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Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2015, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,220 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $6,710 is due on March 31, 2016, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn's cash flow problems are due primarily to the company's desire to finance a $316,800 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal years. BRADBURN CORPORATION BALANCE SHEET MARCH 31 Assets 2015 Cash Notes receivable Accounts receivable (net) Inventories (at cost) Plant & equipment (net of depreciation) 2014 $18,570 149,820 132,020 107,520 1,464,400 $13,190 132,830 126,760 50,900 1,422,000 $1,872,330 $1,745,680 Liabilities and Owners' Equity Accounts payable Notes payable Accrued liabilities Common stock (130,000 shares, $10 par) Retained earningsa $80,730 77,150 31,172 1,300,000 383,278 $91,290 62,340 9,210 1,300,000 282,840 Total liabilities and stockholders' equity $1,872,330 $1,745,680 Total assets a Cash dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year 2015. BRADBURN CORPORATION INCOME STATEMENT FOR THE FISCAL YEARS ENDED MARCH 31 2015 Sales revenue Cost of goods solda Gross margin Operating expenses Income before income taxes Income taxes (40%) Net income a 2014 $3,012,600 1,548,500 $2,710,800 1,440,200 1,464,100 863,370 1,270,600 786,000 600,730 240,292 484,600 193,840 $360,438 $290,760 Depreciation charges on the plant and equipment of $109,300 and $111,600 for fiscal years ended March 31, 2014 and 2015, respectively, are included in cost of goods sold. (a) Compute the following items for Bradburn Corporation. (Round answer to 2 decimal places, e.g. 2.25.) (1) (2) (3) (4) Current ratio for fiscal years 2014 and 2015. Acid-test (quick) ratio for fiscal years 2014 and 2015. Inventory turnover for fiscal year 2015. Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,693,500 at 3/31/13.) (5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015. 2014 (1) Current ratio 2015 :1 :1 2.46 (2) Acid-test (quick) ratio 2.02 :1 :1 (3) Inventory turnover times (4) Return on assets % (5) Percent Changes % Percent Increase Sales revenue % Cost of goods sold % Gross margin % Net income after taxes % Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2014. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2009. The client provides you with the information below. ALMADEN CORPORATION BALANCE SHEET DECEMBER 31, 2014 Assets Current assets Other assets Liabilities $1,885,000 5,189,245 $7,074,245 Current liabilities Long-term liabilities Capital $968,440 1,471,640 4,634,165 $7,074,245 An analysis of current assets discloses the following. Cash (restricted in the amount of $302,930 for plant expansion) Investments in land Accounts receivable less allowance of $30,320 Inventories (LIFO flow assumption) $572,770 185,260 481,020 645,950 $1,885,000 Other assets include: Prepaid expenses Plant and equipment less accumulated depreciation of $1,445,400 Cash surrender value of life insurance policy Unamortized bond discount Notes receivable (short-term) Goodwill Land $62,590 4,142,500 86,060 35,935 162,600 252,600 446,960 $5,189,245 Current liabilities include: Accounts payable Notes payable (due 2017) Estimated income taxes payable Premium on common stock $511,440 159,290 146,770 150,940 $968,440 Long-term liabilities include: Unearned revenue Dividends payable (cash) 8% bonds payable (due May 1, 2019) $490,070 200,370 781,200 $1,471,640 Capital includes: Retained earnings Capital stock, par value $10; authorized 200,000 shares, 185,330 shares issued $2,780,865 1,853,300 $4,634,165 The supplementary information below is also provided. 1 On May 1, 2014, the corporation issued at 95.4, $781,200 of bonds to finance plant expansion. The . long-term bond agreement provided for the annual payment of interest every May 1. The existing plant was pledged as security for the loan. Use the straight-line method for discount amortization. 2 The bookkeeper made the following mistakes. . (a) In 2012, the ending inventory was overstated by $184,300. The ending inventories for 2013 and 2014 were correctly computed. (b) In 2014, accrued wages in the amount of $226,000 were omitted from the balance sheet, and these expenses were not charged on the income statement. (c) In 2014, a gain of $176,530 (net of tax) on the sale of certain plant assets was credited directly to retained earnings. 3 A major competitor has introduced a line of products that will compete directly with Almaden's . primary line, now being produced in a specially designed new plant. Because of manufacturing innovations, the competitor's line will be of comparable quality but priced 50% below Almaden's line. The competitor announced its new line on January 14, 2015. Almaden indicates that the company will meet the lower prices that are high enough to cover variable manufacturing and selling expenses, but permit recovery of only a portion of fixed costs. 4 You learned on January 28, 2015, prior to completion of the audit, of heavy damage because of a . recent fire to one of Almaden's two plants; the loss will not be reimbursed by insurance. The newspapers described the event in detail. Analyze the above information to prepare a corrected balance sheet for Almaden in accordance with proper accounting and reporting principles. Prepare a description of any notes that might need to be prepared. The books are closed and adjustments to income are to be made through retained earnings. (List current assets in order of liquidity. Enter account name only and do not provide descriptive information.) ALMADEN CORPORATION Balance Sheet December 31, 2014 Assets $ $ : $ $ : $ Liabilities and Stockholders' Equity $ $ $ : $ Problem 24-5 Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend has never been declared. Presented below is a brief financial summary of Matheny Inc. operations. 2015 Sales revenue Net income Average total assets Current assets Working capital Common shares: $20,690 2,870 23,020 8,210 3,960 ($000 omitted) 2014 2013 2012 $17,870 1,480 20,900 6,580 3,790 $15,740 890 11,750 3,220 1,780 $6,070 780 4,700 1,310 540 2011 $4,070 280 3,360 1,200 510 Number of shares outstanding (000) Average market price 3,700 $8 3,700 $6 3,700 $4 20 20 (b) Compute the return on assets, profit margin on sales, earnings per share, price-earnings ratio, and current ratio for each of the 5 years for Matheny Inc. (Round answers to 2 decimal places, e.g. 2.25.) 2015 Return on assets Profit margin on sales 2014 2013 2012 2011 % % % % % % $ % $ % $ % $ % $ Earning s per share Priceearning s ratio times times times Current ratio times times times Don't show me this message again for the assignment times times \fProblem 24-1 Your firm has been engaged to examine the financial statements of Almaden Corporation for the year 2014. The bookkeeper who maintains the financial records has prepared all the unaudited financial statements for the corporation since its organization on January 2, 2009. The client provides you with the information below. ALMADEN CORPORATION BALANCE SHEET DECEMBER 31, 2014 Assets Current assets Other assets Liabilities $1,885,000 5,189,245 Current liabilities Long-term liabilities Capital $7,074,245 $968,440 1,471,640 4,634,165 $7,074,245 An analysis of current assets discloses the following. Cash (restricted in the amount of $302,930 for plant expansion) Investments in land Accounts receivable less allowance of $30,320 Inventories (LIFO flow assumption) $572,770 185,260 481,020 645,950 $1,885,000 Other assets include: Prepaid expenses Plant and equipment less accumulated depreciation of $1,445,400 Cash surrender value of life insurance policy Unamortized bond discount Notes receivable (short-term) Goodwill Land $62,590 4,142,500 86,060 35,935 162,600 252,600 446,960 $5,189,245 Current liabilities include: Accounts payable Notes payable (due 2017) Estimated income taxes payable Premium on common stock $511,440 159,290 146,770 150,940 $968,440 Long-term liabilities include: Unearned revenue Dividends payable (cash) 8% bonds payable (due May 1, 2019) $490,070 200,370 781,200 $1,471,640 Capital includes: Retained earnings Capital stock, par value $10; authorized 200,000 shares, 185,330 shares $2,780,865 1,853,300 issued $4,634,165 The supplementary information below is also provided. 1 On May 1, 2014, the corporation issued at 95.4, $781,200 of bonds to finance plant expansion. The . long-term bond agreement provided for the annual payment of interest every May 1. The existing plant was pledged as security for the loan. Use the straight-line method for discount amortization. 2 The bookkeeper made the following mistakes. . (a) In 2012, the ending inventory was overstated by $184,300. The ending inventories for 2013 and 2014 were correctly computed. (b) In 2014, accrued wages in the amount of $226,000 were omitted from the balance sheet, and these expenses were not charged on the income statement. (c) In 2014, a gain of $176,530 (net of tax) on the sale of certain plant assets was credited directly to retained earnings. 3 A major competitor has introduced a line of products that will compete directly with Almaden's . primary line, now being produced in a specially designed new plant. Because of manufacturing innovations, the competitor's line will be of comparable quality but priced 50% below Almaden's line. The competitor announced its new line on January 14, 2015. Almaden indicates that the company will meet the lower prices that are high enough to cover variable manufacturing and selling expenses, but permit recovery of only a portion of fixed costs. 4 You learned on January 28, 2015, prior to completion of the audit, of heavy damage because of a . recent fire to one of Almaden's two plants; the loss will not be reimbursed by insurance. The newspapers described the event in detail. Analyze the above information to prepare a corrected balance sheet for Almaden in accordance with proper accounting and reporting principles. Prepare a description of any notes that might need to be prepared. The books are closed and adjustments to income are to be made through retained earnings. (List current assets in order of liquidity. Enter account name only and do not provide descriptive information.) ALMADEN CORPORATION Balance Sheet December 31, 2014 Assets $ $ : $ $ : $ Liabilities and Stockholders' Equity $ $ $ : $ Don't show me this message again for the assignment Link to Text