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Connect Managerial Accounting Chapter 13

Q1. Compute trend percents for the above accounts, using 2013 as the base year.

	2017	2016	2015	2014	2013
Sales	$525,948	$339,321	$266,134	$179,820	$133,200
Cost of goods sold	270,783	174,804	139,128	92,758	67,932
Accounts receivable	25,456	19,748	18,230	10,501	9,098

Q2. Simon Company’s year-end balance sheets follow.

At December 31	2017	2016	2015
Assets
Cash	$35,199	$42,404	$42,438
Accounts receivable, net	102,017	74,941	56,013
Merchandise inventory	132,193	98,058	61,486
Prepaid expenses	11,913	11,021	4,715
Plant assets, net	327,441	298,372	268,348
Total assets	$608,763	$524,796	$433,000
Liabilities and Equity
Accounts payable	$151,582	$89,577	$56,584
Long-term notes payable secured by mortgages on plant assets	117,881	123,117	94,736
Common stock, $10 par value	163,500	163,500	163,500
Retained earnings	175,800	148,602	118,180
Total liabilities and equity	$608,763	$524,796	$433,000

Express the balance sheets in common-size percents. (Do not round intermediate calculations and round your final percentage answers to 1 decimal place.)

Q3. Simon Company’s year-end balance sheets follow.

At December 31	2017	2016	2015
Assets
Cash	$24,465	$28,886	$30,403
Accounts receivable, net	70,906	49,539	41,356
Merchandise inventory	88,251	66,799	43,167
Prepaid expenses	8,038	7,583	3,446
Plant assets, net	227,185	208,266	191,828
Total assets	$418,845	$361,073	$310,200
Liabilities and Equity
Accounts payable	$105,335	$61,632	$41,356
Long-term notes payable secured by mortgages on plant assets	80,318	80,555	68,554
Common stock, $10 par value	162,500	162,500	162,500
Retained earnings	70,692	56,386	37,790
Total liabilities and equity	$418,845	$361,073	$310,200

1. Compute the current ratio for the year ended 2017, 2016, and 2015.
2. Compute the acid-test ratio for the year ended 2017, 2016, and 2015.

Q4. Simon Company’s year-end balance sheets follow.

At December 31	2017			2016			2015
Assets
Cash	$	31,000		$	34,600		$	37,000
Accounts receivable, net		89,900			63,800			57,200
Merchandise inventory		101,746			83,200			59,900
Prepaid expenses		10,175			9,545			3,512
Plant assets, net		292,179			258,855			152,388
Total assets	$	525,000		$	450,000		$	310,000
Liabilities and Equity
Accounts payable	$	134,647		$	78,332		$	40,102
Long-term notes payable secured by mortgages on plant assets		96,726			106,605			69,880
Common stock, $10 par value		162,500			162,500			162,500
Retained earnings		131,127			102,563			37,518
Total liabilities and equity	$	525,000		$	450,000		$	310,000

The company’s income statements for the years ended December 31, 2017 and 2016, follow.

For Year Ended December 31	2017						2016
Sales				$	682,500					$	535,500
Cost of goods sold	$	416,325					$	348,075
Other operating expenses		211,575						135,482
Interest expense		11,603						12,317
Income taxes		8,873						8,033
Total costs and expenses					648,376						503,907
Net income				$	34,124					$	31,593
Earnings per share				$	2.10					$	1.94

Additional information about the company follows.

Common stock market price, December 31, 2017		$33.00
Common stock market price, December 31, 2016		31.00
Annual cash dividends per share in 2017		0.24
Annual cash dividends per share in 2016		0.12

To help evaluate the company’s profitability, compute the following ratios for 2017 and 2016:

1. 1. Return on common stockholders’ equity.
   2. Price-earnings ratio on December 31.
   3. Dividend yield.

Connect Managerial Accounting Chapter 13 Quiz

Q1. Industry standards for financial statement analysis:

• Are based on a single competitor’s financial performance.
• Are set by the government.
• Are available for the financial performance and condition of the company’s industry.
• Are based on rules of thumb.
• Compare a company’s income with its prior year’s income.

Q2. The market price of Horokhiv Corporation’s common stock at the start of 2016 was $47.50 and it declared and paid cash dividends of $3.28 per share. The Dividend yield ratio is:

• 14.5%
• 7.4%
• 6.5%
• 144.8%
• 6.9%

Q3. The dollar change for a comparative financial statement item is calculated by:

• Subtracting the analysis period amount from the base period amount.
• Subtracting the base period amount from the analysis period amount.
• Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100.
• Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100.
• Subtracting the base period amount from the analysis amount, then dividing the result by the base amount.

Q4. Internal users of financial information:

• Are not directly involved in operating a company.
• Are those individuals involved in managing and operating the company.
• Include shareholders and lenders.
• Include directors and customers.
• Include suppliers, regulators, and the press.

Q5. A corporation reported cash of $27,000 and total assets of $461,000 on its balance sheet. Its common-size percent for cash equals:

• 17.1%
• 58.6%
• 100%
• 5.86%
• 17.07%

Q6. Refer to the following selected financial information from Graceworks, Corp. Compute the company’s days’ sales in inventory for Year 2. (Use 365 days a year.)

	Year 2		Year 1
Merchandise inventory	271,000		253,500
Cost of goods sold	486,400		433,100

• 203.4
• 228.4
• 179.5
• 215.1
• 113.3

Q7. Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The working capital is:

• 141%
• 71%
• ($56,000)
• $56,000
• 41%

Q8. All of the following are true of a financial statement analysis report, except:

• Contains ambiguities and qualifications.
• Forces preparers to organize their reasoning and to verify the logic of analysis.
• Serves as a method of communication to users.
• Helps users and preparers to refine conclusions based on evidence from key building blocks.
• Enables readers to see the process and rationale of analysis.

Q9. To compute trend percentages the analyst should:

• Select a base period, assign each item in the base period statement a weight of 100%, and then express financial numbers from other periods as a percent of their base period number.
• Subtract the analysis period number from the base period number.
• Subtract the base period amount from the analysis period amount, divide the result by the analysis period amount, then multiply that amount by 100.
• Compare amounts across industries using Dun and Bradstreet.
• Compare amounts to a competitor.

Q10. A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet. Its common-size percent for cash equals:

• .0785%
• 7.85%
• 12.73%
• 1273%
• 78.50%

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