
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Prepaid expenses
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12,000
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5,000
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Total current assets
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$366,000
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$381,000
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Property, plant, and equipment, net
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211,000
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179,000
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Total assets
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577,000
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$560,000
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598,000
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Total current liabilities
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$225,000
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$246,000
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Long-term liabilities
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114,000
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97,000
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Total liabilities
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$339,000
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$343,000
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Preferred stock, 3%
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108,000
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108,000
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Common stockholders' equity, no par
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130,000
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109,000
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Total liabilities and stockholders' equity
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$577,000
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$560,000
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* Selected 2010 amounts
1. Market price of Danfield's common stock: $86.58 at December 31, 2012 and $46.54 at December 31, 2011.
2. Common shares outstanding: 12,000 during 2012 and 10,000 during 2011 and 2010.
3. All sales on credit.
Requirements
1. Compute the following ratios for 2012 and 2011:
a. Current ratio
b. Times-interest-earned ratio
c. Inventory turnover
d. Gross profit percentage
e. Debt to equity ratio
f. Rate of return on common stockholders' equity
g. Earnings per share of common stock
h. Price/earnings ratio
2. Decide (a) whether Danfield's ability to pay debts and sell inventory improved or deteriorated during 2012 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.