Question
Pls help I only have few question number to post Shown as follows is selected information from the financial statements of Dickson, Inc., a retail
Pls help I only have few question number to post
Shown as follows is selected information from the financial statements of Dickson, Inc., a retail furniture store.
From the balance sheet:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,000
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .200,000
Plant assets (net of accumulated depreciation) . . . . . . . . . . . . . 500,000
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Total stockholders equity . . . . . . . . . . ........................... . 300,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,000,000
From the income statement:
Net sales . . . . . . . . . . . . . . . . . . . . . $1,500,000
Cost of goods sold . . . . . . . . . . . . .1,080,000
Operating expenses . . . . . . . . . .315,000
Interest expense . . . . . . . . . . 84,000
Income tax expense . . . . . . . . . . 6,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,000
From the statement of cash flows:
Net cash provided by operating activities
(including interest paid of $79,000) . . . . . . . . . . . . . . . .$ 40,000
Net cash used in investing activities . . . . . . . (46,000)
Financing activities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts borrowed . . . . . . . . . . . . . . . . . . . . . . .$ 50,000
Repayment of amounts borrowed . . . . . . . . . . . . . . (14,000)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,000)
Net cash provided by financing activities . . . . . . . . . . . . . 16,000
Net increase in cash during the year . . . . . . . . . . . . . . . . . . . .$ 10,000
Q:
A.
Explain how the interest expense shown in the income statement could be $84,000, when the interest payment appearing in the statement of cash flows is only $79,000.
A.1. Comment on these measurements and evaluate Dickson, Inc.s short-term debt-paying ability.
A.2 Comment on the companys performance under these measurements. Explain why the return
on assets and return on equity are so different.
A.3. Discuss (1) the apparent safety of long-term creditors claims and (2) the prospects for
Dickson, Inc., continuing its dividend payments at the present level
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started