Question

Problem 24-3 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, 2015, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,530 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $6,670 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 $302,800 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 BALANCE SHEET MARCH 31 Assets 2015 2014 Cash $18,950 $12,550 Notes receivable 149,260 132,610 Accounts receivable (net) 133,840 127,400 Inventories (at cost) 106,330 50,940 Plant & equipment (net of depreciation) 1,467,200 1,426,000 Total assets $1,875,580 $1,749,500 Liabilities and Owners’ Equity Accounts payable $79,220 $91,680 Notes payable 77,730 63,490 Accrued liabilities 31,516 11,830 Common stock (130,000 shares, $10 par) 1,300,000 1,300,000 Retained earningsa 387,114 282,500 Total liabilities and stockholders’ equity $1,875,580 $1,749,500 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 YEARS ENDED MARCH 31 2015 2014 Sales revenue $3,003,600 $2,706,900 Cost of goods solda 1,532,200 1,436,800 Gross margin 1,471,400 1,270,100 Operating expenses 863,710 786,700 Income before income taxes 607,690 483,400 Income taxes (40%) 243,076 193,360 Net income $364,614 $290,040 aDepreciation charges on the plant and equipment of $119,800 and $122,000 for fiscal years ended March 31, 2014 and 2015, respectively, are included in cost of goods sold. (a) Compute the following items for Bradburn Corporation. (Round answer to 2 decimal places, e.g. 2.25.) (1) Current ratio for fiscal years 2014 and 2015. (2) Acid-test (quick) ratio for fiscal years 2014 and 2015. (3) Inventory turnover for fiscal year 2015. (4) Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,690,300 at 3/31/13.) (5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015. 2014 2015 (1) Current ratio :1 :1 (2) Acid-test (quick) ratio :1 :1 (3) Inventory turnover times (4) Return on assets % % (5) Percent Changes Percent Increase Sales revenue % Cost of goods sold % Gross margin % Net income after taxes %

Answer 1