11–57
Solutions to Analyze, Think, Communicate – Chapter 11
ATC 11-1
All dollar amounts are in millions.
a. The par value of Targets’ common stock is $.0833 (8.33 cents),
according to its balance sheet.
b. The company had 632,930,740 shares issued and outstanding.
11–58
ATC 11-2
Except for per-share amounts, Wendy’s and Harley Davidson’s amounts
are in thousands, and Coca-cola amounts are in millions.
b. Wendy’s stated value per share:
$47,042 470,424 = $.10 per share
Coca-Cola par value per share:
ATC 11-2 (cont.)
e. Wendy’s average cost per share of treasury stock:
2013: $409,449 77,637 = $5.27
Coca-Cola’s average cost per share of treasury stock:
2013: $39,091 2,638 = $14.82
ATC 11-2 h. (cont.)
Cola-Cola
(in millions)
Stockholders’ Equity
2013
2012
Common Stock
$ 1,760
$ 1,760
Capital Surplus
12,276
11,379
Total Paid-in Capital
14,036
13,139
Retained Earnings
61,660
58,045
Accum. Other Comp. Income
(3,432)
(3,385)
Treasury Stock
(39,091)
(35,009)
Total Stockholders’ Equity
$33,173
$32,790
Stockholders’ Equity
2012
Common Stock
$ 3,432
$ 3,413
Additional Paid-in Capital
1,175,052
1,066,069
Total Paid-in Capital
1,178,484
1,069,482
Retained Earnings
7,852,729
7,306,424
Accum. Other Comp. Income
(332,676)
(607,678)
Treasury Stock
(5,689,051)
(5,210,604)
Total Stockholders’ Equity
$3,009,486
$2,557,624
11–61
ATC 11-3
a.
Company
Net Earnings
Shares
Outstanding
EPS
Berkshire Hathaway
19,476,000
÷
1,644
=
11,847
Carmax
434,284
÷
228,095
=
1.90
Chevron
21,423,000
÷
1,916,000
=
11.18
eBay
2,856,000
÷
1,295,000
=
2.21
Pfizer
22,003,000
÷
6,813,000
=
3.23
b. and c.
Rank
Company
Market-
Price
per Share
EPS
P/E
Ratio
3
Berkshire Hathaway
$183,772
÷
11,847
=
15.5
2
Carmax
48.6
÷
1.90
=
25.6
4
Chevron
115.08
÷
11.18
=
10.3
1
eBay
59.06
2.21
=
26.7
5
Pfizer
32.43
÷
3.23
=
10.0
11–62
ATC 11-3 – (continued)
d.
Company
Stockholders’
Equity
Shares
Outstanding
Book–
Value per
Share
Berkshire Hathaway
$224,485,000
÷
1,644
=
$136,548
Carmax
3,019,167
÷
228,095
=
13.24
Chevron
150,427,000
÷
1,916,000
78.51
eBay
23,647,000
÷
1,295,000
=
18.26
Pfizer
76,620,000
÷
6,813,000
=
11.25
e.
Rank
Company
Market-
Price
per Share
Book-
Value
per
Share
Ratio
of Market
Value
to Book Value
5
Berkshire Hathaway
$183,772
÷
$136,548
=
1.35
1
Carmax
48.6
÷
13.24
=
3.67
4
Chevron
115.08
÷
78.51
=
1.47
2
eBay
59.06
÷
18.26
=
3.23
3
Pfizer
32.43
÷
11.25
=
2.88
11–63
ATC 11-4
Note: The stock price for the date two months after the end of the
company’s fiscal year was used because this about the time
the company’s audited financial statements and annual report
would be released to the public.
11–64
ATC 11-5
Note: The stock price for the date two months after the end of the
companies’ fiscal year was used because this was close to the
time the companies’ audited financial statements and annual
report would be released to the public.
11–65
ATC 11-6
Note to Instructor: The factors given below are only selected factors and
not meant to be all inclusive.
MEMO
TO: Jim and Scott
FROM: Sam Student
The advantages and disadvantages of the partnership and the corporate
11–66
Based on above information, I would recommend that the business be
11–67
ATC 11-7
a.
1. Converting to an accelerated method of depreciation would increase
expense on the income statement thereby decreasing net income
2. Increasing the receivables expected to be uncollectible would
increase the amount of bad debt expense on the income statement
3. Increasing the percentage of estimated warranty claims would
increase warranty expense in the current period. This action would
reduce net income and stockholders’ equity (i.e., retained earnings)
on the balance sheet. Other balance sheet accounts affected would
11–68
ATC 11-7 (cont.)
c. The managers of a company are hired to make decisions that are in
the best interest of the stockholders (the owners of the company).
They should make decisions that increase the value of stockholders’
equity, not decisions that increase their own personal worth.
11–69
ATC 11-8
This solution is based on the company’s From10-K for the fiscal year
ended September 29, 2013, and dollar amounts and total shares
outstanding are in millions.
1. The fair values of its assets, such as land, are higher than the
2. The “market” believes the company has goodwill that is not
3. The “market” believes the company has potential future
earnings power that is not reflected on its balance sheet under
11–70
EXERCISE 11-1B
Transactions
Cash Acquired from Owner
$30,000
Revenues
50,000
Expenses
22,300
Withdrawals
10,000
Maria Lopez Sole Proprietorship
Financial Statements
For the Year Ended December 31, 2016
Income Statement
Revenues
$50,000
Expenses
(22,300)
Net Income
$27,700
Capital Statement
Beginning Capital Balance
$ -0-
Plus: Capital Acquired from Owner
30,000
Plus: Net Income
27,700
Less: Withdrawal by Owner
(10,000)
Ending Capital Balance
$47,700
11–71
EXERCISE 11-1B (cont.)
Maria Lopez Sole Proprietorship
Financial Statements
Balance Sheet
As of December 31, 2016
Assets
Cash
$47,700
Total Assets
$47,700
Liabilities
$ -0-
Equity
Lopez, Capital
47,700
Total Liabilities and Equity
$47,700
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Receipts from Revenues
$50,000
Paid for Expenses
(22,300)
Net Cash Flow from Operating Activities
$27,700
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Proceeds from Owner
$30,000
Paid for Owner Withdrawals
(10,000)
Net Cash Flow from Financing Activities
20,000
Net Change in Cash
47,700
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$47,700
EXERCISE 11-2B
Transactions:
Cash Contributions
D. Reed
$ 70,000
33.33%
J. Files
140,000
66.67%
Total
$210,000
100.00%
Revenues
$ 75,000
Expenses
39,000
Reed Withdrawal
2,000
Files Withdrawal
4,000
11–73
EXERCISE 11-2B (cont.)
Prepared for the instructor’s use:
Analysis of Capital Accounts:
Reed
Files
Total
Beginning Capital Balance
$ -0-
$ -0-
$ -0-
Investments
70,000
140,000
210,000
Net Income
36,000
D. Reed 33.33%
12,000
J. Files 66.67%
24,000
Withdrawals
(2,000)
(4,000)
(6,000)
Ending Capital Balances
$80,000
$160,000
$240,000
11–74
EXERCISE 11-2B (cont.)
RF Partnership
Financial Statements
Balance Sheet
As of December 31, 2016
Assets
Cash
$240,000
Total Assets
$240,000
Liabilities
$ -0-
Equity
D. Reed, Capital
$ 80,000
J. Files, Capital
160,000
Total Equity
240,000
Total Liabilities and Equity
$240,000
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Receipts from Revenues
$ 75,000
Paid for Expenses
(39,000)
Net Cash Flow from Operating Activities
$36,000
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Proceeds from Partners
$210,000
Paid for Partners’ Withdrawals
(6,000)
Net Cash Flow from Financing Activities
204,000
Net Change in Cash
240,000
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$240,000
11–75
11–76
EXERCISE 11-3B
Transactions:
Issued 10,000 shares of $10 par stock @ $16
$160,000
Revenues
71,000
Expenses
46,500
Dividends Paid
5,000
Bozeman Corporation
Financial Statements
For the Year Ended December 31, 2016
Income Statement
Revenues
$71,000
Expenses
(46,500)
Net Income
$24,500
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$ -0-
Plus: Issuance of Common Stock
160,000
Ending Common Stock
$160,000
Beginning Retained Earnings
$ -0-
Plus: Net Income
24,500
Less: Dividends
(5,000)
Ending Retained Earnings
19,500
Total Stockholders’ Equity
$179,500