Connect Managerial Accounting Chapter 13

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

Connect Managerial Accounting Chapter 13

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.)

Connect Managerial Accounting Chapter 13

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.

Connect Managerial Accounting Chapter 13

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

Connect Managerial Accounting Chapter 13

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%