journal entries, t-account, balance sheet, income statement

THE CRIMSON PRESS CURRICULUM CENTER THE CRIMSON GROUP, INC. Amerbrand Company (A) Amerbrand Company was a diversified company that sold various consumer products, including food, tobacco, distilled, and personal care products and financial services. Financial statements for the company for 2004 are shown in Exhibit 1. These statements reflect the following transactions (dollar amounts in thousands): 1. Depreciation and amortization expense was $115,974. 2. Net income included a loss of $66,046 resulting from the write-off of some obsolete equipment. The equip- ment had not yet been disposed of. 3. Net income included $59,610 from Amerbrand's investment in a subsidiary; none of this income had been re- ceived in cash. 4. The year-end balance in Deferred Income Taxes was $17.548 lower than it was at the start of the year. 5. New property, plant, and equipment purchases totaled $260,075, all paid for with cash. Disposals of fixed as- sets generated $33,162 cash proceeds. 6. Acquisition of another company that was made for cash resulted in additional depreciable assets of $31,691 and goodwill of $102,030. 7. Cash dividends were paid in the amount of $216,158. 8. The firm declared and issued a 100 percent common stock dividend effective September 10, 2004; that is, each shareholder received as a dividend a number of shares equal to his or her holdings prior to the dividend. The newly issues shares were valued at par in recording this transaction. 9. The firm spent $30,609 to purchase treasury stock on the open market. Some of the shares so acquired were issued to certain employees as a bonus. 10. The firm increased its short-term debt as indicated on the balance sheet in Exhibit 1. Long-term borrowing de- creased by $34,606. Assignment 1 Prepare a statement of cash flows for the year 2004. In order for your statement to show the correct increase in cash (54960), you will need to add a "miscellaneous activities" category; this will capture several transactions that were not described because they are somewhat complicated. THE CRIMJUI THE CRIMSON GROUP, INC Amerbrand Company (B) Using the 2004 financial statements in Amerbrand Company (A) together with the 2003 income statement shown in Exhibit 1 in the (A) case, calculate the ratios listed below for 2003 and 2004. Use year-end amounts for ratios that involve balance sheet data. The company's interest expense in 2003 and 2004 respectively was in thou- sands) $105,165 and $102,791 respectively. 1. Return on assets 2. Return on equity 3. Gross margin percentage 4. Return on sales 5. Asset turnover 6. Days' cash 7. Days' receivables 8. Days' inventories 9. Inventory turnover 10. Current ratio 11. Acid-test ratio 12. Debt-capitalization ratio 13. Times interest eamed Assignment 1. Comment on Amerbrand's treatment of excise taxes as part of the calculation of gross roargin. 2. As an outside analyst, what questions would you want to ask Amerbrand's management based on the ratios you have calcu- lated? AMERBRAND COMPANY (B) AMERBR 1. Income Stateer 31, 2003 For the Year Ended December 31, 2003 (in thousands) $6,577,480 2,573,350 2.354.350 Sales revenue, net Less: Cost of sales Excise taxes on goods sold Gross margin Selling, general, and administrative expenses Income before income taxes Provision for income taxes Net income 1,649,780 974.121 675,659 296.877 $378,782 AMERBRAND COMPANY (A) Exhibit 1. Balance Sheets as of December 31 in thousands) Assets Cash 2004 2003 $ 28,912 $ Accounts receivable Inventories Prepaid expenses Total current assets Investments Property, plant, and equipment, at cost Less accumulated depreciation Net property, plant, and equipment Goodwill Other assets Total assets Liabilities and Shareholders' Equity 756,152 1,244,912 76,140 2,106,116 1,116,534 1,566,268 1 23,952 687,325 1.225,402 77.167 2,013,846 1.058,637 1,366,719 645,734 720,985 577.606 62,374 4,433,448 723,442 842,826 645,210 115,826 4,826,512 Accounts payable Short-term debt Accrued expenses payable Total current liabilities Long-term liabilities Total liabilities Convertible preferred stock Common stock, at par Additional paid-in capital Treasury stock, at cost Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 271,452 430,776 922.990 1,625,218 880,674 2.505.892 33,828 322,834 53,641 (110,948) 2,021.265 2,320,620 $ 4,826,512 238,377 351,112 728,262 1,317,751 932,828 2,250,579 42,611 161,417 57,072 (102,705) 2.024.474 2,182,869 5 4,433,448 Income Statement For the year ended December 31, 2004 in thousands) Sales revenues, net Cost of sales Excise taxes on goods sold Gross margin Selling, general, and administrative expenses Income before income taxes Provision for income taxes Net income $ 7,622,677 2,803,623 2.887,616 1,931,438 1,328,107 603,331 274,558 328,773 THE CRIMSON PRESS CURRICULUM CENTER THE CRIMSON GROUP, INC. Amerbrand Company (A) Amerbrand Company was a diversified company that sold various consumer products, including food, tobacco, distilled, and personal care products and financial services. Financial statements for the company for 2004 are shown in Exhibit 1. These statements reflect the following transactions (dollar amounts in thousands): 1. Depreciation and amortization expense was $115,974. 2. Net income included a loss of $66,046 resulting from the write-off of some obsolete equipment. The equip- ment had not yet been disposed of. 3. Net income included $59,610 from Amerbrand's investment in a subsidiary; none of this income had been re- ceived in cash. 4. The year-end balance in Deferred Income Taxes was $17.548 lower than it was at the start of the year. 5. New property, plant, and equipment purchases totaled $260,075, all paid for with cash. Disposals of fixed as- sets generated $33,162 cash proceeds. 6. Acquisition of another company that was made for cash resulted in additional depreciable assets of $31,691 and goodwill of $102,030. 7. Cash dividends were paid in the amount of $216,158. 8. The firm declared and issued a 100 percent common stock dividend effective September 10, 2004; that is, each shareholder received as a dividend a number of shares equal to his or her holdings prior to the dividend. The newly issues shares were valued at par in recording this transaction. 9. The firm spent $30,609 to purchase treasury stock on the open market. Some of the shares so acquired were issued to certain employees as a bonus. 10. The firm increased its short-term debt as indicated on the balance sheet in Exhibit 1. Long-term borrowing de- creased by $34,606. Assignment 1 Prepare a statement of cash flows for the year 2004. In order for your statement to show the correct increase in cash (54960), you will need to add a "miscellaneous activities" category; this will capture several transactions that were not described because they are somewhat complicated. THE CRIMJUI THE CRIMSON GROUP, INC Amerbrand Company (B) Using the 2004 financial statements in Amerbrand Company (A) together with the 2003 income statement shown in Exhibit 1 in the (A) case, calculate the ratios listed below for 2003 and 2004. Use year-end amounts for ratios that involve balance sheet data. The company's interest expense in 2003 and 2004 respectively was in thou- sands) $105,165 and $102,791 respectively. 1. Return on assets 2. Return on equity 3. Gross margin percentage 4. Return on sales 5. Asset turnover 6. Days' cash 7. Days' receivables 8. Days' inventories 9. Inventory turnover 10. Current ratio 11. Acid-test ratio 12. Debt-capitalization ratio 13. Times interest eamed Assignment 1. Comment on Amerbrand's treatment of excise taxes as part of the calculation of gross roargin. 2. As an outside analyst, what questions would you want to ask Amerbrand's management based on the ratios you have calcu- lated? AMERBRAND COMPANY (B) AMERBR 1. Income Stateer 31, 2003 For the Year Ended December 31, 2003 (in thousands) $6,577,480 2,573,350 2.354.350 Sales revenue, net Less: Cost of sales Excise taxes on goods sold Gross margin Selling, general, and administrative expenses Income before income taxes Provision for income taxes Net income 1,649,780 974.121 675,659 296.877 $378,782 AMERBRAND COMPANY (A) Exhibit 1. Balance Sheets as of December 31 in thousands) Assets Cash 2004 2003 $ 28,912 $ Accounts receivable Inventories Prepaid expenses Total current assets Investments Property, plant, and equipment, at cost Less accumulated depreciation Net property, plant, and equipment Goodwill Other assets Total assets Liabilities and Shareholders' Equity 756,152 1,244,912 76,140 2,106,116 1,116,534 1,566,268 1 23,952 687,325 1.225,402 77.167 2,013,846 1.058,637 1,366,719 645,734 720,985 577.606 62,374 4,433,448 723,442 842,826 645,210 115,826 4,826,512 Accounts payable Short-term debt Accrued expenses payable Total current liabilities Long-term liabilities Total liabilities Convertible preferred stock Common stock, at par Additional paid-in capital Treasury stock, at cost Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 271,452 430,776 922.990 1,625,218 880,674 2.505.892 33,828 322,834 53,641 (110,948) 2,021.265 2,320,620 $ 4,826,512 238,377 351,112 728,262 1,317,751 932,828 2,250,579 42,611 161,417 57,072 (102,705) 2.024.474 2,182,869 5 4,433,448 Income Statement For the year ended December 31, 2004 in thousands) Sales revenues, net Cost of sales Excise taxes on goods sold Gross margin Selling, general, and administrative expenses Income before income taxes Provision for income taxes Net income $ 7,622,677 2,803,623 2.887,616 1,931,438 1,328,107 603,331 274,558 328,773