Question 1. Merino Plc 2019 and 2020 Balance Sheets included the following items:

Merino Plc

Comparative Balance Sheets

As of December 31st, 2019 and 2020

2020

2019

Cash

120,792

71,232

Accounts Receivable

43,512

52,080

Merchandise Inventory

392,784

313,320

Equipment

236,208

171,360

TOTAL ASSETS

793,296

607,992

Accumulated Depreciation, Equipment

108,192

68,544

Accounts Payable

86,184

79,800

Taxes Payable

10,080

15,120

Common Shares

463,680

369,600

Retained Earnings

125,160

74,928

TOTAL LIABILITIES & EQUITY

793,296

607,992

Merino Plc Income Statement was as follows:

Merino Plc

Income Statement

For The Year Ended December 31st, 2020

Revenue:

Sales

1,365.840

Cost Of Goods Sold

624,960

Gross Profit

740,880

Depreciation Expenses:

39,648

Other Expense

402,696

Total Operating Expense

442,344

Profit from operations

298,536

Income Taxes

100,464

NET INCOME

198,072

Required:

Prepare the STATEMENT OF CASH FLOWS for the year ended December 31, 2020. Additional information includes the following:

a. Equipment was purchased for $64,848 cash

b. Issued 3,360 common shares for cash at $28 per share

c. Declared and paid cash dividends during the year.

Question 2: The following are extracts from the financial statements of Cheviot Plc.

Income Statement, for the year ended 30th April 2019

20192018

Sales$11,200$9,750

Cost of sales 8,460 6,825

Gross profit 2,740 2,925

Expenses:

Depreciation 560 527

Interest Expense 195 360

Rent expense 1,2901,400

Income Tax expense 150 268

Net Income 545 370

Comparative Balance Sheet, as at 30th April 2019

20192018

Assets

Current Assets

Cash80120

A/C Receivables12301080

Inventory640490

PPE

Equipment18501430

Total Assets38003120

Liabilities:

A/C payable750690

Interest payable11080

Taxes payable9575

Total liabilities955845

Equity:

Commons shares800800

Long-term Bonds 800600

Retained Earnings1245875

Total Liabilities and Equity38003120

The following ratios are those calculated for Cheviot Plc, based on its published accounts for the previous year, and also the latest industry average ratios:

CheviotIndustry average

30th April 2018

Current Ratio2.001.90

Quick Assets ratio1.421.27

Inventory turnover(times)13.9018.30

Days sales uncollected40 days52 days

Accounts Payable payment period37 days49 days

Profit margin3.793.80

Gross profit ratio30.0035.00

Return on Total Assets11.8512.00

Required:

a. Calculate the above comparable ratios for Cheviot Plc for the year ended 30th April 2019.

b. Write a report to your board of directors analyzing the performance of Cheviot Plc, comparing the results against the previous year and against industry average.

c. If the profit for the year ended 30th April 2018 was $370 compute the Earnings Per Share.