Comparative financial statements for Na Pali Coast Company for the years ending December 31, 20-1 and 20-2 are provided. Na Pali Coast Company Comparative Income Statement For Years Ended December 31, 20-2 and 20-1 1 20-2 20-1 2 Net sales $466,451.00 $291,613.00 3 Cost of goods sold 285,889.00 188,626.00 4 Gross profit $180,562.00 $102,987.00 5 Operating expenses 125,650.00 78,200.00 6 Operating income $54,912.00 $24,787.00 7 Other expenses 1,200.00 500.00 8 Income before income taxes $53,712.00 $24,287.00 9 Income tax expense 18,250.00 7,285.00 10 Net income $35,462.00 $17,002.00 Na Pali Coast Company Comparative Balance Sheet December 31, 20-2 and 20-1 1 20-2 20-1 2 Assets 3 Current assets: 4 Cash $8,600.00 $7,500.00 5 Government notes 3,000.00 2,000.00 6 Accounts receivable (net) 10,500.00 8,600.00 7 Merchandise inventory 53,600.00 33,200.00 8 Supplies and prepayments 4,500.00 3,200.00 9 Total current assets $80,200.00 $54,500.00 10 Property, plant, and equipment: 11 Land $40,000.00 $40,000.00 12 Building (net) 200,000.00 150,000.00 13 Delivery equipment (net) 13,000.00 15,000.00 14 Office equipment (net) 5,400.00 6,000.00 15 Patents 5,000.00 6,000.00 16 Total property, plant, and equipment $263,400.00 $217,000.00 17 Total assets $343,600.00 $271,500.00 18 Liabilities 19 Current liabilities: 20 Notes payable $5,000.00 $3,000.00 21 Accounts payable 28,700.00 22,300.00 22 Accrued and withheld payroll taxes 4,200.00 5,600.00 23 Accrued interest payable 500.00 1,700.00 24 Total current liabilities $38,400.00 $32,600.00 25 Long-term liabilities: 26 Bonds payable 50,000.00 20,000.00 27 Total liabilities $88,400.00 $52,600.00 28 Stockholders’ Equity 29 Common stock ($5 par) $115,000.00 $100,000.00 30 Paid-in capital in excess of par 65,000.00 60,000.00 31 Retained earnings 75,200.00 58,900.00 32 Total stockholders’ equity $255,200.00 $218,900.00 33 Total liabilities and stockholders’ equity $343,600.00 $271,500.00 Required: 1. Perform horizontal analysis of the comparative income statement and balance sheet. Round percentages to one decimal place. 2. Perform vertical analysis of the comparative income statement and balance sheet. Round percentages to one decimal place. 3. Compute the following liquidity measures for 20-2 (round all calculations to two decimal places): (a) Working capital (b) Current ratio (c) Quick or acid-test ratio 4. Compute the following activity measures for 20-2 (round all calculations to two decimal places): (a) Accounts receivable turnover and average number of days to collect receivables (Assume that sales on account for 20-2 were $120,000.) (b) Merchandise inventory turnover and average number of days to sell inventory (c) Asset turnover 5. Compute the following profitability measures for 20-2 (round all calculations to two decimal places): (a) Profit margin ratio (b) Return on assets (c) Return on common stockholders’ equity (d) Earnings per share of common stock 6. Compute the following leverage measures for 20-2 (round all calculations to two decimal places): (a) Debt-to-equity ratio (b) Times interest earned ratio (Assume interest expense for 20-2 was $1,200.) 7. Compute the following market measures for 20-2 (round all calculations to two decimal places): (a) Price-earnings ratio (The market price of Na Pali Coast Company’s common stock was $23.00 on December 31, 20-2.) (b) Book value per share of common stock Ratio Analysis Shaded cells have feedback. Calculate the following ratios and amounts for 20-2 (round all calculations to two decimal places). December 31, 20-2 3(a) Working capital 3(b) Current ratio to 1 3(c) Quick or acid-test ratio to 1 4(a) Accounts receivable turnover Average collection period days 4(b) Merchandise inventory turnover Average number of days to sell inventory days 4(c) Asset turnover 5(a) Profit margin ratio 5(b) Return on assets 5(c) Return on common stockholders’ equity 5(d) Earnings per share of common stock per share 6(a) Debt-to-equity ratio to 1 6(b) Times interest earned ratio times 7(a) Price-earnings ratio 7(b) Book value per share of common stock per share

Comparative financial statements for Na Pali Coast Company for the years ending December 31, 20-1 and 20-2 are provided. Na Pali Coast Company Comparative Income Statement For Years Ended December 31, 20-2 and 20-1 1 20-2 20-1 2 Net sales $466,451.00 $291,613.00 3 Cost of goods sold 285,889.00 188,626.00 4 Gross profit $180,562.00 $102,987.00 5 Operating expenses 125,650.00 78,200.00 6 Operating income $54,912.00 $24,787.00 7 Other expenses 1,200.00 500.00 8 Income before income taxes $53,712.00 $24,287.00 9 Income tax expense 18,250.00 7,285.00 10 Net income $35,462.00 $17,002.00 Na Pali Coast Company Comparative Balance Sheet December 31, 20-2 and 20-1 1 20-2 20-1 2 Assets 3 Current assets: 4 Cash $8,600.00 $7,500.00 5 Government notes 3,000.00 2,000.00 6 Accounts receivable (net) 10,500.00 8,600.00 7 Merchandise inventory 53,600.00 33,200.00 8 Supplies and prepayments 4,500.00 3,200.00 9 Total current assets $80,200.00 $54,500.00 10 Property, plant, and equipment: 11 Land $40,000.00 $40,000.00 12 Building (net) 200,000.00 150,000.00 13 Delivery equipment (net) 13,000.00 15,000.00 14 Office equipment (net) 5,400.00 6,000.00 15 Patents 5,000.00 6,000.00 16 Total property, plant, and equipment $263,400.00 $217,000.00 17 Total assets $343,600.00 $271,500.00 18 Liabilities 19 Current liabilities: 20 Notes payable $5,000.00 $3,000.00 21 Accounts payable 28,700.00 22,300.00 22 Accrued and withheld payroll taxes 4,200.00 5,600.00 23 Accrued interest payable 500.00 1,700.00 24 Total current liabilities $38,400.00 $32,600.00 25 Long-term liabilities: 26 Bonds payable 50,000.00 20,000.00 27 Total liabilities $88,400.00 $52,600.00 28 Stockholders’ Equity 29 Common stock ($5 par) $115,000.00 $100,000.00 30 Paid-in capital in excess of par 65,000.00 60,000.00 31 Retained earnings 75,200.00 58,900.00 32 Total stockholders’ equity $255,200.00 $218,900.00 33 Total liabilities and stockholders’ equity $343,600.00 $271,500.00 Required: 1. Perform horizontal analysis of the comparative income statement and balance sheet. Round percentages to one decimal place. 2. Perform vertical analysis of the comparative income statement and balance sheet. Round percentages to one decimal place. 3. Compute the following liquidity measures for 20-2 (round all calculations to two decimal places): (a) Working capital (b) Current ratio (c) Quick or acid-test ratio 4. Compute the following activity measures for 20-2 (round all calculations to two decimal places): (a) Accounts receivable turnover and average number of days to collect receivables (Assume that sales on account for 20-2 were $120,000.) (b) Merchandise inventory turnover and average number of days to sell inventory (c) Asset turnover 5. Compute the following profitability measures for 20-2 (round all calculations to two decimal places): (a) Profit margin ratio (b) Return on assets (c) Return on common stockholders’ equity (d) Earnings per share of common stock 6. Compute the following leverage measures for 20-2 (round all calculations to two decimal places): (a) Debt-to-equity ratio (b) Times interest earned ratio (Assume interest expense for 20-2 was $1,200.) 7. Compute the following market measures for 20-2 (round all calculations to two decimal places): (a) Price-earnings ratio (The market price of Na Pali Coast Company’s common stock was $23.00 on December 31, 20-2.) (b) Book value per share of common stock Ratio Analysis Shaded cells have feedback. Calculate the following ratios and amounts for 20-2 (round all calculations to two decimal places). December 31, 20-2 3(a) Working capital 3(b) Current ratio to 1 3(c) Quick or acid-test ratio to 1 4(a) Accounts receivable turnover Average collection period days 4(b) Merchandise inventory turnover Average number of days to sell inventory days 4(c) Asset turnover 5(a) Profit margin ratio 5(b) Return on assets 5(c) Return on common stockholders’ equity 5(d) Earnings per share of common stock per share 6(a) Debt-to-equity ratio to 1 6(b) Times interest earned ratio times 7(a) Price-earnings ratio 7(b) Book value per share of common stock per share

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...

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Comparative financial statements for Na Pali Coast Company for the years ending December 31, 20-1 and 20-2 are provided.

Na Pali Coast Company

Comparative Income Statement

For Years Ended December 31, 20-2 and 20-1

1		20-2	20-1
2	Net sales	$466,451.00	$291,613.00
3	Cost of goods sold	285,889.00	188,626.00
4	Gross profit	$180,562.00	$102,987.00
5	Operating expenses	125,650.00	78,200.00
6	Operating income	$54,912.00	$24,787.00
7	Other expenses	1,200.00	500.00
8	Income before income taxes	$53,712.00	$24,287.00
9	Income tax expense	18,250.00	7,285.00
10	Net income	$35,462.00	$17,002.00

Na Pali Coast Company

Comparative Balance Sheet

December 31, 20-2 and 20-1

1		20-2	20-1
2	Assets
3	Current assets:
4	Cash	$8,600.00	$7,500.00
5	Government notes	3,000.00	2,000.00
6	Accounts receivable (net)	10,500.00	8,600.00
7	Merchandise inventory	53,600.00	33,200.00
8	Supplies and prepayments	4,500.00	3,200.00
9	Total current assets	$80,200.00	$54,500.00
10	Property, plant, and equipment:
11	Land	$40,000.00	$40,000.00
12	Building (net)	200,000.00	150,000.00
13	Delivery equipment (net)	13,000.00	15,000.00
14	Office equipment (net)	5,400.00	6,000.00
15	Patents	5,000.00	6,000.00
16	Total property, plant, and equipment	$263,400.00	$217,000.00
17	Total assets	$343,600.00	$271,500.00
18	Liabilities
19	Current liabilities:
20	Notes payable	$5,000.00	$3,000.00
21	Accounts payable	28,700.00	22,300.00
22	Accrued and withheld payroll taxes	4,200.00	5,600.00
23	Accrued interest payable	500.00	1,700.00
24	Total current liabilities	$38,400.00	$32,600.00
25	Long-term liabilities:
26	Bonds payable	50,000.00	20,000.00
27	Total liabilities	$88,400.00	$52,600.00
28	Stockholders’ Equity
29	Common stock ($5 par)	$115,000.00	$100,000.00
30	Paid-in capital in excess of par	65,000.00	60,000.00
31	Retained earnings	75,200.00	58,900.00
32	Total stockholders’ equity	$255,200.00	$218,900.00
33	Total liabilities and stockholders’ equity	$343,600.00	$271,500.00

	Required:
1.	Perform horizontal analysis of the comparative income statement and balance sheet. Round percentages to one decimal place.
2.	Perform vertical analysis of the comparative income statement and balance sheet. Round percentages to one decimal place.
3.	Compute the following liquidity measures for 20-2 (round all calculations to two decimal places):
(a)	Working capital
(b)	Current ratio
(c)	Quick or acid-test ratio
4.	Compute the following activity measures for 20-2 (round all calculations to two decimal places):
(a)	Accounts receivable turnover and average number of days to collect receivables (Assume that sales on account for 20-2 were $120,000.)
(b)	Merchandise inventory turnover and average number of days to sell inventory
(c)	Asset turnover
5.	Compute the following profitability measures for 20-2 (round all calculations to two decimal places):
(a)	Profit margin ratio
(b)	Return on assets
(c)	Return on common stockholders’ equity
(d)	Earnings per share of common stock
6.	Compute the following leverage measures for 20-2 (round all calculations to two decimal places):
(a)	Debt-to-equity ratio
(b)	Times interest earned ratio (Assume interest expense for 20-2 was $1,200.)
7.	Compute the following market measures for 20-2 (round all calculations to two decimal places):
(a)	Price-earnings ratio (The market price of Na Pali Coast Company’s common stock was $23.00 on December 31, 20-2.)
(b)	Book value per share of common stock

Ratio Analysis

Shaded cells have feedback.

Calculate the following ratios and amounts for 20-2 (round all calculations to two decimal places).

		December 31, 20-2
3(a)	Working capital
3(b)	Current ratio	to 1
3(c)	Quick or acid-test ratio	to 1
4(a)	Accounts receivable turnover
	Average collection period	days
4(b)	Merchandise inventory turnover
	Average number of days to sell inventory	days
4(c)	Asset turnover
5(a)	Profit margin ratio
5(b)	Return on assets
5(c)	Return on common stockholders’ equity
5(d)	Earnings per share of common stock	per share
6(a)	Debt-to-equity ratio	to 1
6(b)	Times interest earned ratio	times
7(a)	Price-earnings ratio
7(b)	Book value per share of common stock	per share

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