2. [Cash Conversion Cycle] Castillo Products Company improved its operations from a net loss in 2015 to a net profit in 2016. While the founders, Cindy and Rob Castillo, are happy about these developments, they are concerned with trying to understand how long the firm takes to complete its cash conversion cycle in 2016. Use the following financial statements to make your calculations. Balance sheet items should reflect the averages of the 2015 and 2016 accounts.
|
CASTILLO PRODUCTS COMPANY |
||||
|
INCOME STATEMENT |
2015 |
2016 |
||
|
Net sales |
$900,000 |
$1,500,000 |
||
|
Cost of goods sold |
540,000 |
900,000 |
||
|
Gross profit |
360,000 |
600,000 |
||
|
Marketing |
90,000 |
150,000 |
||
|
General and administrative |
250,000 |
250,000 |
||
|
Depreciation |
40,000 |
40,000 |
||
|
EBIT |
–20,000 |
160,000 |
||
|
Interest |
45,000 |
60,000 |
||
|
Earnings before taxes |
–65,000 |
100,000 |
||
|
Income taxes |
0 |
25,000 |
||
|
Net income (loss) |
–$65,000 |
$ 75,000 |
||
|
BALANCE SHEET |
2015 |
2016 |
||
|
Cash |
$ 50,000 |
$ 20,000 |
||
|
Accounts receivable |
200,000 |
280,000 |
||
|
Inventories |
400,000 |
500,000 |
||
|
Total current assets |
650,000 |
800,000 |
||
|
Gross fixed assets |
450,000 |
540,000 |
||
|
Accumulated depreciation |
–100,000 |
–140,000 |
||
|
Net fixed assets |
350,000 |
400,000 |
||
|
Total assets |
$1,000,000 |
$1,200,000 |
||
|
Accounts payable |
$ 130,000 |
$160,000 |
||
|
Accruals |
50,000 |
70,000 |
||
|
Bank loan |
90,000 |
100,000 |
||
|
Total current liabilities |
270,000 |
330,000 |
||
|
Long-term debt |
300,000 |
400,000 |
||
|
Common stock (0.05 par) |
150,000 |
150,000 |
||
|
Additional paid-in-capital |
200,000 |
200,000 |
||
|
Retained earnings |
80,000 |
120,000 |
||
|
Total liabilities and equity |
$1,000,000 |
$1,200,000 |
||
A. Calculate the inventory-to-sale conversion period for 2016.
B. Calculate the sale-to-cash conversion period for 2016.
C. Calculate the purchase-to-payment conversion period for 2016.
D. Determine the length of the Castillo Product’s cash conversion cycle for 2016.
In: Accounting
|
During 2016 and 2017, Agatha Corp. completed the following transactions relating to its bond issue. The corporation’s fiscal year is the calendar year. |
|
2016 |
|
Jan. 1 |
Issued $230,000 of 10-year, 6 percent bonds for $221,000. The annual cash payment for interest is due on December 31. |
|
Dec. 31 |
Recognized interest expense, including the straight-line amortization of the discount, and made the cash payment for interest. |
|
Dec. 31 |
Closed the interest expense account. |
|
2017 |
|
Dec. 31 |
Recognized interest expense, including the straight-line amortization of the discount, and made the cash payment for interest. |
|
Dec. 31 |
Closed the interest expense account. |
|
b. |
Prepare the general journal entries for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) |
|
2016 |
|
|
Jan. 1 |
Issued $230,000 of 10-year, 6 percent bonds for $221,000. The annual cash payment for interest is due on December 31. |
|
Dec. 31 |
Recognized interest expense, including the straight-line amortization of the discount, and made the cash payment for interest. |
|
Dec. 31 |
Closed the interest expense account. |
|
2017 |
|
Dec. 31 |
Recognized interest expense, including the straight-line amortization of the discount, and made the cash payment for interest. |
||||||||||||||||||||
|
Dec. 31 |
Closed the interest expense account. |
||||||||||||||||||||
|
c. . |
Prepare the liabilities section of the balance sheet at December 31, 2016 and 2017. (Amounts to be deducted should be indicated with minus sign.)
|
||||||||||||||||||||
|
d. |
Determine the amount of interest expense that will be reported on the income statements for 2016 and 2017. |
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|
|||||||||
|
e. |
Determine the amount of interest that will be paid in cash to the bondholders in 2016 and 2017. |
|
In: Accounting
You have been hired as the new Chief Financial Officer for a large integrated health delivery organization and your first goal is to improve the management information reporting of key company performance indicators. You have decided this information would best be monitored and communicated using a dashboard which contains the following financial and operational metrics.
Key Metric Titles:
Select company data:
2017 Net Income = $2,458,000
2016 Net Income = $2,102,000
2017 Total Assets = $54,275,000
2016 Total Assets = $52,964,000
2017 Total Revenues = $36,416,000
2016 Total Revenues = $32,429,000
2017 Current Assets = $11,732,000
2016 Current Assets = $11,969,000
2017 Current Liabilities = $4,401,000
2016 Current Liabilities = $4,097,000
2017 Inpatient Profit = $8,345,000
2016 Inpatient Profit = $6,919,000
2017 Inpatient Days = 40,062
2016 Inpatient Days = 42,434
2017 Total Discharges = 8,576
2016 Total Discharges = 8,318
2017 # of Licensed Beds = 210
2016 # of Licensed Beds = 210
questions:
40 points
In: Finance
|
The plant asset and accumulated depreciation accounts of Pell Corporation had the following balances at December 31, 2015: |
| Plant Asset |
Accumulated Depreciation |
|||||
| Land | $ | 480,000 | $ | — | ||
| Land improvements | 245,000 | 58,000 | ||||
| Building | 2,150,000 | 363,000 | ||||
| Machinery and equipment | 1,184,000 | 418,000 | ||||
| Automobiles | 215,000 | 125,000 | ||||
| Transactions during 2016 were as follows: | |
| a. |
On January 2, 2016, machinery and equipment were purchased at a total invoice cost of $325,000, which included a $6,800 charge for freight. Installation costs of $40,000 were incurred. |
| b. |
On March 31, 2016, a machine purchased for $71,000 in 2012 was sold for $49,500. Depreciation recorded through the date of sale totaled $26,600. |
| c. |
On May 1, 2016, expenditures of $63,000 were made to repave parking lots at Pell’s plant location. The work was necessitated by damage caused by severe winter weather. |
| d. |
On November 1, 2016, Pell acquired a tract of land with an existing building in exchange for 10,000 shares of Pell's common stock that had a market price of $35 per share. Pell paid legal fees and title insurance totaling $36,000. Shortly after acquisition, the building was razed at a cost of $48,000 in anticipation of new building construction in 2017. |
| e. |
On December 31, 2016, Pell purchased a new automobile for $16,550 cash and trade-in of an old automobile purchased for $24,500 in 2012. Depreciation on the old automobile recorded through December 31, 2016, totaled $14,800. The fair value of the old automobile was $5,050. |
| Required: |
| 1. |
Prepare a schedule analyzing the changes in each of the plant assets during 2016. |
| 2. |
Prepare a schedule showing the gain or loss from each asset disposal that would be recognized in Pell’s income statement for the year ended December 31, 2016. |
In: Accounting
| P13-3A Perform ratio analysis, and discuss change in financial position and operating results | |||||||||||
| Condensed balance sheet and income statement data for Jergan Corporation are presented here. | |||||||||||
| JERGAN CORPORATION | |||||||||||
| Balance Sheet | |||||||||||
| December 31 | |||||||||||
| 2017 | 2016 | 2015 | |||||||||
| Cash | $30,000 | $20,000 | $18,000 | ||||||||
| Accounts receivable (net) | 50,000 | 45,000 | 48,000 | ||||||||
| Other current assets | 90,000 | 95,000 | 64,000 | ||||||||
| Investments | 55,000 | 70,000 | 45,000 | ||||||||
| Plant and equipment (net) | 500,000 | 370,000 | 358,000 | ||||||||
| $725,000 | $600,000 | $533,000 | |||||||||
| Current liabilities | $85,000 | $80,000 | $70,000 | ||||||||
| Long-term debt | 145,000 | 85,000 | 50,000 | ||||||||
| Common stock, $10 par | 320,000 | 310,000 | 300,000 | ||||||||
| Retained Earnings | 175,000 | 125,000 | 113,000 | ||||||||
| $725,000 | $600,000 | $533,000 | |||||||||
| JERGAN CORPORATION | |||||||||||
| Income Statement | |||||||||||
| For the Year Ended December 31 | |||||||||||
| 2017 | 2016 | ||||||||||
| Sales revenue | $740,000 | $600,000 | |||||||||
| Less: Sales return and allowances | 40,000 | 30,000 | |||||||||
| Net sales | 700,000 | 570,000 | |||||||||
| Cost of goods sold | 425,000 | 350,000 | |||||||||
| Gross profit | 275,000 | 220,000 | |||||||||
| Operating expenses (including income taxes) | 180,000 | 150,000 | |||||||||
| Net income | 95,000 | 70,000 | |||||||||
| Additional information: | |||||||||||
| 1. | The market price of Jergan's common stock was $7.00, $7.50, and $8.50 for 2012, | ||||||||||
| 2016, and 2017, respectively. | |||||||||||
| 2. | You must compute dividends paid. All dividends were paid in cash. | ||||||||||
| Instructions | |||||||||||
| (a) | Compute the following ratios for 2016 and 2017. | ||||||||||
| (1) Profit margin. | 5. Price-earnings ratio. | ||||||||||
| (2) Gross profit rate. | 6. Payout ratio. | ||||||||||
| (3) Asset turnover. | 7. Debt to assets ratio. | ||||||||||
| (4) Earnings per share. | |||||||||||
| (b) | Based on the ratios calculated, discuss briefly the improvement or lack thereof in the | ||||||||||
| financial position and operating results from 2016 to 2017 of Jergan Corporation. | |||||||||||
| NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . | |||||||||||
| (a)(1) | Profit margin | ||||||||||
| 2017 | 2016 | ||||||||||
| Net income | Value | Value | |||||||||
| Net sales | Value | Value | |||||||||
| Profit margin | ? | ? | |||||||||
| (a)(2) | Gross profit rate | ||||||||||
| 2017 | 2016 | ||||||||||
| Gross profit | Value | Value | |||||||||
| Net sales | Value | Value | |||||||||
| Gross profit rate | ? | ? | |||||||||
| (a)(3) | Asset turnover | ||||||||||
| 2017 | 2016 | ||||||||||
| Total assets, 2017 | Value | ||||||||||
| Total assets, 2016 | Value | Value | |||||||||
| Total assets, 2015 | Value | ||||||||||
| Average total assets | ? | ? | |||||||||
| 2017 | 2016 | ||||||||||
| Net sales | Value | Value | |||||||||
| Average total assets | Value | Value | |||||||||
| Asset turnover | ? | ? | |||||||||
| (a)(4) | Earnings per share | ||||||||||
| 2017 | 2016 | ||||||||||
| Common shares outstanding, 2017 | Value | ||||||||||
| Common shares outstanding, 2016 | Value | Value | |||||||||
| Common shares outstanding, 2015 | Value | ||||||||||
| Average common shares outstanding | ? | ? | |||||||||
| 2017 | 2016 | ||||||||||
| Net income - Pfd. Dividends | Value | Value | |||||||||
| Average common shares outstanding | Value | Value | |||||||||
| Earnings per share | ? | ? | |||||||||
| (a)(5) | Price-earnings ratio | ||||||||||
| 2017 | 2016 | ||||||||||
| Stock price per share | Value | Value | |||||||||
| Earnings per share | Value | Value | |||||||||
| Price-earnings ratio | ? | ? | |||||||||
| (a)(6) | Payout ratio | ||||||||||
| 2017 | 2016 | ||||||||||
| Prior year's retained earnings | Value | Value | |||||||||
| Plus: current year net income | Value | Value | |||||||||
| Less: current year's retained earnings | Value | Value | |||||||||
| Cash dividends declared | ? | ? | |||||||||
| 2017 | 2016 | ||||||||||
| Cash dividends declared (common) | Value | Value | |||||||||
| Net income | Value | Value | |||||||||
| Payout ratio | ? | ? | |||||||||
| (a)(7) | Debt to assets ratio | ||||||||||
| 2017 | 2016 | ||||||||||
| Current Liabilities | Value | Value | |||||||||
| Long-term debt | Value | Value | |||||||||
| Total liabilities | ? | ? | |||||||||
| Total assets | Value | Value | |||||||||
| Debt to assets ratio | ? | ? | |||||||||
| After you have completed P13-3A, answer the additional question. | |||||||||||
| 1. | Assume that 2017 net income and total assets changed to $87,000 and total assets to | ||||||||||
| $700,000. Show the impact of these changes on the ratios. | |||||||||||
In: Accounting
In 2015 Noah, Inc’s car sales were $682,700, and the company expects to have warranty costs of 4% of sales. However, in 2016, the company changes its estimate to 3% of sales. The car sales in 2016 were $603,400 with $18,693 warranty expenditures.
What is the ending balance in estimated warranty payable in 2016?
Please show all steps and how you got each number
In: Accounting
Suppose General Electric paid its line workers $10 per hour in
2015 when the Consumer Price Index was 100. Suppose that deflation
occurred and the aggregate price level fell to 88 in 2016.
Instructions: Round your answers to two decimal
places.
a. GE needed to pay its workers $ in 2016
in order to keep the real wage fixed at $10.
b. GE needed to pay its workers $ in 2016
if it wanted to increase the real wage by 6 percent.
c. If GE kept the wage fixed at $10 per
hour in 2016, in real terms, its workers got a %
increase in wages.
In: Economics
In 2016, the Allen Corporation had sales of $ 60 million, total assets of $ 45 million, and total liabilities of $ 23 million. The interest rate on the company's debt is 5.9 percent, and its tax rate is 35 percent. The operating profit margin is 14 percent.
a. Compute the firm's 2016 net operating income and net income.
b. Calculate the firm's operating return on assets and return on equity. (Hint: You can assume that interest must be paid on all of the firm's liabilities.)
a. Compute the firm's 2016 net operating income and net income.
The firm's 2016 net operating income is $ ____ million. (Round to two decimal places.)
In: Finance
For the year ended December 31, 2016, Harvest Productions Inc. earned $4,000,000. Outstanding preferred shares included $400,000 in 3% cumulative preferred shares issued on January 1, 2015 and $500,000 in 2% non-cumulative preferred shares issued on January 1, 2016. Dividends on the cumulative preferred shares were not declared in 2015. On December 15, 2016, Harvest declared and paid $24,000 in dividends on the 3% cumulative shares including the arrears. Harvest also declared and paid the $10,000 dividends on the non-cumulative shares.
Required:
Determine the net income available to ordinary shareholders for the year ended December 31, 2016.
In: Accounting
HairNeat Inc. manufactures hair brushes that sell at wholesale
for $2.60 per unit. Budgeted production in both 2016 and 2017 was
3,000 units. There was no beginning inventory in 2016. The
following data summarized the 2016 and 2017 operations:
|
2016 |
2017 |
|
|
Units sold |
2,500 |
3,200 |
|
Units produced |
3,000 |
3,000 |
|
Costs: |
||
|
Variable manufacturing costs per unit |
$0.65 |
$0.65 |
|
Fixed factory overhead |
$1,290 |
$1,290 |
|
Variable marketing per unit |
$0.80 |
$0.80 |
|
Fixed Selling and Administrative |
$650 |
$650 |
Absorption costing operating income for 2017 is calculated to
be:
|
|||
|
|||
|
|||
|
In: Accounting