30 May ACC 560 Week 10 Homework Chapter 14 (E14-4, E14-7, E14-11) NEW
Chapter 14: Financial Statement Analysis
ACC 560 Week 10 Chapter 14 Exercises 4, 7, and 11
E14-4
The comparative condensed income statements of Emley Corporation are shown below.
EMLEY CORPORATION
Comparative Condensed Income Statements
For the Years Ended December 31
2017 2016
Net sales $660,000 $600,000
Cost of goods sold 483,000 420,000
Gross profit 177,000 180,000
Operating expenses 125,000 120,000
Net income $ 52,000 $ 60,000
Instructions
a. Prepare a horizontal analysis of the income statement data for Emley Corporation using 2016 as a base. (Show the amounts of increase or decrease.
b. Prepare a vertical analysis of the income statement data for Emley Corporation in columnar form for both years.
E14-7
Frizell Company has the following comparative balance sheet data.
FRIZELL COMPANY
Balance Sheets
December 31
2017 2016
Cash $ 15,000 $ 30,000
Accounts receivable (net) 70,000 60,000
Inventory 60,000 50,000
Plant assets (net) 200,000 180,000
$345,000 $320,000
Accounts payable $ 50,000 $ 60,000
Mortgage payable (6%) 100,000 100,000
Common stock, $10 par 140,000 120,000
Retained earnings 55,000 40,000
$345,000 $320,000
Instructions
Compute the following ratios at December 31, 2017.
a. Current ratio.
b. Acid-test ratio.
c. Accounts receivable turnover.
d. Inventory turnover.
E14-11
Wiemers Corporation’s comparative balance sheets are presented on the next page.
WIEMERS CORPORATION
Balance Sheets
December 31
2017 2016
Cash $ 4,300 $ 3,700
Accounts receivable (net) 21,200 23,400
Inventory 10,000 7,000
Land 20,000 26,000
Buildings 70,000 70,000
Accumulated depreciation—buildings (15,000) (10,000)
Total $110,500 $120,100
Accounts payable $ 12,370 $ 31,100
Common stock 75,000 69,000
Retained earnings 23,130 20,000
Total $110,500 $120,100
Wiemers’s 2017 income statement included net sales of $100,000, cost of goods sold of $60,000, and net income of $15,000.
Instructions
Compute the following ratios for 2017.
a. Current ratio.
b. Acid-test ratio.
c. Accounts receivable turnover.
d. Inventory turnover.
e. Profit margin.
f. Asset turnover.
g. Return on assets.
h. Return on common stockholders’ equity.
i. Debt to assets ratio.
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