ACC 560 Week 10 Homework Chapter 14 (E14-4, E14-7, E14-11) 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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