SMG AC 221 Lecture Notes - Lecture 18: Reverse Stock Split, Revenue Recognition, Mci Inc.
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Data Table
Outdoor Adventure Company | |||
Comparative Balance Sheet | |||
December 31, 2019 and 2018 | |||
2019 | 2018 | ||
Assets | |||
Current Assets: | |||
Cash | $1,398,330 | $14,790 | |
Short-term Investments, net | 29,000 | 0 | |
Accounts Receivable, net | 1,600 | 6,300 | |
Merchandise Inventory | 400 | 0 | |
Office Supplies | 70 | 300 | |
Prepaid Rent | 0 | 2,000 | |
Property, Plant, and Equipment: | |||
Land | 615,000 | 75,000 | |
Building | 944,000 | 94,000 | |
Canoes | 13,920 | 13,920 | |
Office Furniture and Equipment | 140,000 | 0 | |
Accumulated DepreciationâPP&E | (31,920) | (1,740) | |
Total Assets | $3,110,400 | $204,570 | |
Liabilities | |||
Current Liabilities: | |||
Accounts Payable | $6,420 | $4,400 | |
Utilities Payable | 550 | 250 | |
Telephone Payable | 640 | 290 | |
Wages Payable | 3,700 | 1,200 | |
Notes Payable | 18,000 | 0 | |
Interest Payable | 630 | 30 | |
Unearned Revenue | 650 | 450 | |
Long-Term Liabilities: | |||
Notes Payable | 6,720 | 6,720 | |
Mortgage Payable | 725,000 | 0 | |
Bonds Payable | 1,000,000 | 0 | |
Discount on Bonds Payable | (1,140) | 0 | |
Total Liabilities | 1,761,170 | 13,340 | |
Stockholders' Equity | |||
Paid-In Capital: | |||
Preferred Stock | 60,000 | 0 | |
Paid-In Capital in Excess of ParâPreferred | 480,000 | 0 | |
Common Stock | 229,000 | 189,000 | |
Paid-In Capital in Excess of ParâCommon | 240,000 | 0 | |
Retained Earnings | 340,230 | 2,230 | |
Total Stockholders' Equity | 1,349,230 | 191,230 | |
Total Liabilities and Stockholders' Equity | $3,110,400 | $204,570 |
1. | Theincome statement for 20192019 included the following items: | |
a. | Net income, $ 435 comma 000$435,000 | |
b. | Depreciation expense for the year, $ 30 comma 180$30,180. | |
c. | Amortization on the bonds payable, $ 380$380. | |
2. | There were no disposals of property, plant and equipment duringthe year. All acquisitions of PP&E were for cash except theland, which was acquired by issuing preferred stock. | |
3. | Thecompany issued bonds payable with a face value of $ 1 comma 000 comma 000$1,000,000 , receiving cash of$ 998 comma 480$998,480. | |
4. | Thecompany distributed 8 comma 0008,000 shares of common stock in a stock dividend when the market valuewas$ 9.00$9.00 per share. All other dividends were paid in cash. | |
5. | The common stock, except for the stock dividend, was issued forcash. | |
6. | Thecash receipt from the notes payable in 20192019 is considered a financing activity because it does not relate tooperations. |
Net Cash Provided by (Used for) Investing Activities | (990,000) |
Cash Flows From Financing Activities: | ||
Cash Receipt from Issuance of Common Stock | ||
Cash Receipt from Issuance of Notes Payable | ||
Cash Receipt from Issuance of Mortgage Payable | ||
Cash Receipt from Issuance of Bonds Payable | ||
Cash Payment of Dividends | ||
Net Cash Provided by (Used for) Financing Activities |
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Star Industries Inc comparative financial statements for theyears ending December 31, 2010 and 2009, are as follows. The marketprice for Star Industries common stock was $ 20 on December 31,2009, and $ 32 on December 31, 2010. Common stockshares outstanding for both 2010 and 2009 are 70000 shares (Ie $700,000 / $ 10 par)
Star Industries
Comparative Income Statement
For the Years Ended December 31, 2010 and 2009
2010 | 2009 | ||
Sales | $7,000,000 | $5,670,000 | |
Sales returns and allowances | $325,000 | $175,000 | |
Net Sales | $6,675,000 | $5,495,000 | |
Cost of Goods Sold | $4,850,000 | $3,950,000 | |
Gross Profit | $1,825,000 | $1,545,000 | |
Selling Expenses | $780,000 | $464,000 | |
Administrative Expenses | $485,000 | $423,000 | |
Total Operating Expenses | $1,465,000 | $887,000 | |
Income From Operations | $360,000 | $658,000 | |
Other Income | $25,000 | $19,200 | |
Earnings before Interest & taxes (EBIT) | $385,000 | $677,200 | |
Other Expenses (interest) | $105,000 | $64,000 | |
Income Before Income Tax | $280,000 | $613,200 | |
Income Tax Expense | $35,000 | $176,000 | |
Net Income | $245,000 | $437,200 |
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Star Industries
Comparative Retained Earnings Statement
For the Years Ended December 31, 2010 and 2009
2010 | 2009 | ||
Retained Earnings, Januray 1 | $ 723,000 | $ 355,800 | |
Add Net Income for year | $245,000 | $437,200 | |
Total | $ 968,000 | $ 793,000 | |
Deduct dividends: | |||
Preferred Stock | $ 40,000 | $ 40,000 | |
Common Stock | $ 45,000 | $ 30,000 | |
Total | $ 85,000 | $ 70,000 | |
Retained Earnings, December 31 | $883,000 | $ 723,000 |
Star Industries
Comparative Balance Statement
December 31, 2010 and 2009
12-31-2010 | 12-31-2009 | ||||
Assets | |||||
Current Assets | |||||
Cash | $235,000 | $215,000 | |||
Temporary Investments | $10,000 | $50,000 | |||
Accounts Receivable(Net) | $525,000 | $425,000 | |||
Inventories | $940,000 | $580,000 | |||
Prepaid Expenses | $30,000 | $20,000 | |||
Total Current Assets | $1,740,000 | $1,290,000 | |||
Long-Term Investments | $165,000 | $135,000 | |||
Property, Plant and Equipment (Net) | $2,525,000 | $1,878,000 | |||
Total Assets | $4,430,000 | $3,303,000 | |||
Liabilities | |||||
Current Liabilities | $950,000 | $780,000 | |||
Long-Term Liabilities | |||||
Mortgage Note Payable 8%(due 2013) | $410,000 | $0 | |||
Bonds Payable, 7% (due2016) | $1,200,000 | $800,000 | |||
Total Long Term Liabilities | $1,610,000 | $800,000 | |||
Total Liabilities | $2,560,000 | $1,580,000 | |||
Stockholders' Equity | |||||
Preferred 8% stock, $ 100 Par | $300,000 | $300,000 | |||
Common Stock, $ 10 Par | $700,000 | $700,000 | |||
Retained Earnings | $883,000 | $723,000 | |||
Total Stockholders' Equity | $1,883,000 | $1,723,000 | |||
Total Liabilities and Stockholders' Equity | $4,443,000 | $3,303,000 |
Determine the following measures for 2010: Compare withindustry norms and comment:
Ratios | Industry Norm | ||||
1. Working Capital | N/A | ||||
2. Current Ratio | 2.2 | ||||
3. Quick Ratio | 0.8 | ||||
4. Accounts Receivable Turnover | 16.0 | ||||
5. Number of days sales in receivables | 22.2 | ||||
6. Inventory Turnover | 5.0 | ||||
7. Number of days sales in inventory | 75.0 | ||||
8. Ratio of fixed assets to long-term liabilites | 2.0 | ||||
9. Ratio of liabilities to stockkholders equity | 0.7 | ||||
10. Number of times interest charges are earned | 8.5 | ||||
11. Number of times preferred dividends earned | 7.1 | ||||
12. Ratio of net sales to assets | 2.1 | ||||
13. Rate earned on total assets | 8.5% | ||||
14. Rate earned on stockholders' equity | 12.0% | ||||
15. Rate earned on common stockholders' equity | 14.2% | ||||
16. Earnings per share on common stock | $3.65 | ||||
17. Price-earnings ratio | 9.2 | ||||
18. Dividends per share | $0.80 | ||||
19. Dividend yield | 2.50% |
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