Problem 13-2B (60 minutes)
Part 1
Current ratio: December 31, 2015: $54,860 / $22,370 = 2.5 to 1
Part 2
BLUEGRASS CORPORATION
Common-Size Comparative Income Statements
For Years Ended December 31, 2015, 2014, and 2013
2015
2014
2013
Sales ……………………………………………………
100.00%
100.00%
100.00%
Cost of goods sold …………………………..
54.77
51.91
46.04
Gross profit …………………………………………
45.23
48.09
53.96
Selling expenses …………………………….……
11.41
11.92
12.52
Administrative expenses ………………..……
8.43
8.80
10.92
Total expenses ……………………………….……
19.84
20.72
23.44
Income before taxes ……………………….….
25.39
27.36
30.53
Income taxes ………………………………….……
3.04
3.56
3.69
Net income …………………………………….……
22.34%
23.80%
26.84%
* Some totals do not reconcile due to rounding.
Problem 13-3B (60 minutes)
Trans-
action
Current
Assets
Quick
Assets
Current
Liabilities
Current
Ratio
Acid-Test
Ratio
Working
Capital
Beginning*
$300,000
$168,000
$120,000
2.50
1.40
$180,000
June 1
+120,000
+120,000
– 75,000
_______
________
____
____
_______
Bal.
345,000
288,000
120,000
2.88
2.40
225,000
June 3
+ 88,000
+ 88,000
– 88,000
– 88,000
________
____
____
_______
Bal.
345,000
288,000
120,000
2.88
2.40
225,000
June 5
+150,000
________
+150,000
____
____
_______
Bal.
495,000
288,000
270,000
1.83
1.07
225,000
June 7
+100,000
+100,000
+100,000
____
____
_______
Bal.
595,000
388,000
370,000
1.61
1.05
225,000
June 10
+120,000
+120,000
_______
____
____
_______
Bal.
715,000
508,000
370,000
1.93
1.37
345,000
June 12
– 275,000
– 275,000
________
____
____
_______
Bal.
440,000
233,000
370,000
1.19
0.63
70,000
June 15
________
________
+ 80,000
____
____
_______
Bal.
440,000
233,000
450,000
0.98
0.52
(10,000)
June 19
+0
+0
________
____
____
_______
Bal.
440,000
233,000
450,000
0.98
0.52
(10,000)
June 22
– 12,000
– 12,000
– 12,000
____
____
_______
Bal.
428,000
221,000
438,000
0.98
0.50
(10,000)
June 30
– 80,000
– 80,000
– 80,000
____
____
_______
Bal.
$348,000
$141,000
$358,000
0.97
0.39
(10,000)
*Beginning balances
Current assets (given) …………………………..
$300,000
Current liabilities ($300,000 / 2.50) ………..…………..
120,000
Quick assets ($120,000 x 1.40) ……………..…………..
168,000
Problem 13-4B (50 minutes)
1. Current ratio
2. Acid-test ratio
3. Days’ sales uncollected
4. Inventory turnover
5. Days’ sales in inventory
6. Debt–to-equity ratio
7. Times interest earned
8. Profit margin ratio
Problem 13–4B (Concluded)
9. Total asset turnover
10. Return on total assets
11. Return on common stockholders’ equity
Problem 13–6BA (Concluded)
Part 3 Income from discontinued segment
l.
Loss from operating a discontinued segment (after-tax) ………………
$ (90,000)
p.
Loss on sale of discontinued segment’s assets (after-tax) …..………
(135,000)
Loss from discontinued segment …………………………………………
$(225,000)
Part 4 Income before extraordinary items
Income from cont. operations after taxes (from Part 2) …….……….
$ 783,000
Loss from discontinued segment (from Part 3) ………………..……….
(225,000)
Income before extraordinary items ……………………………..……….
$ 558,000
Part 5 Net income
Income before extraordinary items ……………………………….……..
$ 558,000
Extraordinary item:
e.
Loss on hurricane damage (after-tax) …………………………………..
(48,000)
Net income ……………………………………………………….………….……..
$ 510,000