Chapter Two - Wiley

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8956d_ch02.qxd 7/17/03 2:41 PM Page 92 mac34 Mac34: kec_420: 92 CHAPTER 2 A Further Look at Financial Statements Prepare a classified balance sheet. (SO 4) Tot. current assets $1,051,533 Tot. assets $2,379,346 P2-2B The following items are taken from the 2001 balance sheet of Yahoo!, Inc. (in thousands). Common stock $2,008,003 Property and equipment, net 131,648 Accounts payable 13,218 Other assets 357,085 Long-term investments 839,080 Accounts receivable 68,648 Prepaid expenses and other current assets 56,458 Short-term investments 553,795 Retained earnings (deficit) (40,986) Cash and cash equivalents 372,632 Long-term liabilities 53,812 Accrued expenses and other current liabilities 235,897 Unearned revenue—current 109,402 Instructions Prepare a classified balance sheet for Yahoo! Inc. as of December 31, 2001. (Note: Because Yahoo!’s cumulative losses exceeded its cumulative earnings, its balance sheet reports a retained earnings deficit.) Prepare financial statements. (SO 4, 6) P2-3B 2005. These items are taken from the financial statements of Karr Corporation for Retained earnings (beginning of year) $26,000 Utilities expense 2,000 Equipment 66,000 Accounts payable 13,300 Cash 13,600 Salaries payable 3,000 Common stock 13,000 Dividends 12,000 Service revenue 82,000 Prepaid insurance 3,500 Repair expense 1,800 Depreciation expense 2,600 Accounts receivable 14,200 Insurance expense 2,200 Salaries expense 37,000 Accumulated depreciation 17,600 Net income $36,400 Tot. assets $79,700 Prepare financial statements. (SO 4, 6) Instructions Prepare an income statement, a retained earnings statement, and a classified balance sheet as of December 31, 2005. P2-4B You are provided with the following information for Commerce Crusaders, effective as of its April 30, 2005, year-end. Accounts payable $ 834 Accounts receivable 810 Building, net of accumulated depreciation 1,537 Cash 570 Common stock 900 Cost of goods sold 990 Current portion of long-term debt 450 Depreciation expense 335 Dividends paid during the year 325 Equipment, net of accumulated depreciation 1,220 Income tax expense 135 Income taxes payable 135
8956d_ch02.qxd 7/17/03 2:41 PM Page 93 mac34 Mac34: kec_420: Problems: Set B 93 Interest expense 400 Inventories 967 Land 1,400 Long-term debt 3,500 Prepaid expenses 12 Retained earnings, beginning 1,600 Revenues 3,400 Selling expenses 440 Short-term investments 1,200 Wages expense 700 Wages payable 222 Instructions (a) Prepare an income statement and a retained earnings statement for Commerce Crusaders for the year ended April 30, 2005. (b) Prepare a classified balance sheet for Commerce Crusaders as of April 30, 2005. P2-5B Comparative financial statement data for Bates Corporation and Wilson Corporation, two competitors, appear below. All balance sheet data are as of December 31, 2005, and December 31, 2004. Bates Corporation Wilson Corporation 2005 2004 2005 2004 Net sales $1,949,035 $542,814 Cost of goods sold 1,280,490 338,006 Operating expenses 302,275 79,000 Interest expense 6,800 1,252 Income tax expense 47,840 7,740 Current assets 427,200 $412,410 190,336 $160,467 Plant assets (net) 532,000 500,000 139,728 125,812 Current liabilities 66,325 75,815 35,348 30,281 Long-term liabilities 108,500 90,000 29,620 25,000 Net income $400 Tot. current assets $3,559 Tot. assets $7,716 Compute ratios; comment on relative profitability, liquidity, and solvency. (SO 5, 7, 8) Additional information: Cash provided by operations for 2005 was $162,594 for Bates and $24,211 for Wilson. The average number of shares outstanding was 100,000 for Bates and 50,000 for Wilson. The stock price at December 31, 2005, was $25 for Bates and $14 for Wilson. Instructions (a) Comment on the relative profitability of the companies by computing the net income, earnings per share, and the price-earnings ratios for both companies for 2005. (b) Comment on the relative liquidity of the companies by computing working capital, the current ratios, and the current cash debt coverage ratios for both companies for 2005. (c) Comment on the relative solvency of the companies by computing the debt to total assets ratio and the cash debt coverage ratio for each company for 2005. P2-6B Here are the comparative statements of Roger Petersen Company. ROGER PETERSEN COMPANY Income Statements For the Years Ended December 31 2005 2004 Net sales $2,218,500 $2,100,500 Cost of goods sold 1,012,400 996,000 Selling and administrative expense 906,000 879,000 Interest expense 98,000 79,000 Income tax expense 84,000 77,000 Net income $ 118,100 $ 69,500 Compute liquidity, solvency, and profitability ratios. (SO 5, 7, 8)
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Chapter Two - Wiley

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