Need help with Homework -Finance

1.

Given the following information, prepare in good form an income statement for the Dental Drilling Company.(Input all amounts as positive values.)

Selling and administrative expense	$	88,000
Depreciation expense		77,000
Sales		538,000
Interest expense		44,000
Cost of goods sold		234,000
Taxes		54,000

Dental Drilling Company
Income Statement
	$
	$
	$
	$
	$

2.

Given the following information, prepare in good form an income statement for Jonas Brothers Cough Drops. (Input all amounts as positive values.)

Selling and administrative expense	$	289,000
Depreciation expense		193,000
Sales		1,720,000
Interest expense		123,000
Cost of goods sold		508,000
Taxes		168,000

Jonas Brothers Cough Drops
Income Statement
	$
	$
	$
	$
	$

3.

Stein Books Inc. sold 2,300 finance textbooks for $220 each to High Tuition University in 2013. These books cost $200 to produce. Stein Books spent $12,500 (selling expense) to convince the university to buy its books.

Depreciation expense for the year was $15,800. In addition, Stein Books borrowed $100,000 on January 1, 2013, on which the company paid 14 percent interest. Both the interest and principal of the loan were paid on December 31, 2013. The publishing firm’s tax rate is 30 percent.

Prepare an income statement for Stein Books. (Input all amounts as positive values.)

Stein Books Inc.
Income Statement
For the Year Ending December 31, 2013
	$
	$
	$
	$
	$

4.

Arrange the following items in proper balance sheet presentation: (Be sure to list the assets and liabilities in order of their liquidity. Input all amounts as positive values.)

Accumulated depreciation	$	395,000
Retained earnings		9,000
Cash		15,000
Bonds payable		215,000
Accounts receivable		54,000
Plant and equipment—original cost		764,000
Accounts payable		44,000
Allowance for bad debts		7,000
Common stock, $1 par, 100,000 shares outstanding		100,000
Inventory		70,000
Preferred stock, $52 par, 1,000 shares outstanding		52,000
Marketable securities		24,000
Investments		24,000
Notes payable		35,000
Capital paid in excess of par (common stock)		94,000

Balance Sheet
Assets	Liabilities and Stockholders’ Equity
Current Assets:			Current Liabilities:
		$		$
	$
			Total current liabilities	$
			Long-term liabilities
Net accounts receivable
Total current assets		$	Total liabilities	$
Other Assets:			Stockholders’ Equity:
				$
Fixed assets:
	$
Net plant and equipment			Total stockholders’ equity	$
Total assets		$	Total liabilities and stockholders’ equity	$

5.

Elite Trailer Parks has an operating profit of $254,000. Interest expense for the year was $34,600; preferred dividends paid were $29,800; and common dividends paid were $42,200. The tax was $67,700. The firm has 18,400 shares of common stock outstanding.

a.	Calculate the earnings per share and the common dividends per share for Elite Trailer Parks. (Round your answers to 2 decimal places.)

Earnings per share	$
Common dividends per share	$

b.	What was the increase in retained earnings for the year?

Increase in retained earnings

$

6.

Botox Facial Care had earnings after taxes of $362,000 in 2012 with 200,000 shares of stock outstanding. The stock price was $81.80. In 2013, earnings after taxes increased to $450,000 with the same 200,000 shares outstanding. The stock price was $95.00.

a.	Compute earnings per share and the P/E ratio for 2012. (The P/E ratio equals the stock price divided by earnings per share.) (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Earnings per share	$
P/E ratio	times

b.	Compute earnings per share and the P/E ratio for 2013. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Earnings per share	$
P/E ratio	times

c.	Why did the P/E ratio change? (Do not round intemediate calculations. Input your answers as percents rounded to 2 decimal places.)

The stock price  by  percent while EPS  by  percent.

7.

The Rogers Corporation has a gross profit of $702,000 and $277,000 in depreciation expense. The Evans Corporation also has $702,000 in gross profit, with $47,300 in depreciation expense. Selling and administrative expense is $227,000 for each company.

a.	Given that the tax rate is 40 percent, compute the cash flow for both companies.

	Rogers	Evans
Cash flow	$	$

b.	Calculate the difference in cash flow between the two firms.

Difference in cash flow	$

8.

The Holtzman Corporation has assets of $452,000, current liabilities of $93,000, and long-term liabilities of $137,000. There is $33,800 in preferred stock outstanding; 20,000 shares of common stock have been issued.

a.	Compute book value (net worth) per share. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Book value per share	$
b.	If there is $30,900 in earnings available to common stockholders, and Holtzman’s stock has a P/E of 20 times earnings per share, what is the current price of the stock? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Current price

$

c.	What is the ratio of market value per share to book value per share? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Market value to book value	times
9.Amigo Software Inc. has total assets of $889,000, current liabilities of $192,000, and long-term liabilities of $154,000. There is $87,000 in preferred stock outstanding. Thirty thousand shares of common stock have been issued.

a.	Compute book value (net worth) per share. (Round your answer to 2 decimal places.)

Book value per share

$

b.	If there is $56,300 in earnings available to common stockholders, and the firm’s stock has a P/E of 23 times earnings per share, what is the current price of the stock? (Do not round intermediate calculations. Round you final answer to 2 decimal places.)

Current price

$

c.	What is the ratio of market value per share to book value per share? (Do not round intermediate calculations. Round you final answer to 2 decimal places.)
Market value to book value		times

10.

For December 31, 2012, the balance sheet of Baxter Corporation was as follows:

Current Assets			Liabilities
Cash	$	24,000	Accounts payable	$	26,000
Accounts receivable		29,000	Notes payable		34,000
Inventory		39,000	Bonds payable		64,000
Prepaid expenses		13,400
Fixed Assets			Stockholders’ Equity
Gross plant and equipment	$	264,000	Preferred stock	$	34,000
Less: Accumulated depreciation		52,800	Common stock		69,000
			Paid-in capital		39,000
Net plant and equipment		211,200	Retained earnings		50,600
Total assets	$	316,600	Total liabilities and stockholders’ equity	$	316,600

Sales for 2013 were $290,000, and the cost of goods sold was 55 percent of sales. Selling and administrative expense was $29,000. Depreciation expense was 12 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 8 percent, while the interest rate on the bonds payable was 16 percent. This interest expense is based on December 31, 2012 balances. The tax rate averaged 40 percent.

$3,400 in preferred stock dividends were paid and $6,156 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding.

During 2013, the cash balance and prepaid expenses balances were unchanged. Accounts receivable and inventory increased by 8 percent. A new machine was purchased on December 31, 2013, at a cost of $49,000.

Accounts payable increased by 30 percent. Notes payable increased by $7,400 and bonds payable decreased by $17,000, both at the end of the year. The preferred stock, common stock, and capital paid in excess of par accounts did not change.

a.	Prepare an income statement for 2013. (Round EPS answer to 2 decimal places. Input all amounts as positive values.)

BAXTER CORPORATION 2013 Income Statement
	$
	$
	$
	$
	$
Earnings available to common stockholders	$
Shares outstanding
Earnings per share	$

b.	Prepare a statement of retained earnings for 2013. (Input all amounts as positive values.)

BAXTER CORPORATION 2013 Income Statement
	$
Add:
Less:
	$

c.	Prepare a balance sheet as of December 31, 2013. (Be sure to list the assets and liabilities in order of their liquidity. Input all amounts as positive values.)

BAXTER CORPORATION 2013 Balance Sheet
Current Assets		Liabilities
		$			$
Total current assets		$		Total liabilities	$
Fixed Assets		Stockholders’ Equity
	$				$
Net plant and equipment
				Total stockholders’ equity	$
Total assets		$		Total liabilities and stockholders’ equity	$

11.

Refer to the following financial statements for Crosby Corporation:

CROSBY CORPORATION Income Statement For the Year Ended December 31, 2011
Sales		$	3,550,000
Cost of goods sold			2,280,000
Gross profit		$	1,270,000
Selling and administrative expense			723,000
Depreciation expense			268,000
Operating income		$	279,000
Interest expense			88,500
Earnings before taxes		$	190,500
Taxes			115,000
Earnings after taxes		$	75,500
Preferred stock dividends			10,000
Earnings available to common stockholders		$	65,500
Shares outstanding			150,000
Earnings per share		$	.44

Statement of Retained Earnings For the Year Ended December 31, 2011
Retained earnings, balance, January 1, 2011	$	1,379,800
Add: Earnings available to common stockholders, 2011		65,500
Deduct: Cash dividends declared and paid in 2011		174,000
Retained earnings, balance, December 31, 2011	$	1,271,300

Comparative Balance Sheets For 2010 and 2011
	Year-End 2010	Year-End 2011
Assets
Current assets:
Cash			$	146,000			$	106,100
Accounts receivable (net)				502,000				608,000
Inventory				639,000				665,000
Prepaid expenses				62,200				34,700
Total current assets			$	1,349,200			$	1,413,800
Investments (long-term securities)				97,600				83,100
Gross plant and equipment	$	2,620,000			$	3,150,000
Less: Accumulated depreciation		1,040,000				1,308,000
Net plant and equipment				1,580,000				1,842,000
Total assets			$	3,026,800			$	3,338,900
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable			$	309,000			$	637,000
Notes payable				542,000				542,000
Accrued expenses				79,000				50,600
Total current liabilities			$	930,000			$	1,229,600
Long-term liabilities:
Bonds payable, 2011				127,000				248,000
Total liabilities			$	1,057,000			$	1,477,600
Stockholders’ equity:
Preferred stock, $100 par value			$	90,000			$	90,000
Common stock, $1 par value				150,000				150,000
Capital paid in excess of par				350,000				350,000
Retained earnings				1,379,800				1,271,300
Total stockholders’ equity			$	1,969,800			$	1,861,300
Total liabilities and stockholders’ equity			$	3,026,800			$	3,338,900

a.	Prepare a statement of cash flows for the Crosby Corporation: (Amounts to be deducted should be indicated with a minus sign.)

CROSBY CORPORATION Statement of Cash Flows For the Year Ended December 31, 2011
Cash flows from operating activities:
		$
Adjustments to determine cash  flow from operating activities:
	$
Total adjustments
Net cash flows from operating activities		$
Cash flows from investing activities:
	$
Net cash flows from investing activities
Cash flows from financing activities:
	$
Net cash flows from financing activities
Net increase (decrease) in cash flows		$

b.	Compute the book value per common share for both 2010 and 2011 for the Crosby Corporation. (Round your answers to 2 decimals places.)

Book value
2010	$
2011	$

c.	If the market value of a share of common stock is 3.3 times book value for 2011, what is the firm’s P/E ratio for 2011? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

P/E ratio

times

12.

Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation.

a.	Butters Corporation has a profit margin of 6.5 percent and its return on assets (investment) is 16.25 percent.  What is its assets turnover? (Round your answer to 2 decimal places.)

Assets turnover ratio

times

b.	If the Butters Corporation has a debt-to-total-assets ratio of 70.00 percent, what would the firm’s return on equity be? (Input your answer as a percent rounded to 2 decimal places.)

Return on equity

%

c.	What would happen to return on equity if the debt-to-total-assets ratio decreased to 60.00 percent?(Input your answer as a percent rounded to 2 decimal places.)

Return on equity

%

13.

Jerry Rice and Grain Stores has $4,040,000 in yearly sales. The firm earns 4 percent on each dollar of sales and turns over its assets 2 times per year. It has $102,000 in current liabilities and $381,000 in long-term liabilities.

a.	What is its return on stockholders’ equity? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Return on stockholders’ equity

%

b.

If the asset base remains the same as computed in part a, but total asset turnover goes up to 3.00, what will be the new return on stockholders’ equity? Assume that the profit margin stays the same as do current and long-term liabilities. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

New return on stockholders’ equity

%

14.

Assume the following data for Cable Corporation and Multi-Media Inc.

	Cable Corporation	Multi-Media Inc.
Net income	$	38,200		$	172,000
Sales		323,000			2,020,000
Total assets		475,000			958,000
Total debt		156,000			475,000
Stockholders’ equity		319,000			483,000

a-1.	Compute return on stockholders’ equity for both firms. (Input your answers as a percent rounded to 2 decimal places.)

	Return on Stockholders’ Equity
Cable Corporation	%
Multi-Media, Inc.	%

a-2.	Which firm has the higher return?
	Multi-Media Inc.Cable Corporation

b.	Compute the following additional ratios for both firms. (Input your Net income/Sales, Net income/Total assets and Debt/Total asset answers as a percent rounded to 2 decimal places. Round your Sales/Total assets answers to 2 decimal places.)

	Cable Corporation	Multi-Media Inc.
Net income/Sales	%	%
Net income/Total assets	%	%
Sales/Total assets	times	times
Debt/Total assets	%	%

15.

The balance sheet for Stud Clothiers is shown next. Sales for the year were $3,700,000, with 75 percent of sales sold on credit.

STUD CLOTHIERS Balance Sheet 20XX
Assets	Liabilities and Equity
Cash	$	70,000	Accounts payable	$	296,000
Accounts receivable		358,000	Accrued taxes		164,000
Inventory		245,000	Bonds payable (long-term)		139,000
Plant and equipment		423,000	Common stock		100,000
			Paid-in capital		150,000
			Retained earnings		247,000
Total assets	$	1,096,000	Total liabilities and equity	$	1,096,000

Compute the following ratios: (Use a 360-day year. Do not round intermediate calculations. Round your answers to 2 decimal places. Input your debt-to-total assets answer as a percent rounded to 2 decimal places.)

a.	Current ratio		times
b.	Quick ratio		times
c.	Debt-to-total-assets ratio		%
d.	Asset turnover		times
e.	Average collection period		days

16.

Using the income statement for Times Mirror and Glass Co., compute the following ratios:

TIMES MIRROR AND GLASS Co. Income Statement
Sales	$	281,000
Cost of goods sold		169,000
Gross profit	$	112,000
Selling and administrative expense		44,800
Lease expense		17,500
Operating profit*	$	49,700
Interest expense		8,100
Earnings before taxes	$	41,600
Taxes (30%)		16,640
Earnings after taxes	$	24,960
*Equals income before interest and taxes.

a.	Compute the interest coverage ratio. (Round your answer to 2 decimal places.)

Interest coverage

times

b.	Compute the fixed charge coverage ratio. (Round your answer to 2 decimal places.)

Fixed charge coverage

times

The total assets for this company equal $211,000. Set up the equation for the Du Pont system of ratio analysis.

c.	Compute the profit margin ratio. (Input your answer as a percent rounded to 2 decimal places.)

Profit margin

%

d.	Compute the total asset turnover ratio. (Round your answer to 2 decimal places.)

Total asset turnover

times

e.	Compute the return on assets (investment). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Return on assets

%

17.

Quantum Moving Company has the following data.  Industry information also is shown.

Company data	Industry Data on
Year	Net Income	Total Assets	Net Income/Total Assets
2011	$	350,000		$	2,833,000			10.9	%
2012		404,000			3,285,000			7.5
2013		451,000			3,756,000			4.5

Year	Debt	Total Assets	Industry Data on Debt/Total Assets
2011	$	1,714,000		$	2,833,000			55.5	%
2012		1,777,000			3,285,000			48.0
2013		1,989,000			3,756,000			34.0

a.	Calculate the company’s data in terms of: (Input your answers as a percent rounded to 1 decimal place.)

	2011	2012	2013
Net income/Total assets	%	%	%
Debt/Total assets	%	%	%

b.	As an industry analyst comparing the firm to the industry, are you likely to praise or criticize the firm in terms of:

	Praise/Criticize
Net income/Total assets
Debt/Total assets

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