PROBLEMSETC

PROBLEM171C
SelectedcomparativefinancialstatementsofMaxwellCompanyfollow:
MAXWELLCOMPANY
ComparativeIncomeStatements
ForYearsEndedDecember31,2009,2008,and2007
2009 20082007
Sales
$167,200$125,500$76,000
Costofgoodssold
71,06065,26033,440
Grossprofit
$96,140$60,240$42,560
Sellingexpenses
12,54010,2917,828
Administrativeexpenses 40,79726,10413,528
Totalexpenses
$53,337$36,395$21,356
Incomebeforetaxes
$42,803$23,845$21,204
Incometaxes
12,8417,1546,361
Netincome
$29,962$16,691$14,843

MAXWELLCOMPANY
ComparativeBalanceSheets
December31,2009,2008,and2007
200920082007
Assets
Currentassets
$34,420$28,888$21,789
Longterminvestments 05002,550
Plantassets,net
82,00064,00050,000
Totalassets
$116,420$93,388$74,339
LiabilitiesandEquity
Currentliabilities
$20,010$15,340$14,300
Commonstock
48,00048,00040,000
Othercontributedcapital10,00010,0008,000
Retainedearnings
38,41020,04812,039
Totalliabilitiesandequity$116,420$93,388$74,339
Required
1.Computeeachyearscurrentratio.

2.Expresstheincomestatementdataincommonsizepercents.
3.Expressthebalancesheetdataintrendpercentswith2007asthebaseyear.
AnalysisComponent
4.Commentonanysignificantrelationsrevealedbytheratiosandpercentscomputed.
PROBLEM172C
SelectedcomparativefinancialstatementsofMoriglioniCompanyfollow:
MORIGLIONICOMPANY
ComparativeIncomeStatements($000)
ForYearsEndedDecember31,20092003
20092008 200720062005 20042003
Sales
$1,583$1,246$1,193$1,148$1,027$946
$820
Costofgoodssold
1,031913

758

684
631

600

505
Grossprofit
$552$333$435$464$396$346
$315
Operatingexpenses
283241223

155

126124

111
Netincome
$269$92$212

$309
$270

$222

$204
MORIGLIONICOMPANY
ComparativeBalanceSheets($000)
December31,20092003
200920082007 2006 2005 2004

2003

Assets
Cash
$88 $106 $112 $122 $123 $126 $125
Accountsreceivable,net 677
691
605
489
404
403
288
Merchandiseinventory 1,295
959
913
787
693
604
457
Othercurrentassets
42
49
48
44
33
29
22
Longterminvestments 100
100
250
250
200
200
200
Plantassets,net
1,623
1,601

1,466

1,432

1,344

1,275

1,280
Totalassets
$3,825$3,506 $3,394$3,124 $2,797$2,637 $2,372

LiabilitiesandEquity
Currentliabilities
$873 $862 $601 $657 $606 $530 $303
Longtermliabilities
1,380 1,150 1,100
590
590
610
400
Commonstock
800
800
800
750
750
750
700
Othercontributedcapital 250
250
250
225
225
225
200
Retainedearnings
522
444

643

902

626

522

769
Totalliabilities+equity$3,825$3,506$3,394$3,124

$2,797

$2,637

$2,372

Required
1.Computetrendpercentsforthecomponentsofbothstatementsusing2003asthebaseyear.
AnalysisComponent
2.Analyzeandcommentonthefinancialstatementsandtrendpercentsfrompart(1).
PROBLEM173C
MillieCorporationbeganthemonthofAugustwith$400,000ofcurrentassets,acurrentratioof
3:1,andanacidtestratioof1.5:1.Duringthemonth,itcompletedthefollowingtransactions
(thecompanyusesaperpetualinventorysystem):
Aug.1 Paida$15,000accountpayable.
2 Issuedcommonstockfor$145,000cash.
8 Bought$67,000ofmerchandiseonaccount.
12 Bought$89,000ofmerchandiseforcash.
18 Wroteoffa$2,500baddebtagainsttheAllowanceforDoubtfulAccountsaccount.
22 Issued8,000sharesofcommonstockforanewcomputersystem
23 Paida$30,000,60daynotepayable.
24 Paida$30,000longtermsecurednotepayable.
25 Sold6,000sharesoftreasurystockfor$60,000cash.
30 Soldmerchandisethatcost$20,000for$55,000.
Required
PrepareatableshowingMillies(1)currentratio,(2)acidtestratio,and(3)workingcapitalafter
eachtransaction.Roundratiostotwodecimalplaces.
PROBLEM174C
SelectedyearendfinancialstatementsofSpaceOdysseyVoyagesCorporationfollow.(Note:
Allsalesareoncredit;SelectedbalancesheetamountsatDecember31,2007,weretotalassets,
$220,700;inventory,$53,400;commonstock,$50,000;andretainedearnings,$88,800.)
SPACEODYSSEYVOYAGESCORPORATION
IncomeStatement
ForYearEndedDecember31,2008
Sales
Costofgoodssold
Grossprofit
Operatingexpenses
Interestexpense

$427,600

212,050
$215,550
94,000
4,450

Incomebeforetaxes
Incometaxes
Netincome

$117,100
35,130
$81,970
SPACEODYSSEYVOYAGESCORPORATION
BalanceSheet
December31,2008

Assets
Cash
$22,700
Shortterminvestment
5,300
Accountsreceivable,net 34,000
Merchandiseinventory 51,200
Prepaidexpenses
Plantassets,net
Totalassets

LiabilitiesandEquity
Accountspayable
$28,750
Accruedwagespayable
2,000
Incometaxespayable
1,250
LongtermNotePayable,
securedbymortgageon
plantassets
55,000
3,000 Commonstock,$5parvalue 50,000
125,000 Retainedearnings
104,200
$241,200 Totalliabilitiesandequity $241,200

Required
Compute the following: (1) current ratio, (2) acidtest ratio, (3) dayssales uncollected, (4)
inventoryturnover,(5)dayssalesininventory,(6)debttoequityratio,(7)timesinterestearned,
(8)profitmarginratio,(9)totalassetturnover,(10)returnontotalassets,and(11)returnon
commonstockholdersequity.
PROBLEM175C
Summaryinformationfromthefinancialstatementsoftwocompaniescompetingintheindustry
follows:
Datafromtheyearendbalancesheets
BirdyCo.BogeyCo.
Assets
Cash
$91,000 $52,000
Accountsreceivable,net
60,200
40,000
Merchandiseinventory
50,400
80,500
Plantassets,net
201,170 205,000
Totalassets
$402,770 $377,500
LiabilitiesandEquity

Currentliabilities
$50,400 $115,000
Longtermnotespayable
64,000 176,000
Commonstock,$2parvalue 100,000
50,000
Retainedearnings
188,370
36,500
Totalliabilitiesandequity
$402,770 $377,500
Datafromthecurrentyearsincomestatement:
BirdyCo.BogeyCo.
Sales
$540,030
$468,000
Costofgoodssold
393,190
303,300
Interestexpense
6,400
20,400
Incometaxexpense
54,031
114,100
Netincome
86,409
30,200
Basicearningspershare
1.73
1.21
Beginningofyearbalancesheetdata:
BirdyCo.BogeyCo.
Accountsreceivable,net $54,700$38,000
Merchandiseinventory
45,50088,000
Totalassets
181,166355,870
Commonstock,$2parvalue 100,00040,000
Retainedearnings
166,50030,100
Required
1.Forbothcompaniescomputethe(a)currentratio,(b)acidtestratio,(c)accounts(including
notes)receivableturnover,(d)inventoryturnover,(e)dayssalesininventory,and(f)dayssales
uncollected.Identifythecompanyyouconsidertohavethebettershorttermfinancialposition
andexplainwhy.
2.Forbothcompaniescomputethe(a)profitmargin,(b)totalassetturnover,(c)returnontotal
assets,and(d)returnoncommonstockholdersequity.Assumingthateachcompanypaidcash
dividends of $.75 per share and each companys stock can be purchased at $32 per share,
computetheir(e)priceearningsratiosand(f)dividendyields.Identifywhichcompanysstock
youwouldrecommendasthebetterinvestmentandexplainwhy.

PROBLEM176C
Selected account balances from the adjusted trial balance for the Nittany Corporation as of
December31,2006,follow:
DebitCredit
a. Interestearned

$34,000

b. DepreciationexpenseEquipment
$76,000
c. Gainonsaleofequipment
31,500
d. Accountspayable
e. Otheroperatingexpenses
369,800
f. AccumulateddepreciationEquipment
g. Gainfrominsurancesettlement

h. Cumulativeeffectofchangeinaccountingprinciple(pretax)
i. AccumulateddepreciationBuildings

j. Lossfromoperatingadiscontinuedsegment(pretax)
35,000
k. Lossonretirementofdebt(pretax)
36,000
l. Netsales
m.DepreciationexpenseBuildings
82,000
n. Correctionofunderstatementofprioryearssales(pretax)
o.Gainonsaleofdiscontinuedsegmentsassets(pretax)
p. Gainfromsettlementoflawsuit

6,000
q. Incometaxesexpense

?
r. Costofgoodssold
628,000

76,000
104,400
88,000
72,000
266,600

1,744,000
28,000
44,000

Required
Answereachofthefollowingquestionsbyprovidingsupportingcomputations:
1.Assumingthecompanysincometaxrateis35%forallitems,identifythetaxeffectsand
aftertaxmeasuresoftheitemslabeledpretax.
2.What is the amount of the companys income from continuing operations before income
taxes?Whatistheamountofthecompanysincometaxesexpense?Whatistheamountofthe
companysincomefromcontinuingoperationsafterincometaxes?
3.Whatisthetotalamountofaftertaxincome(loss)associatedwiththediscontinuedsegment?
4.Whatistheamountofincome(loss)beforebothanyextraordinaryitemsandanycumulative
effectofchangesinaccountingprinciple?
5.Whatistheamountofnetincomefortheyear?