Question
Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial
Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the companys financial statements for the 2 most recent years.
Kepler Company Comparative Balance Sheets | |||
This Year | Last Year | ||
Assets | |||
Current assets: | |||
Cash | $50,000.00 | $100,000.00 | |
Accounts Receivable, net | 300,000.00 | 150,000.00 | |
Inventory | 600,000.00 | 400,000.00 | |
Prepaid expenses | 25,000.00 | 30,000.00 | |
Total current assets | $975,000.00 | $680,000.00 | |
Property and equipment, net | 125,000.00 | 150,000.00 | |
Total assets | $1,100,000.00 | $830,000.00 | |
Liabilities and Stockholders Equity | |||
Current liabilities: | |||
Accounts payable | $400,000.00 | $290,000.00 | |
Short-term notes payable | 200,000.00 | 60,000.00 | |
Total current liabilities | $600,000.00 | $350,000.00 | |
Long-term bonds payable, 12% | 100,000.00 | 150,000.00 | |
Total liabilities | $700,000.00 | $500,000.00 | |
Stockholders equity: | |||
Common stock (100,000 shares) | 200,000.00 | 200,000.00 | |
Retained earnings | 200,000.00 | 130,000.00 | |
Total liabilities and stockholders equity | $1,100,000.00 | $830,000.00 |
Kepler Company Comparative Income Statements | |||
This Year | Last Year | ||
Sales | $950,000.00 | $900,000.00 | |
Less: Cost of goods sold | (500,000.00) | (490,000.00) | |
Gross margin | $450,000.00 | $410,000.00 | |
Less operating expenses: | |||
Selling and Administrative expenses | (275,000.00) | (260,000.00) | |
Operating income | $175,000.00 | $150,000.00 | |
Less: | |||
Interest expense | (12,000.00) | (18,000.00) | |
Net income before taxes | $163,000.00 | $132,000.00 | |
Less: | |||
Income taxes | (65,200.00) | (52,800.00) | |
Net income after taxes | $97,800.00 | $79,200.00 | |
Less: | |||
Dividends | (27,800.00) | (19,200.00) | |
Net income, retained | $70,000.00 | $60,000.00 |
Required:
1. Express each item in the asset section of the balance sheet as a percentage of total assets for each year. (Note: Enter a decrease as a negative number if applicable. Round all percentages to one decimal place.)
Kepler Company | ||||
Comparative Balance Sheets | ||||
This Year | This Year | Last Year | Last Year | |
Assets | ||||
Current assets: | ||||
Cash | $50,000.00 | $100,000.00 | ||
Accounts Receivable, net | 300,000.00 | 150,000.00 | ||
Inventory | 600,000.00 | 400,000.00 | ||
Prepaid expenses | 25,000.00 | 30,000.00 | ||
Total current assets | $975,000.00 | $680,000.00 | ||
Property and equipment, net | 125,000.00 | 150,000.00 | ||
Total assets | $1,100,000.00 | $830,000.00 |
Feedback
1. Set up both years in balance sheet form, assets section. Start with total assets at 100%. Then compare each line amount to each year's total assets.
2. Express each item in the liabilities and equity section as a percentage of total liabilities and equity for each year. (Note: Enter a decrease as a negative number if applicable. Round all percentages to one decimal place.)
Kepler Company | ||||
Comparative Balance Sheets | ||||
This Year | This Year | Last Year | Last Year | |
Liabilities and Stockholders Equity | ||||
Current liabilities: | ||||
Accounts payable | $400,000.00 | $290,000.00 | ||
Short-term notes payable | 200,000.00 | 60,000.00 | ||
Total current liabilities | $600,000.00 | $350,000.00 | ||
Long-term bonds payable, 12% | 100,000.00 | 150,000.00 | ||
Total liabilities | $700,000.00 | $500,000.00 | ||
Stockholders equity: | ||||
Common stock (100,000 shares) | 200,000.00 | 200,000.00 | ||
Retained earnings | 200,000.00 | 130,000.00 | ||
Total liabilities and stockholders equity | $1,100,000.00 | $830,000.00 | ||
Feedback
2. Set up both years in balance sheet form, liabilities and stockholders' equity section. Start with total liabilities and stockholders' equity at 100%. Then compare each line amount to each years total liabilities and stockholders' equity.
3. Express each item in the income statement as a percentage of sales for each year. (Note: Enter a decrease as a negative number if applicable. Round all percentages to one decimal place.) Due to rounding, percentages may not total 100%.
Kepler Company | ||||
Comparative Income Statement | ||||
This Year | This Year | Last Year | Last Year | |
Sales | $950,000.00 | $900,000.00 | ||
Less: Cost of goods sold | (500,000.00) | (490,000.00) | ||
Gross margin | $450,000.00 | $410,000.00 | ||
Less operating expenses: | ||||
Selling and Administrative expenses | (275,000.00) | (260,000.00) | ||
Operating income | $175,000.00 | $150,000.00 | ||
Less: | ||||
Interest expense | (12,000.00) | (18,000.00) | ||
Net income before taxes | $163,000.00 | $132,000.00 | ||
Less: | ||||
Income taxes | (65,200.00) | (52,800.00) | ||
Net income after taxes | $97,800.00 | $79,200.00 | ||
Less: | ||||
Dividends | (27,800.00) | (19,200.00) | ||
Net income, retained | $70,000.00 | $60,000.00 | ||
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