Financial Analysis Project

Requirements:

You will use the Financial Statements for

Coke

and

Pepsi

as provided on their websites to

complete the following analysis:

1.

Calculate the current ratio and quick ratio for both companies for 2016 and 2017. Write

a paragraph describing what these ratios indicate about the liquidity of Pepsi and Coke

in 2016 compared to 2017. Write a paragraph describing what these ratios indicate

about the liquidity of Pepsi compared to Coke for both years. Which company seems to

be more liquid? What are the advantages and disadvantages of liquidity?

2.

Calculate the accounts receivable turnover and days sales in receivables for both

companies for 2016 and 2017. Write a paragraph comparing 2016 with 2017 and Coke

with Pepsi using these two ratios to indicate the effectiveness of their accounts

receivable collection. Which of the two seems to be doing a better job with receivables?

How does this collection process affect the overall success of the company.

3.

Calculate inventory turnover and days in inventory for both companies for 2016 and

2017. Write a paragraph comparing 2016 with 2017 and Coke with Pepsi using these

two ratios to indicate how they manage their inventory. Which one of the two companies

has a better approach to inventory management? Why? What are the problems that

come with poor inventory management?

4.

Calculate the gross margin, profit margin and return on investment for both companies

for 2016 and 2017. Explain in a paragraph what these ratios show about each

company’s profitability compared to the year before and compared to each other.

Indicate which company shows the best prospects for future profits and explain in detail

why you think the ratios support your observation.

5.

Prepare a vertical analysis or same size income statement and balance sheet for Pepsi

and Coca Cola for 2016 and 2017. Write a paragraph highlighting what you learn from

the percentages of sales or total assets calculated from the financial statements. Write

also about the comparison between 2016 and 2017 and between Coke and Pepsi.

6.

Compare Pepsi’s income statement for 2016 with their income statement for 2017 –

calculate the change in dollars and percent for all of the revenues and expenses. What

do the changes indicate about Pepsi’s success in 2016 relative to 2017? Do the same

comparison for Coke’s income statement. What do the changes indicate about Coke’s

improvement or lack thereof between 2016 and 2017? With this comparison of both

companies over time now compare Coke vs. Pepsi and explain why one company is

better than the other.

7.

Based on all of your calculations and observations described above, make a

recommendation as to which company would be a better investment. Give the reasons

for your conclusion.

The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):

The selling price of the company’s product is $16 per unit. Management expects to collect 75% of sales in the quarter in which the sales are made, 20% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $71,600.

The company expects to start the first quarter with 1,755 units in finished goods inventory. Management desires an ending finished goods inventory in each quarter equal to 15% of the next quarter’s budgeted sales. The desired ending finished goods inventory for the fourth quarter is 1,955 units.

Required:

1. a.Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.

b. Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole.

c. Calculate the required production in units of finished goods for each quarter of the fiscal year and for the year as a whole.

U.S. GAAP and International Financial Reporting Standards have largely similar guidance for accounting for business combinations. Under IFRS, the guidance is established in IFRS 3R, Business Combinations. One topic on which U.S. and IFRS differ is with respect to reporting noncontrolling interest for noncontrolling interest in consolidated financial statements.

Required

Briefly, i.e. no more than 3 paragraphs, explain the difference between IFRS and U.S. GAAP regarding valuation of noncontrolling interest in a consolidated financial statement.

Cho Co. includes one coupon in each box of cereal it sells. In return for 5 coupons and $1, customers receive a Cho branded spoon that the company purchases for $2 each. Cho's experience indicates that 40 percent of the coupons will be redeemed. During 2019, 200,000 boxes of cereal were sold, 20,000 spoons were purchased, and 55,000 coupons were redeemed. During 2020, 280,000 boxes of cereal were sold, 25,000 spoons were purchased, and 90,000 coupons were redeemed. The premium payable account balance at the beginning of the 2019 fiscal year was $8,000. Determine the premium expense reported in the income statement and the ending premium liability balance reported in the balance sheet for 2019 and 2020.

2019 Premium Expense: $  

2019 Ending Premium Liability: $  

2020 Premium Expense: $  

2020 Ending Premium Liability: $  

Activity-Based Costing for a Service Company

Crosswinds Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs:

The activity usage information associated with the two patients is as follows:

a. Determine the activity cost associated with each patient.

b. Why is the total activity cost different for the two patients?

Abel Putin  apparently had a different condition that required more extensive treatment. Thus, the activity cost to Abel Putin  is nearly two  times that of other patient.

Can someone please explain to me the steps in journalizing events in accounting and then turning them into income statements. Like which assets and liabilities are credits and which are debits?

Required information

Problem 9-1B Record and analyze installment notes (LO9-2)

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[The following information applies to the questions displayed below.]

On January 1, 2021, Stoops Entertainment purchases a building for $610,000, paying $110,000 down and borrowing the remaining $500,000, signing a 9%, 15-year mortgage. Installment payments of $5,071.33 are due at the end of each month, with the first payment due on January 31, 2021.

Problem 9-1B Part 3

3-a. Record the first monthly mortgage payment on January 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations. Round your final answers to 2 decimal places.)

Journal entry worksheet

• Record the first monthly mortgage payment.

Note: Enter debits before credits.

3-b. How much of the first payment goes to interest expense and how much goes to reducing the carrying value of the loan? (Round your answers to 2 decimal places.)

4. Total payments over the 15 years are $912,839 ($5,071.33 × 180 monthly payments). How much of this is interest expense and how much is actual payment of the loan?

Matt Litkee is confused about under- and overapplied manufacturing overhead. Define the terms for Matt, and indicate the balance in the manufacturing overhead account applicable to each term.

Cane Company manufactures two products called Alpha and Beta that sell for $125 and $85, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 101,000 units of each product. Its unit costs for each product at this level of activity are given below: Alpha Beta Direct materials $ 30 $ 12 Direct labor 21 20 Variable manufacturing overhead 8 6 Traceable fixed manufacturing overhead 17 19 Variable selling expenses 13 9 Common fixed expenses 16 11 Total cost per unit $ 105 $ 77 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. Required: Assume that Cane’s customers would buy a maximum of 81,000 units of Alpha and 61,000 units of Beta. Also assume that the company’s raw material available for production is limited to 161,000 pounds. What is the maximum contribution margin Cane Company can earn given the limited quantity of raw materials? What is the Total Contribution Margin? $

Tesla Corporation is a publicly-traded company that has a December 31st year-end. For the 2015 fiscal year, there were 500,000 common shares outstanding all year. Net income for the year ended December 31, 2015, was $800,000. The company’s income tax rate is 30%. During 2014, the company issued a $6,000,000, 10% convertible bond at par. Each 2,000 bond is convertible into 10 common shares. No bonds have been converted as of December 31st, 2015. Also during 2014, Spade issued 200,000, $2 cumulative, convertible preferred shares. Two preferred shares are convertible into one common share. The preferred share dividend was declared and paid in June 2015. Calculate basic and diluted earnings per share for 2015.

The shareholders’ equity of Tru Corporation includes $620,000 of $1 par common stock and $1,220,000 par of 7% cumulative preferred stock. The board of directors of Tru declared cash dividends of $152,000 in 2018 after paying $62,000 cash dividends in each of 2017 and 2016.

Required:
What is the amount of dividends common shareholders will receive in 2018?

Statement of Cash Flows—Indirect Method

The comparative balance sheet of Coulson, Inc. at December 31, 20Y2 and 20Y1, is as follows:

The noncurrent asset, noncurrent liability, and stockholders’ equity accounts for 20Y2 are as follows:

Required:

Prepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Beginning of Year Assets: $26,000 $18,000

End of Year Liabilities: $62,000 $25,000

3) If the company issues common stock of $5,600 and pay dividends of $39,400, how much is net income (loss)?

4) If net income is $1,700 and dividends are $6,600, how much is common stock?

5) If the company issues common stock of $18,300 and net income is $18,400, how much is dividends?

6) If the company issues common stock of $42,700 and pay dividends of $3,400, how much is net income (loss)?

Submit a table where you contrast the Standard Costing, Operational Performance Measures, and the Balanced Scorecard with other methods as Semi-variable Standard Cost or Flexible Costing.

ETech Company was organized on January 1, 2017 to produce and sell a revolutionary smart watch. At the beginning of its second year (2018) finished goods inventory was 2,000 watches. During 2018 ETech accountant resigned and the accounting was done by an accounting student who worked part-time for the company. The income statement below was prepared by the accounting student.

ETech Company

Income Statement

As of December 31, 2018

Revenues:

   Sales revenue (38,000 watches)……………………………….                       $1,140,000

   Royalty revenue……………………………………………….                                     500

   Gain on sale of trading investment……………………………                                 7,000

   Deferred rent revenue …………..……………………………                                3,500

   Interest payable………………………………………………...                                 3,700

Total revenues …………………………………………………..                        $1,154,700

Operating expenses:

    Cost of goods manufactured. ..………………………………    $1,113,000    

    Selling and distribution expense………………………..……        195,000

    General and administrative expense…………………………           95,000

    Restructuring costs………………………………………….            25,000

    Short-term investments………………………………………           17,000

    Interest expense………………. ……………………………..           5,000

    Dividend paid………………………………………………..             1,000

Total operating expenses ………………………………………                           1,451,000

Net loss …………………………………………………………                          ($296,300)    

ETech Company

                         Schedule of Cost of Goods Manufactured

                                      As of December 31, 2018

    Purchase of direct materials…………………………………….                           360,000

    Direct manufacturing labor costs ………………………………                             79,000

    Indirect Manufacturing Overhead:

       Factory maintenance.…..…….………………………………       $35,000

       Factory insurance …. ………………………………………..           3,000
       Indirect manufacturing labor costs.…………………………..       105,000

       Rent expense …………………………………………………        84,000

       Utilities expense ………………………………………………      30,000

       Research & development expense…………………………...         15,000

       Prepaid factory insurance…………………………………….          2,000

       Factory equipment …………………………………………...       500,000

       Accumulated depreciation - factory equipment ……………….   (100,000)

   Total indirect manufacturing overhead…………………………                            674,000

    Cost of goods manufactured …………………………………..                        $1,113,000

Additional information about the company’s activities during the year is as follows:

     a. In 2018 the company produced 40,000 watches.

     b. Inventories at the beginning and end of the year were as follows:

                                                                  January1, 2018      December 31, 2018

            Direct materials………………          $8,000                       $10,000

            Work in process ……………..       $25,200                         49,000

             Finished goods ………………         $37,800                              ?

c. Seventy five percent (75%) of rent expense relates to manufacturing, 15% to general and administrative expense and 10% to selling and distribution expense.

Also, 90% of utilities expense relates to manufacturing, 6% to general and administrative expense and 4% to selling and distribution expense.

d. Factory equipment was purchased January 2, 2017 and is estimated to have a useful life of 10 years with a $5,000 salvage value remaining at the end of its useful life. The company uses the double-declining-balance method of depreciation. The accumulated depreciation of $100,000 reported in the Schedule of Cost of Goods Manufactured resulted from 2017 factory equipment depreciation. No depreciation was charged for 2018.

e. The company’s tax rate is 21 %.

The company’s CEO is concerned about the large net loss and hires your accounting firm to review the above financial statements.

Required:

1. Prepare a corrected Schedule of Cost of Goods Manufactured for the year ended December 31, 2018.
2. Calculate the cost of producing one watch (show calculation)
3. Prepare a revised multiple-step income statement for the year ended December 31, 2018.