I just curious about the questions. Can you explain it well because I didn't learn it. Just found it from my friend.
Tuck's competitors use FIFO for inventory costing. The market value of Tuck Corporation at December 31, 2013 was S3,000,000. . . .The investments in nonconsolidated affiliates were made for speculative reasons. Rental revenues were derived from a short-term lease of an unused portion of the Building. e Using the financial statements and notes and the additional information above, provide the following as a basis for a future comparison of Tuck Corporation to competitor ratios and industry benchmarks: 1. A decomposition of ROE using a 5-way DuPont Analysis showing all the components (e.g., interest burden, tax burden, etc) (10 points) 2. A decomposition of ROE into operating return and nonoperating return and the components comprising each (e.g., NOPM, NOAT, FLEV etc.) (10 points) 3. The probability of bankruptcy of the corporation as of December 31st 2013 using the Altman Model showing all components and the Z-score using the NORMDIST function. (5 points) 4. The range of debt ratings for Tuck Corporation using as many of the ratios and definitions as warranted from Exhibit 7-6 in the text. (5 points) 5. A summary of specific results from your analysis that you would be especially interested in comparing Tuck Corporation to its competitors in a future analysis. (5 points) LuC orporation Consolidated Comparative Balance Sheets Decernber 31, 2013 De 31, 2012 ASSETS Current Assets $ 278,000 141,000 1,509,600 ,525,315 5 240,000 125,000 431.20O 1,257,26 3453 28,000 3.081.462 Investments (Note 4) Investment in Thayer Corporation (15% owned). . . . . . . . . . .-. . . . . Investment in Davis Corporation (40% owned) . . . . . . . . . .. . . . . Property, Plant, and Equipment.(Note 5) 87,000 $ 92,000 120,000 215,009 427.000 . Investment in Hitchcock Corporation (30% owned) . . . 135,000 298,000 520,000 . . . . . . . . . Land 82,000 843,000 1,848,418 106,036 2,879.454 82,000 843,000 497,818 106,036 1,528,854 -(353 854) Less Accumulated Depreciation and Amortization.........-.....- (420,8%) Intang bles 6,500,515 36.000 4.689 461 LIABILITIES ANO SHAREHOLDERS' EQUITY Current Liabilities 200,00o 723,700 58,000 78,600 2,000 30,000 160,000 7,383 100,000 656,100 500 25,000 140,000 7,383 Capitalized Lease Obligation-Current Portion. . . . . . . . .. . . . . . Noncurrent Llabilfties Mortgage Payable (Note 8) $1.299.683 S1.102 163 1,104,650 262,554 243,560 46,229 Capitatized Lease Obligation (Note 9) -.--. 30,000 $2.365.932 2,650,461 Sharehotders Equity 5 700,000 1,000,000 130,000 Additional Paid-In C Accumulated Other Comprehensive Income: 583,600 Unreatized Loss on Marletable Securites (25,000) (16,000) 277.000 457 "14,200) $6,500,515 . Less Cost of Treasury Stock (Note 12) aj" ? (27,000) 52.834.900 2,039,000 $4,689,461 Total Liabilities and Shareholders' Equity- .. Tuck Corporation Consolidated Statement of Income and Retained Earnings for 2013 REVENUES AND GAINS Sales. .. 4,000,000 3,000 240,000 8,000 02,000 Rental Total Revenues and Gains... 4,353,00 EXPENSES, LOSSES, AND DEDUCTIONS cost of Goods Sol ncluding Depresation and Amortilation.. $2,50.000 Seling and Administration Expenses (Including Depreclation and Amortization and Bad Debt Expense)-.............. 1,102,205 46,800 65,995 8,000 150,000 Loss on Sale of Marketable Equity Securities............. Total Expenses, Losses, and Deductions . 053,00 5300,000 (119.500 180,500 Increase tn Retained Earnings for 2013 277,000 457.500 Statement of Accounting Policies Basis of consolidation. Tuck Corporation consolidates its financial staterments with those of Harvard Corporation, a 100%-owned subsidiary acquired on January 2, 2011. Marketable securities. The firm classifies marketable securities as available for sale and measures them at fair value Accounts receivable. The firm accounts for customers' uncollectible accounts using the allowance method Inventories. Tuck Corporation uses a ast-in, first-out (LIFO) cost-flow assumption for inventories lnvestnents. The firm classifies investments of less than 20% of the outstanding common stock of other companies as available for sale and measures them at fair value. It accounts for investments of 20% to 50% of the outstanding common stock of affiliates using the equity method. Building, equipient, and leasebolds. Tuck Corporation calculates depreciation for financial reporting purposes using the straight-line method and an accelerated method for income tax reporting Interest expense on long-term debt. The firm measures interest expense on long-term debt using the effective interest method Deferred income taxes. Tuck Corporation provides for deferred income taxes arising from temporary differences between book and taxable income. Notes to the Financial Statements Note 1: The balance sheet presents marketable equity securities, all classitied as available for sale, at fair value, which is less than acquisition cost by $25,000 on December 31, 2012, and $21,000 o December 31, 2013. Tuck Corporation sold markctable cquity securities costing S35,000 during 2013. It received no dividends from marketable equity securiies during 2013. Note 2: The balance sheet presents accounts receivable net of an allowance for uncollect ibles of S128,800 on December 31, 2012, and $210,400 on December 31, 2013. Tuck Cor- poration wrote off a total of S63,000 of accounts receivable as uncollectible during 2013. Note 3: The valuation of inventories on a FIFO basis exceeded the amounts on a LIFO basis by S430,000 on December 31, 2012, and by $410,000 on December 3, 2013. Note 4: Davis Corporation reported net income for 2013 of S2 17,500 and declared and paid dividends totaling $60,000 during the year. Tuck Corporation invested an additional $20,000 in Davis Corporation during 2013, but its ownership percentage remained at 40%. Note S: Tuck Corporation sold equipment with a cost of S23,000 and a carrying value of $4,000 during 2013. This was the only disposition of property, piant, or equipment during the year Note 6: Tuck Corporation paid at maturity a 90-day, 9% note with a face amount of S100,000 with interest on January 30, 2013. On December, 2013, Tuck Corporation bor- rowed $200,000 from its local bank, promising to repay the principal plus interest at 12% in six months H Note 7: Bonds Payable on the balance sheet comprise the following December 31Dber 31 2013 2012 $1,000,000-6%, 20-Year Seniannual Coupon Bonds. Due December 31, 2024, Priced at $1,125,510 to neld 5%, Compounded Semiannuelly, at the Time of Issue ................1,099,823 .104,550 $1,000,000, 8%, 20-Year Semiannual Coupon 90nds. Due December 31, 2031, Priced at $828,409 to Yield 10%. ictal $1.931,143 Note 8: Mortgage Payable represents building mortgage requiring equal installment pay- ments of S40.000 on December 31 of each year. The loan underlying the mortgage bears interest of 7%, compounded annually. The final installment payment is due on December 3, 2013 Note 9: The Capitalized Lease Obligation represents a 20-year, non-cancelable lease on cer- tain equipment. The lease requires annual payments, in advance, of S10,000 on January 2 of each year. Tuck Corporation will make the last lease payment on January 2, 2020, Tuck Corporation capitalizes the lease at its borrowing rate (at the inception of the lease) of 8%. Note 10: Each share of preferred stock is convertible into five shares of common stock. On July 1, 2013, holders of 5,000 shares of preferred stock exercised their conversion options. Tuck Corporation recorded the conversion using carrying values Note 11: On October 1, 2013, Tuck Corporation issued 40,000 shares of common stock on the open market for SIS cash per share. Note 12: Treasury Stock comprises the following: December 31. 2012: 2,250 Shares at $12 per Shace ..-.--..---.-.---... December 31. 2013: 450 Shares at $12 per Share. . $27,COO 5 5,400 8.800 514,200 During 2013. Tuck Corporation sold 1,800 shares of treasury stock and acquired 550 shares Tuck's competitors use FIFO for inventory costing. The market value of Tuck Corporation at December 31, 2013 was S3,000,000. . . .The investments in nonconsolidated affiliates were made for speculative reasons. Rental revenues were derived from a short-term lease of an unused portion of the Building. e Using the financial statements and notes and the additional information above, provide the following as a basis for a future comparison of Tuck Corporation to competitor ratios and industry benchmarks: 1. A decomposition of ROE using a 5-way DuPont Analysis showing all the components (e.g., interest burden, tax burden, etc) (10 points) 2. A decomposition of ROE into operating return and nonoperating return and the components comprising each (e.g., NOPM, NOAT, FLEV etc.) (10 points) 3. The probability of bankruptcy of the corporation as of December 31st 2013 using the Altman Model showing all components and the Z-score using the NORMDIST function. (5 points) 4. The range of debt ratings for Tuck Corporation using as many of the ratios and definitions as warranted from Exhibit 7-6 in the text. (5 points) 5. A summary of specific results from your analysis that you would be especially interested in comparing Tuck Corporation to its competitors in a future analysis. (5 points) LuC orporation Consolidated Comparative Balance Sheets Decernber 31, 2013 De 31, 2012 ASSETS Current Assets $ 278,000 141,000 1,509,600 ,525,315 5 240,000 125,000 431.20O 1,257,26 3453 28,000 3.081.462 Investments (Note 4) Investment in Thayer Corporation (15% owned). . . . . . . . . . .-. . . . . Investment in Davis Corporation (40% owned) . . . . . . . . . .. . . . . Property, Plant, and Equipment.(Note 5) 87,000 $ 92,000 120,000 215,009 427.000 . Investment in Hitchcock Corporation (30% owned) . . . 135,000 298,000 520,000 . . . . . . . . . Land 82,000 843,000 1,848,418 106,036 2,879.454 82,000 843,000 497,818 106,036 1,528,854 -(353 854) Less Accumulated Depreciation and Amortization.........-.....- (420,8%) Intang bles 6,500,515 36.000 4.689 461 LIABILITIES ANO SHAREHOLDERS' EQUITY Current Liabilities 200,00o 723,700 58,000 78,600 2,000 30,000 160,000 7,383 100,000 656,100 500 25,000 140,000 7,383 Capitalized Lease Obligation-Current Portion. . . . . . . . .. . . . . . Noncurrent Llabilfties Mortgage Payable (Note 8) $1.299.683 S1.102 163 1,104,650 262,554 243,560 46,229 Capitatized Lease Obligation (Note 9) -.--. 30,000 $2.365.932 2,650,461 Sharehotders Equity 5 700,000 1,000,000 130,000 Additional Paid-In C Accumulated Other Comprehensive Income: 583,600 Unreatized Loss on Marletable Securites (25,000) (16,000) 277.000 457 "14,200) $6,500,515 . Less Cost of Treasury Stock (Note 12) aj" ? (27,000) 52.834.900 2,039,000 $4,689,461 Total Liabilities and Shareholders' Equity- .. Tuck Corporation Consolidated Statement of Income and Retained Earnings for 2013 REVENUES AND GAINS Sales. .. 4,000,000 3,000 240,000 8,000 02,000 Rental Total Revenues and Gains... 4,353,00 EXPENSES, LOSSES, AND DEDUCTIONS cost of Goods Sol ncluding Depresation and Amortilation.. $2,50.000 Seling and Administration Expenses (Including Depreclation and Amortization and Bad Debt Expense)-.............. 1,102,205 46,800 65,995 8,000 150,000 Loss on Sale of Marketable Equity Securities............. Total Expenses, Losses, and Deductions . 053,00 5300,000 (119.500 180,500 Increase tn Retained Earnings for 2013 277,000 457.500 Statement of Accounting Policies Basis of consolidation. Tuck Corporation consolidates its financial staterments with those of Harvard Corporation, a 100%-owned subsidiary acquired on January 2, 2011. Marketable securities. The firm classifies marketable securities as available for sale and measures them at fair value Accounts receivable. The firm accounts for customers' uncollectible accounts using the allowance method Inventories. Tuck Corporation uses a ast-in, first-out (LIFO) cost-flow assumption for inventories lnvestnents. The firm classifies investments of less than 20% of the outstanding common stock of other companies as available for sale and measures them at fair value. It accounts for investments of 20% to 50% of the outstanding common stock of affiliates using the equity method. Building, equipient, and leasebolds. Tuck Corporation calculates depreciation for financial reporting purposes using the straight-line method and an accelerated method for income tax reporting Interest expense on long-term debt. The firm measures interest expense on long-term debt using the effective interest method Deferred income taxes. Tuck Corporation provides for deferred income taxes arising from temporary differences between book and taxable income. Notes to the Financial Statements Note 1: The balance sheet presents marketable equity securities, all classitied as available for sale, at fair value, which is less than acquisition cost by $25,000 on December 31, 2012, and $21,000 o December 31, 2013. Tuck Corporation sold markctable cquity securities costing S35,000 during 2013. It received no dividends from marketable equity securiies during 2013. Note 2: The balance sheet presents accounts receivable net of an allowance for uncollect ibles of S128,800 on December 31, 2012, and $210,400 on December 31, 2013. Tuck Cor- poration wrote off a total of S63,000 of accounts receivable as uncollectible during 2013. Note 3: The valuation of inventories on a FIFO basis exceeded the amounts on a LIFO basis by S430,000 on December 31, 2012, and by $410,000 on December 3, 2013. Note 4: Davis Corporation reported net income for 2013 of S2 17,500 and declared and paid dividends totaling $60,000 during the year. Tuck Corporation invested an additional $20,000 in Davis Corporation during 2013, but its ownership percentage remained at 40%. Note S: Tuck Corporation sold equipment with a cost of S23,000 and a carrying value of $4,000 during 2013. This was the only disposition of property, piant, or equipment during the year Note 6: Tuck Corporation paid at maturity a 90-day, 9% note with a face amount of S100,000 with interest on January 30, 2013. On December, 2013, Tuck Corporation bor- rowed $200,000 from its local bank, promising to repay the principal plus interest at 12% in six months H Note 7: Bonds Payable on the balance sheet comprise the following December 31Dber 31 2013 2012 $1,000,000-6%, 20-Year Seniannual Coupon Bonds. Due December 31, 2024, Priced at $1,125,510 to neld 5%, Compounded Semiannuelly, at the Time of Issue ................1,099,823 .104,550 $1,000,000, 8%, 20-Year Semiannual Coupon 90nds. Due December 31, 2031, Priced at $828,409 to Yield 10%. ictal $1.931,143 Note 8: Mortgage Payable represents building mortgage requiring equal installment pay- ments of S40.000 on December 31 of each year. The loan underlying the mortgage bears interest of 7%, compounded annually. The final installment payment is due on December 3, 2013 Note 9: The Capitalized Lease Obligation represents a 20-year, non-cancelable lease on cer- tain equipment. The lease requires annual payments, in advance, of S10,000 on January 2 of each year. Tuck Corporation will make the last lease payment on January 2, 2020, Tuck Corporation capitalizes the lease at its borrowing rate (at the inception of the lease) of 8%. Note 10: Each share of preferred stock is convertible into five shares of common stock. On July 1, 2013, holders of 5,000 shares of preferred stock exercised their conversion options. Tuck Corporation recorded the conversion using carrying values Note 11: On October 1, 2013, Tuck Corporation issued 40,000 shares of common stock on the open market for SIS cash per share. Note 12: Treasury Stock comprises the following: December 31. 2012: 2,250 Shares at $12 per Shace ..-.--..---.-.---... December 31. 2013: 450 Shares at $12 per Share. . $27,COO 5 5,400 8.800 514,200 During 2013. Tuck Corporation sold 1,800 shares of treasury stock and acquired 550 shares
