Question :
150.Comparative financial statements for TJ Cleaners for December 31, 2014 : 1302949
150.Comparative financial statements for TJ Cleaners for December 31, 2014 and 2013 follow:
December 31
Assets 2014 2013
Current assets:
Cash$ 12,000 $ 12,458
Accounts receivable45,489 37,486
Inventory40,23933,568
Prepaid expenses 3,400 2,581
Total current assets101,128 86,093
Long-term investments 128,580 104,600
Property, plant, and equipment, net 867,565 739,258
Total assets$1,097,273 $929,951
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$ 98,789 $ 85,451
Other current liabilities 5,456 5,157
Total current liabilities 104,245 90,608
Long-term debt 486,781 424,760
Total liabilities 591,026 515,368
Stockholders’ equity:
Common stock375,000 336,000
Retained earnings 131,247 78,583
Total stockholders’ equity 506,247 414,583
Total liabilities and stockholders’ equity $1,097,273 $929,951
Year Ended December 31
20142013
Net sales $2,111,789 $2,174,354
Cost of goods sold 1,505,981 1,648,330
Gross margin 605,808 526,024
Operating expenses 418,245 420,408
Operating income 187,563 105,616
Interest expense 36,542 33,181
Earnings before income taxes 151,021 72,435
Income taxes expense 98,357 15,352
Net earnings $ 52,664 $ 57,083
TJ sells all items on account. Calculate the following for TJ Cleaners for 2014:
a.Asset turnover
b.Accounts receivable turnover
c.Days’ sales in inventory
d.Inventory turnover
e.Days’ sales in inventory
151.The following information for BuyRite Rooms, a retail furniture and design firm, is presented for 2014 and 2013:
December 31
Assets2014 2013
Current assets:
Cash$ 42,000 $ 54,000
Accounts receivable580,000445,000
Inventory5,010,000 4,950,000
Prepaid expenses 84,000 79,000
Total current assets5,716,000 5,528,000
Building and equipment, net 1,097,000 1,095,000
Total assets$6,813,000 $6,623,000
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$ 605,000 $ 628,000
Bank loan payable679,000625,000
Other accrued payables 215,000 315,000
Total current liabilities1,499,000 1,568,000
Long-term debt 1,729,000 1,791,000
Total liabilities3,228,000 3,359,000
Stockholders’ equity:
Common stock1,307,000 1,307,000
Retained earnings 2,278,000 1,957,000
Total stockholders’ equity 3,585,000 3,264,000
Total liabilities and stockholders’ equity $6,813,000 $6,623,000
There were 100,000 shares of common stock outstanding during both years. In addition, the following information is provided:
20142013
Market price per share at the end of year $ 134 $ 110
Net income for the year 815,000 639,000
Cost of goods sold for the year 2,900,000 2,700,000
Net sales for the year 5,568,000 5,253,000
a.Calculate asset turnover, accounts receivable turnover, days’ sales in receivables, inventory turnover, and days’ sales in inventory for 2013 and 2014. Use three significant digits for all calculations.
b.How well does BuyRite Rooms appear to manage its accounts receivable and inventory? What suggestions do you have for the company’s managers?
152.Hank Hatley is interested in purchasing the stock of Brinker, a company that sells bricks to the construction industry. Before purchasing the stock, Hatley would like to learn as much as possible about the company in which he is contemplating a potential investment. However, the only information that Hatley has is a portion of Brinker’s annual report for the current year (Year 3), which contains no comparative data other than the summary of the ratios listed below:
Year 3 Year 2 Year 1
Current ratio2.6:12.3:12.1:1
Acid-test ratio0.8:11.0:11.2:1
Accounts receivable turnover10.0 times10.1 times10.5 times
Inventory turnover6.1 times8.1 times8.3 times
Return on total assets15.50%12.10%10.30%
Return on common stockholders’ equity18.10%14.70%11.90%
Price-earnings ratio12.317.217.7
Earnings per share$1.53$1.52 $1.55
Are customers paying their accounts as well as they were in Year 1? Support your answer with accounting justification citing specific information in the analysis.
153.The following information for 2014 and 2013 is presented for BuyRite:
December 31
Assets2014 2013
Current assets:
Cash$ 42,000 $ 54,000
Accounts receivable580,000445,000
Inventory5,010,000 4,950,000
Prepaid expenses 84,000 79,000
Total current assets5,716,000 5,528,000
Building and equipment, net 1,097,000 1,095,000
Total assets$6,813,000 $6,623,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$ 605,000 $ 628,000
Bank loan payable679,000625,000
Other accrued payables 215,000 315,000
Total current liabilities1,499,000 1,568,000
Long-term debt 1,729,000 1,791,000
Total liabilities3,228,000 3,359,000
Stockholders’ equity:
Common stock1,307,000 1,307,000
Retained earnings 2,278,000 1,957,000
Total stockholders’ equity 3,585,000 3,264,000
Total liabilities and stockholders’ equity $6,813,000 $6,623,000
There were 100,000 shares of common stock outstanding throughout both 2013 and 2014. Additional information follows:
20142013
Market price per share at the end of year $ 134 $ 110
Net income for the year 815,000 639,000
Cost of goods sold for the year 2,900,000 2,700,000
Net sales for the year 5,568,000 5,253,000
a.Calculate the 1) current ratio, 2) acid-test ratio, and the 3) debt-to-equity ratio for 2013 and 2014. Calculate to three significant digits.
b.The company intends to apply for a loan. What concerns might the loan officer have about lending to the company?
