Philadelphia Widget Corporation is in the process of preparing financial statements for the year ended December 31, 2015. They have completed the balance sheet and income statement as shown.
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Question
Philadelphia Widget Corporation is
in the process of preparing financial statements for the year ended December 31, 2015. They have completed the balance sheet and income statement as shown.
| Philadelphia Widget Corporation | ||
| Income Statement | ||
| For the year ended December 31, 2015 | ||
| Revenue | $1,235,000 | |
| Cost of Goods Sold | 806,356 | |
| Gross Profit | $428,644 | |
| Administrative Expenses: | ||
| Salaries | $212,450 | |
| Rent | 82,500 | |
| Depreciation | 24,800 | |
| Total Administrative Expense | 319,750 | |
| Operating Profit | $108,894 | |
| Gain on Sale of Equipment | 4,500 | |
| Interest Expense | (42,115) | |
| Net Income | $71,279 |
| Philadelphia Widget Corporation | ||||||
| Comparative Balance Sheets | ||||||
| December 31, 2015; 2014; and 2013 | ||||||
| 2015 | 2014 | 2013 | ||||
| Cash | $119,411 | $89,564 | $105,644 | |||
| Accounts Receivable | 85,455 | 83,118 | 78,400 | |||
| Inventory | 41,600 | 48,560 | 62,600 | |||
| Prepaid Expenses | 14,500 | 18,100 | 24,000 | |||
| Total Current Assets | 260,966 | 239,342 | 270,644 | |||
| Land | 50,000 | 50,000 | 50,000 | |||
| Buildings & Equipment | $182,450 | $172,450 | $166,800 | |||
| Accumulated Depreciation | 78,900 | 103,550 | 62,600 | 109,850 | 54,580 | 112,220 |
| Total Assets | $414,516 | $399,192 | $432,864 | |||
| Accounts Payable | $62,525 | $51,480 | $45,200 | |||
| Wages Payable | 4,500 | 4,500 | 1,500 | |||
| Unearned Revenue | 3,000 | – | – | |||
| Current Portion of Long-Term Debt | 50,000 | 50,000 | 50,000 | |||
| Total Current Liabilities | 120,025 | 105,980 | 96,700 | |||
| Long-Term Debt | 175,000 | 225,000 | 275,000 | |||
| Common Stock, 3,500 shares outstanding | $35,000 | $35,000 | $35,000 | |||
| Retained Earnings | 84,491 | 33,212 | 26,164 | |||
| Total Stockholders’ Equity | 119,491 | 68,212 | 61,164 | |||
| Total Liabilities & Equity | $414,516 | $399,192 | $432,864 |
Instructions
Prepare a Statement of Cash Flow using the indirect method for the 2015, using the above statements and the following additional information:
- Equipment costing $30,000 was purchased in 2015.
- Equipment having an original cost of $20,000 and accumulated depreciation of $8,500 was sold for $16,000 during 2015.
- A dividend of $20,000 was declared and paid in 2015.
| Philadelphia Widget Corporation | ||
| Statement of Cash Flows | ||
| For the year ended December 31, 2015 | ||
| Cash provided (used) by operating activities: | ||
| Item | Amount | |
| Adjustments to reconcile net income to net cash: | ||
| Item | Amount | |
| Item | Amount | |
| Item | Amount | |
| Item | Amount | |
| Item | Amount | |
| Item | Amount | |
| Item | Amount | |
| Net cash provided by operating activities | Amount | |
| Cash provided (used) by investing activities: | ||
| Item | Amount | |
| Item | Amount | |
| Net cash (used) by investing activities | Amount | |
| Cash provided (used) by financing activities: | ||
| Item | Amount | |
| Item | Amount | |
| Net cash (used) by financing activities | Amount | |
| Total cash provided (used) | Amount | |
| Cash at the beginning of the year | Amount | |
| Cash at the end of the year | Amount |
Question 2
Instructions
Prepare a vertical analysis for the most recent year for Philadelphia Widget Corporation’ income statement.
| Philadelphia Widget Corporation | ||
| Vertical Analysis of Income Statement | ||
| Revenue | $1,235,000 | ##.#% |
| Cost of Goods Sold | 806,356 | ##.#% |
| Gross Profit | $428,644 | ##.#% |
| Administrative Expenses: | ||
| Salaries | 212,450 | ##.#% |
| Rent | 82,500 | ##.#% |
| Depreciation | 24,800 | ##.#% |
| Total Administrative Expense | 319,750 | ##.#% |
| Operating Profit | $108,894 | ##.#% |
| Gain on Sale of Equipment | 4,500 | ##.#% |
| Interest Expense | (42,115) | ##.#% |
| Net Income | $71,279 | ##.# |
Question 3
Philadelphia Widget Corporation is in the process of preparing financial statements for the year ended December 31, 2015. They have completed the balance sheet and income statement as shown.
| Philadelphia Widget Corporation | ||
| Income Statement | ||
| For the year ended December 31, 2015 | ||
| Revenue | $1,235,000 | |
| Cost of Goods Sold | 806,356 | |
| Gross Profit | $428,644 | |
| Administrative Expenses: | ||
| Salaries | $212,450 | |
| Rent | 82,500 | |
| Depreciation | 24,800 | |
| Total Administrative Expense | 319,750 | |
| Operating Profit | $108,894 | |
| Gain on Sale of Equipment | 4,500 | |
| Interest Expense | (42,115) | |
| Net Income | $71,279 |
| Philadelphia Widget Corporation | ||||||
| Comparative Balance Sheets | ||||||
| December 31, 2015; 2014; and 2013 | ||||||
| 2015 | 2014 | 2013 | ||||
| Cash | $119,411 | $89,564 | $105,644 | |||
| Accounts Receivable | 85,455 | 83,118 | 78,400 | |||
| Inventory | 41,600 | 48,560 | 62,600 | |||
| Prepaid Expenses | 14,500 | 18,100 | 24,000 | |||
| Total Current Assets | 260,966 | 239,342 | 270,644 | |||
| Land | 50,000 | 50,000 | 50,000 | |||
| Buildings & Equipment | $182,450 | $172,450 | $166,800 | |||
| Accumulated Depreciation | 78,900 | 103,550 | 62,600 | 109,850 | 54,580 | 112,220 |
| Total Assets | $414,516 | $399,192 | $432,864 | |||
| Accounts Payable | $62,525 | $51,480 | $45,200 | |||
| Wages Payable | 4,500 | 4,500 | 1,500 | |||
| Unearned Revenue | 3,000 | – | – | |||
| Current Portion of Long-Term Debt | 50,000 | 50,000 | 50,000 | |||
| Total Current Liabilities | 120,025 | 105,980 | 96,700 | |||
| Long-Term Debt | 175,000 | 225,000 | 275,000 | |||
| Common Stock, 3,500 shares outstanding | $35,000 | $35,000 | $35,000 | |||
| Retained Earnings | 84,491 | 33,212 | 26,164 | |||
| Total Stockholders’ Equity | 119,491 | 68,212 | 61,164 | |||
| Total Liabilities & Equity | $414,516 | $399,192 | $432,864 |
Instructions
Calculate the following ratios based on 12/31/2015 numbers:
- Earnings per share
- Return on common stockholders’ equity
- Return on assets
- Current ratio
- Acid-test ratio
- Accounts receivable turnover
| Philadelphia Widget Corporation | |
| 2015 Ratios | |
| Earnings per share | $##.## |
| Return on common stockholders’ equity | ##.#% |
| Return on assets | ##.#% |
| Current ratio | #.## |
| Acid-test ratio | #.## |
| Accounts receivable turnover | #.## |
Question 4
Instructions
Prepare a horizontal analysis the two most recent years of Philadelphia Widget Corporation’s balance sheets.>
| Philadelphia Widget Corporation | |||||
| Horizontal Analysis of Balance Sheet | |||||
| 2015 | 2014 | 2013 | |||
| Cash | $119,411 | ##.#% | $89,564 | ##.#% | $105,644 |
| Accounts Receivable | 85,455 | ##.#% | 83,118 | ##.#% | 78,400 |
| Inventory | 41,600 | ##.#% | 48,560 | ##.#% | 62,600 |
| Prepaid Expenses | 14,500 | ##.#% | 18,100 | ##.#% | 24,000 |
| Total Current Assets | $260,966 | ##.#% | $239,342 | ##.#% | $270,644 |
| Land | 50,000 | ##.#% | 50,000 | ##.#% | 50,000 |
| Buildings & Equipment, net | 103,550 | ##.#% | 109,850 | ##.#% | 112,220 |
| Total Assets | $414,516 | ##.#% | $399,192 | ##.#% | $432,864 |
| Accounts Payable | $62,525 | ##.#% | $51,480 | ##.#% | $45,200 |
| Wages Payable | 4,500 | ##.#% | 4,500 | ##.#% | 1,500 |
| Unearned Revenue | 3,000 | – | – | – | – |
| Current Portion of Long-Term Debt | 50,000 | ##.#% | 50,000 | ##.#% | 50,000 |
| Total Current Liabilities | $120,025 | ##.#% | $105,980 | ##.#% | $96,700 |
| Long-Term Debt | 175,000 | ##.#% | 225,000 | ##.#% | 275,000 |
| Common Stock | 35,000 | ##.#% | 35,000 | ##.#% | 35,000 |
| Retained Earnings | 84,491 | ##.#% | 33,212 | ##.#% | 26,164 |
| Total Liabilities & Equity | $414,516 | ##.#% | $399,192 | ##.#% | $432,864 |
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