ACC 560 week 10 Chapter 14: Exercises 4, 7, and 11; Problem 5

ACC 560 week 10 Chapter 14: Exercises 4, 7, and 11; Problem 5

E14-4 The comparative condensed income statements of Emley Corporation are shown below.

EMLEY CORPORATION

Comparative Condensed Income Statements

For the Years Ended December 31

                                                                                                2017                             2016

Net sales                                                                                  $660,000                       $600,000

Cost of goods sold                                                                    483,000                        420,000

Gross profit                                                                                177,000                         180,000

Operating expenses                                                                   125,000                        120,000

Net income                                                                               $ 52,000                       $ 60,000

Instructions

Prepare a horizontal analysis of the income statement data for Emley Corporation using 2016 as a base. (Show the amounts of increase or decrease.) Prepare a vertical analysis of the income statement data for Emley Corporation in columnar form for both years.

E14-7Frizell Company has the following comparative balance sheet data.

FRIZELL COMPANY

Balance Sheets

December 31

                                                                                    2017                 2016

Cash                                                                             $ 15,000           $ 30,000

Accounts receivable (net)                                                   70,000              60,000

Inventory                                                                           60,000              50,000

Plant assets (net)                                                           200,000            180,000

                                                                                    $345,000           $320,000

Accounts payable                                                         $ 50,000           $ 60,000

Mortgage payable (6%)                                                               100,000             100,000

Common stock, $10 par                                                  140,000             120,000

Retained earnings                                                             55,000            40,000

                                                                                    $345,000           $320,000

Additional information for 2017:

Net income was $25,000. Sales on account were $410,000. Sales returns and allowances were $20,000. Cost of goods sold was $198,000.

Instructions

Compute the following ratios at December 31, 2017.

Current ratio. Acid-test ratio. Accounts receivable turnover. Inventory turnover.

E14-11Wiemers Corporation's comparative balance sheets are presented on the next page.

WIEMERS CORPORATION

Balance Sheets

December 31

                                                                                    2017                 2016

Cash                                                                             $  4,300          $  3,700 

Accounts receivable (net)                                                   21,200               23,400 

Inventory                                                                           10,000                 7,000 

Land                                                                                 20,000               26,000

Buildings                                                                          70,000               70,000 

Accumulated depreciation—buildings                            (15,000)             (10,000)

Total                                                                             $110,500           $120,100

Accounts payable                                                         $ 12,370          $ 31,100 

Common stock                                                                 75,000              69,000 

Retained earnings                                                             23,130            20,000 

Total                                                                             $110,500           $120,100

Wiemers's 2017 income statement included net sales of $100,000, cost of goods sold of $60,000, and net income of $15,000.

Instructions

Compute the following ratios for 2017.

Current ratio. Acid-test ratio. Accounts receivable turnover. Inventory turnover. Profit margin. Asset turnover. Return on assets. Return on common stockholders' equity. Debt to assets ratio.

Selected financial data of Target and Wal-Mart for a recent year are presented here (in millions).

Target

Corporation

Wal-Mart

Stores, Inc.

Income Statement Data for Year

Net sales

$61,471

$374,526

Cost of goods sold

41,895

286,515

Selling and administrative expenses

16,200

70,847

Interest expense

647

1,798

Other income (expense)

1,896

4,273

Income tax expense

1,776

6,908

Net income

$ 2,849

$ 12,731

Balance Sheet Data (End of Year)

Current assets

$18,906

$ 47,585

Noncurrent assets

25,654

115,929

Total assets

$44,560

$163,514

Current liabilities

$11,782

$ 58,454

Long-term debt

17,471

40,452

Total stockholders’ equity

15,307

64,608

Total liabilities and stockholders’ equity

$44,560

$163,514

Beginning-of-Year Balances

Total assets

$37,349

$151,587

Total stockholders’ equity

15,633

61,573

Current liabilities

11,117

52,148

Total liabilities

21,716

90,014

        Other Data

Average net accounts receivable

$ 7,124

$ 3,247

Average inventory

6,517

34,433

Net cash provided by operating activities

4,125

20,354

(a)

For each company, compute the following ratios. (Round all answers to 1 decimal place, e.g.1.6, or 1.6% .)

Ratio

Target

Wal-Mart

(1)

Current

:1

:1

(2)

Accounts receivable turnover

(3)

Average collection period

(4)

Inventory turnover

(5)

Days in inventory

(6)

Profit margin

%

%

(7)

Asset turnover

(8)

Return on assets

%

%

(9)

Return on common stockholders’ equity

%

%

(10)

Debt to total assets

%

%

(11)

Times interest earned

A. For each company, compute the following ratios.

(1) Current ratio.

(2) Accounts receivable turnover.

(3) Average collection period.

(4) Inventory turnover.

(5) Days in inventory.

(6) Profit margin.

(7) Asset turnover.

(8) Return on assets.

(9) Return on common stockholders' equity.

(10) Debt to assets ratio.

(11) Times interest earned.

Compare the liquidity, profitability, and solvency of the two companies.