|
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): |
| 2016 | 2015 | |||
| Sales | $ | 4,550,000 | $ | 3,650,000 |
| Cost of goods sold | 2,890,000 | 2,030,000 | ||
| Administrative expenses | 830,000 | 705,000 | ||
| Selling expenses | 390,000 | 342,000 | ||
| Interest revenue | 153,000 | 143,000 | ||
| Interest expense | 206,000 | 206,000 | ||
| Loss on sale of assets of discontinued component | 62,000 | — | ||
|
On July 1, 2016, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2016, for $62,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows: |
| 1/1/16-9/30/16 | 2015 | ||||||
| Sales | $ | 430,000 | $ | 530,000 | |||
| Cost of goods sold | (305,000 | ) | (338,000 | ) | |||
| Administrative expenses | (53,000 | ) | (43,000 | ) | |||
| Selling expenses | (23,000 | ) | (33,000 | ) | |||
| Operating income before taxes | $ | 49,000 | $ | 116,000 | |||
|
In addition to the account balances above, several events occurred during 2016 that have not yet been reflected in the above accounts: |
|
| 1. |
A fire caused $53,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event. |
| 2. |
Inventory that had cost $43,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $6,000. |
| 3. | Income taxes have not yet been recorded. |
| Required: |
|
Prepare a multiple-step income statement for the Reed Company for 2016, showing 2015 information in comparative format, including income taxes computed at 30% and EPS disclosures assuming 400,000 shares of common stock. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.) |
In: Accounting
Retail Inventory Method
Harmes Company is a clothing store that uses the retail inventory method. The following information relates to its operations during 2016:
| Cost | Retail | |
|---|---|---|
| Inventory, January 1 | $29,000 | $40,200 |
| Purchases | 67,500 | 100,100 |
| Markups (net) | — | 2,200 |
| Markdowns (net) | — | 700 |
| Sales | — | 88,400 |
Required:
1. Compute the ending inventory by the retail inventory method for the following cost flow assumption: FIFO. Round the cost-to-retail ratio to three decimal places. If necessary, round dollar amounts to the nearest whole dollar.
| HARMES COMPANY | ||
| Calculation of ending inventory by retail inventory method | ||
| FIFO 2016 | ||
| Cost | Retail | |
| $ | $ | |
| $ | $ | |
| $ | $ | |
| $ | ||
| $ | ||
2. Compute the ending inventory by the retail inventory method for the following cost flow assumption: Average cost. Round the cost-to-retail ratio to three decimal places. If necessary, round dollar amounts to the nearest whole dollar.
| HARMES COMPANY | ||
| Calculation of ending inventory by retail inventory method | ||
| Average Cost 2016 | ||
| Cost | Retail | |
| $ | $ | |
| $ | $ | |
| $ | ||
| $ | ||
3. Compute the ending inventory by the retail inventory method for the following cost flow assumption: LIFO. Round the cost-to-retail ratio to three decimal places. If necessary, round dollar amounts to the nearest whole dollar.
| HARMES COMPANY | ||
| Calculation of ending inventory by retail inventory method | ||
| LIFO 2016 | ||
| Cost | Retail | |
| $ | $ | |
| $ | ||
| $ | $ | |
| $ | ||
| Ending inventory at LIFO cost | ||
| Beginning layer (as stated in data) | $29,000 | |
| New layer | ||
| Total | $ | |
4. Compute the ending inventory by the retail inventory method for the following cost flow assumption: Lower of cost or market (based on average cost). Round the cost-to-retail ratio to three decimal places. If necessary, round dollar amounts to the nearest whole dollar.
| HARMES COMPANY | ||
| Calculation of ending inventory by retail inventory method | ||
| Lower of Cost or Market (based on average cost) 2016 | ||
| Cost | Retail | |
| $ | $ | |
| $ | $ | |
| $ | ||
| $ | ||
In: Accounting
(12-8) Stevens Textile Corporation’s 2016 financial statements are shown below:
Balance Sheet as of December 31, 2016 (Thousands of Dollars)
Cash $ 1,080 Accounts payable $ 4,320
Receivables 6,480 Accruals 2,880
Inventories 9,000 Line of credit 0
Total current assets $16,560 Notes payable 2,100
Net fixed assets 12,600 Total current liabilities $ 9,300
Mortgage bonds 3,500
Common stock 3,500
______ Retained earnings 12,860
Total assets $29,160 Total liabilities and equity $ 29,160
Income Statement for December 31, 2016 (Thousands of Dollars)
Sales $36,000
Operating costs 32,440
Earnings before interest and taxes $ 3,560
Interest 460
Pre-tax earnings $ 3,100
Taxes (40%) 1,240
Net income $ 1,860
Dividends (45%) $ 837
Addition to retained earnings $ 1,023
a. Suppose 2017 sales are projected to increase by 15% over 2016 sales. Use the
forecasted financial statement method to forecast a balance sheet and income
statement for December 31, 2017. The interest rate on all debt is 10%, and cash
earns no interest income. Assume that all additional debt in the form of a line of
credit is added at the end of the year, which means that you should base the
forecasted interest expense on the balance of debt at the beginning of the year. Use
the forecasted income statement to determine the addition to retained earnings.
Assume that the company was operating at full capacity in 2016, that it cannot sell
off any of its fixed assets, and that any required financing will be borrowed as
notes payable. Also, assume that assets, spontaneous liabilities, and operating costs
are expected to increase by the same percentage as sales. Determine the additional
funds needed.
b. What is the resulting total forecasted amount of the line of credit?
In: Finance
Northwest Paperboard Company, a paper and allied products manufacturer, was seeking to gain a foothold in Canada. Toward that end, the company bought 40% of the outstanding common shares of Vancouver Timber and Milling, Inc., on January 2, 2016, for $560 million. At the date of purchase, the book value of Vancouver's net assets was $855 million. The book values and fair values for all balance sheet items were the same except for inventory and plant facilities. The fair value exceeded book value by $5 million for the inventory and by $30 million for the plant facilities. The estimated useful life of the plant facilities is 15 years. All inventory acquired was sold during 2016. Vancouver reported net income of $180 million for the year ended December 31, 2016. Vancouver paid a cash dividend of $20 million.
Required: 1. Prepare all appropriate journal entries related to the investment during 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)
2. What amount should Northwest report as its income from its investment in Vancouver for the year ended December 31, 2016? (Enter your answer in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)
3. What amount should Northwest report in its balance sheet as its investment in Vancouver? (Enter your answer in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)
4. What should Northwest report in its statement of cash flows regarding its investment in Vancouver? (Enter your answers in millions. (i.e., 10,000,000 should be entered as 10).)
In: Accounting
|
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): |
| 2016 | 2015 | |||
| Sales | $ | 5,200,000 | $ | 4,300,000 |
| Cost of goods sold | 3,020,000 | 2,160,000 | ||
| Administrative expenses | 960,000 | 835,000 | ||
| Selling expenses | 520,000 | 472,000 | ||
| Interest revenue | 166,000 | 156,000 | ||
| Interest expense | 232,000 | 232,000 | ||
| Loss on sale of assets of discontinued component | 114,000 | — | ||
|
On July 1, 2016, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2016, for $114,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows: |
| 1/1/16-9/30/16 | 2015 | ||||||
| Sales | $ | 560,000 | $ | 660,000 | |||
| Cost of goods sold | (370,000 | ) | (416,000 | ) | |||
| Administrative expenses | (66,000 | ) | (56,000 | ) | |||
| Selling expenses | (36,000 | ) | (46,000 | ) | |||
| Operating income before taxes | $ | 88,000 | $ | 142,000 | |||
|
In addition to the account balances above, several events occurred during 2016 that have not yet been reflected in the above accounts: |
|
| 1. |
A fire caused $66,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event. |
| 2. |
Inventory that had cost $56,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $7,000. |
| 3. | Income taxes have not yet been recorded. |
| Required: |
|
Prepare a multiple-step income statement for the Reed Company for 2016, showing 2015 information in comparative format, including income taxes computed at 40% and EPS disclosures assuming 500,000 shares of common stock. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.) |
In: Accounting
|
Selected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): |
| 2016 | 2015 | |||
| Sales | $ | 4,700,000 | $ | 3,800,000 |
| Cost of goods sold | 2,920,000 | 2,060,000 | ||
| Administrative expenses | 860,000 | 735,000 | ||
| Selling expenses | 420,000 | 372,000 | ||
| Interest revenue | 156,000 | 146,000 | ||
| Interest expense | 212,000 | 212,000 | ||
| Loss on sale of assets of discontinued component | 74,000 | — | ||
|
On July 1, 2016, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2016, for $74,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows: |
| 1/1/16-9/30/16 | 2015 | ||||||
| Sales | $ | 460,000 | $ | 560,000 | |||
| Cost of goods sold | (320,000 | ) | (356,000 | ) | |||
| Administrative expenses | (56,000 | ) | (46,000 | ) | |||
| Selling expenses | (26,000 | ) | (36,000 | ) | |||
| Operating income before taxes | $ | 58,000 | $ | 122,000 | |||
|
In addition to the account balances above, several events occurred during 2016 that have not yet been reflected in the above accounts: |
|
| 1. |
A fire caused $56,000 in uninsured damages to the main office building. The fire was considered to be an infrequent but not unusual event. |
| 2. |
Inventory that had cost $46,000 had become obsolete because a competitor introduced a better product. The inventory was sold as scrap for $6,000. |
| 3. | Income taxes have not yet been recorded. |
| Required: |
|
Prepare a multiple-step income statement for the Reed Company for 2016, showing 2015 information in comparative format, including income taxes computed at 20% and EPS disclosures assuming 500,000 shares of common stock. (Amounts to be deducted should be indicated with a minus sign. Round EPS answers to 2 decimal places.) |
In: Accounting
Problem 12-09
Financing Deficit
Garlington Technologies Inc.'s 2016 financial statements are shown below:
Balance Sheet as of December 31, 2016
| Cash | $ 180,000 | Accounts payable | $ 360,000 | |
| Receivables | 360,000 | Notes payable | 156,000 | |
| Inventories | 720,000 | Line of credit | 0 | |
| Total current assets | $1,260,000 | Accruals | 180,000 | |
| Fixed assets | 1,440,000 | Total current liabilities | $ 696,000 | |
| Common stock | 1,800,000 | |||
| Retained earnings | 204,000 | |||
| Total assets | $2,700,000 | Total liabilities and equity | $2,700,000 |
Income Statement for December 31, 2016
| Sales | $3,600,000 |
| Operating costs | 3,279,720 |
| EBIT | $ 320,280 |
| Interest | 18,280 |
| Pre-tax earnings | $ 302,000 |
| Taxes (40%) | 120,800 |
| Net income | 181,200 |
| Dividends | $ 108,000 |
Suppose that in 2017 sales increase by 15% over 2016 sales and that 2017 dividends will increase to $202,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2016. Use an interest rate of 13%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the all new-debt will be in the form of a line of credit. Round your answers to the nearest dollar. Do not round intermediate calculations.
| Garlington Technologies Inc. Pro Forma Income Statement December 31, 2017 |
|||
| Sales | $ | ||
| Operating costs | $ | ||
| EBIT | $ | ||
| Interest | $ | ||
| Pre-tax earnings | $ | ||
| Taxes (40%) | $ | ||
| Net income | $ | ||
| Dividends: | $ | ||
| Addition to RE: | $ | ||
| Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2017 |
|||
| Cash | $ | ||
| Receivables | $ | ||
| Inventories | $ | ||
| Total current assets | $ | ||
| Fixed assets | $ | ||
| Total assets | $ | ||
| Accounts payable | $ | ||
| Notes payable | $ | ||
| Accruals | $ | ||
| Total current liabilities | $ | ||
| Common stock | $ | ||
| Retained earnings | $ | ||
| Total liabilities and equity | $ | ||
In: Finance
|
Financing Deficit Garlington Technologies Inc.'s 2016 financial statements are shown below: Balance Sheet as of December 31, 2016
Income Statement for December 31, 2016
Suppose that in 2017 sales increase by 5% over 2016 sales and that 2017 dividends will increase to $144,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2016. Use an interest rate of 8%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the all new-debt will be in the form of a line of credit. Round your answers to the nearest dollar. Do not round intermediate calculations.
|
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In: Finance
inancing Deficit
Garlington Technologies Inc.'s 2016 financial statements are shown below:
Balance Sheet as of December 31, 2016
| Cash | $ 180,000 | Accounts payable | $ 360,000 | |
| Receivables | 360,000 | Notes payable | 156,000 | |
| Inventories | 720,000 | Line of credit | 0 | |
| Total current assets | $1,260,000 | Accruals | 180,000 | |
| Fixed assets | 1,440,000 | Total current liabilities | $ 696,000 | |
| Common stock | 1,800,000 | |||
| Retained earnings | 204,000 | |||
| Total assets | $2,700,000 | Total liabilities and equity | $2,700,000 |
Income Statement for December 31, 2016
| Sales | $3,600,000 |
| Operating costs | 3,279,720 |
| EBIT | $ 320,280 |
| Interest | 18,280 |
| Pre-tax earnings | $ 302,000 |
| Taxes (40%) | 120,800 |
| Net income | 181,200 |
| Dividends | $ 108,000 |
Suppose that in 2017 sales increase by 20% over 2016 sales and that 2017 dividends will increase to $200,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2016. Use an interest rate of 8%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the all new-debt will be in the form of a line of credit. Round your answers to the nearest dollar. Do not round intermediate calculations.
| Garlington Technologies Inc. Pro Forma Income Statement December 31, 2017 |
|||
| Sales | $ | ||
| Operating costs | $ | ||
| EBIT | $ | ||
| Interest | $ | ||
| Pre-tax earnings | $ | ||
| Taxes (40%) | $ | ||
| Net income | $ | ||
| Dividends: | $ | ||
| Addition to RE: | $ | ||
| Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2017 |
|||
| Cash | $ | ||
| Receivables | $ | ||
| Inventories | $ | ||
| Total current assets | $ | ||
| Fixed assets | $ | ||
| Total assets | $ | ||
| Accounts payable | $ | ||
| Notes payable | $ | ||
| Accruals | $ | ||
| Total current liabilities | $ | ||
| Common stock | $ | ||
| Retained earnings | $ | ||
| Total liabilities and equity | $ | ||
In: Finance
Problem 12-09
Financing Deficit
Garlington Technologies Inc.'s 2016 financial statements are shown below:
Balance Sheet as of December 31, 2016
| Cash | $ 180,000 | Accounts payable | $ 360,000 | |
| Receivables | 360,000 | Notes payable | 156,000 | |
| Inventories | 720,000 | Line of credit | 0 | |
| Total current assets | $1,260,000 | Accruals | 180,000 | |
| Fixed assets | 1,440,000 | Total current liabilities | $ 696,000 | |
| Common stock | 1,800,000 | |||
| Retained earnings | 204,000 | |||
| Total assets | $2,700,000 | Total liabilities and equity | $2,700,000 |
Income Statement for December 31, 2016
| Sales | $3,600,000 |
| Operating costs | 3,279,720 |
| EBIT | $ 320,280 |
| Interest | 18,280 |
| Pre-tax earnings | $ 302,000 |
| Taxes (40%) | 120,800 |
| Net income | 181,200 |
| Dividends | $ 108,000 |
Suppose that in 2017 sales increase by 15% over 2016 sales and that 2017 dividends will increase to $128,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2016. Use an interest rate of 12%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the all new-debt will be in the form of a line of credit. Round your answers to the nearest dollar. Do not round intermediate calculations.
| Garlington Technologies Inc. Pro Forma Income Statement December 31, 2017 |
|||
| Sales | $ | ||
| Operating costs | $ | ||
| EBIT | $ | ||
| Interest | $ | ||
| Pre-tax earnings | $ | ||
| Taxes (40%) | $ | ||
| Net income | $ | ||
| Dividends: | $ | ||
| Addition to RE: | $ | ||
| Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2017 |
|||
| Cash | $ | ||
| Receivables | $ | ||
| Inventories | $ | ||
| Total current assets | $ | ||
| Fixed assets | $ | ||
| Total assets | $ | ||
| Accounts payable | $ | ||
| Notes payable | $ | ||
| Accruals | $ | ||
| Total current liabilities | $ | ||
| Common stock | $ | ||
| Retained earnings | $ | ||
| Total liabilities and equity | $ | ||
In: Finance