Financial Statements: Includes 3 years of comparative Balance Sheets and Income Statements for Thistlewood Corporation that you must use to complete the tasks on tabs 3-5. Statement of Cash Flows (50 points) : Prepare the Statement of Cash Flows, using the indirect method, for the year ending December 31, 2019. Additional information is provided on tab 3. Trend and Common-Size Analysis (Horizontal and Vertical Analysis) (9 points): Perform horizontal (trend) analysis, where each number in a row is stated as a percent of the oldest number (base year), using 3 years of data for the Balance Sheets and Income Statements. Perform vertical (common-size) analysis, where each number in a column is stated as a percentage of revenues on the Income Statement and as a percentage of total assets on the Balance Sheet, using 3 years of data. Answer the analysis questions within this tab. Ratio Analysis (16 points): Use linking formulas (to the financial statements on tab 2) to calculate the ratios listed on tab 5 for the current year and previous year (2 years total). Answer the analysis questions within this tab. Your work on the take-home problem MUST represent your own work. You may NOT work with other students or seek outside help from anyone. You may use your book and other course materials. Thistlewood Corporation Balance Sheets December 31, 2019, 2018 and 2017 ($ in millions) 2019 2018 2017 ASSETS Current Assets: Cash $41 $20 $17 Accounts receivable 32 30 33 Inventory 46 50 36 36 4 Prepaid insurance Total Current Assets $122 $106 $90 Property, Plant, & Equipment: Land 60 71 Equipment 81 75 80 Less: Accumulated depreciation (16) (20) (30) Total Property, Pland, & Equipment $145 $115 $121 Total Assets $267 $221 $211 $26 $24 $20 1 3 2 34 47 39 LIABILITIES Current Liabilities: Accounts payable Salaries payable Income tax payable Notes payable, current Long-term Liabilities: Notes payable, long-term EQUITY Common stock, $10 par, 50 million shares Paid-in capital in excess of par-common stock Retained Earnings Total Liabilities and Equity 2005 $100 20 $120 26 35 $267 $100 20 25 $221 17 $211 1) Instructions 2) Financial Statements 3) Cash Flow Statement for 2019 4) Trend & Common-Size Analysis 5) Ratio Analysis 2017 2018 $105 (70) 35 40 (55) 35 (12) Thistlewood Corporation Income Statement for the years ended December 31, 2019, 2018 and 2017 ($ in millions) 2019 Sales revenue $121 Cost of goods sold (81) Gross profit Operating expenses: Salaries expense (13) Depreciation expense Insurance expense Income from operations Other income and expenses: Interest expense Gain on sale of land Loss on sale of equipment Income before taxes Income tax expense (6) Net income $15 (8) (6) 13 (2) 17 10 1 (2) 21 (3) $9 1) Instructions 2) Financial Statements 3 ) Cash Flow Statement for 2019 4) Trend & Common-Size Analysis 5) Ratio Analysis Statement of Cash Flows: Use the following comparative Balance Sheets, Income Statement, and additional information to prepare the 2019 Statement of Cash Flows for Thistlewood Corporation. Use the indirect method to prepare the Operating Activities section. SHOW YOUR WORK for all Investing and Financing Activities. You must show your work in t-accounts and/or journal entries. Additional information for 2019 transactions: a. All inventory is purchased on account, and the Accounts Payable account is used exclusively for inventory purchases. b. A portion of the company land was sold for $18 million in cash. This land was originally purchased in a previous year for $10 million. c. Land was purchased for $30 million cash for use as a parking lot. d. Equipment was sold in 2019 that had an Accumulated Depreciation balance of $7 million on the date of sale. The equipment originally cost $14 million and was sold at a loss for cash. (HINT: You must determine the amount of cash received.) e. In 2019, new equipment was acquired by issuing a 12%, five-year, $20 million note payable to the seller. f. During 2019, $55 million of short-term (current) notes payable were paid in cash and $42 million of cash was borrowed in the form of short-term debt (current notes payable). g The increase in the common stock account is attributed the issuance of 2 million shares for cash when the market price was $13 per share. h. Cash dividends were declared and paid to shareholders. (HINT: You must determine the amount of cash dividends paid.) Thistlewood Corporation Balance Sheets December 31, 2019 and 2018 ($ in millions) Thistlewood Corporation Statement of Cash Flows for the year ended December 31, 2019 ($ in millions) 2019 2018 Change 21 2 ASSETS Current Assets: Cash Accounts receivable Inventory Prepaid insurance Total Current Assets Property, Plant, & Equipment: Land Equipment Less: Accumulated depreciation Total Property, Plant, & Equipment Total Assets $41 $20 32 30 46 50 36 $122 $106 (3) 20 81 (16) $145 $267 60 75 (20) $115 $221 6 2 $26 $20 31 38 47 34 LIABILITIES Current Liabilities: Accounts payable Salaries payable Income tax payable Notes payable, current Long-term Liabilities: Notes payable, long-term EQUITY Common stock, $10 par, 50 million shares authorized, 13 Paid-in capital in excess of par-common stock Retained Earnings Total Liabilities and Equity 200 $120 20 26 6 $100 20 25 $221 10 35 $267 Thistlewood Corporation Income Statement for the year ended December 31, 2019 ($ in millions) 2019 $121 Sales revenue Cost of goods sold Gross profit Operating expenses: Salaries expense Depreciation expense Insurance expense Income from operations Other income and expenses: Interest expense Gain on sale of land Loss on sale of equipment Income before taxes Income tax expense Net income 1) Instructions 2) Financial Statements 3) Cash Flow Statement for 2019 4) Trend & Common-Size Analysis 5) Ratio Analysis + Trend and Common-Size Analysis: Perform horizontal (trend) analysis, where each number in a row is stated as a percent of the oldest number (base year), using 3 years of data for the Balance Sheets and Income Statements. Perform vertical (common-size) analysis, where each number in a column is stated as a percentage of revenues on the Income Statement and as a percentage of total assets on the Balance Sheet, using 3 years of data. Answer the analysis questions within this tab. Thistlewood Corporation Balance Sheets December 31, 2019, 2018 and 2017 ($ in millions) Trend Analysis 2018 Common-Size Analysis 2019 2018 2017 2019 2018 2017 2019 2017 2017 $41 32 46 ASSETS Current Assets: Cash Accounts receivable Inventory Prepaid insurance Total Current Assets Property, Plant, & Equipment: Land Equipment Less: Accumulated depreciation Total Property, Pland, & Equipment Total Assets $20 $17 30 33 5036 6 4 $106 $90 $122 80 81 (16) $145 $267 60 75 (20) $115 $221 71 80 (30) $121 $211 $24 $26 3 $ 20 1 3 34 8 47 39 LIABILITIES Current Liabilities: Accounts payable Salaries payable Income tax payable Notes payable, current Long-term Liabilities: Notes payable, long-term EQUITY Common stock, $10 par, 50 million shares Paid-in capital in excess of par-common stock Retained Earnings Total Liabilities and Equity 20 0 $120 26 35 $267 $100 20 25 $221 $100 20 17 $211 Trend Analysis 2018 Common-Size Analysis 2019 2018 2017 2019 2017 2018 $105 (70) 2017 $90 (55) 35 40 35 (8) Thistlewood Corporation Income Statement for the years ended December 31, 2019, 2018 and 2017 ($ in millions) 2019 Sales revenue $121 Cost of goods sold (81) Gross profit Operating expenses: Salaries expense (13) Depreciation expense (3) Insurance expense Income from operations Other income and expenses: Interest expense (2) Gain on sale of land Loss on sale of equipment Income before taxes Income tax expense (6) Net income $15 (12) (4) (8) (2) (7) (6) 17 13 17 (5) (6) 8 10 (2) 21 (5) 13 (4) 11 (3) $8 $9 Balance Sheet and Income Statement Trend and Common-Size Anaylsis. Comment on any significant changes, noticeable trends, or favorable/unfavorable results. You must provide a minimum of three observations. Each observation should include an explanation of what you observed and the favorable or unfavorable impact of your observation. Ratio Analysis: Use linking formulas (to the financial statements) to calculate the ratios listed below for Thistlewood for 2019 and 2018 The ratios for Thistlewood's main competitor are provided below for comparison Answer the analysis questions within this tab. For the P/E Ratio, assume the following: Thistlewood's common stock was selling for $28 pershare on December 31, 2019 and for $22 on December 31, 2018. Its EPS was $2.10 on December 31, 2019, and $1.90 on December 31, 2018 Thistlewood 2019 2018 Competitor 2019 2018 Ratio Anaylsis 1. How did Thistlewood's liquidity ratias compare from year to year and to its competitor Interpret and explain. 2. Was Thistlewood efficient in collecting its accounts receivable and managing its inventory? Interpret and explain Current Ratio Acid-test Ratio A/R Turnaver Inventory Tumover Debt Ratio Equity Ratio Total Asset Turnaver Profit Margin Ratio Return on Total Assets Price-Eamines Ratio 2.15 1.65 6.2 3.51 45.65% 54.35% 1.26 8.65% 10.90% 16.25 1.98 1.43 6.9 4.2 42.29% 57.71% 1.32 9.26% 12.22% 18.43 3. What do the Total Asset Turnover, Profit Margin Ratio, and Return on Total Assets tell you about the two companies? Interpret and explain. 4. How does Thistlewood's capital structure (mix of debt and equity) compere to its competitor? Did Thistlewood have more or less debt in 2019 compared to 2018? 5. Comment on the P/E Ratios, which company has higher market expectations for future earnings growth? 6. Da the ratios support your analysis based on the trend and common size statements? If so, how do the ratios provide additional support? If not, explain why not. Financial Statements: Includes 3 years of comparative Balance Sheets and Income Statements for Thistlewood Corporation that you must use to complete the tasks on tabs 3-5. Statement of Cash Flows (50 points) : Prepare the Statement of Cash Flows, using the indirect method, for the year ending December 31, 2019. Additional information is provided on tab 3. Trend and Common-Size Analysis (Horizontal and Vertical Analysis) (9 points): Perform horizontal (trend) analysis, where each number in a row is stated as a percent of the oldest number (base year), using 3 years of data for the Balance Sheets and Income Statements. Perform vertical (common-size) analysis, where each number in a column is stated as a percentage of revenues on the Income Statement and as a percentage of total assets on the Balance Sheet, using 3 years of data. Answer the analysis questions within this tab. Ratio Analysis (16 points): Use linking formulas (to the financial statements on tab 2) to calculate the ratios listed on tab 5 for the current year and previous year (2 years total). Answer the analysis questions within this tab. Your work on the take-home problem MUST represent your own work. You may NOT work with other students or seek outside help from anyone. You may use your book and other course materials. Thistlewood Corporation Balance Sheets December 31, 2019, 2018 and 2017 ($ in millions) 2019 2018 2017 ASSETS Current Assets: Cash $41 $20 $17 Accounts receivable 32 30 33 Inventory 46 50 36 36 4 Prepaid insurance Total Current Assets $122 $106 $90 Property, Plant, & Equipment: Land 60 71 Equipment 81 75 80 Less: Accumulated depreciation (16) (20) (30) Total Property, Pland, & Equipment $145 $115 $121 Total Assets $267 $221 $211 $26 $24 $20 1 3 2 34 47 39 LIABILITIES Current Liabilities: Accounts payable Salaries payable Income tax payable Notes payable, current Long-term Liabilities: Notes payable, long-term EQUITY Common stock, $10 par, 50 million shares Paid-in capital in excess of par-common stock Retained Earnings Total Liabilities and Equity 2005 $100 20 $120 26 35 $267 $100 20 25 $221 17 $211 1) Instructions 2) Financial Statements 3) Cash Flow Statement for 2019 4) Trend & Common-Size Analysis 5) Ratio Analysis 2017 2018 $105 (70) 35 40 (55) 35 (12) Thistlewood Corporation Income Statement for the years ended December 31, 2019, 2018 and 2017 ($ in millions) 2019 Sales revenue $121 Cost of goods sold (81) Gross profit Operating expenses: Salaries expense (13) Depreciation expense Insurance expense Income from operations Other income and expenses: Interest expense Gain on sale of land Loss on sale of equipment Income before taxes Income tax expense (6) Net income $15 (8) (6) 13 (2) 17 10 1 (2) 21 (3) $9 1) Instructions 2) Financial Statements 3 ) Cash Flow Statement for 2019 4) Trend & Common-Size Analysis 5) Ratio Analysis Statement of Cash Flows: Use the following comparative Balance Sheets, Income Statement, and additional information to prepare the 2019 Statement of Cash Flows for Thistlewood Corporation. Use the indirect method to prepare the Operating Activities section. SHOW YOUR WORK for all Investing and Financing Activities. You must show your work in t-accounts and/or journal entries. Additional information for 2019 transactions: a. All inventory is purchased on account, and the Accounts Payable account is used exclusively for inventory purchases. b. A portion of the company land was sold for $18 million in cash. This land was originally purchased in a previous year for $10 million. c. Land was purchased for $30 million cash for use as a parking lot. d. Equipment was sold in 2019 that had an Accumulated Depreciation balance of $7 million on the date of sale. The equipment originally cost $14 million and was sold at a loss for cash. (HINT: You must determine the amount of cash received.) e. In 2019, new equipment was acquired by issuing a 12%, five-year, $20 million note payable to the seller. f. During 2019, $55 million of short-term (current) notes payable were paid in cash and $42 million of cash was borrowed in the form of short-term debt (current notes payable). g The increase in the common stock account is attributed the issuance of 2 million shares for cash when the market price was $13 per share. h. Cash dividends were declared and paid to shareholders. (HINT: You must determine the amount of cash dividends paid.) Thistlewood Corporation Balance Sheets December 31, 2019 and 2018 ($ in millions) Thistlewood Corporation Statement of Cash Flows for the year ended December 31, 2019 ($ in millions) 2019 2018 Change 21 2 ASSETS Current Assets: Cash Accounts receivable Inventory Prepaid insurance Total Current Assets Property, Plant, & Equipment: Land Equipment Less: Accumulated depreciation Total Property, Plant, & Equipment Total Assets $41 $20 32 30 46 50 36 $122 $106 (3) 20 81 (16) $145 $267 60 75 (20) $115 $221 6 2 $26 $20 31 38 47 34 LIABILITIES Current Liabilities: Accounts payable Salaries payable Income tax payable Notes payable, current Long-term Liabilities: Notes payable, long-term EQUITY Common stock, $10 par, 50 million shares authorized, 13 Paid-in capital in excess of par-common stock Retained Earnings Total Liabilities and Equity 200 $120 20 26 6 $100 20 25 $221 10 35 $267 Thistlewood Corporation Income Statement for the year ended December 31, 2019 ($ in millions) 2019 $121 Sales revenue Cost of goods sold Gross profit Operating expenses: Salaries expense Depreciation expense Insurance expense Income from operations Other income and expenses: Interest expense Gain on sale of land Loss on sale of equipment Income before taxes Income tax expense Net income 1) Instructions 2) Financial Statements 3) Cash Flow Statement for 2019 4) Trend & Common-Size Analysis 5) Ratio Analysis + Trend and Common-Size Analysis: Perform horizontal (trend) analysis, where each number in a row is stated as a percent of the oldest number (base year), using 3 years of data for the Balance Sheets and Income Statements. Perform vertical (common-size) analysis, where each number in a column is stated as a percentage of revenues on the Income Statement and as a percentage of total assets on the Balance Sheet, using 3 years of data. Answer the analysis questions within this tab. Thistlewood Corporation Balance Sheets December 31, 2019, 2018 and 2017 ($ in millions) Trend Analysis 2018 Common-Size Analysis 2019 2018 2017 2019 2018 2017 2019 2017 2017 $41 32 46 ASSETS Current Assets: Cash Accounts receivable Inventory Prepaid insurance Total Current Assets Property, Plant, & Equipment: Land Equipment Less: Accumulated depreciation Total Property, Pland, & Equipment Total Assets $20 $17 30 33 5036 6 4 $106 $90 $122 80 81 (16) $145 $267 60 75 (20) $115 $221 71 80 (30) $121 $211 $24 $26 3 $ 20 1 3 34 8 47 39 LIABILITIES Current Liabilities: Accounts payable Salaries payable Income tax payable Notes payable, current Long-term Liabilities: Notes payable, long-term EQUITY Common stock, $10 par, 50 million shares Paid-in capital in excess of par-common stock Retained Earnings Total Liabilities and Equity 20 0 $120 26 35 $267 $100 20 25 $221 $100 20 17 $211 Trend Analysis 2018 Common-Size Analysis 2019 2018 2017 2019 2017 2018 $105 (70) 2017 $90 (55) 35 40 35 (8) Thistlewood Corporation Income Statement for the years ended December 31, 2019, 2018 and 2017 ($ in millions) 2019 Sales revenue $121 Cost of goods sold (81) Gross profit Operating expenses: Salaries expense (13) Depreciation expense (3) Insurance expense Income from operations Other income and expenses: Interest expense (2) Gain on sale of land Loss on sale of equipment Income before taxes Income tax expense (6) Net income $15 (12) (4) (8) (2) (7) (6) 17 13 17 (5) (6) 8 10 (2) 21 (5) 13 (4) 11 (3) $8 $9 Balance Sheet and Income Statement Trend and Common-Size Anaylsis. Comment on any significant changes, noticeable trends, or favorable/unfavorable results. You must provide a minimum of three observations. Each observation should include an explanation of what you observed and the favorable or unfavorable impact of your observation. Ratio Analysis: Use linking formulas (to the financial statements) to calculate the ratios listed below for Thistlewood for 2019 and 2018 The ratios for Thistlewood's main competitor are provided below for comparison Answer the analysis questions within this tab. For the P/E Ratio, assume the following: Thistlewood's common stock was selling for $28 pershare on December 31, 2019 and for $22 on December 31, 2018. Its EPS was $2.10 on December 31, 2019, and $1.90 on December 31, 2018 Thistlewood 2019 2018 Competitor 2019 2018 Ratio Anaylsis 1. How did Thistlewood's liquidity ratias compare from year to year and to its competitor Interpret and explain. 2. Was Thistlewood efficient in collecting its accounts receivable and managing its inventory? Interpret and explain Current Ratio Acid-test Ratio A/R Turnaver Inventory Tumover Debt Ratio Equity Ratio Total Asset Turnaver Profit Margin Ratio Return on Total Assets Price-Eamines Ratio 2.15 1.65 6.2 3.51 45.65% 54.35% 1.26 8.65% 10.90% 16.25 1.98 1.43 6.9 4.2 42.29% 57.71% 1.32 9.26% 12.22% 18.43 3. What do the Total Asset Turnover, Profit Margin Ratio, and Return on Total Assets tell you about the two companies? Interpret and explain. 4. How does Thistlewood's capital structure (mix of debt and equity) compere to its competitor? Did Thistlewood have more or less debt in 2019 compared to 2018? 5. Comment on the P/E Ratios, which company has higher market expectations for future earnings growth? 6. Da the ratios support your analysis based on the trend and common size statements? If so, how do the ratios provide additional support? If not, explain why not
