Reference no: EM133151008
Question - a) Selected financial information for DMG Corp. for a six-year period follows:
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Net sales
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$1,835
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$1,757
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$1,640
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$1,704
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$1,665
|
$1,610
|
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Net income
|
144
|
128
|
97
|
130
|
110
|
104
|
|
Ending common shareholders' equity
|
956
|
872
|
782
|
690
|
628
|
608
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1. Make a horizontal analysis to compare 2020 to 2019. Which accounts increased the most?
2. Compute trend percentages for 2016 through 2020?, using 2015 as the base year.
3. From the above data, what can we infer about expenses from 2015 through 2020? (Hint: Sales less net income will give amount of expenses. Compare the rate of growth in expenses to that of sales.)
b) Make a comparative common-size income statement for Bright Tutoring Inc.
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Bright Tutoring Inc. Income Statement For the Years Ended December 31, 2020 and 2019
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|
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2020
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2019
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Net sales
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$533,000
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$465,000
|
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Expenses
|
|
|
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Cost of goods sold
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235,000
|
202,000
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|
Selling and general expenses
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140,000
|
135,000
|
|
Interest expense
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10,000
|
6,000
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Wages expense
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51,000
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41,000
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Total expenses
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436,000
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384,000
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Net income
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$97,000
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$81,000
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c) Blueberry Pie Corporation has requested that you determine whether the company's ability to pay its current liabilities and long-term debt has improved or deteriorated during 2020.
To answer this question, compute the following ratios for 2020 and 2019: (a) current ratio, (b) acid-test ratio, (c) debt ratio, (d) debt/equity ratio and (e) times-interest-earned ratio. Summarize the results of your analysis in a paragraph explaining what the results of the calculations mean.
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2020
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2019
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Cash
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$13,000
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$27,000
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Short-term investments
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16,000
|
---
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Net receivables
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60,000
|
65,500
|
|
Inventory
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133,000
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143,000
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|
Prepaid expenses
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13,500
|
7,500
|
|
Total assets
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275,000
|
265,000
|
|
Total current liabilities
|
114,000
|
144,000
|
|
Total liabilities
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138,000
|
146,000
|
|
Income from operations
|
105,000
|
92,000
|
|
Interest expense
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24,500
|
23,500
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d) The following data are from the financial statements of Joachim's Equipment Manufacturing Ltd.
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Total liabilities
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$29,204
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Preferred shares
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0
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Total current assets
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24,498
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Accumulated amortization
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7,854
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Debt ratio
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0.55312
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Current ratio
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1.75
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Required - Complete the condensed balance sheet.
e) The following data are adapted from the financial statements of Jana's Tennis Shops, Inc.:
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Total current assets
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$1,404,000
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|
Accumulated amortization
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1,800,000
|
|
Total liabilities
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1,620,000
|
|
Preferred shares
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0
|
|
Debt ratio
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72%
|
|
Current ratio
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1.8
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Prepare a condensed balance sheet as of December 31, 2019. (Round your answers to the nearest whole dollar.)
f) The following data are adapted from the financial statements of Pospisil Tennis Shops, Inc.:
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Total current assets
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$1,216,000
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Accumulated amortization
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2,000,000
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|
Total liabilities
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1,540,000
|
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Preferred shares
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0
|
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Debt ratio
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55%
|
|
Current ratio
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1.6
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Make a condensed balance sheet as of December 31, 2019.