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ACCT 2000 Chapter : Accnt2000 Ch 2 Class Notes Word

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azuremammoth471
15 Mar 2019
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LSU
Department
Accounting
Course
ACCT 2000
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All

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Document Summary

Chapter 2 class notes: identify the sections of a classified balance sheet, use ratios to evaluate a company"s profitability, liquidity and solvency, discuss financial reporting concepts. Reports the assets, liabilities, and equity at a specific point in time. Groups together similar assets and similar liabilities, using standard classifications. Stockholders" equity: current assets-what we use up or convert to cash.

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Related Questions

Oceanview MarineCompany 1-1
Balance Sheet
31-Dec-15
Assets 2015 2014 2013
Current Assts
Cash $ 1,320,096 $ 1,089,978 $ 1,200,347
AccountsReceivable: Notes 2 and 5 $ 1,646,046 $ 1,285,593 $ 1,180,982
Inventories *Notes 1a, 3, and 5 $ 13,524,349 $ 12,356,400 $ 11,461,231
PrepaidExpenses $ 17,720 $ 15,826 $ 15,275
Deposits $ 7,916 $ 5,484 $ 4,329
Total CurrentAssets $ 16,516,127 $ 14,753,281 $ 13,862,164
Property, Plant, Equipment *Notes 1b and 4
at cost, less accumulated depreciation $ 596,517 $ 612,480 $ 627,771
TOTAL ASSETS $ 17,112,644 $ 15,365,761 $ 14,489,935
LIABILITIES
CurrentLiabilites
Note Payable -Bank * Note 5 $ 5,100,000 $ 4,250,000 $ 4,000,000
Accountspayable $ 1,750,831 $ 1,403,247 $ 1,106,574
AccruedLiabilities $ 257,800 $ 217,003 $ 211,250
Federal IncomeTax Payable $ 35,284 $ 45,990 $ 39,725
Current portionof long-term debt $ 5,642 $ 5,642 $ 5,642
TotalCurrent Liabilities $ 7,149,557 $ 5,921,882 $ 5,363,191
Long-Term Liabilities
Long-TermDebt $ 409,824 $ 415,466 $ 421,108
TOTAL LIABILITIES $ 7,559,381 $ 6,337,348 $ 5,784,299
STOCKHOLDERS EQUITY
Common Stock - * Note 7 $ 10,000 $ 10,000 $ 10,000
Additional paid in capital $ 2,500,000 $ 2,500,000 $ 2,500,000
Retaind Earnings $ 7,043,263 $ 6,518,413 $ 6,195,636
Total Stockholder Equity $ 9,553,263 $ 9,028,413 $ 8,705,636
TOTAL LIABILITIES AND STOCKHOLDEREQUITY $ 17,112,644 $ 15,365,761 $ 14,489,935
Liquidity ratios: unadjusted 12/31/2015 unadjusted 12/31/2014 CHANGE Percent Change Industry Average
CurrentRation 2.31 2.49 -0.18 -7.23% 1.53
Quick Ratio 0.42 0.4 0.02 5.00% 0.43
Sales/ReceivableRatio 16.05 17.78 -1.73 -9.73% 20.29
Number of dayssales in A/R ? ? ? ? 17.99
InventoryTurnover ? ? ? ? 1.41
PROFITABILITY/PERFORMANCE RATIOS:
Gross Profit Margin (%) ? ? ? ? 39.83%
Income before taxes / owners' equity ? ? ? ? 0.06
Income before taxes / total assets 0.06 0.04 0.02 50.00% 0.04
Sales / Long - term assets 44.29 37.33 6.96 18.64% 19.07
Sales / Total Assets 1.54 1.49 0.05 3.36% 1.32
Sales / Working Capital 2.82 2.59 0.23 8.88% 2.18
SOLVENCY RATIOS
Owners Equity / Total Assets 0.56 0.59 -0.03 -5.08% 0.31
Long - Term Assets / owners' Equity 0.06 0.07 -0.01 -14.29% 0.47
Current Liabilities / Owners Equity ? ? ? ? 1.13
Total Liabilities / Owners Equity ? ? ? ? 2.03
Please answer the questionmarks and show computation


EXERCISE 15-2 Financial Ratios for Assessing Liquidity (L015-2] Comparative financial statements for Weller Corporation, a merchandising company, for the fiscal year ending December 31 appear below. The company did not issue any new common stock dur ing the year. A total of 800,000 shares of common stock were outstanding. The interest rate on the bond payable was 12%, the income tax rate was 40%, and the dividend per share of common stock was $0.40. The market value of the company's common stock at the end of the year was $18. All of the company's sales are on account. Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash................... Accounts receivable, net ......... Inventory ..................... Prepaid expenses .............. Total current assets ............... Property and equipment: Land ............ Buildings and equipment, net ........ Total property and equipment. Total assets ........ $ 1,280 12,300 9,700 1,800 25,080 $ 1,560 9,100 8,200 2,100 20,960 6,000 19,200 25,200 $50,280 6,000 19,000 25,000 $45,960 .... $ 9,500 600 300 10,400 $ 8,300 700 300 9,300 Liabilities and Stockholders' Equity Current liabilities: Accounts payable.. Accrued liabilities .......... Notes payable, short term ........ Total current liabilities ......... Long-term liabilities: Bonds payable ............ Total liabilities .............................. Stockholders' equity: Common stock ... Additional paid-in capital ...... Total paid-in capital ............... Retained earnings ........ . Total stockholders' equity .. Total liabilities and stockholders' equity .......... 5,000 15,400 5,000 14,300 800 4,200 800 4,200 5,000 29,880 34,880 $50,280 5,000 26,660 31,660 $45,960 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales ...... $79,000 $74,000 Cost of goods sold .................... 52,000 48,000 Gross margin .......................... 27,000 26,000 Selling and administrative expenses: Selling expenses 8,500 8.000 Administrative expenses .... 12,000 11,000 Total selling and administrative expenses .... 20,500 19,000 rating income.................... 6,500 Interest expense ........................ 600 600 Net income before taxes ................. 5,900 6,400 Income taxes .......................... 2,360 2,560 Net income ............ .......... 3,540 3,840 Dividends to common stockholders ......... 320 Net income added to retained earings...... 3,220 3,240 Beginning retained earnings 26,660 23,420 Ending retained earnings ................. $29,880 $26,660 7,000 320 EXERCISE 15-5 Financial Ratios for Assessing Profitability [LO15-5] Refer to the data in Exercise 15-2 for Weller Corporation. Required: Compute the following financial data for this year: 1. Gross margin percentage. 2. Net profit margin percentage. 3. Return on total assets. 4. Return on equity.

Write an assessment of the company's financial performance,using ratios to support your conclusion. What can you concludeabout the company's liquidity, solvency, and profitability? Be sureto include the ratios calculation to support your conclusion.

Use the financial statements provided below to calculate thefollowing financial ratios:

2012 2011
1. Current Ratio 10.915 6.715
2. Quick Ratio 11.307 7.524
3. Long-Term Debt-to-Equity Ratio 2.785 3.834
4. Debt-to-Equity Ratio 2.785 3.834
5. Long-Term Debt Ratio 2.866 3.988
6. Accounts Receivable Turnover Ratio (Assume that60% of Sales are Credit 25.491 8.908
7. Inventory Turnover Ratio (Assume 2011 beginninginventory was -0-.) -0.715 -0.450
8. Asset Turnover Ratio 0.163 0.076
9. Gross Profit Percentage 0.731 0.806
10. Net Profit Margin Percentage 0.375 0.311
11. Return on Assets 0.061 0.024
12. Return on Equity 0.237 0.118

Get Your Motor Runnin'

Compartive Balance Sheets

2012 2011

Assets
Current Assets
Cash $198,456 $147,333
Accounts Receivable
4,000		 5,000
Allowance for Uncollectible Accounts (250) 80
Supplies 200 250
Inventory 35,000 32,000
Total current assets 237,406 184,663
Property, Plant, and Equipment
Equipment 60,000 15,000
Accumulated Depreciation - Equipment (14,000) (1,000)
Vehicles 35,000 35,000
Accumulated Depreciation - Vehicles (4,800) (2,400)
Building 684,375 684,375
Accumulated Depreciation - Building (25,000) (12,500)
Land 46,875 46,875
Land Improvements 23,750 23,750
Accumulated Depreciation - Land Improvements (2,539) (663)
Total PP&E 803,661 788,437
Total Assets $1,041,067 $973,100
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $20,000 $24,000
Wages Payable 1,000 500
Warranties Payable 750 500
Notes Payable 0 2,500
Total current liabilities 21,750 27,500
Long-term Liabilities
Bonds Payable 750,000 450,000
Mortgage Payable 0 300,000
Total long-term liabilities 750,00 750,000
Total liabilities 771,750 777,500
Stockholder's Equity
Common Stock 125,000 125,000
Paid-in capital in excess of par - common 25,000 25,000
Preferred Stock 40,000 20,000
Paid-in capital in excess of par - preferred 25,000 15,000
Less: Treasury Stock (3,000) (3,000)
Paid-in capital - treasury stock 500 500
Retained Earnings 56,817 13,100
Total stockholders' equity 269,317 195,600
Total liabilities and stockholders' equity $1,041,067 $973,100

Get Your Motor Runnin'

Comparative Income Statements

2012 2011
Service Revenue $93,693 $50,230
Sales 76,250 24,000
Cost of Goods Sold (45,750) (14,400)
Gross Margin $124,193 $59,830
Operating Expenses:
Advertising Expense $7,500 $5,000
Bad Debt Expense 330 0
Depreciation Expense - Equipment 13,000 5,667
Depreciation Expense - Vehicles 2,400 2,400
Depreciation Expense - Building 12,500 12,500
Depreciation Expense - Land Improvements 1,876 663
Wages Expense 22,870 10,500
Total Expenses 60,476 36,730
Net Income $63,717 $23,100