Gerrard Construction Co. is an excavation contractor. The following summarized data (in thousands) are taken from the December 31, 2016, financial statements:

For the Year Ended December 31, 2016:
Net revenues	$	33,200
Cost of services provided		11,300
Depreciation expense		6,500
Operating income	$	15,400
Interest expense		3,400
Income tax expense		3,300
Net income	$	8,700
At December 31, 2016:
Assets
Cash and short-term investments	$	2,800
Accounts receivable, net		9,600
Property, plant, and equipment, net		84,400
Total assets	$	96,800
Liabilities and Stockholders' Equity
Accounts payable	$	1,400
Income taxes payable		1,300
Notes payable (long term)		53,400
Paid-in capital		11,000
Retained earnings		29,700
Total liabilities and stockholders' equity	$	96,800

At December 31, 2015, total assets were $82,000 and total stockholders' equity was $33,400. There were no changes in notes payable or paid-in capital during 2016.

1.

value: 16.66 points

Required information

a. From the above income statement and balance sheet for Gerrard Construction Co. What other financial statements are required?

Statement of cash flows

Statement of changes in stockholders' equity

Both statement of cash flows and statement of changes in stockholders' equity

None

References

Multiple ChoiceDifficulty: 2 Medium

2.

value: 16.66 points

Required information

b. Indicate the note disclosures that should be provided by Gerrard Construction Co. (Select all that apply.)

The effects of accounting changes

Pension and post-retirement plans

Contingencies and commitments

Events subsequent to the balance sheet

Change in equity

Number of employees

Gross profit & Net profit

Company's effective income tax rate

Details of the company's employee benefit

Significant accounting policies

Earnings per share

References

Check All That ApplyDifficulty: 2 Medium

3.

value: 16.66 points

Required information

c. Assume that the balance of "Accounts Receivable, net" at December 31, 2015, was $8,100. Calculate the following activity measures for Gerrard Construction Co. for the year ended December 31, 2016:

1. Calculate the Accounts receivable turnover. (Round your answer to 1 decimal place.)

2. Calculate the number of days' sales in accounts receivable. (Use 365 days of the year. Do not round intermediate calculations. Round your answer to 1 decimal place.)

References

WorksheetDifficulty: 2 Medium

4.

value: 16.66 points

Required information

d. Calculate the following financial leverage measures for Gerrard Construction Co. at December 31, 2016:

1. Calculate the debt ratio. (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).)

2. Calculate the Debt/equity ratio. (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).)

References

WorksheetDifficulty: 2 Medium

5.

value: 16.66 points

Required information

e. Gerrard Construction Co. wishes to lease some new earthmoving equipment from Caterpillar on a long-term basis. What impact (increase, decrease, or no effect) would a capital lease of $3.6 million have on the company's debt ratio and debt/equity ratio?

	Increase
	Decrease
	No effect

References

WorksheetDifficulty: 2 Medium

6.

value: 16.70 points

Required information

f-1. Calculate the amount of dividends declared and paid during the year ended December 31, 2016. (Enter your answer in thousands (i.e., 20,000 should be entered as 20).)

f-2. Review the answer from part f-1. At this time. Assume that Gerrard Construction Co. had 1,100,000 shares of $1 par value common stock outstanding throughout 2016, and that the market price per share of common stock at December 31, 2016, was $18.72. Calculate the following profitability measures for the year ended December 31, 2016:

(Round your answer to 2 decimal places.)

(Round your answer to 1 decimal place.)

(Do not round intermediate calculations. Round your answers to 1 decimal place.)

References