Vertical Analysis of Income Statement
The following comparative income statement (in thousands of dollars) for the two recent fiscal years was adapted from the annual report of Motor Speedways Inc., owner and operator of several major motor speedways.
Current Year | Previous Year | |||||||
Revenues: | ||||||||
Admissions | $89,870 | $102,690 | ||||||
Event-related revenue | 145,684 | 147,189 | ||||||
NASCAR broadcasting revenue | 170,753 | 161,859 | ||||||
Other operating revenue | 66,693 | 77,262 | ||||||
Total revenues | $473,000 | $489,000 | ||||||
Expenses and other: | ||||||||
Direct expense of events | $97,911 | $97,800 | ||||||
NASCAR purse and sanction fees | 116,358 | 117,849 | ||||||
Other direct expenses | 16,082 | 21,027 | ||||||
General and administrative | 187,308 | 221,028 | ||||||
Total expenses and other | $417,659 | $457,704 | ||||||
Income from continuing operations | $55,341 | $31,296 |
a. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Enter all amounts as positive numbers. (Note: Due to rounding, amounts may not total 100%).
Round your percentages to one decimal place. Due to rounding differences, you will need to:
Motor Speedways Inc. | ||||
Comparative Income Statement (in thousands of dollars) | ||||
For the Years Ended December 31 | ||||
Current Year Amount | Current Year Percent | Prior Year Amount | Prior Year Percent | |
Revenues: | ||||
Admissions | $89,870 | % | $102,690 | % |
Event-related revenue | 145,684 | % | 147,189 | % |
NASCAR broadcasting revenue | 170,753 | % | 161,859 | % |
Other operating revenue | 66,693 | % | 77,262 | % |
Total revenues | $473,000 | % | $489,000 | % |
Expenses and other: | ||||
Direct expense of events | $97,911 | % | $97,800 | % |
NASCAR purse and sanction fees | 116,358 | % | 117,849 | % |
Other direct expenses | 16,082 | % | 21,027 | % |
General and administrative | 187,308 | % | 221,028 | % |
Total expenses and other | $417,659 | % | $457,704 | % |
Income from continuing operations | $55,341 | % | $31,296 | % |
b. While overall revenue some between the two years, the overall mix of revenue sources did change somewhat. The NASCAR broadcasting revenue as a percent of total revenue by 3 percentage points, while the percent of admissions revenue to total revenue by 2 percentage points. Overall, it appears that income from continuing operations has significantly improved because of .
In: Accounting
In Shavertown, Pennsylvania, the owner of Wilkes-Barre Bookkeeping LLC was indicted for embezzling over $375,000 of his clients’ payroll tax remittances between 2010 and 2016 and for lying to clients about his actions. Additionally, he embezzled nearly $70,000 from a nonprofit for which he was the treasurer. He was sentenced to 38 months in prison and ordered to pay restitution totaling nearly $500,000.
In: Accounting
Problem 20-4A Manufacturing: Preparation of a complete master budget LO P1, P2, P3
The management of Zigby Manufacturing prepared the following
estimated balance sheet for March 2017:
ZIGBY MANUFACTURING Estimated Balance Sheet March 31, 2017 |
|||||||
Assets | |||||||
Cash | $ | 80,000 | |||||
Accounts receivable | 364,000 | ||||||
Raw materials inventory | 96,000 | ||||||
Finished goods inventory | 364,800 | ||||||
Total current assets | 904,800 | ||||||
Equipment, gross | 610,000 | ||||||
Accumulated depreciation | (155,000 | ) | |||||
Equipment, net | 455,000 | ||||||
Total assets | $ | 1,359,800 | |||||
Liabilities and Equity | |||||||
Accounts payable | $ | 195,500 | |||||
Short-term notes payable | 17,000 | ||||||
Total current liabilities | 212,500 | ||||||
Long-term note payable | 510,000 | ||||||
Total liabilities | 722,500 | ||||||
Common stock | 340,000 | ||||||
Retained earnings | 297,300 | ||||||
Total stockholders’ equity | 637,300 | ||||||
Total liabilities and equity | $ | 1,359,800 | |||||
To prepare a master budget for April, May, and June of 2017,
management gathers the following information:
Required:
Prepare the following budgets and other financial information as
required. All budgets and other financial information should be
prepared for the second calendar quarter, except as otherwise noted
below. (Round calculations up to the nearest whole dollar, except
for the amount of cash sales, which should be rounded down to the
nearest whole dollar.):
1. Sales budget.
2. Production budget.
3. Raw materials budget.
4. Direct labor budget.
5. Factory overhead budget.
6. Selling expense budget.
7. General and administrative expense budget.
8. Cash budget.
9. Budgeted income statement for the entire second quarter (not for
each month separately).
10. Budgeted balance sheet.
In: Accounting
Determination of whether a legal entity is a variable interest entity Assume a Legal Entity's capital structure consists of the following accounts: Short-term note payable $60,000 Long-term note payable 21,000 Mandatorily redeemable preferred stock 85,000 Common stock 30,000 Additional paid-in capital 60,000 Retained earnings 20,000 Total liabilities and equity $276,000 Note that FASB ASC 480 ("Distinguishing Liabilities from Equity") requires mandatorily redeemable preferred stock to be classified as a liability for financial reporting purposes. Unless otherwise indicated, each of the following parts of this question is independent: a. What is the maximum amount of expected losses that the Legal Entity can expect to sustain without being considered a variable interest entity (VIE)? $276,000 $131,000 $195,000 $110,000 b. What is the maximum amount of expected losses that the Legal Entity can expect to sustain if the lender of the long term note payable is the sole shareholder of the Legal Entity? $131,000 $276,000 $110,000 $195,000 c. What is the maximum amount of expected losses that the Legal Entity can expect to sustain if the long term note payable is convertible to common equity at the option of the holder of the note? Why? (Note that FASB ASC 470-20 ("Debt with Conversion and Other Features") requires convertible debt to be classified as a liability for financial reporting purposes.) $110,000 $195,000 $131,000 $276,000
In: Accounting
[The following information applies to the questions
displayed below.]
The following summary data for the payroll period ended December 27, 2015, are available for Cayman Coating Co.:
Gross pay | $ | 172,000 |
FICA tax withholdings | ? | |
Income tax withholdings | 20,640 | |
Group hospitalization insurance | 2,540 | |
Employee contributions to pension plan | ? | |
Total deductions | 41,650 | |
Net pay | ? | |
Additional information:
In: Accounting
Due to erratic sales of its sole product—a high-capacity battery for laptop computers—PEM, Inc., has been experiencing financial difficulty for some time. The company’s contribution format income statement for the most recent month is given below:
Sales (12,900 units × $30 per unit) | $ | 387,000 | |
Variable expenses | 193,500 | ||
Contribution margin | 193,500 | ||
Fixed expenses | 216,000 | ||
Net operating loss | $ | (22,500 | ) |
Required:
1. Compute the company’s CM ratio and its break-even point in unit sales and dollar sales.
2. The president believes that a $6,700 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $81,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company’s monthly net operating income?
3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $32,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)?
4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by 0.50 cents per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,400?
5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $55,000 each month.
a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales.
b. Assume that the company expects to sell 20,800 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)
c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,800)?
In: Accounting
Please provide an example of computing and use manufacturing overhead allocations using hierarchical and activity-based costing methods.
In: Accounting
Sales and A budget of estimated unit production.Production Budgets
Sonic Inc. manufactures two models of speakers, Rumble and Thunder. Based on the following production and sales data for June, prepare (a) a sales budget and (b) a production budget.
Rumble | Thunder | ||
Estimated inventory (units), June 1 | 278 | 69 | |
Desired inventory (units), June 30 | 320 | 60 | |
Expected sales volume (units): | |||
East Region | 3,900 | 3,450 | |
West Region | 5,250 | 4,550 | |
Unit sales price | $110 | $225 |
a. Prepare a sales budget.
Sonic Inc. | |||
Sales Budget | |||
For the Month Ending June 30 | |||
Product and Area |
Unit Sales Volume |
Unit Selling Price |
Total Sales |
Model Rumble: | |||
East Region | $ | $ | |
West Region | |||
Total | $ | ||
Model Thunder: | |||
East Region | $ | $ | |
West Region | |||
Total | $ | ||
Total revenue from sales | $ |
Feedback
b. Prepare a production budget.
Sonic Inc. | ||
Production Budget | ||
For the Month Ending June 30 | ||
Units Model Rumble | Units Model Thunder | |
Expected units to be sold | ||
|
||
Total units required | ||
|
||
Total units to be produced |
In: Accounting
Chesterfield County had the following transactions.
a. A budget is passed for all ongoing activities. Revenue is anticipated to be $940,750 with approved spending of $631,000 and operating transfers out of $248,000.
b. A contract is signed with a construction company to build a new central office building for the government at a cost of $6,300,000 . A budget for this project has previously been recorded.
c. Bonds are sold for $6,300,000 (face value) to finance construction of the new office building.
d. The new building is completed. An invoice for $6,300,000 is received and paid.
e. Previously unrestricted cash of $1,220,000 is set aside to begin paying the bonds issued in (c).
f. A portion of the bonds comes due and $1,220,000 is paid. Of this total, $150,000 represents interest. The interest had not been previously accrued.
g. Citizens' property tax levies are assessed. Total billing for this tax is $815,000. On this date, the assessment is a legally enforceable claim according to the laws of this state. The money to be received is designated for the current period and 90 percent is assumed to be collectible in this period with receipt of an additional 6 percent during subsequent periods but in time to be available to pay current period claims. The remainder is expected to be uncollectible.
h. Cash of $169,000 is received from a toll road. This money is restricted for highway maintenance.
i. The county received investments valued at $379,000 as a donation from a grateful citizen. Income from these investments must be used to beautify local parks.
Prepare the entries first for fund financial statements and then for government-wide financial statements.
In: Accounting
Explain the similarities and differences between financial and managerial accounting, and prepare, use and interpret a contribution margin income statement using cost, volume, profit and break-even techniques.
In: Accounting
Quasi-Reorganization
The Hassani Corporation has the following balance sheet:
Current assets | $ 700,000 | Current liabilities | $ 600,000 |
Noncurrent assets | 3,600,000 | Long-term liabilities | 2,950,000 |
Common stock ($10 par) | 1,700,000 | ||
Retained earnings | (950,000) | ||
Total assets | $4,300,000 | Total liabilities and equity | $4,300,000 |
Company profitability has been marginal, in part due to book values
of noncurrent assets that do not adequately reflect the reduced
earning power of the assets. To give its balance sheet a better
basis for future profitability, the company decides to undertake a
quasi-reorganization. Hassani writes down noncurrent assets to
their fair value of $3,000,000 and replaces the current common
stock with 100,000 shares of a new issue having a $1 par
value.
Required
a. Prepare journal entries to record the quasi-reorganization.
General Journal | ||
---|---|---|
Description | Debit | Credit |
Retained earningsCommon stockNoncurrent assetsAdditional paid-in capital | ||
Retained earningsCommon stockNoncurrent assetsAdditional paid-in capital | ||
To write down assets to fair value. | ||
Retained earningsCommon stock ($10 par)Noncurrent assetsAdditional paid-in capital | ||
Common stock ($1 par) | ||
Retained earningsCommon stockNoncurrent assetsAdditional paid-in capital | ||
To restructure common stock equity. | ||
Retained earningsCommon stockNoncurrent assetsAdditional paid-in capital | ||
Retained earningsCommon stockNoncurrent assetsAdditional paid-in capital | ||
To eliminate deficit. |
b. Prepare a balance sheet following the quasi-reorganization.
Hassani Corporation Balance Sheet |
|
---|---|
Current assets | $ |
Noncurrent assets | |
$ | |
Current liabilities | $ |
Long-term liabilities | |
Common stock ($1 par) | |
Additional paid-in capital | |
Retained earnings since (date) | |
$ |
In: Accounting
Air North has the following balance as of today:
Bond coupon rate=8%; coupon payment annual; ($million)
Remaining term to maturity= 15 years and the
Face value of each bond =$1000) 10
Common stock:
-Shares outstanding (#5,000,000) 6
-Retained Earnings 8
The yield to maturity of a new 15-year bond which is of similar risk as that of Air North's currently outstanding bond is 12%. Air North can issue this new bond at par of $1,000. Common stock can be issued to the existing shareholders at $18 per share which represents an 11.11% discount from the prevailing market price. Beta of the stock of the firm is 1.4 while the risk free rate and the expected rate of return on the market portfolio are 6% and 14% respectively. Earnings per share at the end of the year are anticipated to be $3. Air North's tax rate is 25%.
Find:
i) The cost of capital to the firm
ii) The cost of equity capital, taking into account three models of estimating cost of equity capital
iii) The weight average cost of capital
In: Accounting
Q3- Abdulaziz company purchased a machine in 2013 for 50,000 that has a useful life of 5 years with a salvage value of 5,000
Calculate the depreciation expense, accumulated depreciation, book value throughout its useful life using:
1- Straight-line method.
2- Units of Production method if the machine produces 100,000 units.
Here is a table of units produced each year:
First |
Second |
Third |
Fourth |
Fifth |
23,000 |
25,000 |
- |
30,000 |
22,000 |
3- Double Declining balance method.
In: Accounting
Standard Product Cost, Direct Materials Variance
Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (2,700 pounds) has the following standards:
Standard Quantity | Standard Price | |||
Whole tomatoes | 4,500 | lbs. | $ 0.53 | per lb. |
Vinegar | 250 | gal. | $ 3.20 | per gal. |
Corn syrup | 22 | gal. | $ 11.80 | per gal. |
Salt | 100 | lbs. | $ 2.90 | per lb. |
The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch K-111 were as follows:
4,700 lbs. of tomatoes |
240 gal. of vinegar |
23 gal. of corn syrup |
99 lbs. of salt |
a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent.
Ingredient | Standard Cost per Batch |
Whole tomatoes | $ |
Vinegar | $ |
Corn syrup | $ |
Salt | $ |
Total | $ |
Standard unit materials cost per pound | $ |
b. Determine the direct materials quantity variance for batch K-111. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Ingredient | Materials Quantity Variance | Favorable/Unfavorable |
Whole tomatoes | $ | |
Vinegar | $ | |
Corn syrup | $ | |
Salt | $ | |
Total direct materials quantity variance | $ |
In: Accounting