会计专业英语第3章习题答案

PAGE

9

Lesson3FinancialStatementsandFinancialStatementAnalysis

PAGE

1

Lesson3FinancialStatementsandFinancialStatementAnalysis

AnswerforChapter3

3.1Selectthebestanswerforeachofthefollowingunrelateditems

1.c 2.b 3.b 4.d 5.b 6.c7.c8.a9.b10.b

11d12d13b14d15a16d17b18c19b20c

3.2Prepareanincomestatement

WindsorCorporationhadtheinformationlistedbelowavailableinpreparinganincomestatementfortheyearendedDecember31,2X11.Allamountsarebeforeincometaxes.Assumea30%incometaxrateforallitems.

Sales ₤600,000

Incomefromoperationofdiscontinuedcementdivision ₤100,000

Lossfromdisposalofcementdivision ₤(80,000)

Operatingexpenses ₤125,000

Gainonsaleofequipment ₤65,000

Costofgoodssold ₤420,000

Enquired

Prepareanincomestatementingoodformwhichtakesintoaccountintra-periodincometaxallocation.

Solution

WINDSORCORPORATION

IncomeStatement

ortheYearEndedDecember31,2011

———————————————————————————————————————————

Sales ₤600,000

Costofgoodssold 420,000

Grossprofit 180,000

Operatingexpenses 125,000

Incomefromoperations 55,000

Otherincomeandexpense

Gainonsaleofequipment 65,000

Incomebeforeincometaxes 120,000

Incometaxes 36,000

Incomefromcontinuingoperations 84,000

Discontinuedoperations

Incomefromoperationofdiscontinuedcement

division,netof$30,000incometaxes ₤70,000

Lossfromdisposalofcementdivision,

netof$24,000incometaxsavings (56,000) 14,000

Netincome ₤98,000

3.3Preparetheretainedearningsstatement

ThebalanceinretainedearningsonJanuary1,20X1,forBlakelyInc.,was$600,000.Duringtheyear,thecorporationpaidcashdividendsof$70,000anddistributedasharedividendof$15,000.Inaddition,thecompanydeterminedthatithadoverstateditsdepreciationexpenseinprioryearsby$50,000.Netincomefor20X1was$120,000.

Enquired

Preparetheretainedearningsstatementfor20X1.

Solution

BLAKELYINC.

RetainedEarningsStatement

FortheYearEndedDecember31,20X1

Balance,January1asreported $600,000

Correctionforunderstatementofnetincome

inpriorperiod(depreciationexpenseerror) 50,000

Balance,January1,asadjusted 650,000

Add:Netincome 120,000

770,000

Less:Cashdividends $70,000

Sharedividend 15,000 85,000

Balance,December31 $685,000

3.4Preparefiancialstatements

Thesefinancialstatementitems(inthousands)areforChenCompanyatyear-end,July31,2X11.

Salariespayable ¥4,580 Notepayable(long-term) ¥3,300

Salariesexpense 45,700 Cash 22,200

Utilitiesexpense 19,100 Accountsreceivable 9,780

Equipment 22,000 Accumulateddepreciation 6,000

Accountspayable 4,100 Dividends 4,000

Commissionrevenue 56,100 Depreciationexpense 4,000

Rentrevenue 6,500 Retainedearnings(1/1/2X11) 30,000

Sharecapital-ordinary16,200

Enquired

(a) Prepareanincomestatementandaretainedearningsstatementfortheyear.

(b) PrepareaclassifiedstatementoffinancialpositionatJuly31,2X11.

Solution

(a) CHENCOMPANY

IncomeStatement

FortheYearEndedJuly31,2X11

———————————————————————————————————————————

Revenues

Commissionrevenue ¥56,100

Rentrevenue 6,500

Totalrevenues ¥62,600

Expenses

Salariesexpense 45,700

Utilitiesexpense 19,100

Depreciationexpense 4,000

Totalexpense 68,800

Netloss ¥(6,200)

CHENCOMPANY

RetainedEarningsStatement

FortheYearEndedJuly31,2X11

———————————————————————————————————————————

RetainedEarnings,August1,2X10 ¥30,000

Less:Netloss ¥6,200

Dividends 4,000 10,200

RetainedEarnings,July31,2X11 ¥18,800

(b) CHENCOMPANY

StatementofFinancialPosition

July31,2X11

———————————————————————————————————————————

Assets

Property,plant,andequipment

Equipment ¥22,000

Less:Accumulateddepreciation 6,000 ¥16,000

Currentassets

Accountsreceivable 9,780

Cash 22,200 31,980

Totalassets ¥47,980

EquityandLiabilities

Equity

Sharecapital-ordinary………………… ¥16,200

Retainedearnings 18,800 ¥35,000

Long-termliabilities

Notepayable 3,300

Currentliabilities

Accountspayable ¥4,100

Salariespayable 4,580 8,680

Totalequityandliabilities ¥47,980

3.5Prepareastatementofcashflows

AcomparativestatementoffinancialpositionforMannCompanyappearsbelow:

MANNCOMPANY

ComparativeStatementofFinancialPosition

Dec.31,2Y11 Dec.31,2Y10

Assets

Equipment€60,000 €32,000

Accumulateddepreciation—equipment(20,000) (14,000)

Long-terminvestments-0- 18,000

Prepaidexpenses6,000 9,000

Inventory25,000 18,000

Accountsreceivable 18,00014,000

Cash 27,000 10,000

Totalassets €116,000€87,000

EquityandLiabilities

Sharecapital-ordinary€40,000 €23,000

Retainedearning22,000 10,000

Bondspayable37,00047,000

Accountspayable17,000 7,000

Totalequityandliabilities€116,000 €87,000

Additionalinformation:

1. NetincomefortheyearendingDecember31,2Y11was€27,000.

2. Cashdividendsof€15,000weredeclaredandpaidduringtheyear.

3. Long-terminvestmentsthathadacostof€18,000weresoldfor€14,000.

4. Salesfor2Y11were€120,000.

Enquired

PrepareastatementofcashflowsfortheyearendedDecember31,2Y11,usingtheindirectmethod.

Solution

MANNCOMPANY

StatementofCashFlows

FortheYearEndedDecember31,2Y11

Cashflowsfromoperatingactivities

Netincome €27,000

Adjustmentstoreconcilenetincometonetcashprovidedby

operatingactivities:

Depreciationexpense €6,000

Lossonsaleoflong-terminvestments 4,000

Increaseinaccountsreceivable (4,000)

Decreaseinprepaidexpenses 3,000

Increaseininventories (7,000)

Increaseinaccountspayable 10,000 12,000

Netcashprovidedbyoperatingactivities 39,000

Cashflowsfrominvestingactivities

Saleoflong-terminvestments 14,000

Purchaseofequipment (28,000)

Netcashusedbyinvestingactivities (14,000)

Cashflowsfromfinancingactivities

Issuanceofordinaryshares 17,000

Retirementofbondspayable (10,000)

Paymentofcashdividends (15,000)

Netcashusedbyfinancingactivities (8,000)

Netincreaseincash 17,000

Cashatbeginningofperiod 10,000

Cashatendofperiod €27,000

3.6Performverticalanalysis

December31,2X12 December31,2X11

Inventory €780,000 €600,000

Accountsreceivable 510,000 400,000

Totalassets 3,000,000 2,500,000

Enquired

UsingthesedatafromthecomparativestatementoffinancialpositionofLucaCompanyperformverticalanalysis.

Solution

Dec.31,2012 Dec.31,2011

Amount Percentage* Amount Percentage**

Inventory €780,000 26% €600,000 24%

Accountsreceivable 510,000 17% 400,000 16%

Totalassets 3,000,000 100.0% 2,500,000 100.0%

**

*

3.7Performhorizontalanalysis

ComparativeinformationtakenfromtheWellsCompanyfinancialstatementsisshownbelow:

2X12 2X11

(a) Notesreceivable $20,000 $-0-

(b) Accountsreceivable 175,000 140,000

(c) Retainedearnings 30,000 (40,000)

(d) Incometaxespayable 45,000 20,000

(e) Sales 900,000 750,000

(f) Operatingexpenses 170,000 200,000

Enquired

Usinghorizontalanalysis,showthepercentagechangefrom2X11to2X12with2X11asthebaseyear.

Solution

(a) Baseyeariszero.Notpossibletocompute.

(b) $35,000÷$140,000=25%increase

(c) Baseyearisnegative.Notpossibletocompute.

(d) $25,000÷$20,000=125%increase

(e) $150,000÷$750,000=20%increase

(f) $30,000÷$200,000=15%decrease

3.8Performhorizontalanalysis

ThefollowingitemsweretakenfromthefinancialstatementsofRitz,Inc.,overafour-yearperiod:

Item 2Y12 2Y11 2Y10 2Y09

NetSales €800,000 €650,000 €600,000 €500,000

CostofGoodsSold 580,000 460,000 420,000 400,000

GrossProfit €220,000 €190,000 €180,000 €100,000

Enquired

Usinghorizontalanalysisand2Y09asthebaseyear,computethetrendpercentagesfornetsales,costofgoodssold,andgrossprofit.Explainwhetherthetrendsarefavorableorunfavorableforeachitem.

Solution

Item 2Y12 2Y11 2Y10 2Y09

NetSales 160% 130% 120% 100%

CostofGoodsSold 145% 115% 105% 100%

GrossProfit 220% 190% 180% 100%

Thetrendinnetsalesisincreasingandfavorable.Thecostofgoodssoldtrendisincreasingwhichcouldbeunfavorable,butthesalesareincreasingeachyearatafasterpacethancostofgoodssold.Thisisapparentbyexaminingthegrossprofitpercentages,whichshowafavorable,increasingtrend.

3.9AnalysistheliquidityoftheHowellCompany

HowellCompanyhasthefollowingselectedaccountsafterpostingadjustingentries:

AccountsPayable €55,000

NotesPayable,3-month 80,000

AccumulatedDepreciation—Equipment 14,000

SalaryPayable 27,000

NotesPayable,5-year,8% 30,000

EstimatedWarrantyLiability 34,000

SalaryExpense 6,000

InterestPayable 3,000

MortgagePayable 200,000

SalesTaxPayable 21,000

Enquired

(a) PreparethecurrentliabilitysectionofHowellCompany'sstatementoffinancialposition,assuming$25,000ofthemortgageispayablenextyear.Listliabilitiesinmagnitudeorder,withlargestfirst.

(b) CommentonHowell'sliquidity,assumingtotalcurrentassetsare€450,000.

Solution

(a) HOWELLCOMPANY

CurrentLiabilities

Notespayable,3-month €80,000

Accountspayable 55,000

Estimatedwarrantyliability 34,000

Salarypayable 27,000

Long-termdebtduewithinoneyear 25,000

Salestaxpayable 21,000

Interestpayable 3,000

TotalCurrentLiabilities €245,000

(b) Theliquiditypositionlooksfavorable.Ifallcurrentliabilitiesarepaidoutofcurrentassets,therewouldstillbe€205,000ofcurrentassets.ThecurrentassetsarealmosttwicethecurrentliabilitiesanditappearsasthoughHowellCompanyhassufficientcurrentresourcestomeetcurrentobligationswhendue.

3.10Calculatethedebttototalassetsandtimesinterestearnedratios

FrancoCorporationreportsthefollowingselectedfinancialstatementinformationatDecember31,2X11:

TotalAssets $110,000

TotalLiabilities 65,000

NetIncome 18,000

InterestIncome 1,600

InterestExpense 900

TaxExpense 300

Enquired

Calculatethedebttototalassetsandtimesinterestearnedratios.

Solution

Debttototalassets:$65,000÷$110,000=59%

Timesinterestearned:($18,000+$900+$300)÷$900=21.33times

3.11Computethereceivablesturnoverandtheaveragecollectionperiod

BermanCompanyreportedthefollowingfinancialinformation:

12/31/2X11 12/31/2X10

Accountsreceivable $320,000 $360,000

Netcreditsales 2,550,000 2,420,000

Enquired

Compute(a)thereceivablesturnoverand(b)theaveragecollectionperiodfor2X11.

Solution

Receivablesturnover=$2,550,000÷$340,000=7.5times

Averagecollectionperiod=365÷7.5=49days

3.12CalculatethenetincomeandEPS

BanksCompanyisconsideringtwoalternativestofinanceitspurchaseofanew$4,000,000officebuilding.

(a) Issue400,000ordinarysharesat$10pershare.

(b) Issue8%,10-yearbondsatpar($4,000,000).

Incomebeforeinterestandtaxesisexpectedtobe$3,000,000.Thecompanyhasa30%taxrateandhas600,000ordinarysharesoutstandingpriortothenewfinancing.

Enquired

Calculateeachofthefollowingforeachalternative:

(1) Netincome.

(2) Earningspershare.

Solution

(a)IssueShares (b)IssueBonds

Incomebeforeinterestandtaxes $3,000,000 $3,000,000

Interest(8%×$4,000,000) — 320,000

Incomebeforeincometaxes 3,000,000 2,680,000

Incometaxexpense 900,000 804,000

(1) Netincome $2,100,000 $1,876,000

Sharesoutstanding 1,000,000 600,000

(2) Earningspershare $2.10 $3.13

3.13Computethereturnonordinaryshareholders’equityratio

ThefollowinginformationisavailableforRitterCorporation:

2Y11 2Y10

Averageordinaryshareholders’equity $1,500,000 $1,000,000

Averagetotalshareholders’equity 2,000,000 1,500,000

Ordinarydividendsdeclaredandpaid 72,000 50,000

Preferencedividendsdeclaredandpaid 30,000 30,000

Netincome 330,000 270,000

Enquired

Computethereturnonordinaryshareholders’equityratioforbothyears.Brieflycommentonyourfindings.

Solution

2Y10 2Y11

Returnonordinary

shareholders’equityratio: $270,000–$30,000 $330,000–$30,000

—————————=24% —————————=20%

$1,000,000 $1,500,000

Ritter’sreturnoncommonstockholders’equityratiodecreasedapproximately17%during2011.Ritter’searningsincreasedduring2011by22%,butitsaverageordinaryshareholders’equityincreasedby50%,causingthereturnonordinaryshareholders’equitytodeclineby17%.

3.14Calculatebookvaluepershare

BellinghamCorporationhasthefollowingequitybalancesatDecember31,2X11.

ShareCapital–Ordinary,$1par $3,500

SharePremium–Ordinary 24,500

RetainedEarnings 62,500

Total$90,500

Enquired

Calculatebookvaluepershare.

Solution

Numberofsharesoutstanding:$3,500/$1=3,500

Bookvaluepershare:$90,500/3,500=$25.86

3.15Calculatefinancialratios

Selected