Question
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.80 on December 31, 20Y2. Question not
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.80 on December 31, 20Y2.
Question not attempted.
| Marshall Inc. |
| Comparative Retained Earnings Statement |
| For the Years Ended December 31, 20Y2 and 20Y1 |
| 1 |
| 20Y2 | 20Y1 |
| 2 | Retained earnings, January 1 | $3,716,000.00 | $3,266,000.00 |
| 3 | Net income | 610,000.00 | 560,000.00 |
| 4 | Total | $4,326,000.00 | $3,826,000.00 |
| 5 | Dividends: |
|
|
| 6 | On preferred stock | $10,000.00 | $10,000.00 |
| 7 | On common stock | 100,000.00 | 100,000.00 |
| 8 | Total dividends | $110,000.00 | $110,000.00 |
| 9 | Retained earnings, December 31 | $4,216,000.00 | $3,716,000.00 |
Question not attempted.
| Marshall Inc. |
| Comparative Income Statement |
| For the Years Ended December 31, 20Y2 and 20Y1 |
| 1 |
| 20Y2 | 20Y1 |
| 2 | Sales | $10,840,000.00 | $10,000,000.00 |
| 3 | Cost of goods sold | 6,000,000.00 | 5,440,000.00 |
| 4 | Gross profit | $4,840,000.00 | $4,560,000.00 |
| 5 | Selling expenses | $2,160,000.00 | $2,000,000.00 |
| 6 | Administrative expenses | 1,627,500.00 | 1,500,000.00 |
| 7 | Total operating expenses | $3,787,500.00 | $3,500,000.00 |
| 8 | Income from operations | $1,052,500.00 | $1,060,000.00 |
| 9 | Other revenue | 99,500.00 | 20,000.00 |
| 10 |
| $1,152,000.00 | $1,080,000.00 |
| 11 | Other expense (interest) | 132,000.00 | 120,000.00 |
| 12 | Income before income tax | $1,020,000.00 | $960,000.00 |
| 13 | Income tax expense | 410,000.00 | 400,000.00 |
| 14 | Net income | $610,000.00 | $560,000.00 |
Question not attempted.
| Marshall Inc. |
| Comparative Balance Sheet |
| December 31, 20Y2 and 20Y1 |
| 1 |
| 20Y2 | 20Y1 |
| 2 | Assets |
|
|
| 3 | Current assets: |
|
|
| 4 | Cash | $1,050,000.00 | $950,000.00 |
| 5 | Marketable securities | 301,000.00 | 420,000.00 |
| 6 | Accounts receivable (net) | 584,000.00 | 500,000.00 |
| 7 | Inventories | 410,000.00 | 380,000.00 |
| 8 | Prepaid expenses | 107,000.00 | 20,000.00 |
| 9 | Total current assets | $2,452,000.00 | $2,270,000.00 |
| 10 | Long-term investments | 800,000.00 | 800,000.00 |
| 11 | Property, plant, and equipment (net) | 5,750,000.00 | 5,184,000.00 |
| 12 | Total assets | $9,002,000.00 | $8,254,000.00 |
| 13 | Liabilities |
|
|
| 14 | Current liabilities | $836,000.00 | $788,000.00 |
| 15 | Long-term liabilities: |
|
|
| 16 | Mortgage note payable, 6%, | $200,000.00 | $0.00 |
| 17 | Bonds payable, 4%, | 3,000,000.00 | 3,000,000.00 |
| 18 | Total long-term liabilities | $3,200,000.00 | $3,000,000.00 |
| 19 | Total liabilities | $4,036,000.00 | $3,788,000.00 |
| 20 | Stockholders Equity |
|
|
| 21 | Preferred 4% stock, $5 par | $250,000.00 | $250,000.00 |
| 22 | Common stock, $5 par | 500,000.00 | 500,000.00 |
| 23 | Retained earnings | 4,216,000.00 | 3,716,000.00 |
| 24 | Total stockholders equity | $4,966,000.00 | $4,466,000.00 |
| 25 | Total liabilities and stockholders equity | $9,002,000.00 | $8,254,000.00 |
Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts): Assume a 365-day year.
| 1. | Working capital The excess of the current assets of a business over its current liabilities. |
| 2. | Current ratio A financial ratio that is computed by dividing current assets by current liabilities. |
| 3. | Quick ratio A financial ratio that measures the ability to pay current liabilities with quick assets (cash, temporary investments, accounts receivable), computed as quick assets divided by current liabilities. |
| 4. | Accounts receivable turnover The relationship between sales and accounts receivable, computed by dividing the sales by the average net accounts receivable; measures how frequently during the year the accounts receivable are being converted to cash. |
| 5. | Number of days sales in receivables The relationship between sales and accounts receivable, computed by dividing the average accounts receivable by the average daily sales. |
| 6. | Inventory turnover The relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory. |
| 7. | Number of days sales in inventory The relationship between the volume of sales and inventory, computed by dividing average inventory by the average daily cost of goods sold. |
| 8. | Ratio of fixed assets to long-term liabilities A solvency ratio that measures how much fixed assets a company has to support its long-term debt. |
| 9. | Ratio of liabilities to stockholders equity A comprehensive leverage ratio that measures the relationship of the claims of creditors to stockholders' equity, calculated as total liabilities divided by total stockholders' equity. |
| 10. | Times interest earned A ratio that measures the risk that interest payments will not be made if earnings decrease, calculated as income before income tax and interest expense divided by interest expense. |
| 11. | Asset turnover Ratio that measures how effectively a business uses its assets to generate revenues, computed as sales divided by average total assets. |
| 12. | Return on total assets A measure of the profitability of assets, without regard to the equity of creditors and stockholders in the assets. |
| 13. | Return on stockholders equity A measure of profitability computed by dividing net income by average stockholders' equity. |
| 14. | Return on common stockholders equity A measure of profitability computed by dividing net income, reduced by preferred dividend requirements, by average common stockholders' equity. |
| 15. | Earnings per share on common stock The profitability ratio of net income available to common shareholders to the number of common shares outstanding. |
| 16. | Price-earnings ratio The ratio of the market price per share of common stock, at a specific date, to the annual earnings per share. |
| 17. | Dividends per share Measures the extent to which earnings are being distributed to common shareholders. of common stock |
| 18. | Dividend yield A ratio, computed by dividing the annual dividends paid per share of common stock by the market price per share at a specific date, that indicates the rate of return to stockholders in terms of cash dividend distributions. |
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Questions
Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts): Assume a 365-day year.
| 1. Working Capital | $ |
| 2. Current ratio | |
| 3. Quick ratio | |
| 4. Accounts receivable turnover | |
| 5. Number of days' sales in receivables | |
| 6. Inventory turnover | |
| 7. Number of days sales in inventory | |
| 8. Ratio of fixed assets to long-term liabilities | |
| 9. Ratio of liabilities to stockholders equity | |
| 10. Times interest earned | |
| 11. Asset turnover | |
| 12. Return on total assets | % |
| 13. Return on stockholders equity | % |
| 14. Return on common stockholders equity | % |
| 15. Earnings per share on common stock | $ |
| 16. Price-earnings ratio | |
| 17. Dividends per share of common stock | $ |
| 18. Dividend yield | % |
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
