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Short Problems

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Short Problem 1 = Net sales + beg. A/R – end A/R = 4500000 + 200000 – 300000 = 4400000

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Short Problem 2 = net income add: depreciation decrease in assets loss on sale = 3520000 + 1480000+ 290000 + 130000 = 5420000 IOFOOIOFOO

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Short Problem 3 = book value – loss after insurance *Book value = acquisition cost – accumulated depreciation = 5000000 – 2400000 = 2600000 - 1050000 = 1550000

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Short Problem 4a OIIOxFFOIIOxFF = treasury stock sale - dividends paid = 750000 - 380000 = 370000 (provided)

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= sale of equipment – bond purchase = 100000 – 1800000 = -1700000 (used) Short Problem 4b

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Short Problem 5 OOOFOOOOFO = net income add: depreciation loss on bond retirement less: decrease in A/P decrease in amortization = 9000000 + 5400000 + 2340000 – 540000 - 50000 = 16250000

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= 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

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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 & F I F I F O F

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Short Problem 7c = – purchase of real estate – purchase of patent – sale of securities = – 5500000 – 1250000 - 5000000 = – 1750000 (used)

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Short Problems

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Short Problem 1 = Analysis Period Amount x 100 Base Period Amount = 360000/300000 = 120%

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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

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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

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Short Problem 3a *Sales = 1000000 Days’ Sales = 18 = (A/R / Net Sales ) x 360 *A/R = 50000

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Short Problem 3b Inventory TO = 9 = CGS/Inv. *Gross Margin Rate =.10 = (Net Sales – CGS) / Net Sales **CGS = 900000 Inv. TO = 9 = 900000/Inv *Inv = 100000

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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

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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

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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

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Short Problem 7 *Ave A/R = (75000 + 50000) / 2 = 62500 A/R TO = Credit Sales / Ave. A/R = 500000 / 62500 = 8x

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Short Problem 9

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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

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*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

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Short Problem 9 50 80 880 120 2000 800

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Long Problem 1

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Operating Income

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Long Problem2

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Long Problem 3

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Long Problem 4

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Long Problem 5

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Long Problem 2

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2800 980 1820 1095.41 125.2 599.39 207.39 392

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Long Problem 2 418 320 242 3000 1380 2600 152 1252 500 696 2600

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Long Problem 3

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130 120 250 500 580 80 1000 250 350 600 300 100 400 1000

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Long Problem 3 1280 960 320 192 128 28 100 40 60

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Long Problem 4

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Sales1280000 COGS(960000) Gross Profit320000 Selling Exp(128000) Admin Exp(64000) EBITDA128000 Int Exp(28000) Pre-tax Income100000 Tax Exp(40000) Net Income60000

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ASSETS Cash80000 A/R120000 Inventory250000 Prepaid50000 Machinery & Equip580000 Acc Dep(80000) TOTAL ASSETS1000000 LIABILITIES & EQUITY A/P250000 8% B/P350000 Retained Earnings100000 Common Stock (P5 par)300000 TOTALLIAB & EQUITY1000000

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