Short Problems

Short Problem 1

= Net sales + beg. A/R – end A/R = 4500000 + 200000 – 300000= 4400000

Short Problem 2

= net income add: depreciation decrease in assets loss on sale= 3520000 + 1480000+ 290000 + 130000= 5420000

IOFOO

Short Problem 3

= book value – loss after insurance*Book value = acquisition cost – accumulated depreciation

= 5000000 – 2400000 = 2600000 - 1050000= 1550000

Short Problem 4a

OII

OxFF

= treasury stock sale - dividends paid= 750000 - 380000= 370000 (provided)

= sale of equipment – bond purchase= 100000 – 1800000= -1700000 (used)

Short Problem 4b

Short Problem 5

OOOFO

= net income add: depreciation loss on bond retirement less: decrease in A/P decrease in amortization= 9000000 + 5400000 + 2340000 – 540000 - 50000= 16250000

= net income add: depreciation increase in ADA (dr DBE bad debts exp, cr ADA) decrease in prepaid rent (dr rent exp, cr prep rent) increase in A/P less: increase in A/R = 7500000 + 10000 + 210000 + 150000 – 300000= 7570000

Short Problem 6

Short Problem 7a

= cash barrowed from bank + issuance of stock + cash from B/P – paid dividends – paid bank loan= 5500000 + 2500000 + 3000000 – 6000000 - 1500000= 3500000

I & FI

FFI

FOF

Short Problem 7c

= – purchase of real estate – purchase of patent – sale of securities= – 5500000 – 1250000 - 5000000= – 1750000 (used)

Short Problems

Short Problem 1

= Analysis Period Amount x 100 Base Period Amount= 360000/300000= 120%

Short Problem 2a

Gross Margin Rate = Net Sales - CGS Net Sales

= (5000000-4800000)/5000000 = 4%

Ave. Inventory = (Beg. Inv + End Inv)/2 = (1100000 + 1300000)/2 = 1200000

Inventory TO = 4:1 = CGS/Ave Inv. = CGS/1200000

*CGS = 4800000

Ave. A/R = (Beg. A/R + End A/R)/2 = (900000 + 1100000)/2 = 1000000

A/R TO = 5:1 = Net Sales/Ave A/R = Net Sales/1000000

*Net Sales = 5000000

Short Problem 2b

*Ave A/R = 1000000*Net Sales = 5000000

Days’ Sales = (Ave. A/R / Net Sales ) x 365 = (1000000/5000000) x 365 = 73 days

Short Problem 3a

*Sales = 1000000Days’ Sales = 18 = (A/R / Net Sales ) x 360

*A/R = 50000

Short Problem 3b

Inventory TO = 9 = CGS/Inv.*Gross Margin Rate = .10 = (Net Sales – CGS) / Net Sales

**CGS = 900000Inv. TO = 9 = 900000/Inv

*Inv = 100000

Short Problem 4

Note: EBIT is earning before tax & income expense

*Income before tax = Net Income/(1-tax rate) = 20000/(1-0.2) = 250000

*EBIT = Income before tax + interest expense = 25000 + 10000 = 35000

Times interest earned = EBIT / interest expense = 35000/10000

= 3.5

Short Problem 5

ROA = Net Income / Total Assets

*PM = .20 -> .15 = Net Income / Net Sales*Asset TO = 1.5x -> 2.5x = Net Sales / Total Assets

Du pont analysis:Old ROA = PM * Asset TO

= .20 x 1.5 = .30

New ROA = PM * Asset TO = .15 x 2.5 = .375

Short Problem 6

*Ave A/R = (250000 + 300000) / 2 = 275000

A/R TO = 5.0 = Credit Sales / Ave. A/R**Credit Sales = 1375000

Total Sales = Credit Sales + Cash Sales = 1375000 + 100000 = 1475000

Short Problem 7

*Ave A/R = (75000 + 50000) / 2 = 62500

A/R TO = Credit Sales / Ave. A/R = 500000 / 62500 = 8x

Short Problem 9

Short Problem 9

Net Income Margin = .12 = Net Income / Sales = Net Income / 1000

**Net Income = 120

ROA = 0.06 = Net Income / Assets = 120 / Assets **Assets = 2000

ROE = .10 = Net income / Common Equity = 120 / Common Equity*Common Equity = 1200**Liability = Asset – Equity

= 2000 - 1200

*Tax Ratio = 0.4 = Tax Expense / Pre tax income*Tax Expense = 0.4(Pre tax income)

Pre tax income = Net Income + Tax Expense = 120 + 0.4(Pretax income)0.6(Pre tax income) = 120*Pre tax income = 200**Tax Expense = 0.4(Pre tax Income)

= 0.4(200) = 80

*Operating Income = 1000 – 750 = 250

Pre tax income = 200 = Operating Income – Interest Exp

= 250 – Interest Exp**Interest exp = 50

Total Expenses = Operating + Interest + Tax = 750 + 50 + 80 = 880

Short Problem 9

50808801202000800

Long Problem 1

Operating Income

Long Problem2

Long Problem 3

Long Problem 4

Long Problem 5

Long Problem 2

Long Problem 2

280098018201095.41125.2599.39207.39

392

Long Problem 2

418320242300013802600

1521252

5006962600

Long Problem 3

Long Problem 3

130120250500

580801000

250350600

3001004001000

Long Problem 3

1280960320192128281004060

Long Problem 4

Sales 1280000COGS (960000)Gross Profit 320000Selling Exp (128000)Admin Exp (64000)EBITDA 128000Int Exp (28000)Pre-tax Income 100000Tax Exp (40000)Net Income 60000

ASSETSCash 80000A/R 120000Inventory 250000Prepaid 50000Machinery & Equip 580000Acc Dep (80000)TOTAL ASSETS 1000000

LIABILITIES & EQUITYA/P 2500008% B/P 350000Retained Earnings 100000Common Stock (P5 par) 300000TOTAL LIAB & EQUITY 1000000