This is a comprehensive problem all contained on this spreadsheet tab. You are to prepare a cash flow statement, a vertical analysis, a horizontal analysis, and some ratio calculations. Scroll down the spreadsheet to complete each part.
Philadelphia Widget Corporation is in the process of preparing financial statements for the year ended 12/31/2015.
They have completed the balance sheet and income statement as shown.
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Philadelphia Widget Corporation
Income Statement
For the year ended 12/31/2015
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Revenue
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1,235,000
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Cost of Goods Sold
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806,356
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Gross Profit
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428,644
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Administrative Expenses:
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|
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Salaries
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212,450
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Rent
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82,500
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Depreciation
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24,800
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Total Administrative Expense
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319,750
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Operating Profit
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108,894
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Gain on Sale of Equipment
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4,500
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Interest Expense
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(42,115)
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Net Income
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71,279
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Philadelphia Widget Corporation
Balance Sheet
As of 12/31/2015, 12/31/2014, and 12/31/2013
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Cash
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119,411
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89,564
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105,644
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Accounts Receivable
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85,455
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83,118
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78,400
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Inventory
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41,600
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48,560
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62,600
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Prepaid Expenses
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14,500
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18,100
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24,000
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Total Current Assets
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260,966
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239,342
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270,644
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Land
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50,000
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50,000
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50,000
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Buildings and Equipment
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182,450
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172,450
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166,800
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Accumulated Depreciation
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78,900
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103,550
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62,600
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109,850
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54,580
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112,220
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Total Assets
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414,516
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399,192
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432,864
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Accounts Payable
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62,525
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51,480
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45,200
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Wages payable
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4,500
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4,500
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1,500
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Unearned Revenue
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3,000
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-
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-
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Current Portion of Long-Term Debt
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50,000
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50,000
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50,000
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Total Current Liabilities
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120,025
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105,980
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96,700
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Long-Term Debt
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175,000
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225,000
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275,000
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Common Stock, 3500 shares outstanding
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35,000
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35,000
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35,000
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Retained Earnings
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84,491
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33,212
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26,164
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Total Stockholders' Equity
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119,491
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68,212
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61,164
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Total Liabilities and Equity
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414,516
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399,192
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432,864
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A. Prepare a Statement of Cash Flow using the indirect method for 2015 using the above statements and the following additional information:
1. Equipment costing $30,000 was purchased in 2015.
2. Equipment having an original cost of $20,000 and accumulated depreciation of $8,500 was sold for $16,000 during 2015.
3. A dividend of $20,000 was declared and paid in 2015.
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Philadelphia Widget Corporation
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Statement of Cash Flow
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For the year ended 12/31/2015
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Cash flows from Operating Activities
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Net Income
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71,279
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Adjustments
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Gain on sale of equipment
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(4,500)
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Depreciation Expense
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24,800
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Increase in Accounts Receivable
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(2,337)
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Decrease in Inventory
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6,960
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Decrease in Prepaid Expense
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3,600
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Increase in Accounts Payable
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11,045
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Increase in Unearned revenue
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3,000
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42,568
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Net cash flow from Operating Activities
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113,847
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Cash flows from Investing Activities
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Sale proceeds of sale of equipment
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16,000
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Purchase of Equipment
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(30,000)
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Net cash out-flow from Operating Activities
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(14,000)
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Cash flows from Financing Activities
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Payment of Dividends
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(20,000)
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Repayment of Long term debt
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(50,000)
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Net cash out-flow from Financing Activities
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(70,000)
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Net Increase in cash
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29,847
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Cash Balance - Beginning
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89,564
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Cash Balance - Ending
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119,411
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B. Prepare a vertical analysis (1 year) of the income statement above and a horizontal analysis (2 years) of the balance sheet.
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Philadelphia Widget Corporation
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Vertical Analysis of Income Statement
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2015
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Amount
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Percent
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Revenue
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1235000
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100.00%
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Cost of Goods Sold
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806356
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65.29%
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Gross Profit
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428644
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34.71%
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Administrative Expenses:
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Salaries
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212450
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Rent
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82500
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Depreciation
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24800
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Total Administrative Expense
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319750
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25.89%
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Operating Profit
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108894
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8.82%
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Gain on Sale of Equipment
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4500
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0.36%
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Interest Expense
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-42115
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-3.41%
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Net Income
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71279
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5.77%
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Philadelphia Widget Corporation
Horizontal Analysis of Balance Sheet
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2015
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2014
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Variance
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Amount
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Percentage
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Cash
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119,411
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89,564
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29,847
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33.32%
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Accounts Receivable
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85,455
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83,118
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2,337
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2.81%
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Inventory
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41,600
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48,560
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(6,960)
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-14.33%
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Prepaid Expenses
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14,500
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18,100
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(3,600)
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-19.89%
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Total Current Assets
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260,966
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239,342
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21,624
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9.03%
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Land
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50,000
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50,000
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-
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0.00%
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Buildings and Equipment
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182,450
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172,450
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Accumulated Depreciation
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#REF!
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#REF!
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62,600
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109,850
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#REF!
|
#REF!
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Total Assets
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#REF!
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399,192
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#REF!
|
#REF!
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Accounts Payable
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62,525
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51,480
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11,045
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21.45%
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Wages payable
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4,500
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4,500
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-
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0.00%
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Unearned Revenue
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3,000
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-
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3,000
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Current Portion of Long-Term Debt
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50,000
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50,000
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-
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0.00%
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Total Current Liabilities
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120,025
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105,980
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14,045
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13.25%
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Long-Term Debt
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175,000
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225,000
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(50,000)
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-22.22%
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Common Stock, 3500 shares outstanding
|
35,000
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35,000
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|
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Retained Earnings
|
51,279
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33,212
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Total Stockholders' Equity
|
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86,279
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68,212
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18,067
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26.49%
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Total Liabilities and Equity
|
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381,304
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399,192
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(17,888)
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-4.48%
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C. Calculate the following ratios based on 12/31/2015 numbers:
1. Earnings per share
2. Return on common stockholder's equity
3. Return on assets
4. Current ratio
5. Acid-test ratio
6. Accounts receivable turnover.