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Exercise 12-12 (LO12.5)
LeBron’s Bookstores
Income Statement
For the Year Ended December 31, 2018
Net sales
$ 11,000,000
Cost of goods sold
6,500,000
Exercise 12-13 (LO12.5)
Shaquille Corporation
Income Statement
For the Year Ended December 31, 2018
Operating income
$ 1,700,000
Inventory write-down
200,000
Chapter 12 - Financial Statement Analysis
Exercise 12-14 (LO12.6)
a. Conservative (lower income, lower assets)
Exercise 12-15 (LO12.6)
Requirement 1
(a) Aggressive
Requirement 2
Chapter 12 - Financial Statement Analysis
PROBLEMS: SET A
Problem 12-1A (LO12.1)
Requirement 1
Sports Emporium
Income Statements
For the Year Ended December 31, 2018
Sporting Goods
Sports Apparel
Amount
%
Amount
%
Net sales
$1,800,000
100.0
$970,000
100.0
Requirement 2
The sporting goods segment has a higher net income ($250,000) than the sports
Problem 12-2A (LO12.2)
Requirement 1
Anything Tennis
Income Statements
For the Years Ended December 31
Increase (Decrease)
2018
2017
Amount
%
Net sales
$ 3,500,000
$ 2,620,000
$ 880,000
33.6
Cost of goods sold
2,150,000
1,380,000
770,000
55.8
Requirement 2
Sales increased $880,000 (33.6%), but cost of goods sold increased $770,000 (55.8%),
Problem 12-3A (LO12.1, 12.2)
Requirement 1
Sports Unlimited
Balance Sheet
December 31, 2018
2018
2017
Assets
Amount
%
Amount
%
Current assets:
Cash
$ 103,500
23.0
$ 70,400
17.6
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$ 30,150
6.7
$ 46,800
11.7
Interest payable
7,200
1.6
3,600
0.9
Requirement 2
Sports Unlimited
Balance Sheet
December 31, 2018
Year
Increase (Decrease)
Assets
2018
2017
Amount
%
Current assets:
Cash
$ 103,500
$ 70,400
$ 33,100
47.0
Accounts receivable
46,800
32,000
14,800
46.3
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$ 30,150
$ 46,800
$(16,650)
(35.6)
Chapter 12 - Financial Statement Analysis
Problem 12-4A (LO12.3)
Risk Ratios
Calculations
1. Receivables turnover ratio
$3,086,000
($70,000 + $91,000) / 2
= 38.3 times
4. Average days in inventory
365
15.1
= 24.2 days
Problem 12-5A (LO12.4)
Profitability Ratios
Calculations
1. Gross profit ratio
$1,126,000
$3,086,000
= 36.5%
4. Asset turnover
$3,086,000
($794,200 + $946,000) / 2
= 3.5 times
Problem 12-6A (LO12.3, 12.4)
Requirement 1
Risk Ratios
Calculations
Receivables turnover ratio
2018
$3,086,000
($70,000 + $91,000) / 2
= 38.3 times
Current ratio
2018
$415,000
$104,000
= 4.0 to 1
Chapter 12 - Financial Statement Analysis
Requirement 2
Profitability Ratios
Calculations
Gross profit ratio
2018
$1,126,000
$3,086,000
= 36.5%
Return on assets
2018
$139,000
($794,200 + $946,000) / 2
= 16.0%
Requirement 3
The risk ratios are mixed. The receivables and inventory turnover ratios improved in
2019, while the current ratio and debt to equity ratio indicate greater risk in 2019.
Chapter 12 - Financial Statement Analysis
PROBLEMS: SET B
Problem 12-1B (LO12.1)
Requirement 1
Game-On Sports
Income Statements
For the Year Ended December 31, 2018
Athletic Equipment
Accessories
Amount
%
Amount
%
Net sales
$3,050,000
100.0
$3,500,000
100.0
Cost of goods sold
1,350,000
44.3
1,670,000
47.7
Requirement 2
The athletic equipment segment is more profitable. Net income is 26.0% of sales in
that segment compared to only 23.0% of sales in the accessories segment. If these
Problem 12-2B (LO12.2)
Requirement 1
Galaxy Tennis
Income Statements
For the Years Ended December 31
Increase (Decrease)
2018
2017
Amount
%
Net sales
$ 6,150,000
$ 6,250,000
$ (100,000)
(1.6)
Cost of goods sold
2,850,000
2,920,000
(70,000)
(2.4)
Requirement 2
Sales and gross profit decreased 1.6% and 0.9% respectively. However, even though
Problem 12-3B (LO12.1, 12.2)
Requirement 1
Fantasy Football
Balance Sheet
December 31
Assets
2018
2017
Amount
%
Amount
%
Current assets:
Cash
$ 208,000
5.2
$ 262,200
6.9
Accounts receivable
856,000
21.4
999,400
26.3
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$ 168,000
4.2
$ 129,200
3.4
Interest payable
0
0.0
3,800
0.1
Chapter 12 - Financial Statement Analysis
Requirement 2
Fantasy Football
Balance Sheet
December 31
Year
Increase (Decrease)
Assets
2018
2017
Amount
%
Current assets:
Cash
$ 208,000
$ 262,200
(54,200)
(20.7)
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$ 168,000
$ 129,200
38,800
30.0
Chapter 12 - Financial Statement Analysis
Problem 12-4B
Risk Ratios
Calculations
1. Receivables turnover ratio
$8,900,000
($810,000 + $790,000) / 2
= 11.1 times
4. Average days in inventory
365
4.4
= 83.0 days
