ADM 1340 Chapter Notes - Chapter 2: Income Statement, Accounts Receivable, Promissory Note

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The classified statement of financial position (balance sheet) 1- the resources that a company owns or controls that will provide future economic benefits. 1- are assets that are expected to be converted into cash or will be sold or used up within one yea(cid:396) of the (cid:272)o(cid:373)pa(cid:374)y"s fi(cid:374)a(cid:374)(cid:272)ial state(cid:373)e(cid:374)t date o(cid:396) its ope(cid:396)ati(cid:374)g (cid:272)y(cid:272)le, (cid:449)hi(cid:272)he(cid:448)e(cid:396) is lo(cid:374)ge(cid:396). 2- common types of current assets include cash, short-term investment, accounts receivable, accrued receivables, notes receivable (including loans receivable), merchandise inventory, supplies, and prepaid expenses. Operating cycle: the average time it takes to go from cash to cash in producing revenue. Short-term investments: investments in debt securities (e. g. bonds of another company) or equity securities (e. g. shares in another company) that are held in hopes of generating interest income and/or gains from profitable resale in the near term. Accounts receivable: amounts owed to the company by customers who purchased products or services on credit (on account).

Related Questions

Krogh Lumber's 2016 financial statements are shown here.

Krogh Lumber: Balance Sheet as of December 31, 2016 (Thousands of Dollars)
Cash	$1,800	Accounts payable	$7,200
Receivables	10,800	Notes payable	3,472
Inventories	12,600	Accrued liabilities	2,520
Total current assets	$25,200	Total current liabilities	$13,192
		Mortgage bonds	5,000
Net fixed assets	21,600	Common stock	2,000
		Retained earnings	26,608
Total assets	$46,800	Total liabilities and equity	$46,800

Now suppose 2017 sales increase by 25% over 2016 sales. Assume that Krogh cannot sell any fixed assets. All assets other than fixed assets will grow at the same rate as sales; however, after reviewing industry averages, the firm would like to reduce its operating costs/sales ratio to 82% and increase its total liabilities-to-assets ratio to 42%. The firm will maintain its 60% dividend payout ratio, and it currently has 1 million shares outstanding. The firm plans to raise 35% of its 2017 forecasted interest-bearing debt as notes payable, and it will issue bonds for the remainder. The firm forecasts that its before-tax cost of debt (which includes both short- and long-term debt) is 11.5%. Any stock issuances or repurchases will be made at the firm's current stock price of $40. Develop Krogh's projected financial statements. What are the balances of notes payable, bonds, common stock, and retained earnings? Round your answers to the nearest hundredth of thousand of dollars.

Krogh Lumber Pro Forma Balance Statement December 31, 2017 (Thousands of Dollars)

2016

2017

Cash

$1,800

Accounts receivable

10,800

Inventories

12,600

Fixed assets

21,600

Total assets

$46,800

Payables + accruals

$9,720

Short-term bank loans

3,472

Total current liabilities

$13,192

Long-term bonds

5,000

Total debt

$18,192

Common stock

2,000

Retained earnings

26,608

Total common equity

$28,608

Total liab. and equity

$46,800

Basic Financial Ratios

The accounting staff of CCB Enterprises has completed the financial statements for the 2016 calendar year. The statement of income for the current year and the comparative statements of financial position for 2016 and 2015 follow.

CCB Enterprises
Statement of Income
For the Year Ended December 31, 2016
(thousands omitted)
Revenue:
Net sales	$794,620
Other	58,420
Total revenue	$853,040
Expenses:
Cost of goods sold	$530,320
Research and development	24,480
Selling and administrative	155,320
Interest	19,600
Total expenses	$729,720
Income before income taxes	$123,320
Income taxes	49,328
Net income	$73,992

CCB Enterprises
Comparative Statements of Financial Position
December 31, 2016 and 2015
(thousands omitted)
	2016	2015
Assets
Current assets:
Cash and short-term investments	$25,910	$20,860
Receivables, less allowance for doubtful accounts
($1,130 in 2016 and $1,410 in 2015)	48,190	50,300
Inventories, at lower of FIFO cost or market	64,860	62,100
Prepaid items and other current assets	5,220	3,280
Total current assets	$144,180	$136,540
Other assets:
Investments, at cost	$105,880	$105,880
Deposits	10,160	7,980
Total other assets	$116,040	$113,860
Property, plant, and equipment:
Land	$12,100	$12,100
Buildings and equipment, less accumulated depreciation
($126,330 in 2016 and $122,240 in 2015)	268,840	247,870
Total property, plant, and equipment	$280,940	$259,970
Total assets	$541,160	$510,370
Liabilities and Ownersâ Equity
Current liabilities:
Short-term loans	$22,180	$23,900
Accounts payable	72,240	71,070
Salaries, wages, and other	26,300	26,780
Total current liabilities	$120,720	$121,750
Long-term debt	$160,620	$171,030
Total liabilities	$281,340	$292,780
Ownersâ equity:
Common stock, at par	$43,840	$42,010
Paid-in capital in excess of par	64,020	61,260
Total paid-in capital	$107,860	$103,270
Retained earnings	151,960	114,320
Total ownersâ equity	$259,820	$217,590
Total liabilities and ownersâ equity	$541,160	$510,370

Required:

1. Calculate the following financial ratios for 2016 for CCB Enterprises:

Round items h, j, and k to the nearest whole number. Round all other answers to two decimal places. Assume a 360-day year.

a. Times interest earned	to 1
b. Return on total assets	%
c. Return on common stockholders' equity	%
d. Debt-to-equity ratio (at December 31, 2016)	to 1
e. Current ratio (at December 31, 2016)	to 1
f. Quick (acid-test) ratio (at December 31, 2016)	to 1
g. Accounts receivable turnover ratio (Assume that all sales are on credit.)	times
h. Number of days' sales in receivables	days
i. Inventory turnover ratio (Assume that all purchases are on credit.)	times
j. Number of days' sales in inventory	days
k. Number of days in cash operating cycle	days

2. Which of the following statements pertaining to ratio analysis of CCB Enterprises is true?
All of these are true.

limeweasel644

Using the 2005 and 2006 Statement of Financial Position (SFP) and the Statement of Earnings (SE) found on pages 465 and 466, complete a vertical analysis (common-sized statements) for both years and a horizontal analysis (trend) from 2005 to 2006.Please show work.......thanks

Table13:1

Bayside Memorial Hospital Statements of Operations (Income Statements) Years Ended December 31, 2006 and 2005 (Thousands of dollars 2006 2005

Net Patient Service Revenue $108,600 $97,393

Premium revenue 5,232 4,622

Other revenue $ 3,644 6,014

Total revenues $117,476 $108,029

Expense:

Nursing Services $58,245 56,752

Dietary Services 5,424 4,718

General services 13,198 11,655

Administrative services 11,427 11,585

Employee health and welfare 10,250 10,705

Provision for uncollectible 3,328 3,469

Provision for malpractice 1,320 1,204

Depreciation 4,130 4,025

Interest expense 1,542 1,521

Total Expense $108,904 $105,634

Net Income $8,572 $2,395

Balance Sheet

Table 13.2 contains Bay sideâs 2005 and 2006 balance sheets. Although the assets are all stated in terms of dollars, only cash represents actual money we see that bayside can if it liquidated its short-term investment securities. Write checks at the end of 2006 for a total $6,263,000 (verse total current liabilities of $13,332,000 due during 2006). The noncash current assets will presumably be converted to cash within a year, but they do not represent cash on hand.

Then Claims against assets are two types: 1) liabilities, or money the firm owes, and 2) equity, also called net assets or fund capital. Equity is a residual, so for 2006

Assets -Liabilities = Equity

151,278,000 - ($13,332,000+$30,582,000) =$107,364,000

Liabilities consist of $(13,332,000 of current liabilities plus $30,582,000of long-term liabilities. If assets decline in value-suppose some of Baysideâ s fixed assets were sold at less that book value-liabilities remain constant, so the value of the equity capital declines.

Table 13:2 Bayside Memorial Hospital Balance Sheets December 31, 2006 and 2005 (thousand of dollars)

2006 2005

Cash $4,263 $5,095

Short-term investments 2,000 0

Accounts receivable 21,840 20,738

Inventories 3,177 2,982

Total current assets $31,280 $28,815

Gross plant and equipment $145,168 $140,865

Accumulated depreciations 25,160 21,030

Net plant and equipment $119,998 $119,835

Total assets $151,278 $148,650

Accounts payable $4,707 $5,145

Accrued expenses 5,650 5,421

Notes payable 825 4,237

Current portion of long-term debt 2,150 2,000

Total current liabilities $13,332 $16,803

Long-term debt $28,750 $30,900

Capital lease obligations 1,832 2,155

Total long-term liabilities $30,582 $33,055

Net assets (equity) $107,364 $98,792

Total liabilities and net assets $151,278 $148,650

ADM 1340 Chapter Notes - Chapter 2: Income Statement, Accounts Receivable, Promissory Note

ADM 1340 Full Course Notes

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