Waterways prepared the balance sheet and income statement for the irrigation installation division for 2020. Now the company also needs to prepare a statement of cash flows for the same division. The comparative balance sheets for Waterways Corporation’s Irrigation Installation Division for the years 2019 and 2020 and the income statement for the year 2020 are presented below. Additional information: 1. Waterways sold a company vehicle for $24,200. The vehicle had been used for 10 years. It cost $80,500 when purchased and had a 10-year life and a $6,100 salvage value. Straight-line depreciation was used. 2. Waterways purchased with cash new equipment costing $209,100. 3. Prepaid expenses increased by $33,800. All changes in accounts payable relate to inventory purchases.
| WATERWAYS CORPORATION—INSTALLATION
DIVISION Balance Sheets December 31 |
|||||||
| Assets | 2020 | 2019 | |||||
| Current assets | |||||||
| Cash | $829,900 | $751,300 | |||||
| Accounts receivable | 679,600 | 543,100 | |||||
| Work in process | 705,000 | — | |||||
| Inventory | 16,800 | 7,500 | |||||
| Prepaid expenses | 76,200 | 42,400 | |||||
| Total current assets | 2,307,500 | 1,344,300 | |||||
| Property, plant, and equipment | |||||||
| Land | 302,000 | 302,000 | |||||
| Buildings | 447,000 | 447,000 | |||||
| Equipment | 921,800 | 793,200 | |||||
| Furnishings | 40,300 | 40,300 | |||||
| Accumulated depreciation | (483,600 | ) | (483,800 | ) | |||
| Total property, plant, and equipment | 1,227,500 | 1,098,700 | |||||
| Total assets | $3,535,000 | $2,443,000 | |||||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities | |||||||
| Accounts payable | $157,000 | $128,300 | |||||
| Income taxes payable | 101,500 | 80,700 | |||||
| Wages payable | 4,400 | 2,000 | |||||
| Interest payable | 1,100 | — | |||||
| Other current liabilities | 14,600 | 15,100 | |||||
| Revolving bank loan payable | 14,900 | — | |||||
| Total current liabilities | 293,500 | 226,100 | |||||
| Long-term liabilities | |||||||
| Note payable | 142,000 | — | |||||
| Total liabilities | 435,500 | 226,100 | |||||
| Stockholders’ equity | |||||||
| Common stock | 1,250,000 | 1,250,000 | |||||
| Retained earnings | 1,849,500 | 966,900 | |||||
| Total stockholders’ equity | 3,099,500 | 2,216,900 | |||||
| Total liabilities and stockholders’ equity | $3,535,000 | $2,443,000 | |||||
| WATERWAYS CORPORATION—INSTALLATION
DIVISION Income Statement For the Year Ending December 31, 2020 |
||||||
| Sales | $5,513,457 | |||||
| Less: Cost of goods sold | 3,125,200 | |||||
| Gross profit | 2,388,257 | |||||
| Operating expenses | ||||||
| Advertising | $50,500 | |||||
| Insurance | 400,400 | |||||
| Salaries and wages | 587,300 | |||||
| Depreciation | 74,200 | |||||
| Other operating expenses | 20,900 | |||||
| Total operating expenses | 1,133,300 | |||||
| Income from operations | 1,254,957 | |||||
| Other income | ||||||
| Gain on sale of equipment | 18,100 | |||||
| Other expenses | ||||||
| Interest expense | (12,200 | ) | ||||
| Net other income and expenses | 5,900 | |||||
| Income before income tax | 1,260,857 | |||||
| Income tax expense | 378,257 | |||||
| Net income | $882,600 | |||||
(a) Prepare a statement of cash flows using the
indirect method for the year 2020. (Show amounts that
decrease cash flow with either a - sign e.g. -15,000 or in
parenthesis e.g. (15,000).)
In: Accounting
Exercise 9-12
Kirkland Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first 6 months of 2020, the following data are available.
| 1. | Sales: 20,800 units quarter 1; 22,100 units quarter 2. | |
| 2. | Variable costs per dollar of sales: sales commissions 5%, delivery expense 2%, and advertising 3%. | |
| 3. | Fixed costs per quarter: sales salaries $10,900, office salaries $6,160, depreciation $4,490, insurance $2,080, utilities $880, and repairs expense $670. | |
| 4. | Unit selling price: $24. |
Prepare a selling and administrative expense budget by quarters for
the first 6 months of 2020. (List variable expenses
before fixed expense.)
KIRKLAND COMPANY
Selling and Administrative Expense Budget
| KIRKLAND
COMPANY Selling and Administrative Expense Budget For the Quarter Ending June 30, 2020For the Six Months Ending June 30, 2020June 30, 2020 |
|||||
|
Quarter |
|||||
|
1 |
2 |
Six Months |
|||
|
Budget Sales in Units |
|||||
| Variable Expenses | |||||
| Sales Commissions | $ | $ | $ | ||
|
Delivery Expense |
|||||
|
Advertising |
|||||
|
Total Variable |
|||||
| Fixed Expenses | |||||
|
Sales Salaries |
|||||
|
Office Salaraies |
|||||
|
Depreciation |
|||||
|
Insurance |
|||||
|
Utilities |
|||||
|
Repair Expense |
|||||
|
Total Fixed |
|||||
| Total Selling and Administrative Expenses | $ | $ | $ | ||
In: Finance
Income Statement
For the Year Ended December 31, 2018
Sales $8,500,000
Manufacturing Expenses
Variable $3,250,000
Fixed overhead 640,000 3,890,000
Gross Margin $4,610,000
Selling and administrative expenses
Commissions $580,000
Fixed marketing expenses 300,000
Fixed admin expenses 450,000 1,330,000
Net Operating Income $3,280,000
Fixed Interest expenses 230,000
Income before Taxes $3,050,000
Income Taxes (21%) 640,500
Net Income $2,409,500
Your company is considering out-sourcing the sales and marketing to an agency specializing in these types of sales. The outsourcing would remove the commissions, reduce the marketing by $270,000, and reduce the fixed administrative expenses by $35,000. The out-sourcing firm, Jangler Marketing, will charge a fee of 14% of sales. Jangler requires a 3-year contract. Jangler believes that it can increase sales by 10% for 2019 and 13% each year after (2020 and 2021). The company believes that with its current sales and marketing staff, sales will increase by 8% for 2019 and 9% in each year after (2020 and 2021).
1.Prepare contribution format projected income statements for 2019, 2020 & 202a assuming the company hires Jangler Marketing.
2.Prepare contribution format projected income statements assuming the outsourcing is rejected.
In: Accounting
Free cash flow valuation Nabor Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist in making the public offering, managers at Nabor have decided to make their own estimate of the firm's common stock value. The firm's CFO has gathered data for performing the valuation using the free cash flow valuation model.
The firm's weighted average cost of capital is
13 %
and it has
$2,480,000
of debt at market value and
$500,000
of preferred stock at its assumed market value. The estimated free cash flows over the next 5 years, 2016 through2020, are given in the table,
| Year
(t) |
Free cash flow
(FCF) |
|
|
2016 |
$250,000 |
|
|
2017 |
$300,000 |
|
|
2018 |
$370,000 |
|
|
2019 |
$440,000 |
|
|
2020 |
$520,000 |
. Beyond 2020 to infinity, the firm expects its free cash flow to grow by
5 %
annually.
a. Estimate the value of Nabor Industries' entire company by using the free cash flow valuation
model.
a. The value of Nabor Industries' entire company is
$ 4,969,043 nothing
b. Use your finding in part
a,
along with the data provided above, to find Nabor Industries' common stock value.
b. The value of Nabor Industries' common stock is
$ ? nothing.
(Round to the nearest dollar.)
In: Finance
Indigo Company began operations on 1/1/20 and produces tumbling mats and rebound mats for cheerleading. Both types of mats are manufactured from a joint process. During January 2020, the company incurred joint production costs of $89,500 and produced 2,000 tumbling mats and 500 rebound mats. Indigo believes the tumbling mats will require separate costs past the split-off point of $14.00 per unit, and the company believes it will be able to sell the tumbling mats for $150.00 per unit. Indigo believes the rebound mats will require separate costs past the split-off point of $10.00 per unit, and the company believes it will be able to sell the rebound mats for $100.00 per unit.
In: Accounting
Question 3
At a local university, a sample of 64 evening students was selected in order to determine whether the average age of the evening students is significantly different from 21. The average age of the students in the sample was 23 years. The population standard deviation is known to be 4.5 years. Determine whether or not the average age of the evening students is significantly different from 21. Use a 0.05 level of significance
In: Statistics and Probability
A private college has several study programs. Recently there was a publication from BPS stating that the income of the middle class has increased by 10% this year. Although happy with the improving condition, the university is concerned that the impact of this change on applicants who will continue to the tertiary institution is estimated to decrease. From these concerns, what can we conclude about the study programs at these colleges? Complete the answers with graphic explanations.
In: Economics
Understanding Finance (30%):
The CEO needs you to explain the following concepts which deeply trouble him:
a. What is advantage and disadvantages between raising money
from debt and equity?
b. What is purpose of Treasury shares?
c. Explain the benefits and downside of different depreciation
policies such as straight line and declining method?
d. Explain what is financial leverage and its advantage and
disadvantage.
In: Accounting
CONTINUOUS CASE CHAPTER FIVE
The world has been hit by the Coronavirus that is believed to have originated in China. Suppose
you, are the CEO and have set up an automobile factory in the affected area (in China). How
would you deal with the ethical issues that might arise from continuing to operate the factory?
What do you think would be your responsibility to your employees, customers and to society?
In: Operations Management
The comparative statements of Wahlberg Company are presented
here.
|
Wahlberg Company |
||||||
|
2020 |
2019 |
|||||
| Net sales | $1,813,300 | $1,745,300 | ||||
| Cost of goods sold | 1,010,100 | 994,000 | ||||
| Gross profit | 803,200 | 751,300 | ||||
| Selling and administrative expenses | 512,200 | 481,600 | ||||
| Income from operations | 291,000 | 269,700 | ||||
| Other expenses and losses | ||||||
| Interest expense | 18,700 | 14,000 | ||||
| Income before income taxes | 272,300 | 255,700 | ||||
| Income tax expense | 82,022 | 77,800 | ||||
| Net income | $ 190,278 | $ 177,900 | ||||
|
Wahlberg Company |
||||||
|
Assets |
2020 |
2019 |
||||
| Current assets | ||||||
| Cash | $59,500 | $64,500 | ||||
| Debt investments (short-term) | 70,800 | 50,500 | ||||
| Accounts receivable | 117,900 | 101,500 | ||||
| Inventory | 123,000 | 115,600 | ||||
| Total current assets | 371,200 | 332,100 | ||||
| Plant assets (net) | 600,700 | 516,300 | ||||
| Total assets | $971,900 | $848,400 | ||||
|
Liabilities and Stockholders’ Equity |
||||||
| Current liabilities | ||||||
| Accounts payable | $159,000 | $144,100 | ||||
| Income taxes payable | 42,200 | 41,200 | ||||
| Total current liabilities | 201,200 | 185,300 | ||||
| Bonds payable | 220,000 | 200,000 | ||||
| Total liabilities | 421,200 | 385,300 | ||||
| Stockholders’ equity | ||||||
| Common stock ($5 par) | 276,800 | 299,800 | ||||
| Retained earnings | 273,900 | 163,300 | ||||
| Total stockholders’ equity | 550,700 | 463,100 | ||||
| Total liabilities and stockholders’ equity | $971,900 | $848,400 | ||||
All sales were on account. Net cash provided by operating
activities for 2020 was $216,000. Capital expenditures were
$132,000, and cash dividends were $79,678.
Compute the following ratios for 2020. (Round Earnings
per share, Current ratio and Asset turnover to 2 decimal places,
e.g. 1.65 or 1.65:1, and all other answers to 1 decimal place, e.g.
6.8 or 6.8%. Use 365 days for calculation.)
| (a) | Earnings per share | $ | |||
| (b) | Return on common stockholders’ equity | % | |||
| (c) | Return on assets | % | |||
| (d) | Current ratio | :1 | |||
| (e) | Accounts receivable turnover | times | |||
| (f) | Average collection period | days | |||
| (g) | Inventory turnover | times | |||
| (h) | Days in inventory | days | |||
| (i) | Times interest earned | times | |||
| (j) | Asset turnover | times | |||
| (k) | Debt to assets ratio | % | |||
| (l) | Free cash flow | $ |
In: Accounting