Question
Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one
Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2015, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,800 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $6,480 is due on March 31, 2016, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburns cash flow problems are due primarily to the companys desire to finance a $304,500 plant expansion over the next 2 fiscal years through internally generated funds.
The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal years.
| BRADBURN CORPORATION BALANCE SHEET MARCH 31 | ||
| Assets | 2015 | 2014 |
| Cash | $18,270 | $13,350 |
| Notes receivable | 149,800 | 132,410 |
| Accounts receivable (net) | 135,070 | 126,330 |
| Inventories (at cost) | 106,180 | 52,030 |
| Plant & equipment (net of depreciation) | 1,467,400 | 1,423,000 |
| Total assets | $1,876,720 | $1,747,120 |
| Liabilities and Owners Equity | ||
| Accounts payable | $79,990 | $91,320 |
| Notes payable | 78,080 | 63,210 |
| Accrued liabilities | 23,256 | 9,820 |
| Common stock (130,000 shares, $10 par) | 1,300,000 | 1,300,000 |
| Retained earningsa | 395,394 | 282,770 |
| Total liabilities and stockholders equity | $1,876,720 | $1,747,120 |
| aCash dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year 2015. |
| BRADBURN CORPORATION INCOME STATEMENT FOR THE FISCAL YEARS ENDED MARCH 31 | ||
| 2015 | 2014 | |
| Sales revenue | $3,018,600 | $2,719,300 |
| Cost of goods solda | 1,535,600 | 1,440,100 |
| Gross margin | 1,483,000 | 1,279,200 |
| Operating expenses | 861,960 | 782,800 |
| Income before income taxes | 621,040 | 496,400 |
| Income taxes (40%) | 248,416 | 198,560 |
| Net income | $372,624 | $297,840 |
| aDepreciation charges on the plant and equipment of $108,200 and $111,000 for fiscal years ended March 31, 2014 and 2015, respectively, are included in cost of goods sold. |
(a)
Compute the following items for Bradburn Corporation. (Round answer to 2 decimal places, e.g. 2.25.)
| (1) | Current ratio for fiscal years 2014 and 2015. |
| (2) | Acid-test (quick) ratio for fiscal years 2014 and 2015. |
| (3) | Inventory turnover for fiscal year 2015. |
| (4) | Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,696,100 at 3/31/13.) |
| (5) | Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015. |
| 2014 | 2015 | ||||
| (1) | Current ratio | :1 | :1 | ||
| (2) | Acid-test (quick) ratio | :1 | :1 | ||
| (3) | Inventory turnover | times | |||
| (4) | Return on assets | % | % |
| (5) | Percent Changes | Percent Increase |
| Sales revenue | % | |
| Cost of goods sold | % | |
| Gross margin | % | |
| Net income after taxes | % |
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Modern Advanced Accounting in Canada
Authors: Hilton Murray, Herauf Darrell
8th edition
1259087557, 1057317623, 978-1259087554
