Question
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
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-
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