Swiss Group reports net income of $40,000 for 2019. At the beginning of 2019, Swiss Group had $200,000 in assets. By the end of 2019, assets had grown to $300,000. What is Swiss Group’s 2019 return on assets? How would you assess its performance if competitors average an 11% return on assets?
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Swiss Group reports net income of $40,000 for 2019. At the beginning of 2019, Swiss Group had $200,000
in assets. By the end of 2019, assets had grown to $300,000. What is Swiss Group’s 2019 return on assets?
How would you assess its performance if competitors average an 11% return on assets?
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- LONG-TERM FINANCING NEEDED At year-end 2019, total assets for Arrington Inc. were 1.8 million and accounts payable were 450,000. Sales, which in 2019 were 3.0 million, are expected to increase by 25% in 2020. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to 500,000 in 2019, and retained earnings were 475,000. Arrington plans to sell new common stock in the amount of 130,000. The firms profit margin on sates is 5%; 35% of earnings will be retained. a. What were Arringtons total liabilities in 2019? b. How much new long-term debt financing will be needed in 2020? (Hint: AFN - New stock = New long-term debt.)Reinhardt Company reported revenues of $122,000 and expenses of $83,000 on its 2019 income statement. In addition, Reinhardt paid of dividends during 2019. On December 31, 2019, Reinhardt prepared closing entries. The net effect of the closing entries on retained earnings was a(n): a. decrease of $4,000. b. increase of $35,000. c. increase of $39,000. d. decrease of $87,000.Profitability Ratios Tinker Corporation operates in the highly competitive consulting industry. Tinkers balance sheet indicates the following balances as of December 31, 2019. Required: Calculate Tinkers return on equity if Tinkers 2019 net income is $90,000.
- Balance Sheet Calculations Cornerstone Development Companys balance sheet information at the end of 2019 and 2020 is provided in random order, as follows: Additional information: At the end of 2019, (a) the amount of long-term liabilities is twice the amount of current liabilities and (b) there are 2,900 shares of common stock outstanding. During 2020, the company (a) issued 100 shares of common stock for 25 per share, (b) earned net income of 20,600, and (c) paid dividends of 1 per share on the common stock outstanding at year-end. Required: Next Level Fill in the blanks lettered (a) through (p). All of the necessary information is provided. (Hint: It is not necessary to calculate your answers in alphabetical order.)Starlight Enterprises has net credit sales for 2019 in the amount of $2,600,325, beginning accounts receivable balance of $844,260, and an ending accounts receivable balance of $604,930. Compute the accounts receivable turnover ratio and the number of days sales in receivables ratio for 2019 (round answers to two decimal places). What do the outcomes tell a potential investor about Starlight Enterprises if the industry average is 1.5 times and the number of days sales ratio is 175 days?Athenian Venues Inc. just reported the following selected portion of its financial statements for the end of 2020. Your assistant has already calculated the 2020 end-of-year net operating working capital (NOWC) from the full set of financial statements (not shown here), which is 13 million. The total net operating capital for 2019 was 50 million. What was the 2020 net investment in operating capital? Athenian Venues Inc.: Selected Balance Sheet Information as of December 31 (Millions of Dollars)
- DIVIDENDS Brooks Sporting Inc. is prepared to report the following 2019 income statement (shown in thousands of dollars). Prior to reporting this income statement, the company wants to determine its annual dividend. The company has 320,000 shares of common stock outstanding, and its stock trades at 37 per share. a. The company had a 25% dividend payout ratio in 2018. If Brooks wants to maintain this payout ratio in 2019, what will be its per-share dividend in 2019? b. If the company maintains this 25% payout ratio, what will be the current dividend yield on the companys stock? c. The company reported net income of 1.35 million in 2018. Assume that the number of shares outstanding has remained constant. What was the companys per-share dividend in 2018? d. As an alternative to maintaining the same dividend payout ratio. Brooks is considering maintaining the same per-share dividend in 2019 that it paid in 2018. If it chooses this policy, what will be the companys dividend payout ratio in 2019? e. Assume that the company is interested in dramatically expanding its operations and that this expansion will require significant amounts of capital. The company would like to avoid transactions costs involved in issuing new equity. Given this scenario, would it make more sense for the company to maintain a constant dividend payout ratio or to maintain the same per-share dividend? Explain.Long-Term Financing Needed At year-end 2018, Wallace Landscapings total assets were 2.17 million, and its accounts payable were 560,000. Sales, which in 2018 were 3.5 million, are expected to increase by 35% in 2019. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Wallace typically uses no current liabilities other than accounts payable. Common stock amounted to 625,000 in 2018, and retained earnings were 395,000. Wallace has arranged to sell 195,000 of new common stock in 2019 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt at the end of 2019. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its net profit margin on sales is 5%, and 45% of earnings will be paid out as dividends. a. What were Wallaces total long-term debt and total liabilities in 2018? b. How much new long-term debt financing will be needed in 2019? [Hint: AFN New stock = New long-term debt.)Roseau Company is preparing its annual earnings per share amounts to be disclosed on its 2019 income statement. It has collected the following information at the end of 2019: 1. Net income: 120,400. Included in the net income is income from continuing operations of 130,400 and a loss from discontinued operations (net of income taxes) of 10,000. Corporate income tax rate: 30%. 2. Common stock outstanding on January 1, 2019: 20,000 shares. 3. Common stock issuances during 2019: July 6, 4,000 shares; August 24, 3,000 shares. 4. Stock dividend: On October 19, 2019, the company declared a 10% stock dividend that resulted in 2,700 additional outstanding shares of common stock. 5. Common stock prices: 2019 average market price, 30 per share; 2019 ending market price, 27 per share. 6. 7% preferred stock outstanding on January 1, 2019: 1,000 shares. Terms: 100 par, nonconvertible. Current dividends have been paid. No preferred stock issued during 2019. 7. 8% convertible preferred stock outstanding on January 1, 2019: 800 shares. The stock was issued in 2018 at 130 per share. Each 100 par preferred stock is currently convertible into 1.7 shares of common stock. Current dividends have been paid. To date, no preferred stock has been converted. 8. Bonds payable outstanding on January 1, 2019: 100,000 face value. These bonds were issued several years ago at 97 and pay annual interest of 9.6%. The discount is being amortized in the amount of 300 per year. Each 1,000 bond is currently convertible into 22 shares of common stock. To date, no bonds have been converted. 9. Compensatory share options outstanding: Key executives may currently acquire 3,000 shares of common stock at 20 per share. The options were granted in 2018. To date, none have been exercised. The unrecognized compensation cost (net of tax) related to the options is 4 per share. Required: 1. Compute the basic earnings per share. Show supporting calculations. 2. Compute the diluted earnings per share. Show supporting calculations. 3. Show how Roseau would report these earnings per share figures on its 2019 income statement. Include an explanatory note to the financial statements.
- Comprehensive The following are Farrell Corporations balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019: Additional information: a. On January 2, 2019, Farrell sold equipment costing 45,000, with a book value of 24,000, for 19,000 cash. b. On April 2, 2019, Farrell issued 1, 000 shares of common stock for 23,000 cash. c. On May 14, 2019, Farrell sold all of its treasury stock for 25,000 cash. d. On June 1, 2019, Farrell paid 50, 000 to retire bonds with a face value (and book value) of 50, 000. e. On July 2, 2019, Farrell purchased equipment for 63, 000 cash. f. On December 31, 2019, land with a fair market value of 150,000 was purchased through the issuance of a long-term note in the amount of 150,000. The note bears interest at the rate of 15% and is due on December 31, 2021. g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting. Required: 1. Prepare a spreadsheet to support a statement of cash flows for Farrell for the year ended December 31, 2019, based on the preceding information. 2. Prepare the statement of cash flows. (Appendix 21.1) Spreadsheet and Statement Refer to the information for Farrell Corporation in P21-13. Required: 1. Using the direct method for operating cash flows, prepare a spreadsheet to support a 2019 statement of cash flows. (Hint: Combine the income statement and December 31, 2019, balance sheet items for the adjusted trial balance. Use a retained earnings balance of 291,000 in this adjusted trial balance.) 2. Prepare the statement of cash flows. (A separate schedule reconciling net income to cash provided by operating activities is not necessary.)Comprehensive The following are Farrell Corporations balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019: Additional information: a. On January 2, 2019, Farrell sold equipment costing 45,000, with a book value of 24,000, for 19,000 cash. b. On April 2, 2019, Farrell issued 1,000 shares of common stock for 23,000 cash. c. On May 14, 2019, Farrell sold all of its treasury stock for 25,000 cash. d. On June 1, 2019, Farrell paid 50,000 to retire bonds with a face value (and book value) of 50,000. e. On July 2, 2019, Farrell purchased equipment for 63,000 cash. f. On December 31, 2019. land with a fair market value of 150,000 was purchased through the issuance of a long-term note in the amount of 150,000. The note bears interest at the rate of 15% and is due on December 31, 2021. g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting. Required: 1. Prepare a spreadsheet to support a statement of cash flows for Farrell for the year ended December 31, 2019, based on the preceding information. 2. Prepare the statement of cash flows.Leverage Cook Corporation issued financial statements at December 31, 2019, that include the following information: Balance sheet at December 31,2019 Assets $8,000,000 Liabilities $1,200,000 Stockholders' equity (300,000 shares) $6,800,000 Income statement for 2019: Income from operations $1,200,000 Less: Interest expense (100,000) Income before taxes $1,100,000 Less: Income taxes expense (0,30) (330,000) Net income $ 770,000 The levels of assets, liabilities, stockholders' equity, and operating income have been stable in recent years; however, Cook Corporation is planning a 51,800,000 expansion program that will increase income from operations by $350,000 to $1,550,000, Cook is planning to sell 8.5% notes at par to finance the expansion. Required: What earnings per share does Cook report before the expansion?
