Question 1

Explain sustainable income. What relationship does this concept have to the treatment of irregular items on the income statement?

Accepted Answer

The answer of Explain sustainable income. What relationship does this...

Question 2

Here is the income statement for Ginsberg, Inc.  Additional information:
1. Common stock outstanding January 1, 2014, was 30,000 shares, and 40,000 shares were outstanding at December 31, 2014.
2. The market price of Gillman, Inc., stock was $15.86 in 2014.
3. Cash dividends of $16,000 were paid, $4,500 of which were to preferred stockholders.
Instructions
Compute the following measures for 2014.
(a) Earnings per share.
(b) Price-earnings ratio.
(c) Payout ratio.
(d) Times interest earned.

Accepted Answer

The answer of Here is the income statement for Ginsberg,...

Question 3

Here are the comparative income statements of Georgia Development Corporation.  Instructions
(a) Prepare a horizontal analysis of the income statement data for Georgia Development Corporation using 2013 as a base. (Show the amounts of increase of decrease.)
(b) Prepare a vertical analysis of the income statement data for Georgia Development Corporation for both years.

Accepted Answer

The answer of Here are the comparative income statements of...

Question 4

Armada Company has these comparative balance sheet data:  Additional information for 2014:
1. Net income was $25,000.
2. Sales on account were $450,000. Sales returns and allowances amounted to $25,000.
3. Cost of goods sold was $275,000.
4. Net cash provided by operating activities was $49,000.
5. Capital expenditures were $23,000, and cash dividends were $18,000.
Instructions
Compute the following ratios at December 31, 2014.

Accepted Answer

The answer of Armada Company has these comparative balance sheet...

Question 5

The following items were taken from the financial statements of St. Johns, Inc., over a four-year period:  Instructions
Using horizontal analysis and 2012 as the base year, compute the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable or unfavorable for each item.

Accepted Answer

The answer of The following items were taken from the...

Question 6

The financial statements of Elcamino Company appear below:   Additional information: 
a. Cash dividends of $50,000 were declared and paid on common stock in 2014.
b. Weighted-average number of shares of common stock outstanding during 2014 was 50,000 shares.
c. Market value of common stock on December 31, 2014, was $16 per share.
d. Net cash provided by operating activities for 2014 was $70,000.
Instructions
Using the financial statements and additional information, compute the following ratios for the Lewis Company for 2012. Show all computations.

Accepted Answer

The answer of The financial statements of Elcamino Company appear...

Question 7

Selected data taken from the 2014 financial statements of Phillips Card Company, Inc. are as follows (in millions).  Instructions
Compute these ratios at February 20, 2014:
(a) Current cash debt coverage
(b) Cash debt coverage
(c) Free cash flow
Provide a brief interpretation of your results.

Accepted Answer

The answer of Selected data taken from the 2014 financial...

Question 8

Here is financial information for Valdez Express Inc.  Instructions
Prepare a schedule showing a horizontal analysis for 2014 using 2013 as the base year.

Accepted Answer

The answer of Here is financial information for Valdez Express...

Question 9

Exeter Corporation had net income of $3,000,000 in 2013. Using 2013 as the base year, net income decreased by 40% in 2014 and increased by 110% in 2015.
Instructions
Compute the net income reported by Exeter Corporation for 2014 and 2015.

Accepted Answer

The answer of Exeter Corporation had net income of $3,000,000...

Question 10

The following ratios have been computed for Southern Company for 2014.    Instructions
Use the above ratios and information from the Southern Company financial statements to fill in the missing information on the financial statements. Follow the sequence indicated. Show computations that support your answers.

Accepted Answer

The answer of The following ratios have been computed for...

Question 11

Operating data for Panola Land Corporation are presented below  Instructions
Prepare a schedule showing a vertical analysis for 2014 and 2013.

Accepted Answer

The answer of Operating data for Panola Land Corporation are...

Question 12

The balance sheet for Appalachian Corporation at the end of the current year includes the following:  Net income was $565,000 and income tax expense for the current year amounted to $285,000. Cash dividends paid on common stock were $200,000, and the common stock was selling for $28 per share at the end of the year. There were no ownership changes during the year.
Instructions
Determine each of the following:

Accepted Answer

The answer of The balance sheet for Appalachian Corporation at...

Question 13

The comparative balance sheet of Delta Company appears below:  Instructions
(a) Using horizontal analysis, show the percentage change for each balance sheet item using 2013 as a base year.
(b) Using vertical analysis, prepare a common size comparative balance sheet.

Accepted Answer

The answer of The comparative balance sheet of Delta Company...

Question 14

Belcanto Corporation experienced a fire on December 31, 2014, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following balances.  Additional information:
1. The inventory turnover is 4.2 times
2. The return on common stockholders' equity is 14%. The company had no additional paid-in-capital.
3. The accounts receivable turnover is 10.2 times.
4. The return on assets is 12.5%.
5. Total assets, Dec. 31, 2013 = 604,750.
Instructions
Compute the following values for 2014.
(a) Cost of goods sold.
(b) Net credit sales.
(c) Net income.
(d) Total assets.

Accepted Answer

The answer of Belcanto Corporation experienced a fire on December...

Question 15

Jones Corporation has issued common stock only. The company has been successful and has a gross profit rate of 20%. The information shown below was taken from the company's financial statements.  Instructions
Compute the following:
(a) Accounts receivable turnover and the average number of days required to collect the accounts receivable.
(b) The inventory turnover and the average days in inventory.
(c) Return on common stockholders' equity.

Accepted Answer

The answer of Jones Corporation has issued common stock only....

Question 16

Horizontal and vertical analyses are analytical tools frequently used to analyze financial statements. What type of information or insights can be obtained by using these two techniques? Explain how the output of horizontal analysis and vertical analysis can be compared to industry averages and/or competitive companies.

Accepted Answer

The answer of Horizontal and vertical analyses are analytical tools...

Question 17

What issues must be considered when determining whether or not a loss from earthquake destruction should be treated as an extraordinary item?

Accepted Answer

The answer of What issues must be considered when determining...

Question 18

The income statement for the Carolina Service Company for the year ended December 31, 2014, appears below.  *Includes $25,000 of interest expense and $20,000 of income tax expense.
Additional information:
1. Common stock outstanding on January 1, 2014, was 50,000 shares. On July 1, 2014, 10,000 more shares were issued.
2. The market price of Carolina's stock was $22 at the end of 2014.
3. Cash dividends of $35,000 were paid, $5,000 of which were paid to preferred stockholders.
Instructions
Compute the following ratios for 2014:
(a) Earnings per share.
(b) Price-earnings.
(c) Times interest earned.

Accepted Answer

The answer of The income statement for the Carolina Service...

Question 19

Tim Forsyth, the CEO of Magical Products, is a successful entrepreneur and his focus is his products, not his accounting system. He asks you to explain to him, in a memo, the bases of comparison for ratio analysis.

Accepted Answer

The answer of Tim Forsyth, the CEO of Magical Products,...

Question 20

The following information was taken from the financial statements of Bjorg Company:  Instructions
(a) Compute the net sales for each year.
(b) Compute the cost of goods sold in dollars and as a percentage of net sales for each year.
(c) Compute operating expenses in dollars and as a percentage of net sales for each year. (Income taxes are not operating expenses).

Accepted Answer

The answer of The following information was taken from the...

Quiz 13: Financial Analysis: The Big Picture

Explain sustainable income. What relationship does this concept have to the treatment of irregular items on the income statement?

Selected data taken from the 2014 financial statements of Phillips Card Company, Inc. are as follows (in millions). Instructions Compute these ratios at February 20, 2014: (a) Current cash debt coverage (b) Cash debt coverage (c) Free cash flow Provide a brief interpretation of your results.

Here is financial information for Valdez Express Inc. Instructions Prepare a schedule showing a horizontal analysis for 2014 using 2013 as the base year.

Exeter Corporation had net income of $3,000,000 in 2013. Using 2013 as the base year, net income decreased by 40% in 2014 and increased by 110% in 2015. Instructions Compute the net income reported by Exeter Corporation for 2014 and 2015.

Operating data for Panola Land Corporation are presented below Instructions Prepare a schedule showing a vertical analysis for 2014 and 2013.

The comparative balance sheet of Delta Company appears below: Instructions (a) Using horizontal analysis, show the percentage change for each balance sheet item using 2013 as a base year. (b) Using vertical analysis, prepare a common size comparative balance sheet.

What issues must be considered when determining whether or not a loss from earthquake destruction should be treated as an extraordinary item?

Tim Forsyth, the CEO of Magical Products, is a successful entrepreneur and his focus is his products, not his accounting system. He asks you to explain to him, in a memo, the bases of comparison for ratio analysis.