ACC 522 Lecture Notes - Lecture 6: Cash Flow, Gross Profit, Income Statement

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19 Oct 2017

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Below is the comparative income statement for bleaue inc. for 2016 and 2015. Prepare a vertical analysis for each year and comment on the results. Bleaue inc. has also provided the following selected accounts from the comparative balance sheet. Complete a horizontal analysis and comment on the results. Provided below is the statement of cash flows for bleaue inc. for. Bleaue is a merchandising business that has decided to start selling to customers in usa and they are planning for the increased inventory they will have to carry in order to meet the orders from new us customers. This year the business"s profit (net income) was ,000. Analyze the statement of cash flows given the information above and on the statement of cash flows. Comments about the cash flow from investing activities: Comments about the cash flow from financing activities:

Related Questions

For 2016, Indigo Company initiated a sales promotion campaignthat included the expenditure of an additional $39,000 foradvertising. At the end of the year, Lumi Neer, the president, ispresented with the following condensed comparative incomestatement: Indigo Company Comparative Income Statement For theYears Ended December 31, 2016 and 2015 1 2016 2015 2 Sales$810,000.00 $500,000.00 3 Cost of goods sold 283,500.00 185,000.004 Gross profit $526,500.00 $315,000.00 5 Selling expenses$162,000.00 $90,000.00 6 Administrative expenses 56,700.0045,000.00 7 Total operating expenses $218,700.00 $135,000.00 8Income from operations $307,800.00 $180,000.00 9 Other income72,900.00 45,000.00 10 Income before income tax $380,700.00$225,000.00 11 Income tax expense 210,600.00 130,000.00 12 Netincome $170,100.00 $95,000.00 Required: 1. Prepare a comparativeincome statement for the two-year period, presenting an analysis ofeach item in relationship to sales for each of the years. Roundyour percentages to one decimal place. Enter all amounts aspositive numbers. 2. To the extent the data permit, comment on thesignificant relationships revealed by the vertical analysisprepared in (1).

Please Prepare the schedule of Net Assets with theexchange loss for the year asssuming they are a self-sustainingsubsidary.

In 2015, Corbus Co., a Canadian company, created a foreignsubsidiary called Snazzy Ltd. by investing $2,000,000 CAD (800,000FC) in return for all of Snazzyâs common shares. In preparing tostart operations, Snazzy acquired equipment for 960,000 FC and tookout a 320,000 FC loan. Snazzy is committed to repaying the loan in3 years. In 2016, Snazzy acquired a tract of land for 320,000 FC.All dividends were paid on December 31 of the years in which theywere declared.

Snazzyâs financial statements for its first 2 years ofoperations are presented below.

Snazzy Ltd.

Statement of Financial Position

As of December 31

(in FC)

2016 2015

Assets:

Current assets:

Cash $ 48.000 $ 256,000

Accounts receivable64,000 48,000

112,000 304,000

Noncurrent assets:

Land 320,000 -

Equipment 960,000 960,000

Accumulatedamortization (192,000) (96,000)

1,088,000 864,000

Totalassets $1,200,000 $ 1,168,000

Liabilities and shareholderâs equity:

Current liabilities:

Accountspayable 16,000 32,000

Noncurrent liabilities:

Loanpayable 320,000 320,000

336,000 352,000

Shareholderâs equity:

Share capital800,000 800,000

Retainedearnings _64,000 _16,000

864,000 816,000

Total liabilities and shareholderâsequity $1,200,000 $ 1,168,000

Snazzy Ltd.

Statement of Comprehensive Income

For the year ended December 31

(in FC)

2016 2015

Revenue $480,000 $ 352,000

Expenses:

Amortization 96,000 96,000

Interest 64,000 64,000

Otherexpenses 192,000 128,000

352,000 288,000

Net and comprehensiveincome $128,000 $ 64,000

Snazzy Ltd.

Statement of Changes in Equity â Retained Earnings Section

For the year ended December 31

(in FC)

2016 2015

Retained earnings, beginning ofyear $ 16,000 $ -

Netincome 128,000 64,000

Dividendsdeclared (80,000) (48,000)

Retained earnings, end ofyear $ 64,000 $ 16,000

Selected exchange rates

when the equipment waspurchased 1FC = $2.30 CAD

when the loan wasnegotiated 1FC = $2.40 CAD

when the land waspurchased 1FC = $1.90 CAD

average during2015 1FC = $2.20 CAD

December 31,2015 1FC = $2.00 CAD

Average during2016 1FC = $1.70 CAD

December 31,2016 1FC = $1.50 CAD

Complete P9-3 using the template provided here.

P9-3 Performratio analysis, and discuss change in financial position andoperating results
Condensed balance sheet andincome statement data for Jergan Corporation are presentedhere.

	JERGAN CORPORATION
	Balance Sheet
	December 31
		2017	2016	2015
	Cash	$30,000	$20,000	$18,000
	Accounts receivable (net)	50,000	45,000	48,000
	Other current assets	90,000	95,000	64,000
	Investments	55,000	70,000	45,000
	Plant and equipment (net)	500,000	370,000	358,000
		$725,000	$600,000	$533,000

	Current liabilities	$85,000	$80,000	$70,000
	Long-term debt	145,000	85,000	50,000
	Common stock, $10 par	320,000	310,000	300,000
	Retained Earnings	175,000	125,000	113,000
		$725,000	$600,000	$533,000


	JERGAN CORPORATION
	Income Statement
	For the Year Ended December31
			2017	2016
	Sales revenue		$740,000	$600,000
	Less: Sales return and allowances		40,000	30,000
	Net sales		700,000	570,000
	Cost of goods sold		425,000	350,000
	Gross profit		275,000	220,000
	Operating expenses (including income taxes)		180,000	150,000
	Net income		95,000	70,000

Additional information:
1.	The market price of Jergan's common stock was$7.00, $7.50, and $8.50 for 2015,
	2016, and 2017, respectively.
2.	You must compute dividends paid. All dividends werepaid in cash.

*Instructions*
(a)	Compute the following ratios for 2016 and2017.
	(1) Profit margin.	5. Price-earnings ratio.
	(2) Gross profit rate.	6. Payout ratio.
	(3) Asset turnover.	7. Debt to assets ratio.
	(4) Earnings per share.
(b)	Based on the ratios calculated, discuss briefly theimprovement or lack thereof in the
	financial position and operating results from 2016to 2017 of Jergan Corporation.
NOTE: Enter a numberin cells requesting a value; enter either a number or a formula incells with a "?" .



(a)(1)	Profit margin
		2017	2016
	Net income	Value	Value
	Net sales	Value	Value
	Profit margin	?	?


(a)(2)	Gross profit rate
		2017	2016
	Gross profit	Value	Value
	Net sales	Value	Value
	Gross profit rate	?	?


(a)(3)	Asset turnover
		2017	2016
	Total assets, 2017	Value
	Total assets, 2016	Value	Value
	Total assets, 2015		Value
	Average total assets	?	?

		2017	2016
	Net sales	Value	Value
	Average total assets	Value	Value
	Asset turnover	?	?


(a)(4)	Earnings per share
		2017	2016
	Common shares outstanding, 2017	Value
	Common shares outstanding, 2016	Value	Value
	Common shares outstanding, 2015		Value
	Average common shares outstanding	?	?

		2017	2016
	Net income - Pfd. Dividends	Value	Value
	Average common shares outstanding	Value	Value
	Earnings per share	?	?


(a)(5)	Price-earnings ratio
		2017	2016
	Stock price per share	Value	Value
	Earnings per share	Value	Value
	Price-earnings ratio	?	?


(a)(6)	Payout ratio
		2017	2016
	Prior year's retained earnings	Value	Value
	Plus: current year net income	Value	Value
	Less: current year's retained earnings	Value	Value
	Cash dividends declared	?	?

		2017	2016
	Cash dividends declared (common)	Value	Value
	Net income	Value	Value
	Payout ratio	?	?


(a)(7)	Debt to assets ratio
		2017	2016
	Current Liabilities	Value	Value
	Long-term debt	Value	Value
	Total liabilities	?	?
	Total assets	Value	Value
	Debt to assets ratio	?	?



After you have completed P9-3,consider the additional question.
1.	Assume that 2017 net income and total assetschanged to $87,000 and total assets to
	$700,000. Show the impact of these changes on theratios.

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ACC 522 Lecture Notes - Lecture 6: Cash Flow, Gross Profit, Income Statement

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