Prepare a horizontal analysis of the balance sheet data

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Exercise 1 - The comparative condensed balance sheets of Conard Corporation are presented below:

CONARD CORPORATION Comparative Condensed Balance Sheets December 31

2012 2011

Assets

Current assets $74,000 $80,000

Property, plant, and equipment (net) 99,000 90,000

Intangibles 27,000 40,000

Totals assets $200,000 $210,000

Liabilities and stockholder's equity

Current liabilities $42,000 $48,000

Long-term liabilities 143,000 150,000

Stockholders' equity 15,000 12,000

Total liabilities and Stockholders' equity $200,000 $210,000

Instructions:

(a) Prepare a horizontal analysis of the balance sheet data for Conard Corporation using 2011 as a base.

(b) Prepare a vertical analysis of the balance sheet data for Conard Corporation in columnar form for 2012.

Exercise 2 - Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data for the year ending January 31, 2009, are shown below:

NORDSTROM, INC. Balance Sheet (partial) (in millions) End-of-Year Beginning-of-Year

Cash and cash equivalents $72 $358

Accounts receivable (net) 1,942 1,788

Merchandise inventory 900 956

Prepaid expenses 93 78

Other current assets 210 181

Total current assets $3,217 $3,361

Total current assets $1,601 $1,635

For the year,, net credit sales were $8,272, and cost of goods sold was $5,417 (in millions).

Instructions:

(a) Compute the four liquidity ratios at the end of the year.

(b) Using the data in the chapter, compare Nordstrom's liquidity with (1) that of J.C. Penney Company, and (2) the industry averages for department stores.

Exercise 3 - Bennis Company has the following comparative balance sheet data.

BENNIS COMPANY Balance Sheet December 31

2012 2011

Cash $15,000 $30,000

Receivables (net) 70,000 60,000

Inventories 60,000 50,000

Plant assets (net) 200,000 180,000

$345,000 $320,000

Accounts payable $50,000 $60,000

Mortagae payable (15%) 100,000 100,000

Common stock, $10 par 140,000 120,000

Retained earnings 55,000 40,000

$345,000 $320.00

Additional information for 2012:

1. Net income was $25,000.

2. Sales on account were $410,000. Sales returns and allowances were $20,000.

3. Cost of goods sold was $198,000.

4. The allowance for doubtful accounts was $2,500 on December 31, 2012, and $2,000 on December 31,2011.

Instructions:

Compute the following ratios at December 31, 2012.

(a) Current.

(b) Acid-test.

(c) Receivables turnover.

(d) Inventory turnover.

Exercise 4 - The income statement for Christensen, Inc., appears below.

CHRISTENSEN, INC. Income Statement For the Year Ended December 31, 2011

Sales $400,000

Cost of goods sold 230,000

Gross profit 170,000

Expenses (including $16,000 interest and $24,000 income taxes) 105,000

Net income $65,000

Additional information:

1. The weighted-average common shares outstanding in 2011 were 30,000 shares.

2. The market price of Christensen, Inc. stock was $13 in 2011.

3. Cash dividends of $26,000 were paid, $5,000 of which were to preferred stockholders.

Instructions:

Compute the following ratios for 2011.

(a) Earnings per share.

(b) Price-earnings.

(c) Payout.

(d) Times interest earned.

Reference no: EM131767442

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