PROBLEM 1. You work for a prominent investment banking firm, DEWEY, CHEATUM & HOWE. One of your most important clients, Maurice Howard, comes to you for investment advice regarding two top tier pet stores, EDDIE'S PET SUPPLY COMPANY and MILLIE'S PETS, INC. The Eddie's market price per common share is $100 and Millie's is $90 per common share. There is no preferred stock. You gathered the following financial information for the year ended, February 29, 2020. Net sales Cost of goods sold Selling and administrative expenses Interest expense Other income (expense) Income tax expense Net income EDDIE'S MILLIE'S Income Statement Data for the year ended $67,390 $405,046 45,725 304,657 13,469 79,607 757 1,884 (2,944) 2,576 1,575 7,139 $ 2,920 $ 14,335 Current assets Noncurrent assets Total assets Balance Sheet Data (02/29/2020) $17,213 $ 48,331 26,492 122,375 $43,705 $170,706 $10,070 $ 55,561 18,148 44,396 15,487 70,749 $43,705 $170,706 Current liabilities Long-term debt Total stockholders' equity Total liabilities and stockholders' equity Total assets Total stockholders' equity Current liabilities EDDIES MILLIE'S Beginning-of-Year Balances $44,533 $ 163,429 15,347 65,285 11,327 55,390 29,186 98,144 Total liabilities Other Data Average net accounts receivable Dividends per common share Average common shares outstanding $ 6,560 $ 4,025 $ 10 $ 20 5,000 7,500 Instructions: Using all of the financial analysis tools leamed in Chapter 17 and based upon your complete analysis, which entity do you recommend to Maurice Howard, as the best investment? Maurice Howard insists upon seeing all of your calculations as proof of your recommendation. PROBLEM 2. Chewy Dewey, the managing partner, at the infamous investment banking firm, DEWEY, CHEATUM & HOWE, asks you to prepare a cash flow statement for the fiscal year ended, January 31, 2019 of Bengali Imports, Inc., using the indirect method. The comparative balance sheets for Bengali Imports, Inc. as of January 31 are presented below. Bengali Imports, Inc. Comparative Balance Sheets January 31 Assets 2019 2018 Cash Accounts receivable Inventory Prepaid expenses Land $ 59,520 $ 45,000 44,000 62,000 154,550 142,000 15,280 21,000 145,000 130,000 200,000 200,000 (60,000) (40,000) 228,000 155,000 (45,000) (35,000) $741,350 $680,000 Buildings Accumulated depreciationbuildings Equipment Accumulated depreciation oment Total Liabilities and Stockholders' Equity Accounts payable $ 46,350 $ 40,000 Bonds payable 300,000 300,000 Common stock, $1 par 195,000 160,000 Retained eamings 200,000 180,000 Total $741,350 $680,000 Additional information: 1. Operating expenses include depreciation expense of $40,000. 2. Land was sold for cash at book value of $20,000. 3. Cash dividends of $25,000 were paid. 4. Net income for 2019 was $45,000. 5. Equipment was purchased for $95,000 cash. In addition, equipment costing $22,000 with a book value of $12,000 was sold for $6,000 cash. 6. Issued 35,000 shares of $1 par value common stock in exchange for land with a fair value of $35,000. Instructions: Prepare a statement of cash flows for the year ended January 31, 2019, using the indirect method and complete the statement in good form
