FIN 350 P3-3 to P3-21 P3-3 P3-6 P3-10 P3-16 P3-18
P3-20 P3-21
FIN
350 P3-3 to P3-21
Details Complete the following problems from the textbook (All 7 problems are printed on here)
P3-3 P3-6 P3-10 P3-16 P3-18 P3-20 P3-21
Details Complete the following problems from the textbook (All 7 problems are printed on here)
P3-3 P3-6 P3-10 P3-16 P3-18 P3-20 P3-21
Follow
these instructions for completing and submitting your assignment:
Do all work in Excel. Do not submit Word files or *.pdf
files.
Submit a single spread sheet file for this assignment. Do not submit multiple files.
Place each problem on a separate spread sheet tab.
Label all inputs and outputs and highlight your final answer.
Follow the directions in “Guidelines for Developing Spreadsheets.”
P-3 Income statement preparation On December 31, 2015, Cathy Chen, a self-employed redefining certified public accountant (CPA), completed her first full year in business. During the year, she billed $360,000 for her accounting services. She had two employees, a bookkeeper and a clerical assistant. In addition to her monthly salary of $8,000, Ms. Chen paid annual salaries of $48,000 and $36,000 to the bookkeeper and the clerical assistant, respectively. Employment taxes and benefit costs for Ms. Chen and her employees totaled $34,600 for the year. Expenses for office supplies, including postage, totaled $10,400 for the year. In addition, Ms. Chen spent $17,000 during the year on tax-deductible travel and entertainment associated with client visits and new business development. Lease payments for the office space rented (a tax deductible expense) were $2,700 per month. Depreciation expense on the office furniture and fixtures was $15,600 for the year. During the year, Ms. Chen paid interest of $15,000 on the $120,000 borrowed to start the business. She paid an average tax rate of 30% during 2015.
Submit a single spread sheet file for this assignment. Do not submit multiple files.
Place each problem on a separate spread sheet tab.
Label all inputs and outputs and highlight your final answer.
Follow the directions in “Guidelines for Developing Spreadsheets.”
P-3 Income statement preparation On December 31, 2015, Cathy Chen, a self-employed redefining certified public accountant (CPA), completed her first full year in business. During the year, she billed $360,000 for her accounting services. She had two employees, a bookkeeper and a clerical assistant. In addition to her monthly salary of $8,000, Ms. Chen paid annual salaries of $48,000 and $36,000 to the bookkeeper and the clerical assistant, respectively. Employment taxes and benefit costs for Ms. Chen and her employees totaled $34,600 for the year. Expenses for office supplies, including postage, totaled $10,400 for the year. In addition, Ms. Chen spent $17,000 during the year on tax-deductible travel and entertainment associated with client visits and new business development. Lease payments for the office space rented (a tax deductible expense) were $2,700 per month. Depreciation expense on the office furniture and fixtures was $15,600 for the year. During the year, Ms. Chen paid interest of $15,000 on the $120,000 borrowed to start the business. She paid an average tax rate of 30% during 2015.
a. Prepare an income statement
for Cathy Chen, CPA, for the year ended December 31, 2015.
b.
Evaluate her 2015 financial performance.
P3-6 Balance sheet preparation Use the appropriate
items from the following list to prepare in good
form Mellark’s Baked Goods balance sheet at December 31, 2015.
Item Value at ($000) December 31,
2015 Item Value ($000) at December 31,
2015
Accounts
payable $ 220
Inventories
$375
Accounts
receivable 450
Land 100
Accruals 55
Long-term
debts 420
Accumulated
depreciation 265
Machinery
420
Buildings
225
Marketable
securities 75
Cash 215
Notes
payable 475
Common
stock (at par) 90
Paid in
capital in excess Cost of goods sold 2,500
of par 360
Depreciation
expense 45
Preferred
Stock 100
Equipment
140
Retained
Earnings 210
Furniture
and fixtures 170
Sales
Revenue 3,600
General
expense 320
Vehicles 25
P3-10 Statement of retained earnings Hayes Enterprises
began 2015 with a retained earnings balance of $928,000.
During 2015, the firm earned $377,000 after taxes. From this amount, preferred
stockholders were paid $47,000 in dividends. At year-end 2015, the firm’s
retained earnings totaled $1,048,000. The firm had 140,000 shares of common
stock outstanding during 2015.
a. Prepare a statement of
retained earnings for the year ended December 31, 2015, for Hayes Enterprises.
(Note: Be sure to calculate and include the amount of cash
dividends paid in 2015.)
b.
Calculate the firm’s 2015 earnings per share (EPS).
c. How large a per-share cash dividend did the firm pay on common stock during 2015?
P3-16 Accounts receivable management An evaluation of the books of Blair Supply, which follows, gives the end-of-year accounts receivable balance, which is believed to consist of amounts originating in the months indicated. The company had annual sales of $2.4 million. The firm extends 30-day credit terms.
c. How large a per-share cash dividend did the firm pay on common stock during 2015?
P3-16 Accounts receivable management An evaluation of the books of Blair Supply, which follows, gives the end-of-year accounts receivable balance, which is believed to consist of amounts originating in the months indicated. The company had annual sales of $2.4 million. The firm extends 30-day credit terms.
Month of origin Accounts receivable
July
$ 3,875
August 2,000
September 34,025
October 15,100
November 52,000
December 193,000
Year-end accounts receivable $300,000
August 2,000
September 34,025
October 15,100
November 52,000
December 193,000
Year-end accounts receivable $300,000
a. Use the year-end total to
evaluate the firm’s collection system.
b.
If 70% of the firm’s sales occur between July and December, would this
information affect the validity of your conclusion in part a? Explain.
P3-18 Debt analysis Springfield Bank is evaluating
Creek Enterprises, which has requested a $4,000,000
loan, to assess the firm’s financial leverage and financial risk. On the basis
of the debt ratios for Creek, along with the industry averages (see the top of
the next page) and Creek’s recent financial statements (following), evaluate
and recommend appropriate action on the loan request
Creek Enterprises Income
Statement for the Year Ended December 31, 2015
Sales
revenue
$30,000,000
Less: Cost of goods
sold 21,000,000
Gross
profits $
9,000,000
Less: Operating expenses
Selling expense
$3,000,000
General and administrative
expenses 1,800,000
Lease
expense
200,000
Depreciation
expense
1,000,000
Total
operating expense $
6,000,000
Operating profits
$ 3,000,000
Less: Interest expense
1,000,000
Net profits before taxes
$
2,000,000
Less: Taxes (rate 5
40%) 800,000
Net profits after
taxes
$ 1,200,000
Less: Preferred stock
dividends 100,000
Earnings available for common stockholders
$
1,100,000
P3-20 Common-size statement analysis A common-size
income statement for Creek Enterprises’ 2014 operations
follows. Using the firm’s 2015 income statement presented in Problem 3–18,
develop the 2015 common-size income statement and compare it with the 2014
statement. Which areas require further analysis and investigation?
Creek Enterprises Common-Size Income
Statement
for the Year Ended December 31, 2014
Sales revenue ($35,000,000)
100.0%
Less: Cost of goods sold
65.9
Gross profits
34.1%
Less: Operating expenses
Selling expense
12.7%
General and administrative
expenses
6.3
Lease
expense
0.6
Depreciation
expense
3.6
Total operating
expense
23.2
Operating
profits
10.9%
Less: Interest
expense 1.5
Net profits before
taxes
9.4%
Less: Taxes (rate 5
40%)
3.8
Net profits after
taxes
5.6%
Less: Preferred stock
dividends 0.1
Earnings available for common stockholders
5.5%
P3-21 The relationship between financial leverage and
profitability Pelican Paper, Inc., and Timberland
Forest, Inc., are rivals in the manufacture of craft papers. Some financial
statement values for each company follow. Use them in a ratio analysis that
compares the firms’ financial leverage and profitability.
Item
Pelican Paper,
Inc.
Timberland Forest, Inc.
Total assets
$10,000,000
$10,000,000
Total equity (all
common)
9,000,000
5,000,000
Total
debt
1,000,000
5,000,000
Annual
interest
100,000
500,000
Total
sales
25,000,000
25,000,000
EBIT
6,250,000
6,250,000
Earnings available for
common
stockholders
3,690,000
3,450,000
a. Calculate the following
debt and coverage ratios for the two companies. Discuss their financial risk
and ability to cover the costs in relation to each other.
1. Debt ratio
2. Times interest earned ratio
b. Calculate the following
profitability ratios for the two companies. Discuss their profitability
relative to one another.
1.
Operating profit margin
2. Net profit margin
3. Return on total assets
4. Return on common equity
2. Net profit margin
3. Return on total assets
4. Return on common equity
c. In what way has the larger
debt of Timberland Forest made it more profitable than Pelican Paper? What are
the risks that Timberland’s investors undertake when they choose to purchase
its stock instead of Pelican’s?
TUTORIAL PREVIEW
Item
|
Pelican Paper, Inc.
|
Timberland Forest, Inc.
|
Total Assets
|
$10,000,000
|
$10,000,000
|
Total Equity (all common)
|
$9,000,000
|
$5,000,000
|
Total Debt
|
$1,000,000
|
$5,000,000
|
