Question
Use the following financial statements of Precise Company to answer the requirements. Precise Company Comparative Income Statements For the year ended 31 December 2018 and
Use the following financial statements of Precise Company to answer the requirements.
Precise Company
Comparative Income Statements
For the year ended 31 December 2018 and 2017
2018
2017
Sales
$2,486,000
$2,075,000
Cost of goods sold
1,523,000
1,222,000
Gross profit
963,000
853,000
Operating expenses:
Advertising
145,000
100,000
Staff salaries
240,000
280,000
Office salaries
165,000
200,000
Insurance
100,000
45,000
Supplies expense
26,000
35,000
Depreciation
85,000
75,000
Miscellaneous
17,000
15,000
Total operating expenses
778,000
750,000
Operating profit
185,000
103,000
Interest expense
44,000
46,000
Profit before tax
141,000
57,000
Income tax expense
47,000
19,000
Net profit
$94,000
$38,000
Earnings per share
$0.99
$0.99
Precise Company
Comparative Statements of Financial Position
As at 31 December 2018 and 2017
Assets
$
$
Current Assets:
Cash
79,000
42,000
Short-term investments
65,000
96,000
Accounts receivable
120,000
100,000
Merchandise inventory
250,000
265,000
Total current assets
514,000
503,000
Property, plant and equipment
Store equipment
400,000
350,000
Office equipment
45,000
50,000
Buildings
625,000
675,000
Land
100,000
100,000
Total property, plant and equipment
1,170,000
1,175,000
Total assets
$1,684,000
$1,678,000
Liabilities
Current liabilities:
Accounts payable
164,000
190,000
Short-term notes payable
75,000
90,000
Taxes payable
26,000
12,000
Total current liabilities
265,000
292,000
Long-term liabilities:
Notes payable (secured by mortgage on buildings)
400,000
420,000
Total liabilities
665,000
712,000
Shareholders' equity
Share capital
475,000
475,000
Retained earnings
544,000
491,000
Total shareholders' equity
1,019,000
966,000
Total liabilities and equity
$1,684,000
$1,678,000
Required:
a)Prepare common-size comparative statements of financial position for years 2018 and 2017.
b)Compute the following ratios as at 31 December 2017 and 2018 and compare the performance based on the ratios computed.
i.Current ratio
ii.Acid test ratio
iii.Accounts receivable turnover
iv.Inventory turnover
v.Accounts payable turnover
vi.Days' sales uncollected
vii.Total asset turnover
viii.Debt ratio
ix.Equity ratio
x.Profit margin ratio
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Governmental And Nonprofit Accounting Theory And Practice
Authors: Robert J Freeman, Craig D Shoulders, Gregory S Allison, Terry K Patton, Robert Smith,
9th Edition
0132552728, 9780132552721
