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In: Accounting
THE CULLUMBER COMPANY LTD. Income Statement Year Ended December 31 2021 2020 Net sales $1,779,530 $1,819,610...
| THE CULLUMBER COMPANY LTD. Income Statement Year Ended December 31 |
||||
| 2021 | 2020 | |||
| Net sales | $1,779,530 | $1,819,610 | ||
| Cost of goods sold | 1,091,290 | 1,028,920 | ||
| Gross profit | 688,240 | 790,690 | ||
| Operating expenses | 521,960 | 422,530 | ||
| Profit from operations | 166,280 | 368,160 | ||
| Interest expense | 25,650 | 18,630 | ||
| Profit before income tax | 140,630 | 349,530 | ||
| Income tax expense | 42,189 | 104,859 | ||
| Profit | $98,441 | $244,671 | ||
| THE CULLUMBER COMPANY LTD. Balance Sheet December 31 |
||||
| Assets | 2021 | 2020 | ||
| Current assets | ||||
| Cash | $112,631 | $67,485 | ||
| Accounts receivable | 102,723 | 112,506 | ||
| Inventory | 141,460 | 123,690 | ||
| Total current assets | 356,814 | 303,681 | ||
| Property, plant, and equipment | 451,990 | 530,838 | ||
| Total assets | $808,804 | $834,519 | ||
| Liabilities and Shareholders’ Equity | ||||
| Current liabilities | ||||
| Accounts payable | $147,370 | $127,596 | ||
| Income tax payable | 43,310 | 37,860 | ||
| Current portion of mortgage payable | 10,610 | 19,920 | ||
| Total current liabilities | 201,290 | 185,376 | ||
| Mortgage payable | 95,460 | 193,100 | ||
| Total liabilities | 296,750 | 378,476 | ||
| Shareholders’ equity | ||||
| Common shares (50,190 issued in 2021; 54,330 in 2020) | 150,570 | 162,990 | ||
| Retained earnings | 361,484 | 293,053 | ||
| Total shareholders’ equity | 512,054 | 456,043 | ||
| Total liabilities and shareholders’ equity | $808,804 | $834,519 | ||
Additional information:
| 1. | All sales were on account. | |
| 2. | The allowance for doubtful accounts was $5,412 in 2021 and $5,087 in 2020. | |
| 3. | On July 1, 2021, 4,140 shares were reacquired for $9 per share and cancelled. | |
| 4. | In 2021, $5,170 of dividends were paid to the common shareholders. | |
| 5. | Cash provided by operating activities was $332,125. | |
| 6. | Cash used by investing activities was $153,228 |
Calculate all possible liquidity, solvency, and profitability
ratios for 2021. (Round answers for Collection period,
Days sales in inventory, Operating cycle and Free cash flow to 0
decimal places, e.g. 125. Round answer for Earnings per share to 2
decimal places, e.g. 12.56. Round all other answers to 1 decimal
place, e.g. 12.5 or 12.5%. )
Solutions
Expert Solution
Liquidity ratios
Current ratio= Current assets/ current liabilities
= 356814/ 201290= 1.77 times
Quick (Acid-test) ratio= Quick assets/ current liabilities
= (Cash+ Marketable securities+ Accounts Receivable)/ Current liabilities
= 215354/201290= 1.06 times.
Cash Ratio= (Cash+ Marketable securities)/ current assets
= 112631/ 201290= .56 times
Cash flow ratio= Operating cash flow/ current liabilities
= 332125/ 201290= 1.65 times.
Solvency ratios
Debt to Equity Ratio = Total debt/ Equity
= 296,750/ 512,054= .58 times
Long term debt to equity ratio= (Total debt- Current liabilities)/ Equity
= (296750-201290)/512054= .19 times
Debt to Total Asset Ratio= Total debt/ Total Assets
= 296750/808804= .37 times
Interest Coverage(Times Interest Earned) Ratio= EBIT/ Interest expense
=166280/25650= 6.48 times
Turnover Ratios
Accounts Receivable Turnover ratio= Credit sales/ Average Gross Accounts Receivale
= 1779530/[( 108135+117593)/2] =
= 1179530/ 112864= 10.45 times
Average collection period = 365/10.45 =35 days
Inventory Turnover Ratio= Cost of Goods sold/ Average Inventory
= 1091290/[(141460+123690)/2]
= 1091290/ 132575= 8.23 times
Days sales in inventory= 365/8.23 = 44.3 days
Operating cycle= Days' sales in Receivables+ Days' sales in inventory
= 35+44.3= 79.3 days
Earnings per Common share= (Net Income- Preferred Dividends)/ Weighted Average Number of Common Shares Outstanding
Profitability Ratios
Gross Profit Ratio= Gross profit/ Sales
= 688240/1779530= 39%
Net Profit Raatio= Net profit/ Sales
= 98441/ 1179530= 8.35%
Operating Profit Margin Percentage= Operating Profit/ Sales
= 166280/1179530= 14.1%
Return on Assets= Net Income/ Average Total Assets
= 98441/ [(808804+834519)/2]
= 98441/821662= 12%
Return on Equity= Net income / Average Equity
= 98441/ [(512054+456043)/2]
= 98441/ 484049= 20%
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Fixed
overhead
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Selling and administrative expenses
Commissions
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Fixed marketing expenses
300,000
Fixed admin expenses
450,000
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Net Operating
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$3,280,000
Fixed Interest
expenses
230,000
Income before
Taxes
$3,050,000
Income Taxes
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Net
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Manufacturing Expenses
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$3,250,000
Fixed
overhead
640,000
3,890,000
Gross
Margin
$4,610,000
Selling and administrative expenses
Commissions
$580,000
Fixed marketing expenses
300,000
Fixed admin expenses
450,000
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230,000
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