Davidson Yachts is a small private company founded by two businesspeople who are friends and avid sailors. At present, they are interested in expanding the business and have asked you to review its financial statements.

Davidson Yachts sells approximately $130$ to $180$ sailboats each year, ranging from $15-$foot dinghies to $21-$foot sailboats. Their sales prices range from $$2,300$ to more than $$10,300.$ The company has a limited inventory of boats consisting primarily of one or two boats from each of the four manufacturers that supply Davidson. The company also sells a variety of supplies and parts and performs different types of service. Most sales are on credit.

The company operates from a large building that has offices, storage, and sales space for some of the smaller sailboats. The larger sailboats are kept in a fenced area adjacent to the main building, and an ample parking area is nearby. This year, Davidson purchased a boat lift to haul boats. The lift has brought in revenues for boat repairs, hull painting, and related services, as well as the boat hauls.

The balance sheet and income statement for Davidson Yachts for $2017$ to $2022$ follow. The increase in net fixed assets in the recent $2$ years is due to improvements in the building, paving of the parking area, and the purchase of the lift.

DAVIDSON YACHTS COMPANY

Comparative Balance Sheet

December $31$

$201720182019202020212022$

Cash $ $23,560$ $ $22,266$ $ $19,035$ $ $28,726$ $ $43,992$ $$31,564$

Accounts receivable $99,765103,164113,263126,053104,688144,309$

Allowance for bad debts $(9,454)(9,236)(8,974)(11,416)(7,432)(12,806)$

Inventory $35,30957,11462,15268,27459,29497,104$

Other current assets $12,19413,2249,38411,39619,22323,233$

Total current assets $ $161,374$ $ $186,532$ $ $194,860$ $ $223,033$ $ $219,765$ $$283,404$

Property and equipment $262,495282,308299,680368,865405,569498,926$

Accumulated depreciation $(66,284)(93,742)(123,192)(158,399)(187,527)(227,607)$

Total assets $ $357,585$ $ $375,098$ $ $371,348$ $ $433,499$ $ $437,807$ $$554,723$

Accounts payable $ $82,935$ $ $78,457$ $ $63,706$ $ $56,646$ $ $40,489$ $$50,874$

Taxes payable $11,93011,28312,08014,3834,03816,432$

Short$-$term loans $60,17657,28037,88341,39349,89477,262$

Accrued payroll payable $5,5274,8983,9494,5245,0745,579$

Total current liabilities $ $160,568$ $ $151,918$ $ $117,618$ $ $116,946$ $ $99,495$ $ $150,147$

Long$-$term debt $158,473172,688179,790215,297229,771262,558$

Equity $38,54450,49273,940101,256108,541142,018$

Total liabilities and equity $ $357,585$ $ $375,098$ $ $371,348$ $ $433,499$ $ $437,807$ $ $554,723$

DAVIDSON YACHTS COMPANY

Comparative Statement of Income and Operating Cash Flow

For the Years Ended December $31$

$201720182019202020212022$

Sales $ $769,080$ $ $726,378$ $ $778,980$ $ $930,978$ $ $766,110$ $ $950,357$

Returns and allowances $38,67935,94540,63446,29833,18747,680$

Cost of sales $474,808442,198458,915546,678454,569531,497$

Gross margin $ $255,593$ $ $248,235$ $ $279,431$ $ $338,002$ $ $278,354$ $ $371,180$

Depreciation expense $ $29,105$ $ $27,488$ $ $29,480$ $ $35,237$ $ $29,158$ $ $40,110$

Interest expense $18,62719,58721,02821,50524,91929,023$

Salaries and wages $81,95373,69477,87695,79492,933101,477$

Accounting and legal $9,4549,2369,35311,86413,13811,410$

Administration expense $79,69675,26480,72396,49988,02597,471$

Other expense $12,66018,95715,79322,93318,96422,692$

Total expense $ $231,495$ $ $224,226$ $ $234,253$ $ $283,832$ $ $267,137$ $ $302,183$

Net income $ $24,098$ $ $24,009$ $ $45,178$ $ $54,170$ $ $11,217$ $ $68,997$

Cash flow from operations $($adjustments to net income$)$

Depreciation $ $27,488$ $ $29,480$ $ $35,237$ $ $29,158$ $ $40,110$

Decrease $($increase$)$ in receivables $(3,617)(10,361)(10,348)17,381(34,247)$

Decrease $($increase$)$ in inventory $(21,805)(5,038)(6,122)8,980(37,810)$

Decrease $($increase$)$ in other current assets $(1,030)3,840(2,012)(7,827)(4,010)$

Increase $($decrease$)$ in current liabilities $(8,650)(34,300)(672)(17,451)50,652$

$ $16,395$ $ $28,799$ $ $70,253$ $ $41,458$ $ $83,692$