Question

Please answer the 3 question below about the Miller Corporation

Miller Corporation ‐ Year 20X3  During the year, you paid the amounts owed for Motorcycles at the end of year 20X2 and collected all  the amounts owed by customers for 20X2.  You purchased 25 more Motorcycles for $6,000 each and at  the same terms as in 20X2.  During the year, you sold 22 Motorcycles for $11,000 each at the same  terms as 20X2.  You paid the money owed to suppliers (Accounts Payable) at the beginning of the year  and collected all money due you at the beginning of the year (Accounts Receivable).  You use the FIFO  inventory system.     On January 1, 20X3, you purchased furniture and fixtures for $55,000.  You put $15,000 down and  financed the remaining amount at 10%.  You will make annual payments on December 31st for four years  that include the interest accrued to date plus $10,000 on the principal each year.  You estimate that you  will use them for 10 years and then they will be worth $5,000.      On June 30th, you paid $3,600 for a two‐year insurance policy; office expenses of $12,000; $4,500 for  advertising in The Post; utilities of $6,000; and Supplies of $1,500.  You also paid $26,000 for 13 months  of rent.  You paid your worker $18,000 (includes amount owed from prior year) and owed her $2,000  more at the end of the year.      On December 31st, you paid the first payment on the furniture and fixtures loan.  Paid Uncle Mike his  interest and paid the principal balance owed on December 31st.    This year you declared and paid a dividend of $4,000 to your shareholders.  On October 1st you issued 30  shares of common stock for $3,000.      You paid the 20X2 taxes.  The 20X3 taxes will be paid in 20X4.  The tax rate is 21%.      Prepare the Journal Entries (including the closing entry), T‐accounts, and all four Financial Statements  (in good form).      Miller Corporation ‐ Year 20X4  During the year, you bought 31 more Motorcycles for $6,500 each and sold 29 for $12,000 each, same  terms as last year.  You paid the money owed to suppliers (Accounts Payable) at the beginning of the  year and collected all money due you at the beginning of the year (Accounts Receivable).      On January 1st, you purchased a delivery truck for $41,000.  You made a down payment of $10,000 and  financed the balance at 7%.  You will make four equal payments that include interest @ 7%.  You make  the first payment on December 31st of this year.  You estimate the truck will last about 6 years and then  be worth $5,000.     
You paid your worker $17,000 (includes amount owed from prior year) and owed her $2,000 more at  

One part of financial analysis is analyzing the same company over many years using a trend analysis. Using the information you prepared for Assignment #3 (the Accounting Cycle Problem) for Miller Corp., answer the following questions:

Assignment 3 Answer below:

Miller Corporation has shown good financial performance year on year basis. In third year of operations, the company has generated net income $28,835 and gross profit is $114,000. The revenue of the company is $242,000 during third year of operations. The gross profit margin of the company is 47.10% and net profit margin is 11.92%. The revenue of the company is growing year on year basis, but the net profit margin and gross margin have slightly reduced in third year. The company should try to improve its gross profit margin and net profit margin to grow at speedy rate.

The company has generated $40,656 from operations which has been utilized for investing and financing activities. The net changes in cash flows have slightly reduced which shows that the company has utilized its cash balance $10,944 to pay finance obligations during the third year of operations. The total assets of the company are $345,732 as on year 20X3 and the assets partly financed from liability and equity i.e. $152,165 from liability and $193,567 from equity. It shows that the majority assets are financed from equity and the company has reduced its debt obligations during the year.

During fourth year of operations, the revenue, gross profit and net profit of the company are $348,000, $162,000 and $56,114 respectively. The gross margin of the company is 46.55% and net profit margin is 16.12%. The gross margin I fourth year is equivalent to third year of operations and the net profit margin o the company has increase in comparison to third operations and the net profit margin of the company has increased in comparison to third year. It shows that the company has improved its profitability and has utilized its resources more effectively and efficiently. The company has generated $64,060 from operations and the amount has been utilized for investing activities. Further the total asset base of the company has also increased, and the financial position and financial performance of the company has improved year on year basis which is a healthy indicator for the company.

1. How is Miller’s liquidity trending from one year to the next?

2. How is Miller’s solvency trending from one year to the next?

3. How has Miller’s asset base changed over time? Will this allow the company to meet consumer demand for their product? Why or why not?

Answer 1

1.

Miller's liquidity is trending year to year as the owner of the miller corporation is using the same technique for every asset which he buys. He buys the asset on credit basis and make the instalment in parts and always calculate the time duration of the asset which ever he buys and applies the depreciation factor on the assets. After the completion of the time duration of the assets he sells that asset and make some money to buy the new assets.

2.

Miller solvency trending year to year as the miller corporation has a strong fixed assets and the good pricing strategy which helps the miller to generate the revenue every year in the increasing order. This allows the miller corporation to have a good amount of liquid into the organization and maintain the solvency of the organization.

3.

Miller asset base made changes over time and this will help the company to meet the customers needs and wants.

As the miller corporation fix the life of the assets after buying and start charging depreciation on it because of this when the life of the assets gets over the miller corporation has the liquid amount to buy the new machinery for the production with some new classification.

And this can be seen from the above assignment no.3 the analysis has been done on the financial performance of the miller corporation.