Prob.1: Income statement
Net working capital
|
Sales
|
$ 800,000
|
|
Cost of goods sold
|
$ 300,000
|
|
Gross profit
|
$ 500,000
|
|
Selling & administrative expenses
|
$ 40,000
|
|
Depreciation expenses *
|
$ 30,000
|
|
EBIT (Operating Profit)
|
$ 430,000
|
|
Interest expenses
|
$ 20,000
|
|
EBT
|
$ 410,000
|
|
Taxes
|
$ 110,000
|
|
EAT
|
$ 300,000
|
|
Preferred stock dividends
|
$ 80,000
|
|
Net income to common stockholders
|
$ 220,000
|
|
Common stock dividends
|
$ 100,000
|
|
Retained Earnings
|
$ 120,000
|
|
Share outstanding
|
100,000
|
|
Earning per share (EPS)
|
$ 2.20
|
|
Dividend Payout Ratio
|
45.45%
|
|
Retention Ratio
|
54.55%
|
Find the current ratio and quick ratio?
PROB.2
Find net income first and find ROE.
|
a. Earnings After Tax.
|
|
|
Sales
|
$ 700,000
|
|
Cost of goods sold (70% of Sales)
|
$ 490,000
|
|
Gross profit
|
$ 210,000
|
|
Selling & adm. Expenses (12% of Sales)
|
$ 84,000
|
|
Depreciation expenses *
|
$ 10,000
|
|
EBIT (Operating Profit)
|
$ 116,000
|
|
Interest expenses
|
$ 8,000
|
|
EBT
|
$ 108,000
|
|
Taxes (30%)
|
$ 32,400
|
|
EAT
|
$ 75,600
|
b.
|
Sales
|
$ 750,000
|
|
Cost of goods sold (66% of Sales)
|
$ 495,000
|
|
Gross profit
|
$ 255,000
|
|
Selling & adm. Expenses (14% of Sales)
|
$ 105,000
|
|
Depreciation expenses *
|
$ 10,000
|
|
EBIT (Operating Profit)
|
$ 140,000
|
|
Interest expenses
|
$ 15,000
|
|
EBT
|
$ 125,000
|
|
Taxes (30%)
|
$ 37,500
|
|
EAT
|
$ 87,500
|
Mr. Carr's idea will increase profitability.
PROB.3
Balance Sheet
|
Current Assets:
|
|
|
Cash
|
$ 10,000
|
|
Marketable Securities
|
$ 20,000
|
|
Accounts Receivable
|
$ 48,000
|
|
Less: Allowance for bad debts
|
$ (6,000)
|
|
Inventory
|
$ 66,000
|
|
Total Current Assets
|
$ 138,000
|
|
Other Assets: Investment
|
$ 20,000
|
|
Fixed Assests:
|
|
|
Plant and equipment
|
$ 680,000
|
|
Less: Accumulated depreciation**
|
$ 300,000
|
|
Net plant and equipment
|
$ 380,000
|
|
Total assets
|
$ 538,000
|
|
Liabilities and Stockholders' Equity
|
|
|
Current liabilities:
|
|
|
Accounts payable
|
$ 35,000
|
|
Notes payable
|
$ 33,000
|
|
Total Current Liabilities
|
$ 68,000
|
|
Long-term Liabilities
|
|
|
Bonds payable
|
$ 136,000
|
|
Total liabilities
|
$ 204,000
|
|
Stockholders' equity:
|
|
|
Preferred stock ($50 par @ 1,000 shares)
|
$ 50,000
|
|
Common stock ($1 par @100,000 shares)
|
$ 100,000
|
|
Capital paid in excess of par
|
$ 88,000
|
|
Retained earnings
|
$ 96,000
|
|
Stockholders' equity
|
$ 334,000
|
|
Total liabilities and stockholders' equity
|
$ 538,000
|
PROB.4
|
a. Income statement: Dec. 31 2011
|
|
Sales
|
$220,000
|
|
Cost of goods sold
|
$132,000
|
|
Gross profit
|
$88,000
|
|
Selling & administrative expenses
|
$22,000
|
|
Depreciation expenses *
|
$20,000
|
|
EBIT
|
$46,000
|
|
Interest expenses
|
$8,000
|
|
EBT
|
$38,000
|
|
Taxes (20%)
|
$7,600
|
|
EAT
|
$30,400
|
|
Preferred stock dividends
|
$2,000
|
|
Earnings available to commonstockholders
|
$28,400
|
|
Dividends paid to commonstockholders
|
$8,400
|
|
Balance retained in corporation
|
$20,000
|
|
Shares outstanding
|
10,000
|
|
EPS
|
$2.84
|
|
b. Statement of retained earnings
|
|
|
Retained earnings, balance, Dec. 31, 2010
|
$ 80,000
|
|
Add: Earnings available to common stockholders in 2010
|
$ 28,400
|
|
Deduct: Cash dividends declared in 2010
|
$ 8,400
|
|
Retained earnings, balance, Dec. 31, 2011
|
$ 100,000
|
|
c. Balance Sheet
|
Year 2010
|
Year 2011
|
|
Current Assets:
|
|
|
|
Cash
|
$ 10,000
|
$ 10,000
|
|
Accounts Receivable
|
$ 15,000
|
$ 16,500
|
|
Inventory
|
$ 25,000
|
$ 27,500
|
|
Prepaid expenses
|
$ 12,000
|
$ 12,000
|
|
Plant and equipment
|
$ 250,000
|
$ 285,000
|
|
Less: Accumulated depreciation**
|
$ 50,000
|
$ 70,000
|
|
Net plant and assets
|
$ 200,000
|
$ 215,000
|
|
Total assets
|
$ 262,000
|
$ 281,000
|
|
Liabilities and Stockholders' Equity
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$ 12,000
|
$ 15,000
|
|
Notes payable
|
$ 20,000
|
$ 26,000
|
|
Bonds payable
|
$ 50,000
|
$ 40,000
|
|
Stockholders' equity:
|
|
|
|
Common stock
|
$ 75,000
|
$ 75,000
|
|
Paid-in capital
|
$ 25,000
|
$ 25,000
|
|
Retained earnings
|
$ 80,000
|
$ 100,000
|
|
Total liabilities and stockholders' equity
|
$ 262,000
|
$ 281,000
|
Find
Statement of Cash Flows
Common-Size Income statement: Dec. 31 2011
Common-Size Balance Sheet