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survey of Accounting Problem 9-1 Here are comparative statement data for Sheridan Company and Crane Company, two competitors. All balance sheet data...
survey of AccountingProblem 9-1
Here are comparative statement data for Sheridan Company and Crane Company, two competitors. All balance sheet data are as of December 31, 2017, and December 31, 2016.
Sheridan Company
Crane Company
2017
2016
2017
2016
Net sales$1,931,000$561,000Cost of goods sold1,084,000296,000Operating expenses255,00091,000Interest expense6,8002,400Income tax expense67,80032,000Current assets691,067$662,309176,672$ 168,470Plant assets (net)1,116,8161,060,000296,223266,721Current liabilities140,609160,72874,93864,196Long-term liabilities241,659190,80062,79453,000Common stock, $10 par1,060,0001,060,000254,400254,400Retained earnings365,615310,78180,76463,596
Prepare a vertical analysis of the 2017 income statement data for Sheridan Company and Crane Company. (Round all ratios to 1 decimal place, e.g. 2.5%.)
Condensed Income Statement
For the Year Ended December 31, 2017
Sheridan Company
Crane Company
Dollars
Percent
Dollars
Percent
$1,931,000
%
$561,000
%
1,084,000
%
296,000
%
847,000
%
265,000
%
255,000
%
91,000
%
592,000
%
174,000
%
6,800
%
2,400
%
585,200
%
171,600
%
67,800
%
32,000
%
$517,400
%
$139,600
%
Problem 9-4The following financial information is for Oriole Company.
ORIOLE COMPANY
Balance Sheets
December 31
Assets
2017
2016
Cash$ 69,000
$ 65,000
Debt investments (short-term)
55,000
40,000
Accounts receivable109,000
89,000
Inventory239,000
168,000
Prepaid expenses23,000
26,000
Land129,000
129,000
Building and equipment (net)264,000
186,000
Total assets$888,000
$703,000
Liabilities and Stockholders' Equity
Notes payable$169,000
$109,000
Accounts payable66,000
52,000
Accrued liabilities42,000
42,000
Bonds payable, due 2020251,000
170,000
Common stock, $10 par204,000
204,000
Retained earnings156,000
126,000
Total liabilities and stockholders' equity$888,000
$703,000
ORIOLE COMPANY
Income Statements
For the Years Ended December 31
2017
2016
Sales revenue$902,000
$800,000
Cost of goods sold650,000
575,000
Gross profit252,000
225,000
Operating expenses191,000
165,000
Net income$ 61,000
$ 60,000
Additional information:
1.Inventory at the beginning of 2016 was $115,000.2.Accounts receivable (net) at the beginning of 2016 were $89,000.3.Total assets at the beginning of 2016 were $633,000.4.No common stock transactions occurred during 2016 or 2017.5.All sales were on account.
Compute the liquidity and profitability ratios of Oriole Company for 2016 and 2017. (Round current ratio and asset turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 1.8%. If % change is a decrease show the numbers as negative, e.g. -1.83% or (1.83%).)
2017
2016
% Change
LIQUIDITY
Current ratio
:1
:1
%Accounts receivables turnover
times
times
%Inventory turnover
times
times
%
2017
2016
% Change
PROFITABILITY
Profit margin
%
%
%Asset turnover
times
times
%Return on assets
%
%
%Earnings per share$
$
%
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The following are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2017, and (2) as of December 31, 2018, after giving effect to the situation. (Round all answers to 1 decimal places, e.g. 1.8 or 1.8%. If % change is a decrease show the numbers as negative, e.g. -1.83% or (1.83%).)
Situation
Ratio
1.18,000 shares of common stock were sold at par on July 1, 2018. Net income for 2018 was $54,000.Return on common stockholders' equity2.All of the notes payable were paid in 2018. All other liabilities remained at the same levels as at December 31, 2018. At December 31, 2018, total assets were $903,000.Debt to assets ratio3.The market price of common stock was $9 and $13 on December 31, 2017 and 2018, respectively. Net income for 2018 was $54,000.Price-earnings ratio
2018
2017
% Change
Return on common stockholders' equity
%
%
%Debt to assets ratio
%
%
%Price earnings ratio
times
times
%
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Compute the 2017 return on assets and the return on common stockholders' equity for both companies. (Round all ratios to 1 decimal place, e.g. 2.5%.)
Sheridan Company
Crane Company
Return on assets
%
%
Return on common stockholders' equity
%
%
