Question
In: Accounting
Pinnacle Plus declared and paid a cash dividend of $7,600 in the current year. Its comparative...
Pinnacle Plus declared and paid a cash dividend of $7,600 in the current year. Its comparative financial statements, prepared at December 31, reported the following summarized information:
| Current Year | Previous Year | ||||||
| Income Statement | |||||||
| Sales Revenue | $ | 160,000 | $ | 139,000 | |||
| Cost of Goods Sold | 72,000 | 68,000 | |||||
| Gross Profit | 88,000 | 71,000 | |||||
| Operating Expenses | 46,000 | 41,000 | |||||
| Interest Expense | 5,000 | 5,000 | |||||
| Income before Income Tax Expense | 37,000 | 25,000 | |||||
| Income Tax Expense (30%) | 11,100 | 7,500 | |||||
| Net Income | $ | 25,900 | $ | 17,500 | |||
| Balance Sheet | |||||||
| Cash | $ | 82,550 | $ | 28,000 | |||
| Accounts Receivable, Net | 27,000 | 22,000 | |||||
| Inventory | 35,000 | 48,000 | |||||
| Property and Equipment, Net | 105,000 | 115,000 | |||||
| Total Assets | $ | 249,550 | $ | 213,000 | |||
| Accounts Payable | $ | 52,000 | $ | 34,000 | |||
| Income Tax Payable | 1,250 | 1,000 | |||||
| Note Payable (long-term) | 50,000 | 50,000 | |||||
| Total Liabilities | 103,250 | 85,000 | |||||
| Common Stock (par $10) | 96,000 | 96,000 | |||||
| Retained Earnings | 50,300 | 32,000 | |||||
| Total Liabilities and Stockholders’ Equity | $ | 249,550 | $ | 213,000 | |||
Required:
- Compute the gross profit percentage in the current and previous years. Are the current year results better, or worse, than those for the previous year?
- Compute the net profit margin for the current and previous years. Are the current year results better, or worse, than those for the previous year?
- Compute the earnings per share for the current and previous years. Are the current year results better, or worse, than those for the previous year?
- Stockholders’ equity totaled $110,000 at the beginning of the previous year. Compute the return on equity (ROE) ratios for the current and previous years. Are the current year results better, or worse, than those for the previous year?
- Net property and equipment totaled $120,000 at the beginning of the previous year. Compute the fixed asset turnover ratios for the current and previous years. Are the current year results better, or worse, than those for the previous year?
- Compute the debt-to-assets ratios for the current and previous years. Is debt providing financing for a larger or smaller proportion of the company’s asset growth?
- Compute the times interest earned ratios for the current and previous years. Are the current year results better, or worse, than those for the previous year?
- After Pinnacle Plus released its current year’s financial statements, the company’s stock was trading at $28. After the release of its previous year’s financial statements, the company’s stock price was $25 per share. Compute the P/E ratios for both years. Does it appear that investors have become more (or less) optimistic about Pinnacle’s future success?
Solutions
Expert Solution
1. Gross Profit Percentage = Gross Profit/ Total Sales x100
Current Year = 88000/160000 = 0.55x100 = 55%
Previous Year = 71000/139000 = 0.5107x100 = 51.07 %
Clearly, the current year is better as the profit percentage has increased.
2. Net Profit Percentage = Net Profit/ Total Sales x100
Current Year = 25900/160000 = 0.1618x100 = 16.18%
Previous Year = 17500/139000 = 0.1259x100 = 12.59 %
Clearly, the current year is better as the profit percentage has increased.
3. earnings per share = Net Income/ No. of Common stock Outstanding
No. of Common stock = 96000/10 = 9600 Shares
Therefore
Current Year
earnings per share = Net Income/ No. of Common stock Outstanding
= 25900/9600 = $2.6979 per share
Previous Year
earnings per share = Net Income/ No. of Common stock Outstanding
= 17500/9600 = $1.8229 per share
The EPS is better in current year v/s precious year as shareholder's earnings have increased.
4. Shareholder' s equity = Net Income/ Average Shareholders' equity
For current year (end)
share holders equity = Common stock + Retained Earnings =96000+50300 =$146300
For Previous Year (end) or For current year (beginning)
share holders equity = Common stock + Retained Earnings =96000+32000 =$128,000
For previous (begining) as given = $110,000
Therefore,
Average Shareholders' equity (Current Year) = Current Year share holders equity at end+ Current Year share holders equity at beginning / 2
= 146300+128000/2 = $137150
Average Shareholders' equity (Previous Year) = Previous Year share holders equityat end + Previous Year share holders equity at beginning /2
= 128000+ 110000/2 = $119000
Current Year Shareholder' s equity = Net Income/ Average Shareholders' equity
Shareholder' s equity = 25900/ 137150 = 18.88%
Previous Year Shareholder' s equity = Net Income/ Average Shareholders' equity
Shareholder' s equity = 17500/ 119000 = 14.71%
Clearly Current Year Shareholder's Equity is better than Previous Year because, as the shareholder's worth have increased over the years.
ekkarill92 answered 1 year agoRelated Solutions
Pinnacle Plus declared and paid a cash dividend of $6,600 in the current year. Its comparative...
Pinnacle Plus declared
and paid a cash dividend of $6,600 in the current year. Its
comparative financial statements, prepared at December 31, reported
the following summarized information:
Current Year
Previous Year
Income
Statement
Sales
Revenue
$
110,000
$
99,000
Cost of Goods
Sold
52,000
48,000
Gross
Profit
58,000
51,000
Operating
Expenses
36,000
33,000
Interest
Expense
4,000
4,000
Income before
Income Tax Expense
18,000
14,000
Income Tax
Expense (30%)
5,400
4,200
Net Income
$
12,600
$
9,800
Balance
Sheet
Cash
$...
Pinnacle Plus declared and paid a cash dividend of $7,700 in the current year. Its comparative...
Pinnacle Plus declared and paid a cash dividend of $7,700 in the
current year. Its comparative financial statements, prepared at
December 31, reported the following summarized information:
Current Year
Previous Year
Income Statement
Sales Revenue
$
165,000
$
143,000
Cost of Goods Sold
74,000
70,000
Gross Profit
91,000
73,000
Operating Expenses
47,000
41,800
Interest Expense
5,100
5,100
Income before Income Tax Expense
38,900
26,100
Income Tax Expense (30%)
11,670
7,830
Net Income
$
27,230
$
18,270
Balance Sheet
Cash
$...
Pinnacle Plus declared and paid a cash dividend of $8,400 in the current year. Its comparative...
Pinnacle Plus declared and paid a cash dividend of $8,400 in the
current year. Its comparative financial statements, prepared at
December 31, reported the following summarized information:
Current Year
Previous Year
Income Statement
Sales Revenue
$
200,000
$
171,000
Cost of Goods Sold
88,000
84,000
Gross Profit
112,000
87,000
Operating Expenses
54,000
47,400
Interest Expense
5,800
5,800
Income before Income Tax Expense
52,200
33,800
Income Tax Expense (30%)
15,660
10,140
Net Income
$
36,540
$
23,660
Balance Sheet
Cash
$...
On July 1 of the current calendar year, Plum Co. paid $7,600 cash for management services...
On July 1 of the current calendar year, Plum Co. paid $7,600
cash for management services to be performed over a two-year period
beginning July 1. Plum follows a policy of recording all prepaid
expenses to asset accounts at the time of cash payment. The
adjusting entry on December 31 of the current year for Plum would
include:
Multiple Choice
A debit to an expense and a credit to a prepaid expense for
$5,700.
A debit to a prepaid expense...
On May 1, Year 1, Love Corporation declared a $61,500 cash dividend to be paid on...
On May 1, Year 1, Love Corporation declared a $61,500 cash
dividend to be paid on May 31 to shareholders of record on May
15.
Required
a. Record the events occurring on May 1, May 15,
and May 31 in a horizontal statements model. In the Cash Flow
column, indicate whether the item is an operating activity (OA),
investing activity (IA), or financing activity (FA). Use NA to
indicate that an element was not affected by the event.
b. Prepare...
PINNACLE PLUS Horizontal Analysis Increase (Decrease) in the Current year (versus Previous year) Current Year Previous...
PINNACLE PLUS Horizontal Analysis Increase (Decrease) in the
Current year (versus Previous year) Current Year Previous Year
Amount Percentage Income Statement Sales Revenue $120,000 $106,000
% Cost of Goods Sold 54,000 49,000 Gross Profit 66,000 57,000
Operating Expenses 41,000 35,500 Interest Expense 5,000 5,000
Income before Income Tax Expense 20,000 16,500 Income Tax Expense
(30%) 6,000 4,950 Net Income $14,000 $11,550 % Balance Sheet Cash
$77,900 $43,000 % Accounts Receivable, Net 19,000 10,000 Inventory
26,000 40,000 Property and Equipment, Net...
Golden Corporation declared and paid $3,900 of cash dividends during the current year ended December 31....
Golden Corporation declared and paid $3,900 of cash dividends
during the current year ended December 31. Its financial statements
also reported the following summarized data:
Required:
1. Complete the horizontal analyses for each
item in Golden Corporation’s comparative financial statements. TIP:
Calculate the increase (decrease) by subtracting the previous year
from the current year. Calculate the percentage by dividing the
amount of increase (decrease) by the previous year balance.
2-a. Use the horizontal (trend) analyses to
identify the accounts where...
Golden Corporation declared and paid $3,700 of cash dividends during the current year ended December 31....
Golden Corporation declared and paid $3,700 of cash dividends
during the current year ended December 31. Its financial statements
also reported the following summarized data:
Current
Previous
Income Statement
Sales revenue
$
215,000
$
193,000
Cost of goods sold
124,000
114,000
Gross profit
91,000
79,000
Operating expenses
60,300
56,000
Interest expense
3,400
3,300
Income before income taxes
27,300
19,700
Income tax expense
8,190
3,700
Net income
$
19,110
$
16,000
Balance Sheet
Cash
$
5,410
$
8,700
Accounts receivable (net)...
Condensed financial data of Monopoly Corporation appear below: A cash dividend was declared and paid in...
Condensed financial data of Monopoly Corporation appear below: A
cash dividend was declared and paid in full to stockholders during
the year. Required: Solve for the missing numbers.
Balance Sheet
Income Stmt
Cash Flow Stmt
Solve for the missing numbers.
MONOPOLY CORPORATION
Comparative Balance Sheet
December 31
Current Year
Prior Year
Assets
Cash
$34,040
$22,400
Accounts receivable
31,600
Inventories
69,600
Prepaid rent
2,060
1,600
Property, plant, and equipment
218,000
196,000
Accumulated depreciation
(52,600)
(38,000)
Total assets
$324,300
$283,200
Liabilities and...
The comparative financial statements prepared at December 31 for Pinnacle Plus showed the following summarized data:...
The comparative financial statements prepared at December 31 for
Pinnacle Plus showed the following summarized data: Current Year
Previous Year Income Statement Sales Revenue $ 155,000 $ 135,000
Cost of Goods Sold 70,000 66,000 Gross Profit 85,000 69,000
Operating Expenses 45,000 40,200 Interest Expense 4,900 4,900
Income before Income Tax Expense 35,100 23,900 Income Tax Expense
(30%) 10,530 7,170 Net Income $ 24,570 $ 16,730 Balance Sheet Cash
$ 81,245 $ 29,000 Accounts Receivable, Net 26,000 21,000 Inventory
34,000 47,000...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- ANALYSIS each line1 to 5 RATIOSANALYSIS Profitability Ratios (%) E. commerce Amazon EBay 1)Gross Margin 43%...
- Describe a dysfunctional system. What would you do to transform the dysfunctional system into a functional...
- A unit of inventory costs a company $40. Annual carrying costs are 1% for interest charges,...
- There are four hazards that were identified in the last hazard assessment that have not been...
- Wile standing at the edge of the roof of a building, you throw a stone upward...
- 5.19 At 8:00 A.M. there are 10 vehicles in a queue at a toll booth and...
- What is The reaction scheme for the recovery of s-(+)-Ibuprofen from the diastereomeric salt .
ADVERTISEMENT