B&L Landscapes, Inc. Mini Practice Part 3

Bill Graham and Larry Miller incorporated B&L Landscapes, Inc. on July 1, 2014. The business consists of lawn care and sprinkler system installations. In addition, they also sell two types of fertilizer. At the end of the first year, Bill and Larry have asked you to analyze their first year of operations and given them some suggestions on areas that may need improvement as they move into their second year. Below are the balance sheets for the date of incorporation and the end of the first year of operations.

B&L Landscapes, Inc.

Balance Sheet

July 1, 2014

Assets

Current Assets

Cash $27,500

Accounts Receivable (net) 3,500

Prepaid Insurance 1,500

Inventory 6,000

Total Current Assets $38,500

Property, Plant and Equipment

Land 8,000

Building 25,000

Equipment 18,500

51,500

Total Assets $90,000

Liabilities and Stockholders Equity Current Liabilities

Accounts Payable $10,000

Long-Term Liabilities Notes Payable 45,000

Total Liabilities $55,000

Stockholders Equity Paid-in Capital

Capital Stock( 5% Preferred stock, $100 par value, non-cumulative, non-participating, 5,000 shares authorized, 50 shares issued and outstanding 5,000 Common stock, $1 par value, 150,000 shares authorized, 30,000 shares issued and outstanding) 30,000

Total Capital Stock 35,000

Retained Earnings 0

Total Stockholders Equity 35,000

Total Liabilities and Stockholders Equity $90,000

B&L Landscapes, Inc.

Balance Sheet

June 30, 2015

Assets

Current Assets

Cash $23,850

Accounts Receivable (net) 6,275

Prepaid Insurance 1,500

Inventory 29,125

Total Current Assets $60,750

Property, Plant and Equipment

Land 8,000

Building 25,000

Less Accumulated Depreciation 1,250 23,750

Equipment 32,500

Less Accumulated Depreciation 7,000 25,500 57,250

Total Assets $118,000

Liabilities and Stockholders Equity Current Liabilities

Accounts Payable $17,500

Long Term Liabilities

Notes Payable 45,000

Total Liabilities $62,500

Stockholders Equity Paid in Capital

Capital Stock (5% Preferred stock, $100 par value, non-cumulative, non- participating, 5,000 shares authorized, 70 shares issued and outstanding 5,000 Common stock, $1 par value, 150,000 shares authorized, 40,000 shares issued and outstanding) 30,000

Total Capital Stock 35,000

Retained Earnings 20,500

Total Stockholders Equity 55,500

Total Liabilities and Stockholders Equity$118,000

Additional Information:Net Income for the year ending June 30, 2015 was $22,500 and $2,000 was paid in dividends. Net Sales for the year ending June 30, 2015 was $201,000.

Industry Averages-Landscaping Services

Assets

Current Assents 45%

Plant Assets (net) 55%

Total Assets 100%

Liabilities

Current Liabilities 18%

Long-Term Liabilities 15%

Total Liabilities 33%

Stockholder's Equity

Common Stock, $1 par 10%

Prefferred Stock, $100 par 20%

Retained Earnings 37%

Total Stockholder's equity 67%

Total Liabilities and Stockholders' equity 100%

Instructions:

1. Using the two balance sheets provided, prepare a horizontal and vertical analysis for the period ending June 30, 2015. You only need to complete one vertical analysis using the June 30, 2015 balance sheet values.

2. Compare the vertical analysis results with the industry average information provided and identify any areas that you believe merit further investigation, including why you would investigate them further and likely reasons for the results.

3. Calculate the following ratios for the company: 1) Current Ratio 2) Acid-test ratio 3) Profit Margin 4) Asset Turnover 5) Return on Assets 6) Debt to Assets Ratio

Data Entry Tools:

Horizontal Analysis

B&L LANDSCAPES, INC

CONDENSED BALANCE SHEETS

FOR THE YEAR ENDING JUNE 30

	2015	2014	increae or amount	(decrease) Percent
Assets
Liabilities
Stockholders' Equity

Vertical Analysis

B&L LANDSCAPES, INC

CONDENSED BALANCE SHEETS

FOR THE YEAR ENDING JUNE 30

	2015		Industry Averages
	Amount	Percent	Percent	Variance
Assets
Liabilities
Stockholders' Equity

RATIOS

Current Ratio-

Acid Test Ratio-

Profit Margin-

Asset Turnover-

Return on Assets-

Debt to Assets Ratio-