Chapter 13 – Analyzing and Interpreting Financial Statements
Exercise 13-8 (25 minutes)
1. Current ratio
2014: = 1.88 to 1
2. Acid-test ratio
2014: = 0.93 to 1
$37,800 + $50,200
$31,800 + $89,500 + $112,500 + $10,700
$129,900
$31,800 + $89,500
$129,900
$35,625 + $62,500
Exercise 13-9 (25 minutes)
1. Days’ sales uncollected
$673,500
2. Accounts receivable turnover
2014: = 8.9 times
3. Inventory turnover
2014: = 4.2 times
$345,500
4. Days’ sales in inventory
2014: x 365 = 99.9 days
2013: x 365 = 87.2 days
$89,500
$532,000
$673,500
($89,500 + $62,500)/2
($62,500 + $50,200)/2
$411,225
($112,500 + $82,500)/2
($82,500 + $54,000)/2
$112,500
$411,225
$82,500
$345,500
Exercise 13-11 (30 minutes)
1. Profit margin
2. Total asset turnover
2014: = 1.4 times
$532,000
3. Return on total assets
2014: = 6.4%
($445,000 + $377,500)/2
$673,500
($523,000 + $445,000)/2
($445,000 + $377,500)/2
$31,100
($523,000 + $445,000)/2
$29,375
Exercise 13-14 (15 minutes)
RANDA MERCHANDISING, INC.
Income Statement
For Year Ended December 31, 2013
Net sales ………………………………………………………………..
$2,900,000
Expenses
Cost of goods sold ……………………………………………...
$1,480,000
Salaries expense ………………………………………………...
640,000
Depreciation expense ………………………………………....
232,500
Total expenses …………………………………………………...
2,352,500
Income from continuing operations before taxes …....
547,500
Income taxes expense …………………………………………...
217,000
Income from continuing operations ………………………..
330,500
Discontinued segment
Loss from operating wholesale business
segment (net of tax) ………………………………………....
(444,000)
Gain on sale of wholesale business
segment (net of tax) ………………………………………....
775,000
331,000
Income before extraordinary gain …………………………..
661,500
Extraordinary gain on condemnation of
company property (net of tax) ……………………………...
230,000
Net income …………………………………………………………....
$ 891,500
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Financial Accounting, 7th Edition
18
Problem 13-1A (60 minutes)
Part 1
Current ratio: December 31, 2014: $52,390 / $22,800 = 2.3 to 1
December 31, 2013: $37,924 / $19,960 = 1.9 to 1
December 31, 2012: $51,748 / $20,300 = 2.5 to 1
Part 2
KORBIN COMPANY
Common-Size Comparative Income Statements
For Years Ended December 31, 2014, 2013, and 2012
2014
2013
2012
Sales ……………………………………………………
100.00%
100.00%
100.00%
Cost of goods sold …………………………..
51.08
62.50
55.36
Gross profit …………………………………………
48.92
37.50
44.64
Selling expenses …………………………….……
18.54
13.80
18.27
Administrative expenses ………………..……
9.13
8.80
8.20
Total expenses ……………………………….……
27.67
22.60
26.47
Income before taxes ……………………….….
21.25
14.90
18.17
Income taxes ………………………………….……
7.35
3.05
5.64
Net income ……………………………………..…..
13.90%
11.85%
12.53%
Problem 13-2A (120 minutes)
Part 1
HAROUN COMPANY
Income Statement Trends
For Years Ended December 31, 2014-2008
2014
2013
2012
2011
2010
2009
2008
Sales ……………………………….
182.5%
161.2%
147.6%
136.2%
127.8%
119.6%
100.0%
Cost of goods sold …………..
212.6
176.1
153.9
136.9
128.3
121.2
100.0
Gross profit ……………………..
131.0
135.7
136.8
135.1
126.9
117.0
100.0
Operating expenses ………...
279.7
216.9
198.3
144.1
123.7
122.0
100.0
Net income ……………………...
52.7
92.9
104.5
130.4
128.6
114.3
100.0
HAROUN COMPANY
Balance Sheet Trends
December 31, 2014-2008
2014
2013
2012
2011
2010
2009
2008
Cash ………………………………..
65.2%
87.6%
92.1%
94.4%
98.9%
96.6%
100.0%
Accounts recble., net ……….
226.9
238.0
215.7
166.7
147.2
139.8
100.0
Merchandise inventory ……..
298.9
221.8
195.8
167.8
152.2
131.7
100.0
Other current assets ………...
400.0
355.6
155.6
377.8
311.1
311.1
100.0
Long-term investments …….
—
—
—
100.0
100.0
100.0
100.0
Plant assets, net ……………...
278.6
277.8
241.7
130.2
134.9
118.6
100.0
Total assets ……………………..
246.8
222.3
195.4
144.4
138.6
124.0
100.0
Current liabilities ……………..
432.6
369.5
254.6
217.7
193.6
185.1
100.0
Long-term liabilities ………….
323.5
285.0
278.0
142.5
145.0
155.0
100.0
Common stock ………………...
153.8
153.8
153.8
130.8
130.8
100.0
100.0
Other paid-in capital ………...
166.7
166.7
166.7
113.3
113.3
100.0
100.0
Retained earnings…………….
213.2
179.2
137.7
124.5
109.4
91.2
100.0
Total liabilities & equity …….
246.8
222.3
195.4
144.4
138.6
124.0
100.0