Question

In: Accounting

Be advised, the template workbooks and worksheets are not protected. Overtyping any data may remove it....

Be advised, the template workbooks and worksheets are not protected.
Overtyping any data may remove it.
All of the cells have been correctly formatted for presentation and should not require any adjustment. For example, if the text requires one, two, or three significant digits in a presentation, the template has been set for that presentation in the appropriate cells.
In general, the highlighted cells are the cells which work and effort should be presented. These entries may include date(s), account title(s), values, memorandum appropriate to the entry, or text answers to questions.
And information or data which may be required by the solution will be entered in cells with borders to help identify them.
Where a highlighted cell shows "Date" enter the appropriate date for that step of the challenge. This may be any date format that Microsoft Excel accepts. Some of these formats include "1/1/12", "01/01/12", and "01/01/2012." All of these will return January 01, 2012, in the format set in the template.
Where a highlighted cell shows "Acct Nbr" enter the appropriate account number, provided in the template and in the text for that step of the challenge. This is entry may be a "Look to" formula to another cell where that information has been provided or previously entered.
Where a highlighted cell shows "Account Title" enter the appropriate account title for that step of the challenge. This is a text entry and most of those cells are set for the proper indentation for that step. Frequently the chart of accounts appropriate to the challenge is provided and you can use the "look to" formula to reference the appropriate account title without typing it.
Where a highlighted cell shows titles such as "Values," "Amounts," or "Quantities" enter the appropriate numerical value for that step of the challenge. The cell is formatted for proper presentation of the entered information. If a dollar sign is appropriate, it should not be entered, Microsoft Excel will place it there through formatting. Commas and significant digits (decimals) are also set through formatting for common presentation. Since the formatting of the templates is not protected by any password, you may change any of the formatting found in the templates to meet your desires.
Where a highlighted cell shows titles such as "Formula" you may enter the appropriate formula or enter a numerical value appropriate for that step of the challenge. Most of the values necessary for the appropriate formula are located on the template in cells with borders or in other yellow highlighted cells. The formula may be a simple "Look to" formula, an equal sign and a cell reference, "=E27" or more complex as "=E27*5," or something similar to the time-value-of-money formula. These are addressed in the tutorial text provided for Microsoft Excel.
Where a highlighted cell shows "Text" enter the appropriate text for that step of the challenge. This may be a memorandum entry for a journal entry or a lengthy text answer discussing the results of an analysis of a company's financials. These titles can simply be typed over.
Where a highlighted cell shows titles such as "Journal Number" or "Journ #" you should enter the appropriate number provided in the template and in the text for that step of the challenge. In general this will appear in instances such as "Record the following events in General Journal number six."
When negative values are required, enter them by starting with a minus sign, "-". Negative values may be shown as ($400) or -$400. Negative values in formulas can be created by putting a minus sign in front of the cell reference - "=E10*-E11" will return a negative value if both cells E10 and E11 contain positive values.

(Ratio Computations and Additional Analysis) Bradburn Corporation was formed 5 years ago

through a public subscription of common stock. Daniel Brown, who owns 15% of the
common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2014 Daniel Brown approached the
Topeka National Bank, asking for a 24-month extension on two $35,000 notes, which are due on
June 30, 2015, and September 30, 2015. Another note of $6,000 is due on March 31, 2016, but he
expects no difficulty in paying this note on its due date. Brown explained that Bradburn’s cash flow problems
are due primarily to the company’s desire to finance a $300,000 plant expansion over the next
2 fiscal years through internally generated funds.
The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal years.
BRADBURN CORPORATION
Statement of Financial Position
March 31
Assets 2015 2014
Cash $18,200 $12,500
Notes receivable 148,000 132,000
Accounts receivable (net) 131,800 125,500
Inventories (at cost) 105,000 50,000
Plant & equipment (net of depreciation) 1,449,000 1,420,500
Total assets $1,852,000 $1,740,500
Liabilities and Stockholders' Equity
Accounts payable $79,000 $91,000
Notes payable 76,000 61,500
Accrued liabilities 9,000 6,000
Common stock (130,000 shares, $10 par) 1,300,000 1,300,000
Retained earningsa 388,000 282,000
Total liabilities and stockholders' equity $1,852,000 $1,740,500
aCash dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year 2015.
BRADBURN CORPORATION
Income Statement
For The Fiscal Year Ended March 31
2015 2014
Sales $3,000,000 $2,700,000
Cost of goods sold 1,530,000 1,425,000
Gross margin 1,470,000 1,275,000
Operating expenses 860,000 780,000
Income before income taxes 610,000 495,000
Income taxes 244,000 198,000
Net income after income taxes $366,000 $297,000
Depreciation charges on the plant and equipment of $100,000 and $102,500
for the fiscal years ended March 31, 2014, and 2015, respectively, are included in cost of goods sold.
Instructions:
Fill in the provided matrix and utilize it as the matrix for "VLOOKUP" formulas within the cells below.
Column 4 Column 5
2015 2014
Average inventory - 2015 Formula
Average total assets Formula Formula
Total Assets = Mar 31, 2013 Formula
Total Assets = Mar 31, 2014 Formula
Total Assets = Mar 31, 2015 Amount
Cost of goods sold Amount Amount
Current assets Amount Amount
Current liabilities Amount Amount
Dividends Amount Amount
Depreciation Amount Amount
Gross margin Amount Amount
Income before taxes Amount Amount
Income taxes (40%) Amount Amount
Inventories = EOY 2014 Amount
Inventories = EOY 2015 Amount
Net income after taxes Amount Amount
Operating expenses Amount Amount
Sales Amount Amount
(a) Compute the following items for Bradburn Corporation:
(1) Current ratio for fiscal years 2014 and 2015.
2014 Current ratio = Current assets
----------------------- =
Current liabilities
Amount
---------------- = Formula to 1
Amount
2015 Current ratio = Current assets
----------------------- =
Current liabilities
Formula
---------------- = Formula to 1
Formula
(2) Acid-test (quick) ratio for fiscal years 2014 and 2015.
2014 Quick ratio = Current assets - Inventories
----------------------- =
Current liabilities
Formula
---------------- = Formula
Formula to 1
2015 Quick ratio = Current assets - Inventories
----------------------- =
Current liabilities
Formula
---------------- = Formula
Formula to 1
(3) Inventory turnover for fiscal year 2015.
2015 Inventory Turnover = Cost of goods sold
------------------------------------ =
Average inventory
Amount
---------------- = Formula
#N/A to 1
(4) Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,688,500
at March 31, 2013.)
2014 Return on assets = Net income
----------------------- =
Average total assets
Formula
---------------- = Formula
Formula
2015 Return on assets = Net income
----------------------- =
Average total assets
Formula
---------------- = Formula
Formula
(5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year
     2014 to 2015. Omit "000" from the values.
2014 2015 Change Percent Change
Sales Formula Formula Formula Formula
Cost of goods sold Formula Formula Formula Formula
Gross margin Formula Formula Formula Formula
Net income after taxes Formula Formula Formula Formula
Note: The formulas in some cell formulas are "live" and need values placed in their source cells.
(b) Identify and explain what other financial reports and/or financial analyses might be helpful to the
     commercial loan officer of Topeka National Bank in evaluating Daniel Brown’s request for a time extension
     on Bradburn’s notes.
Other financial reports and financial analyses which might be helpful to the commercial loan officer of Spokane National Bank include:
1 Enter text answer as appropriate.
2 Enter text answer as appropriate.
3 Enter text answer as appropriate.
4 Enter text answer as appropriate.
(c) Assume that the percentage changes experienced in fiscal year 2015 as compared with fiscal year 2014
     for sales and cost of goods sold will be repeated in each of the next 2 years. Is Bradburn’s desire to
     finance the plant expansion from internally generated funds realistic? Discuss.
Enter text answer as appropriate.
2015 2016 2017
Sales Formula Formula Formula
Title Formula Formula Formula
Gross margin Formula Formula Formula
Title Formula Formula Formula
Income before taxes Formula Formula Formula
Title Formula Formula Formula
Net income Formula Formula Formula
Add: Title Amount Amount
Deduct: Title Amount Amount
Note repayment Amount
Funds available for plant expansion Formula Formula
Plant expansion Amount Amount
Excess funds Formula Formula
Assumptions:
Sales increase at a rate of
Cost of goods sold increases at rate of
despite depreciation remaining constant.
Other operating expenses increase at the same rate experienced from 2012 to 2013; i.e., at
Depreciation remains constant at
Dividends remain at per share.
Plant expansion is financed equally over the two years( each year).
Loan extension is granted.
(d) Should Topeka National Bank grant the extension on Bradburn’s notes considering Daniel Brown’s statement
     about financing the plant expansion through internally generated funds? Discuss.
Enter text answer here.

Solutions

Expert Solution

Fill in the provided matrix and utilize it as the matrix for "VLOOKUP" formulas within the cells below.
Column 4 Column 5
2015 2014
Average inventory - 2015 77500
Average total assets 1796250 1714500
Total Assets = Mar 31, 2013 1688500
Total Assets = Mar 31, 2014 $1,740,500
Total Assets = Mar 31, 2015 $1,852,000
Cost of goods sold 1,530,000 1,425,000
Current assets $403,000 $320,000
Current liabilities $164,000 $158,500
Dividends 130000 260000
Depreciation . 100000
Gross margin 1,470,000 1,275,000
Income before taxes 610,000 495,000
Income taxes (40%) 244,000 198,000
Inventories = EOY 2014 50,000
Inventories = EOY 2015 105,000
Net income after taxes $366,000 $297,000
Operating expenses 860,000 780,000
Sales $3,000,000 $2,700,000
(a) Compute the following items for Bradburn Corporation:
(1) Current ratio for fiscal years 2014 and 2015.
2014 Current ratio = Current assets 320000
----------------------- = 2.02 Formula to 1
Current liabilities 158500
2015 Current ratio = Current assets 403000
----------------------- = 2.46 Formula to 1
Current liabilities 164000
(2) Acid-test (quick) ratio for fiscal years 2014 and 2015.
2014 Quick ratio = Current assets - Inventories 270,000
----------------------- = 1.70 Formula
Current liabilities 158500 to 1
2015 Quick ratio = Current assets - Inventories 298,000
----------------------- = 1.82 Formula
Current liabilities 164000 to 1
(3) Inventory turnover for fiscal year 2015.
2015 Inventory Turnover = Cost of goods sold 1427500
------------------------------------ = 18 Formula
Average inventory 77500 to 1
(4) Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,688,500
at March 31, 2013.)
2014 Return on assets = Net income $297,000
----------------------- = 17.32% Formula
Average total assets 1714500
2015 Return on assets = Net income $297,000
----------------------- = 16.53% Formula
Average total assets 1796250
(5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year
     2014 to 2015. Omit "000" from the values.
2014 2015 Change Percent Change
Sales 2700000 3000000 300000 11.11%
Cost of goods sold 1425000 1530000 105000 7.37%
Gross margin 1275000 1470000 195000 15.29%
Net income after taxes 297000 366000 69000 23.23%
Note: The formulas in some cell formulas are "live" and need values placed in their source cells.

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