Question
1. Financial statements for Rarick Company appear below: Rarick Company Statement of Financial Position December 31, Year 2 and Year 1 (dollars in thousands) Year
1. Financial statements for Rarick Company appear below:
Rarick Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2
Year 1
Current assets:
Cash and marketable securities ...........................
Php
120
Php
120
Accounts receivable, net .....................................
180
150
Inventory .............................................................
100
100
Prepaid expenses.................................................
10
20
Total current assets ................................................
410
390
Noncurrent assets:
Plant & equipment, net .......................................
1,830
1,780
Total assets.............................................................
Php2,
240
Php2,
170
Current liabilities:
Accounts payable ................................................
Php
130
Php
150
Accrued liabilities ...............................................
30
50
Notes payable, short term ...................................
270
270
Total current liabilities ...........................................
430
470
Noncurrent liabilities:
Bonds payable.....................................................
310
300
Total liabilities .......................................................
740
770
Stockholders' equity:
Preferred stock, Php10 par, 10% ........................
100
100
Common stock, Php5 par....................................
240
240
Additional paid-in capital-common stock ..........
250
250
Retained earnings................................................
910
810
Total stockholders' equity......................................
1,500
1,400
Total liabilities & stockholders' equity..................
Php2,
240
Php2,
170
Rarick Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) .............................................
Php2,
400
Cost of goods sold..................................................
1,680
Gross margin ..........................................................
720
Selling and administrative expense........................
280
Net operating income .............................................
440
Interest expense......................................................
30
Net income before taxes.........................................
410
Income taxes (30%) ...............................................
123
Net income .............................................................
Php
287
Required:
Compute the following for Year 2:
a. Current ratio.
b. Acid-test ratio.
c. Average collection period.
d. Inventory turnover.
e. Times interest earned.
f. Debt-to-equity ratio.
2. Carlstone Corporation's most recent balance sheet and income statement appear below:
Statement of Financial Position
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2
Year 1
Assets
Current assets:
Cash ....................................................................
Php
30
Php
110
Accounts receivable ............................................
210
260
Inventory .............................................................
190
170
Prepaid expenses.................................................
70
70
Total current assets ................................................
500
610
Plant and equipment, net........................................
810
740
Total assets.............................................................
Php1,
310
Php1,
350
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ................................................
Php
140
Php
150
Accrued liabilities ...............................................
30
30
Notes payable, short term ...................................
40
40
Total current liabilities ...........................................
210
220
Bonds payable ........................................................
190
240
Total liabilities .......................................................
400
460
Stockholders' equity:
Preferred stock, Php100 par value, 5% ...............
100
100
Common stock, Php2 par value ..........................
400
400
Additional paid-in capital-common stock ..........
130
130
Retained earnings................................................
280
260
Total stockholders' equity......................................
910
890
Total liabilities & stockholders' equity..................
Php1,
310
Php1,
350
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) .............................................
Php1,
260
Cost of goods sold..................................................
770
Gross margin ..........................................................
490
Selling and administrative expense........................
400
Net operating income .............................................
90
Interest expense......................................................
26
Net income before taxes.........................................
64
Income taxes (30%) ...............................................
19
Net income .............................................................
Php
45
Required:
Compute the following for Year 2:
a. Working capital.
b. Current ratio.
c. Acid-test ratio.
d. Accounts receivable turnover.
e. Average collection period.
f. Inventory turnover.
g. Average sale period.
3. Financial statements for Pratt Company appear below:
Pratt Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2
Year 1
Current assets:
Cash and marketable securities ...........................
Php
140
Php
140
Accounts receivable, net .....................................
190
180
Inventory .............................................................
150
150
Prepaid expenses.................................................
70
70
Total current assets ................................................
550
540
Noncurrent assets:
Plant & equipment, net .......................................
1,490
1,420
Total assets.............................................................
Php2,
040
Php1,
960
Current liabilities:
Accounts payable ................................................
Php
160
Php
160
Accrued liabilities ...............................................
50
60
Notes payable, short term ...................................
230
250
Total current liabilities ...........................................
440
470
Noncurrent liabilities:
Bonds payable.....................................................
300
300
Total liabilities .......................................................
740
770
Stockholders' equity:
Preferred stock, Php5 par, 10% ..........................
120
120
Common stock, Php5 par....................................
180
180
Additional paid-in capital-common stock ..........
210
210
Retained earnings................................................
790
680
Total stockholders' equity......................................
1,300
1,190
Total liabilities & stockholders' equity..................
Php2,
040
Php1,
960
Pratt Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account) .............................................
Php2,
000
Cost of goods sold..................................................
1,400
Gross margin ..........................................................
600
Selling and administrative expense........................
240
Net operating income .............................................
360
Interest expense......................................................
30
Net income before taxes.........................................
330
Income taxes (30%) ...............................................
99
Net income .............................................................
Php 2
31
Dividends during Year 2 totaled Php121 thousand, of which Php12 thousand were
preferred dividends. The market price of a share of common stock on December 31, Year
2 was Php80.
Required:
Compute the following for Year 2:
a. Earnings per share of common stock.
b. Price-earnings ratio.
c. Dividend payout ratio.
d. Dividend yield ratio.
e. Return on total assets.
f. Return on common stockholders' equity.
g. Book value per share.
h. Working capital.
i. Current ratio.
j. Acid-test ratio.
k. Accounts receivable turnover.
l. Average collection period.
m. Inventory turnover.
n. Average sale period.
o. Times interest earned.
p. Debt-to-equity ratio.
4. Espinola Corporation's most recent balance sheet and income statement appear below:
Statement of Financial Position
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2
Year 1
Assets
Current assets:
Cash ...................................................................
Php
320
Php
180
Accounts receivable ..........................................
220
240
Inventory ...........................................................
140
130
Prepaid expenses ...............................................
20
20
Total current assets ...............................................
700
570
Plant and equipment, net ......................................
860
920
Total assets ...........................................................
Php1,
560
Php1,
490
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ..............................................
Php
200
Php
170
Accrued liabilities..............................................
80
80
Notes payable, short term ..................................
40
40
Total current liabilities .........................................
320
290
Bonds payable ......................................................
210
220
Total liabilities......................................................
530
510
Stockholders' equity:
Preferred stock, Php100 par value, 5% .............
100
100
Common stock, Php1 par value.........................
100
100
Additional paid-in capital-common stock ........
150
150
Retained earnings ..............................................
680
630
Total stockholders' equity ....................................
1,030
980
Total liabilities & stockholders' equity ................
Php1,
560
Php1,
490
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account)............................................
Php1,
220
Cost of goods sold ................................................
790
Gross margin ........................................................
430
Selling and administrative expense ......................
268
Net operating income ...........................................
162
Interest expense ....................................................
26
Net income before taxes .......................................
136
Income taxes (30%) ..............................................
41
Net income............................................................
Php
95
Dividends on common stock during Year 2 totaled Php40 thousand. Dividends on
preferred stock totaled Php5 thousand. The market price of common stock at the end of
Year 2 was Php12.87 per share.
Required:
Compute the following for Year 2:
a. Gross margin percentage.
b. Earnings per share (of common stock).
c. Price-earnings ratio.
d. Dividend payout ratio.
e. Dividend yield ratio.
f. Return on total assets.
g. Return on common stockholders' equity.
h. Book value per share.
i. Working capital.
j. Current ratio.
k. Acid-test ratio.
l. Accounts receivable turnover.
m. Average collection period.
n. Inventory turnover.
o. Average sale period.
p. Times interest earned.
q. Debt-to-equity ratio.
5. Siam Corporation's most recent balance sheet and income statement appear below:
Statement of Financial Position
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2
Year 1
Assets
Current assets:
Cash ....................................................................
Php
100
Php
140
Accounts receivable ............................................
160
180
Inventory .............................................................
210
190
Prepaid expenses.................................................
40
50
Total current assets ................................................
510
560
Plant and equipment, net........................................
860
820
Total assets.............................................................
Php1,
370
Php1,
380
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ................................................
Php
160
Php
180
Accrued liabilities ...............................................
80
80
Notes payable, short term ...................................
80
80
Total current liabilities ...........................................
320
340
Bonds payable ........................................................
70
100
Total liabilities .......................................................
390
440
Stockholders' equity:
Preferred stock, Php100 par value, 10% .............
200
200
Common stock, Php1 par value ..........................
200
200
Additional paid-in capital-common stock ..........
130
130
Retained earnings................................................
450
410
Total stockholders' equity......................................
980
940
Total liabilities & stockholders' equity..................
Php1,
370
Php1,
380
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) .............................................
Php1,
350
Cost of goods sold..................................................
820
Gross margin ..........................................................
530
Selling and administrative expense........................
399
Net operating income .............................................
131
Interest expense......................................................
17
Net income before taxes.........................................
114
Income taxes (30%) ...............................................
34
Net income .............................................................
Php
80
Dividends on common stock during Year 2 totaled Php20 thousand. Dividends on
preferred stock totaled Php20 thousand. The market price of common stock at the end of
Year 2 was Php2.88 per share.
Required:
Compute the following for Year 2:
a. Gross margin percentage.
b. Earnings per share (of common stock).
c. Price-earnings ratio.
d. Dividend payout ratio.
e. Dividend yield ratio.
f. Return on total assets.
g. Return on common stockholders' equity.
h. Book value per share.
6. Financial statements for Qadri Company appear below:
Qadri Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)
Year 2
Year 1
Current assets:
Cash and marketable securities...........................
Php
120
Php
100
Accounts receivable, net.....................................
130
120
Inventory.............................................................
160
180
Prepaid expenses ................................................
50
50
Total current assets ................................................
460
450
Noncurrent assets:
Plant & equipment, net .......................................
1,730
1,730
Total assets ............................................................
Php2,
190
Php2,
180
Current liabilities:
Accounts payable................................................
Php
50
Php
100
Accrued liabilities...............................................
60
50
Notes payable, short term ...................................
160
200
Total current liabilities...........................................
270
350
Noncurrent liabilities:
Bonds payable ....................................................
280
300
Total liabilities .......................................................
550
650
Stockholders' equity:
Preferred stock, Php10 par, 5% ..........................
120
120
Common stock, Php10 par .................................
220
220
Additional paid-in capital-common stock..........
110
110
Retained earnings ...............................................
1,190
1,080
Total stockholders' equity .....................................
1,640
1,530
Total liabilities & stockholders' equity .................
Php2,
190
Php2,
180
Qadri Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)
Sales (all on account).............................................
Php2,
300
Cost of goods sold .................................................
1,610
Gross margin..........................................................
690
Selling and administrative expense .......................
270
Net operating income.............................................
420
Interest expense .....................................................
30
Net income before taxes ........................................
390
Income taxes (30%) ...............................................
117
Net income.............................................................
Php
273
Dividends during Year 2 totaled Php163 thousand, of which Php6 thousand were
preferred dividends. The market price of a share of common stock on December 31, Year
2 was Php150.
Required:
Compute the following for Year 2:
a. Earnings per share of common stock.
b. Price-earnings ratio.
c. Dividend yield ratio.
d. Return on total assets.
e. Return on common stockholders' equity.
f. Book value per share.
7. Maranville Corporation's most recent balance sheet and income statement appear below:
Statement of Financial Position
December 31, Year 2 and Year 1
(in thousands of dollars)
Year 2
Year 1
Assets
Current assets:
Cash ....................................................................
Php
170
Php
180
Accounts receivable ............................................
160
180
Inventory .............................................................
170
160
Prepaid expenses.................................................
70
60
Total current assets ................................................
570
580
Plant and equipment, net........................................
840
830
Total assets.............................................................
Php1,
410
Php1,
410
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ................................................
Php
150
Php
160
Accrued liabilities ...............................................
40
40
Notes payable, short term ...................................
50
50
Total current liabilities ...........................................
240
250
Bonds payable ........................................................
90
100
Total liabilities .......................................................
330
350
Stockholders' equity:
Preferred stock, Php100 par value, 10% .............
200
200
Common stock, Php2 par value ..........................
400
400
Additional paid-in capital-common stock ..........
140
140
Retained earnings................................................
340
320
Total stockholders' equity......................................
1,080
1,060
Total liabilities & stockholders' equity..................
Php1,
410
Php1,
410
Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) .............................................
Php1,
410
Cost of goods sold..................................................
860
Gross margin ..........................................................
550
Selling and administrative expense........................
449
Net operating income .............................................
101
Interest expense......................................................
15
Net income before taxes.........................................
86
Income taxes (30%) ...............................................
26
Net income .............................................................
Php
60
Dividends on common stock during Year 2 totaled Php20 thousand. Dividends on
preferred stock totaled Php20 thousand. The market price of common stock at the end of
Year 2 was Php2.36 per share.
Required:
Compute the following for Year 2:
a. Earnings per share (of common stock).
b. Price-earnings ratio.
c. Dividend payout ratio.
d. Dividend yield ratio.
e. Return on total assets.
f. Return on common stockholders' equity.
g. Book value per share.
8. Isidro Corporation has provided the following financial data (in thousands of dollars):
Year 2
Year 1
Total assets.............................................................
Php1,
520
Php1,
490
Stockholders' equity:
Preferred stock, Php100 par value, 5% ...............
Php20
0
Php20
0
Common stock, Php2 par value ..........................
Php40
0
Php40
0
Additional paid-in capital-common stock ..........
Php16
0
Php16
0
Retained earnings................................................
Php38
0
Php32
0
Net income for Year 2 was Php110 thousand. Interest expense was Php21 thousand. The
tax rate was 30%. Dividends on common stock during Year 2 totaled Php40 thousand.
Dividends on preferred stock totaled Php10 thousand. The market price of common stock
at the end of Year 2 was Php9.15 per share.
Required:
Compute the following for Year 2:
a. Earnings per share (of common stock).
b. Price-earnings ratio.
c. Dividend payout ratio.
d. Dividend yield ratio.
e. Return on total assets.
f. Return on common stockholders' equity.
g. Book value per share.
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College Accounting Chapters 1-12
Authors: Douglas McQuaig
10th Edition
1439038783, 978-1439038789
