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Extreme Edge, Inc. Income Statements For the Years Ended December 31, 2017, 2016 and 2015 ($ in thousands) 2017 2016 2015 Sales revenue $1,340 $1,200

Extreme Edge, Inc.

Income Statements

For the Years Ended December 31, 2017, 2016 and 2015

($ in thousands)

2017 2016 2015

Sales revenue

$1,340

$1,200

$1,000

Less: Cost of goods sold

685

660

600

Gross profit

655

540

400

Operating expenses:

Depreciation expense

200

120

100

Amortization expense

5

5

5

Other operating expenses

368 573

345 470

255 360

Income from operations

82

70

40

Interest (financing) expense

32

10

10

Pretax income

50

60

30

Income tax expense (40%)

20

24

12

Net income

$ 30

$ 36

$ 18

Earnings per share

$0.60

$0.72

$0.45

Extreme Edge, Inc.

Balance Sheets

December 31, 2017, 2016 and 2015

($ in thousands)

2017 2016 2015

Assets

Cash

$ 65

$ 90

$ 30

Accounts receivable, net

150

80

90

Inventory

298

228

170

Total current assets

513

398

290

Property, Plant and Equipment:

Equipment (at cost)

800

600

500

Less: accumulated depreciation

(420)

(220)

(100)

Equipment, net of accumulated depreciation

380

380

400

Intangible Assets:

Customer database (at cost)

25

25

25

Less: accumulated amortization

(15)

(10)

(5)

Customer database, net of accumulated amortization

10

15

20

Total Assets

$903

$793

$710

Liabilities

Accounts payable

$ 44

$145

$160

Accrued liabilities

6

20

32

Total current liabilities

50

165

192

Long-term Liabilities:

Notes payable

300

100

100

Total Liabilities

350

265

292

Shareholders' Equity

Common stock, $1 par

50

50

40

Additional paid-in-capital on common stock

430

430

360

Total contributed capital

480

480

400

Retained earnings

73

48

18

Total Shareholders' Equity

553

528

418

Total Liabilities and Shareholders' Equity

$903

$793

$710

Problem 6-1

Required: Refer to the Chapter6 Homework Spreadsheets above. Compute the 2017 vertical common-size financial statements for Extreme Edge.

Extreme Edge, Inc.

Vertical Common-Size Income Statements

For the Years Ended December 31, 2017, 2016 and 2015

2017 2016 2015

Sales revenue

100.0%

100.0%

Less: Cost of goods sold

55.0%

60.0%

Gross profit

45.0%

40.0%

Operating expenses:

Depreciation expense

10.0%

10.0%

Amortization expense

0.4%

0.5%

Other operating expenses

28.8%

25.5%

Income from operations

5.8%

4.0%

Interest (financing) expense

0.8%

1.0%

Pretax income

5.0%

3.0%

Income tax expense (40%)

2.0%

1.2%

Net income

3.0%

1.8%

Extreme Edge, Inc.

Vertical Common-Size Balance Sheets

December 31, 2017, 2016 and 2015

2017 2016 2015

Assets

Cash

11.3%

4.2%

Accounts receivable, net

10.1%

12.7%

Inventory

28.8%

23.9%

Total current assets

50.2%

40.8%

Property, Plant and Equipment:

Equipment (at cost)

75.7%

70.4%

Less: accumulated depreciation

(27.7)%

(14.1)%

Equipment, net of accumulated depreciation

47.9%

56.3%

Intangible Assets:

Customer database (at cost)

3.2%

3.5%

Less: accumulated amortization

(1.3)%

(0.7)%

Customer database, net of accumulated amortization

1.9%

2.8%

Total Assets

100.0%

100.0%

Liabilities

Accounts payable

18.3%

22.5%

Accrued liabilities

2.5%

4.5%

Total current liabilities

20.8%

27.0%

Long-term Liabilities:

Notes payable

12.6%

14.1%

Total Liabilities

33.4%

41.1%

Shareholders' Equity

Common stock, $1 par

6.3%

5.6%

Additional paid-in-capital on common stock

54.2%

50.7%

Total contributed capital

60.5%

56.3%

Retained earnings

6.1%

2.5%

Total Shareholders' Equity

66.6%

58.9%

Total Liabilities and Shareholders' Equity

100.0%

100.0%

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