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E14-17 E15-18 P15-26A

E14-17 E15-18 P15-26A

E14-17 Minerals Plus, Inc
E15-18 Large Land Photo Shop
P15-26A Danfield, Inc

E14-17 The income statement of Minerals Plus, Inc. follows:
Minerals Plus, Inc.
Income Statement
Year Ended September 30,2012



Revenues:


                                                          Service revenue

$235,000
Expenses:


Cost of goods sold
$97,000

Salary expense
$57,000

Depreciation expense
$26,000

Income tax expense
$4,000
$184,000
Net income

$51,000

Additional data follow:
a.   Acquisition of plant assets is $118,000. Of this amount $100,000 is paid in cash and $18,000 by signing a note payable.
b.   Cash receipts from sale of land totals $28,000. There was no gain or loss.
c.   Cash receipts from issuance of common stock total $29,000.
d.   Payment of note payable is $18,000.
e.   Payment of dividends is $8,000.
f.    From the balance sheet:


Sept. 30


2012
2011
Current Assets:


Cash
$30,00
$8,000
Accounts receivable
$41,000
$59,000
Inventory
$97,000
$93,000
Current Liabilities:


Accounts payable
$30,000
$17,000
Accrued liabilities
$11,000
$24,000

Compute DVD’s net cash provided by (used for) operating activities during July. Use the indirect method.

Financial Statement Analysis
From Chapter 15, complete E15-18 and P15-26A and post the answers to the discussion board by day 3. Respond to at least two of your classmates’ postings.


E15-18 Large Land Photo Shop has asked you to determine whether the company’s ability to pay current liabilities and total liabilities improved or deteriorated during 2012. To answer this question, you gather the following data:

2012
2011
Cash
$58,000
$57,000
Short-term investments
31,000

Net receivables
110,000
132,000
Inventory
247,000
297,000
Total assets
585,000
535,000
Total current liabilities
255,000
222,000
Long-term note payable
46,000
48,000
Income from operations
180,000
153,000
Interest expense
52,000
39,000
1.   Compute the following ratios for 2012 and 2011:
a.   Current ratio
b.   Acid-test ratio
c.   Debt to equity ratio

P15-26A Using ratios to evaluate a stock investment
Comparative financial statement data of Danfield, Inc., follow:
Danfield, Inc.
Comparative Income Statement
Years Ended December 31, 2012 and 2011

2012
2011

Net sales
$467,000
$428,000

Cost of goods sold
237,000
218,000

Gross profit
$230,000
$210,000

Operating expenses
136,000
134,000

Income from operations
$94,000
$76,000

Interest expense
9,000
10,000

Income before income tax
$85,000
$66,000

Income tax expense
24,000
27,000

Net income
$61,000
$39,000



Danfield, Inc.
Comparative Income Statement
Years Ended December 31, 2012 and 2011

2012
2011
2010*
Current assets:



Cash
$97,000
$95,000

Current receivables, net
112,000
118,000
$102,000
Inventories
145,000
163,000
203,000
Prepaid expenses
12,000
5,000

Total current assets
$366,000
$381,000

Property, plant, and equipment, net
211,000
179,000

Total assets
577,000
$560,000
598,000
Total current liabilities
$225,000
$246,000

Long-term liabilities
114,000
97,000

Total liabilities
$339,000
$343,000

Preferred stock, 3%
108,000
108,000

Common stockholders' equity, no par
130,000
109,000

Total liabilities and stockholders' equity
$577,000
$560,000

* Selected 2010 amounts

1. Market price of Danfield’s common stock: $86.58 at December 31, 2012 and $46.54 at December 31, 2011.
2. Common shares outstanding: 12,000 during 2012 and 10,000 during 2011 and 2010.
3. All sales on credit.

Requirements
1.   Compute the following ratios for 2012 and 2011:
a.   Current ratio
b.   Times-interest-earned ratio
c.   Inventory turnover
d.   Gross profit percentage
e.   Debt to equity ratio
f.    Rate of return on common stockholders’ equity
g.   Earnings per share of common stock
h.   Price/earnings ratio

2.   Decide (a) whether Danfield’s ability to pay debts and sell inventory improved or deteriorated during 2012 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.


TUTORIAL PREVIEW
Req. 1

Ratio
Formula
2015
2014



(Dollar Amounts and Stock Quantities in Thousands)
1.
Current Ratio
Current Assets/ Current Liabilities
$366/ $225
= 1.63
$381/ $246
= 1.55


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