Exercise 1 - The comparative condensed balance sheets of Garcia Corporation are presented below.
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GARCIA CORPORATION
Comparative Condensed Balance Sheets
December 31
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2014
|
2013
|
|
Assets
|
|
|
|
Current assets
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$ 76,000
|
$ 80,000
|
|
Property, plant, and equipment (net)
|
100,000
|
90,000
|
|
Intangibles
|
24,000
|
40,000
|
|
Total assets
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$200,000
|
$210,000
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|
Liabilities and stockholders' equity
|
|
|
|
Current liabilities
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$ 40,000
|
$ 48,000
|
|
Long-term liabilities
|
140,000
|
150,000
|
|
Stockholders' equity
|
20,000
|
12,000
|
|
Total liabilities and stockholders' equity
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$200,000
|
$210,000
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(a) Prepare a horizontal analysis of the balance sheet data for Garcia Corporation using 2013 as a base.
(b) Prepare a vertical analysis of the balance sheet data for Garcia Corporation in columnar form for 2014.
Exercise 2 - The comparative condensed income statements of Hendi Corporation are shown below.
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HENDI CORPORATION
Comparative Condensed Income Statements
For the Years Ended December 31
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2014
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2013
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Net sales
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$600,000
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$500,000
|
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Cost of goods sold
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468,000
|
400,000
|
|
Gross profit
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132,000
|
100,000
|
|
Operating expenses
|
60,000
|
54,000
|
|
Net income
|
$ 72,000
|
$ 46,000
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(a) Prepare a horizontal analysis of the income statement data for Hendi Corporation using 2013 as a base. (Show the amounts of increase or decrease.)
(b) Prepare a vertical analysis of the income statement data for Hendi Corporation in columnar form for both years.
Exercise 3 - Maulder Corporation has income from continuing operations of $290,000 for the year ended December 31, 2014. It also has the following items (before considering income taxes).
1. An extraordinary loss of $70,000.
2. A gain of $35,000 on the discontinuance of a division.
3. A correction of an error in last year's financial statements that resulted in a $25,000 understatement of 2013 net income.
Assume all items are subject to income taxes at a 30% tax rate.
Prepare an income statement, beginning with income from continuing operations.
Exercise 4 - The comparative statements of Beulah Company are presented below.
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BEULAH COMPANY
Income Statement
For the Years Ended December 31
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2014
|
2013
|
|
Net sales (all on account)
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$500,000
|
$420,000
|
|
Expenses
|
|
|
|
Cost of goods sold
|
315,000
|
254,000
|
|
Selling and administrative
|
120,800
|
114,800
|
|
Interest expense
|
7,500
|
6,500
|
|
Income tax expense
|
20,000
|
15,000
|
|
Total expenses
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463,300
|
390,300
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Net income
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$ 36,700
|
$ 29,700
|
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BEULAH COMPANY
Balance Sheets
December 31
|
|
Assets
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2014
|
2013
|
|
Current assets
|
|
|
|
Cash
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$ 21,000
|
$ 18,000
|
|
Short-term investments
|
18,000
|
15,000
|
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Accounts receivable (net)
|
85,000
|
75,000
|
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Inventory
|
80,000
|
60,000
|
|
Total current assets
|
204,000
|
168,000
|
|
Plant assets (net)
|
423,000
|
383,000
|
|
Total assets
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$627,000
|
$551,000
|
|
Liabilities and Stockholders' Equity
|
|
|
|
Current liabilities
|
|
|
|
Accounts payable
|
$122,000
|
$110,000
|
|
Income taxes payable
|
12,000
|
11,000
|
|
Total current liabilities
|
134,000
|
121,000
|
|
Long-term liabilities
|
|
|
|
Bonds payable
|
120,000
|
80,000
|
|
Total liabilities
|
254,000
|
201,000
|
|
Stockholders' equity
|
|
|
|
Common stock ($5 par)
|
150,000
|
150,000
|
|
Retained earnings
|
223,000
|
200,000
|
|
Total stockholders' equity
|
373,000
|
350,000
|
|
Total liabilities and stockholders' equity
|
$627,000
|
$551,000
|
Additional data:
The common stock recently sold at $19.50 per share.
Compute the following ratios for 2014.
(a) Current ratio
(b) Acid-test ratio
(c) Accounts receivable turnover
(d) Inventory turnover
(e) Profit margin
(f) Asset turnover
(g) Return on assets
(h) Return on common stockholders' equity
(i) Earnings per share
(j) Price-earnings ratio
(k) Payout ratio
(l) Debt to total assets
(m) Times interest earned