Chapter 05 – Communicating and Interpreting Accounting Information
P5–3.
Req. 1
EXQUISITE JEWELERS
Balance Sheet
December 31, 2015
Assets
Current Assets
Cash ………………………………………………………………… $ 58,000
Store equipment ………………………………………………………. 67,000
Less accumulated depreciation ………………………… 19,000 48,000
Used store equipment held for disposal ………………………. 9,000
Total assets ……………………………………………….. $377,500
Liabilities
Total liabilities …………………………………………….. 103,500
Stockholders’ Equity
Contributed Capital
Common stock, par $1 per share, 100,000 shares ….. 100,000
Additional paid-in capital ……………………………………… 10,000
Chapter 05 – Communicating and Interpreting Accounting Information
P5–5.
AEROPOSTALE, Inc.
Consolidated Statement of Income
For Year Ended March 31, Current Year
(In Thousands Except Per Share Amounts)
Net revenue
$2,342,260
Cost of goods sold
1,733,916
Gross profit
608,344
Other selling, general and administrative expenses
494,829
Total operating expenses
494,829
Operating income
113,515
Interest expense
417
Income before income taxes
113,098
Provision for income taxes
43,583
Net income
$69,515
Earnings per share:
Basic earnings per share
$0.86
Weighted average shares outstanding
81,208
Gross profit percentage
=
Gross profit
=
608,344
=
0.260 (26.0%)
Net sales
2,342,260
It means that 26% of each sales dollar is gross profit. It measures the ability to sell
goods for more than their cost.
P5–6.
(a) JORDAN SALES COMPANY
Income Statement
For the Year Ended March 31, 2016
Sales revenue …………………………………………………………. $99,000
Chapter 05 – Communicating and Interpreting Accounting Information
P5-7.
Req. 1.
Transaction
Gross Profit
Operating Income
Return on Assets
a.
+
+
+
b.
NE
–
–
c.
NE
NE
–
d.
NE
NE
+
Chapter 05 – Communicating and Interpreting Accounting Information
P5-9.
NEWELL RUBBERMAID
Consolidated Statement of Operations
For the Year Ended December 31, 2011
(dollars in thousands)
Net Sales ………………………………………………………………..
$ 5,864.6
Cost of Products Sold ……………………………………….
3,659.4
Gross Profit ……………………………………………………………..
2,205.2
Operating Expenses:
Selling, General, and Administrative Expenses ……..
$1,515.3
Other Expense …………………………………………………
432.7
Total Operating Expenses ……………………………..
1,948.0
Operating Income (loss) ……………………………………………
257.2
Interest and Other Non-Operating Expense ………….
104.7
Income before Income Taxes …………………………………….
152.5
Income Tax Expense ……………………………………….
17.9
Net (Loss) Income from Continuing Operations …………….
134.6
Loss on Sale of Discontinued Operations, Net of
Income Taxes ………………………………………………..
(9.4)
Net (Loss) Income …………………………………………………..
$ 125.2
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AP5-1.
Req. 1
TANGOCO
Balance Sheet
December 31, 2015
Assets
Current Assets
Cash ………………………………………………………………… $ 48,800
Total liabilities …………………………………………….. 100,600
Stockholders’ Equity
Contributed Capital
Common stock, par $1 per share, 100,000 shares ….. 100,000
Chapter 05 – Communicating and Interpreting Accounting Information
AP5-1. (continued)
Req. 2
Store equipment
$67,200 – $13,440 = $53,760
Acquisition cost less sum of all
depreciation expense to date.
Net book value (sometimes called book value or carrying value) is the amount of cost
less any contra accounts (offsets).
AP5-2.
MESA INDUSTRIES
Statement of Stockholders’ Equity
Common Stock
Retained
Total
Stockholders’
Shares
Amount
Earnings
Equity
Balances as of
December 31, 2014
7,000
$105,000
$48,000
$162,000
Net income
46,000
46,000
Dividends declared
(7,000)
(7,000)
Stock issued
1,500
22,500
39,000
Balances as of
December 31, 2015
8,500
$127,500
$87,000
$240,000
AP5-3.
(a) DYNAMITE SALES
Income Statement
For the Year Ended August 31, 2015
Sales revenue …………………………………………………………. $81,000
Chapter 05 – Communicating and Interpreting Accounting Information
AP5-4.
Req. 1.
Transaction
Operating Income
(Loss)
Net Income
Return on Assets
a.
NE
+
+
b.
NE
NE
–
c.
–
–
–
d.
NE
NE
–
b. Inventory (+A) ……………………………………………………………….. 80
Accounts payable (+L) …………………………..……………… 80
c. Advertising expense (+E) ……………………………………………….. 16
Cash (–A) ……………………………………………………………. 16
d. Cash (+A) …………………………………………………………………….. 40
higher in the next period. (Students are encouraged to calculate ROA to verify this
assertion.)
Current
Year
Next
Year
Net Income
Average Total Assets
$514 = 0.07
($7,874+$7,735)/2
$617 = 0.08
($7,735+$8,122)
Chapter 05 – Communicating and Interpreting Accounting Information
CASES AND PROJECTS
ANNUAL REPORT CASES
CP5-1.
1. The Balance Sheet lists “Property and equipment”, “Intangible assets”, “Goodwill”,
“Non-current deferred income taxes and “Other assets” as non-current assets.
2. The company owned $6,364,000 in land at the end of the year. This is disclosed in
note 7, “Property and Equipment”.
6. The highest stock price was $16.18, in the 1st quarter of fiscal 2011. This
information is in Item 5 of the 10-K disclosed with the annual report.