Frantic Fast Foods had earnings after taxes of $1,190,000 in the year 2012 with 399,000 shares …

1. Frantic Fast Foods had earnings after taxes of $1,190,000
in the year 2012 with 399,000 shares outstanding. On January 1, 2013, the
firm issued 27,000 new shares. Because of the proceeds from these new shares
and other operating improvements, earnings after taxes increased by 24
percent.

a.

Compute earnings per share for the year 2012. (Round
your answer to 2 decimal places.)

Earnings per share

$

b.

Compute earnings per share for the year 2013. (Round
your answer to 2 decimal places.)

Earnings per share

$

2

Hillary Swank Clothiers had sales of $363,000 and cost of
goods sold of $343,000.

a.

What is the gross profit margin (ratio of gross profit to
sales)? (Do not round intermediate calculations. Input your answer as
a percent rounded to 2 decimal places.)

Gross profit margin

%

b.

If the average firm in the clothing industry had a gross
profit of 15 percent, how is the firm doing?

The firm is under-performing.

3 A-Rod Fishing Supplies had sales of $2,570,000 and cost of
goods sold of $1,770,000. Selling and administrative expenses represented 12
percent of sales. Depreciation was 8 percent of the total assets of
$4,470,000.

What was the firm’s operating profit?

Operating profit

$

4 Given the following information, prepare in good form an
income statement for the Dental Drilling Company.(Input all amounts as
positive values.)

Selling and administrative expense

$

131,000

Depreciation expense

71,000

Sales

587,000

Interest expense

42,000

Cost of goods sold

164,000

Taxes

51,000

Dental Drilling Company

Income Statement

Sales

$

Cost of goods sold

Gross profit

$

Selling and administrative expense

Depreciation expense

Operating profit

$

Interest expense

Earnings before taxes

$

Taxes

Earnings after taxes

$

5 Given the following information, prepare in good form an
income statement for Jonas Brothers Cough Drops.(Input all amounts as
positive values.)

Selling and administrative expense

$

252,000

Depreciation expense

198,000

Sales

2,110,000

Interest expense

129,000

Cost of goods sold

576,000

Taxes

169,000

Jonas Brothers Cough Drops

Income Statement

Sales

$

Cost of goods sold

Gross profit

$

Selling and administrative expense

Depreciation expense

Operating profit

$

Interest expense

Earnings before taxes

$

Taxes

Earnings after taxes

$

6. Stein Books Inc. sold 2,300 finance textbooks for $200
each to High Tuition University in 2013. These books cost $170 to produce.
Stein Books spent $12,100 (selling expense) to convince the university to buy
its books.

Depreciation expense for the year was $15,700. In
addition, Stein Books borrowed $104,000 on January 1, 2013, on which the
company paid 19 percent interest. Both the interest and principal of the loan
were paid on December 31, 2013. The publishing firm’s tax rate is 30 percent.

Prepare an income statement for Stein Books. (Input
all amounts as positive values.)

Stein Books Inc.

Income Statement

For the Year Ending December 31, 2013

Sales

$

Cost of goods sold

Gross profit

$

Selling expense

Depreciation expense

Operating profit

$

Interest expense

Earnings before taxes

$

Taxes

Earnings after taxes

$

7.

Arrange the following items in proper balance sheet
presentation: (Be sure to list the assets and liabilities in order of
their liquidity. Input all amounts as positive values.)

Accumulated depreciation

$

315,000

Retained earnings

37,000

Cash

13,000

Bonds payable

229,000

Accounts receivable

51,000

Plant and equipment—original cost

738,000

Accounts payable

43,000

Allowance for bad debts

6,000

Common stock, $1 par, 100,000 shares outstanding

100,000

Inventory

73,000

Preferred stock, $59 par, 1,000 shares outstanding

59,000

Marketable securities

27,000

Investments

22,000

Notes payable

39,000

Capital paid in excess of par (common stock)

96,000

Balance Sheet

Assets

Liabilities and Stockholders’ Equity

Current Assets:

Current Liabilities:

Cash

$

Accounts payable

$

Marketable securities

Notes payable

Accounts receivable

$

Less: Allowance for bad debts

Total current liabilities

$

Long-term liabilities

Net accounts receivable

Bonds payable

Inventory

Total current assets

$

Total liabilities

$

Other Assets:

Stockholders’ Equity:

Investments

Preferred stock

$

Fixed assets:

Common stock

Plant and equipment

$

Capital paid in excess of par

Less: Accumulated depreciation

Retained earnings

Net plant and equipment

Total stockholders’ equity

$

Total assets

$

Total liabilities and stockholders’ equity

$

8.

Elite Trailer Parks has an operating profit of $254,000.
Interest expense for the year was $34,600; preferred dividends paid were
$29,800; and common dividends paid were $42,200. The tax was $67,700. The
firm has 18,400 shares of common stock outstanding.

a.

Calculate the earnings per share and the common dividends
per share for Elite Trailer Parks. (Round your answers to 2 decimal
places.)

Earnings per share

$

Common dividends per share

$

b.

What was the increase in retained earnings for the year?

Increase in retained earnings

$

9.award:
1 out of
1.00 point

Quantum Technology had $654,000 of retained earnings on
December 31, 2013. The company paid common dividends of $36,800 in 2013 and
had retained earnings of $509,000 on December 31, 2012.

a.

How much did Quantum Technology earn during 2013?

Earnings available to common stockholders

$

b.

What would earnings per share be if 45,400 shares of
common stock were outstanding? (Round your answer to 2 decimal
places.)

Earnings per share

$

10.

Botox Facial Care had earnings after taxes of $368,000 in
2012 with 200,000 shares of stock outstanding. The stock price was $65.80. In
2013, earnings after taxes increased to $406,000 with the same 200,000 shares
outstanding. The stock price was $73.00.

a.

Compute earnings per share and the P/E ratio for 2012.
(The P/E ratio equals the stock price divided by earnings per share.) (Do
not round intermediate calculations. Round your final answers to 2 decimal
places.)

Earnings per share

$

P/E ratio

times

b.

Compute earnings per share and the P/E ratio for 2013. (Do
not round intermediate calculations. Round your final answers to 2 decimal
places.)

Earnings per share

$

P/E ratio

times

c.

Why did the P/E ratio change? (Do not round
intemediate calculations. Input your answers as percents rounded to 2 decimal
places.)

The stock price increased by percent
while EPS increased by percent.

11.award:
2 out of
2.00 points

The Rogers Corporation has a gross profit of $746,000 and
$305,000 in depreciation expense. The Evans Corporation also has $746,000 in
gross profit, with $48,000 in depreciation expense. Selling and
administrative expense is $224,000 for each company.

a.

Given that the tax rate is 40 percent, compute the cash
flow for both companies.

Rogers

Evans

Cash flow

$

$

b.

Calculate the difference in cash flow between the two
firms.

Difference in cash flow

$

rev: 02_20_2014_QC_4476812.award:
1 out of
1.00 point

Nova Electrics anticipated cash flow from operating
activities of $11 million in 2011. It will need to spend $7.5 million on
capital investments in order to remain competitive within the industry.
Common stock dividends are projected at $.40 million and preferred stock
dividends at $.20 million.

a.

What is the firm’s projected free cash flow for the year
2011? (Enter your answer in millions of dollars rounded to 2
decimal places.)

Free cash flow

$ million

b.

What does the concept of free cash flow represent?

Free cash flow represents the funds that are available for
special financing activities, such as a leveraged buyout.

13.award:
2 out of
2.00 points

The Holtzman Corporation has assets of $414,000, current
liabilities of $41,000, and long-term liabilities of $73,000. There is
$36,000 in preferred stock outstanding; 20,000 shares of common stock have
been issued.

a.

Compute book value (net worth) per share. (Do not
round intermediate calculations. Round your final answer to 2 decimal
places.)

Book value per share

$

b.

If there is $29,600 in earnings available to common
stockholders, and Holtzman’s stock has a P/E of 16 times earnings per share,
what is the current price of the stock? (Do not round intermediate
calculations. Round your final answer to 2 decimal places.)

Current price

$

c.

What is the ratio of market value per share to book value
per share? (Do not round intermediate calculations. Round your final
answer to 2 decimal places.)

Market value to book value

times

14.award:
3 out of
3.00 points

Amigo Software Inc. has total assets of $888,000, current
liabilities of $242,000, and long-term liabilities of $149,000. There is
$126,000 in preferred stock outstanding. Thirty thousand shares of common
stock have been issued.

a.

Compute book value (net worth) per share. (Round
your answer to 2 decimal places.)

Book value per share

$

b.

If there is $50,300 in earnings available to common
stockholders and the firm’s stock has a P/E of 29 times earnings per share,
what is the current price of the stock? (Do not round intermediate
calculations. Round you final answer to 2 decimal places.)

Current price

$

c.

What is the ratio of market value per share to book value
per share? (Do not round intermediate calculations. Round you final
answer to 2 decimal places.)

Market value to book value

times

15.award:
4 out of
4.00 points

For December 31, 2012, the balance sheet of Baxter
Corporation was as follows:

Current Assets

Liabilities

Cash

$

25,000

Accounts payable

$

27,000

Accounts receivable

30,000

Notes payable

35,000

Inventory

40,000

Bonds payable

65,000

Prepaid expenses

13,500

Fixed Assets

Stockholders’ Equity

Gross plant and equipment

$

265,000

Preferred stock

$

35,000

Less: Accumulated depreciation

53,000

Common stock

70,000

Paid-in capital

40,000

Net plant and equipment

212,000

Retained earnings

48,500

Total assets

$

320,500

Total liabilities and stockholders’ equity

$

320,500

Sales for 2013 were $295,000, and the cost of goods sold
was 60 percent of sales. Selling and administrative expense was $29,500.
Depreciation expense was 8 percent of plant and equipment (gross) at the
beginning of the year. Interest expense for the notes payable was 10 percent,
while the interest rate on the bonds payable was 12 percent. This interest
expense is based on December 31, 2012 balances. The tax rate averaged 20
percent.

$3,500 in preferred stock dividends were paid and $4,950
in dividends were paid to common stockholders. There were 10,000 shares of
common stock outstanding.

During 2013, the cash balance and prepaid expenses
balances were unchanged. Accounts receivable and inventory increased by 10
percent. A new machine was purchased on December 31, 2013, at a cost of
$50,000.

Accounts payable increased by 35 percent. Notes payable
increased by $7,500 and bonds payable decreased by $17,500, both at the end
of the year. The preferred stock, common stock, and capital paid in excess of
par accounts did not change.

a.

Prepare an income statement for 2013. (Round EPS
answer to 2 decimal places. Input all amounts as positive values.)

BAXTER CORPORATION
2013 Income Statement

Sales

$

Cost of goods sold

Gross profit

$

Selling and administrative expense

Depreciation expense

Operating profit

$

Interest expense

Earnings before taxes

$

Taxes

Earnings after taxes

$

Preferred stock dividends

Earnings available to common stockholders

$

Shares outstanding

Earnings per share

$

b.

Prepare a statement of retained earnings for 2013. (Input
all amounts as positive values.)

BAXTER CORPORATION
2013 Income Statement

Retained earnings balance, January 1, 2013

$

Add: Earnings available to common stockholders, 2013

Less: Cash dividend declared in 2013

Retained earnings balance, December 31, 2013

$

c.

Prepare a balance sheet as of December 31, 2013. (Be
sure to list the assets and liabilities in order of their liquidity. Input
all amounts as positive values.)

BAXTER CORPORATION
2013 Balance Sheet

Current Assets

Liabilities

Cash

$

Accounts payable

$

Accounts receivable

Notes payable

Inventory

Bonds payable

Prepaid expenses

Total current assets

$

Total liabilities

$

Fixed Assets

Stockholders’ Equity

Gross plant and equipment

$

Preferred stock

$

Less: Accumulated depreciation

Common stock

Capital paid in excess of par

Net plant and equipment

Retained earnings

Total stockholders’ equity

$

Total assets

$

Total liabilities and stockholders’ equity

$

16.award:
2 out of
2.00 points

Refer to the following financial statements for Crosby
Corporation:

CROSBY CORPORATION
Income Statement
For the Year Ended December 31, 2011

Sales

$

4,240,000

Cost of goods sold

2,640,000

Gross profit

$

1,600,000

Selling and administrative expense

700,000

Depreciation expense

300,000

Operating income

$

600,000

Interest expense

89,000

Earnings before taxes

$

511,000

Taxes

211,000

Earnings after taxes

$

300,000

Preferred stock dividends

10,000

Earnings available to common stockholders

$

290,000

Shares outstanding

150,000

Earnings per share

$

1.93

Statement of Retained Earnings
For the Year Ended December 31, 2011

Retained earnings, balance, January 1, 2011

$

80,300

Add: Earnings available to common stockholders, 2011

290,000

Deduct: Cash dividends declared and paid in 2011

150,000

Retained earnings, balance, December 31, 2011

$

220,300

Comparative Balance Sheets
For 2010 and 2011

Year-End
2010

Year-End
2011

Assets

Current assets:

Cash

$

112,000

$

185,900

Accounts receivable (net)

556,000

602,000

Inventory

633,000

641,000

Prepaid expenses

64,900

32,000

Total current assets

$

1,365,900

$

1,460,900

Investments (long-term securities)

92,300

85,000

Gross plant and equipment

$

2,120,000

$

2,870,000

Less: Accumulated depreciation

1,870,000

2,170,000

Net plant and equipment

250,000

700,000

Total assets

$

1,708,200

$

2,245,900

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

304,000

$

635,000

Notes payable

536,000

536,000

Accrued expenses

74,900

56,600

Total current liabilities

$

914,900

$

1,227,600

Long-term liabilities:

Bonds payable, 2011

123,000

208,000

Total liabilities

$

1,037,900

$

1,435,600

Stockholders’ equity:

Preferred stock, $100 par value

$

90,000

$

90,000

Common stock, $1 par value

150,000

150,000

Capital paid in excess of par

350,000

350,000

Retained earnings

80,300

220,300

Total stockholders’ equity

$

670,300

$

810,300

Total liabilities and stockholders’ equity

$

1,708,200

$

2,245,900

a.

Prepare a statement of cash flows for the Crosby
Corporation: (Amounts to be deducted should be indicated with a minus
sign.)

CROSBY CORPORATION
Statement of Cash Flows
For the Year Ended December 31, 2011

Cash flows from operating activities:

Net income

$

Adjustments to determine cash flow from operating
activities:

Add back depreciation

$

Increase in accounts receivable

Increase in inventory

Decrease in prepaid expenses

Increase in accounts payable

Decrease in accrued expenses

Total adjustments

Net cash flows from operating activities

$

Cash flows from investing activities:

Decrease in investments

$

Increase in plant and equipment

Net cash flows from investing activities

Cash flows from financing activities:

Increase in bonds payable

$

Preferred stock dividends paid

Common stock dividends paid

Net cash flows from financing activities

Net increase (decrease) in cash flows

$

b.

Compute the book value per common share for both 2010 and
2011 for the Crosby Corporation. (Round your answers to 2 decimals
places.)

Book value

2010

$

2011

$

c.

If the market value of a share of common stock is 2.1
times book value for 2011, what is the firm’s P/E ratio for 2011? (Do
not round intermediate calculations. Round your final answer to 2 decimal
places.)

P/E ratio

times

17.award:
1 out of
1.00 point

Gates Appliances has a return-on-assets (investment) ratio
of 18 percent.

a.

If the debt-to-total-assets ratio is 25 percent, what is
the return on equity? (Input your answer as a percent rounded to 2
decimal places.)

Return on equity

%

b.

If the firm had no debt, what would the return-on-equity
ratio be? (Input your answer as a percent rounded to 2 decimal
places.)

Return on equity

%

18.award:
2 out of
2.00 points

Using the Du Pont method, evaluate the effects of the
following relationships for the Butters Corporation.

a.

Butters Corporation has a profit margin of 5.5 percent and
its return on assets (investment) is 8.75 percent. What is its assets
turnover? (Round your answer to 2 decimal places.)

Assets turnover ratio

times

b.

If the Butters Corporation has a debt-to-total-assets
ratio of 65.00 percent, what would the firm’s return on equity be? (Input
your answer as a percent rounded to 2 decimal places.)

Return on equity

%

c.

What would happen to return on equity if the
debt-to-total-assets ratio decreased to 60.00 percent?(Input your answer
as a percent rounded to 2 decimal places.)

Return on equity

%

19.award:
2 out of
2.00 points

Jerry Rice and Grain Stores has $4,880,000 in yearly
sales. The firm earns 3 percent on each dollar of sales and turns over its
assets 2.8 times per year. It has $196,000 in current liabilities and
$359,000 in long-term liabilities.

a.

What is its return on stockholders’ equity? (Do
not round intermediate calculations. Input your answer as a percent rounded
to 2 decimal places.)

Return on stockholders’ equity

%

b.

If the asset base remains the same as computed in part a,
but total asset turnover goes up to 3.40, what will be the new return on
stockholders’ equity? Assume that the profit margin stays the same as do
current and long-term liabilities. (Do not round intermediate
calculations. Input your answer as a percent rounded to 2 decimal places.)

New return on stockholders’ equity

%

20.award:
2 out of
2.00 points

Assume the following data for Cable Corporation and
Multi-Media Inc.

Cable
Corporation

Multi-Media Inc.

Net income

$

30,700

$

115,000

Sales

336,000

2,370,000

Total assets

485,000

919,000

Total debt

229,000

465,000

Stockholders’ equity

256,000

454,000

a-1.

Compute return on stockholders’ equity for both firms. (Input
your answers as a percent rounded to 2 decimal places.)

Return on
Stockholders’ Equity

Cable Corporation

%

Multi-Media, Inc.

%

a-2.

Which firm has the higher return?

Multi-Media Inc.

b.

Compute the following additional ratios for both firms. (Input
your Net income/Sales, Net income/Total assets and Debt/Total asset answers
as a percent rounded to 2 decimal places. Round your Sales/Total assets
answers to 2 decimal places.)

Cable Corporation

Multi-Media Inc.

Net income/Sales

%

%

Net income/Total assets

%

%

Sales/Total assets

times

times

Debt/Total assets

%

%

21.award:
2 out of
2.00 points

The balance sheet for Stud Clothiers is shown next. Sales
for the year were $3,490,000, with 75 percent of sales sold on credit.

STUD CLOTHIERS
Balance Sheet 20XX

Assets

Liabilities and Equity

Cash

$

38,000

Accounts payable

$

262,000

Accounts receivable

292,000

Accrued taxes

148,000

Inventory

248,000

Bonds payable (long-term)

178,000

Plant and equipment

500,000

Common stock

100,000

Paid-in capital

150,000

Retained earnings

240,000

Total assets

$

1,078,000

Total liabilities and equity

$

1,078,000

Compute the following ratios: (Use a 360-day year.
Do not round intermediate calculations. Round your answers to 2 decimal
places. Input your debt-to-total assets answer as a percent rounded to 2
decimal places.)

a.

Current ratio

times

b.

Quick ratio

times

c.

Debt-to-total-assets ratio

%

d.

Asset turnover

times

e.

Average collection period

days

22.award:
2 out of
2.00 points

Using the income statement for Times Mirror and Glass Co.,
compute the following ratios:

TIMES MIRROR AND GLASS Co.
Income Statement

Sales

$

231,000

Cost of goods sold

138,000

Gross profit

$

93,000

Selling and administrative expense

43,900

Lease expense

11,800

Operating profit*

$

37,300

Interest expense

11,100

——————————————————————————————-FOR COMPLETE QUESTIONS REFER ATTACHMENT…………………………