T15-1
REVIEW EXERCISES | CHAPTER 15—SECTION I
Calculate the following values according to the accounting equation:
Assets
1. $283,000
2. $548,900
3. $45,300
Liabilities
Owner’s Equity
$121,400
$335,900
$29,000
$161,600
$213,000
$16,300
For the following balance sheet items, check the appropriate category:
Current
Asset
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
Land
Supplies
Marketable securities
Retained earnings
Buildings
Mortgage payable
Cash
Notes payable
Equipment
Note receivable (3-month)
Prepaid expenses
Merchandise inventory
Common stock
Trucks
Debenture bonds
Accounts receivable
Salaries payable
R. Smith, capital
Savings account
Preferred stock
Note payable (2-year)
Taxes payable
Fixed
Asset
Current
Liability
Long-Term Owner’s
Liability
Equity
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
REVIEW EXERCISES
|
CHAPTER 15—SECTION I
b.
26. a.
Gary’s Gifts
Comparative Balance Sheet
December 31, 2005 and 2006
The following financial information is for Gary’s Gifts as of December 31, 2006:
current assets, $175,300; property, plant, and equipment, $43,600; investments and
other assets, $39,200; current liabilities, $27,700; long-term liabilities, $51,000.
Calculate the owner’s equity for 2006 and prepare a comparative balance sheet
with horizontal analysis for 2005 and 2006.
Gary’s Gifts
Balance Sheet
December 31, 2005
Use the following financial information to calculate the owner’s equity and prepare a balance sheet with vertical analysis as of December 31, 2005, for Gary’s
Gifts, a sole proprietorship owned by Gary Robbins: current assets, $157,600;
property, plant, and equipment, $42,000; investments and other assets, $35,700;
current liabilities, $21,200; long-term liabilities, $53,400.
Prepare the following statements on separate sheets of paper.
T15-2
T15-3
26a.
REVIEW EXERCISES | CHAPTER 15—SECTION I
Gary’s Gifts
Balance Sheet
December 31, 2005
Assets
Current Assets
Property, Plant, Equipment
Investments & Other Assets
Total Assets
Liabilities & Owner’s Equity
Current Liability
Long-Term Liability
Total Liabilities
Owners Equity
Total Liabilities & Owner’s Equity
26b.
Assets
$157,600
42,000
35,700
$235,300
67%
17.8%
15.2%
100.0%
$ 21,200
53,400
$ 74,600
$160,700
$235,300
9%
22.7%
31.7%
68.3%
100.0%
Gary’s Gifts
Comparative Balance Sheet
December 31, 2005 and 2006
2006
2005
Current Assets
Property, Plant, Equipment
Invest. & Other Assets
Total Assets
Amount
Percent
$175,300
43,600
39,200
$258,100
$157,600
42,000
35,700
$235,300
$17,700
1,600
3,500
$22,800
11.2%
3.8%
9.8%
9.7%
$ 27,700
51,000
$ 78,700
$179,400
$258,100
$ 21,200
53,400
$ 74,600
$160,700
$235,300
$ 6,500
(2,400)
$ 4,100
$18,700
$22,800
30.7%
(4.5)
5.5%
11.6%
9.7%
Liabilities & Owner’s Equity
Current Liabilities
Long Term Liabilities
Total Liabilities
Owners Equity
Total Liability 1 Owner’s Equity
27. a.
T15-4
|
CHAPTER 15—SECTION I
Northern Industries, Inc.
Balance Sheet
June 30, 2005
Use the following financial information to prepare a balance sheet with vertical
analysis as of June 30, 2005, for Northern Industries, Inc.: cash, $44,300; accounts
receivable, $127,600; merchandise inventory, $88,100; prepaid maintenance,
$4,100; office supplies, $4,000; land, $154,000; building, $237,000; fixtures, $21,400;
vehicles, $64,000; computers, $13,000; goodwill, $20,000; investments, $32,000; accounts payable, $55,700; salaries payable, $23,200; notes payable (6-month),
$38,000; mortgage payable, $91,300; debenture bonds, $165,000; common stock,
$350,000; and retained earnings, $86,300.
REVIEW EXERCISES
T15-5
27a.
REVIEW EXERCISES | CHAPTER 15—SECTION I
Northern Industries, Inc.
Balance Sheet
June 30, 2005
Assets
Current Assets
Cash
Accounts Receivable
Merchandise Inventory
Prepaid Maintenance
Office Supplies
Total Current Assets
$ 44,300
127,600
88,100
4,100
4,000
268,100
Percent
5.5
15.8
10.9
.5
.5
33.2
154,000
237,000
21,400
64,000
13,000
489,400
19.0
29.3
2.6
7.9
1.6
60.4
32,000
20,000
$809,500
4.0
2.5
100%
Current Liabilities
Accounts Payable
Salaries Payable
Notes Payable
Total Current Liabilities
55,700
23,200
38,000
116,900
6.9
2.9
4.7
14.5
Long-Term Liabilities
Mortgage Payable
Debenture Bonds
Total Long-Term Liabilities
91,300
165,000
256,300
11.3
20.4
31.7
373,200
46.2
350,000
86,300
436,300
$809,500
43.2
10.7
53.9
100%
Property, Plant, and Equipment
Land
Buildings
Fixtures
Vehicles
Computers
Total Property, Plant, and Equipment
Investments and Other Assets
Investments
Goodwill
Total Assets
Liabilities and Owner’s Equity
Total Liabilities
Owner’s Equity
Common Stock
Retained Earnings
Total Owner’s Equity
Total Liabilities and Owner’s Equity
*Percents may vary by .1 due to rounding
27. b.
T15-6
|
CHAPTER 15—SECTION I
Northern Industries, Inc.
Comparative Balance Sheet
June 30, 2005 and 2006
The following financial information is for Northern Industries as of June 30, 2006:
cash, $40,200; accounts receivable, $131,400; merchandise inventory, $92,200; prepaid maintenance, $3,700; office supplies, $6,200; land, $154,000; building,
$231,700; fixtures, $23,900; vehicles, $55,100; computers, $16,800; goodwill,
$22,000; investments, $36,400; accounts payable, $51,800; salaries payable, $25,100;
notes payable (6-month), $19,000; mortgage payable, $88,900; debenture bonds,
$165,000; common stock, $350,000; and retained earnings, $113,800.
Prepare a comparative balance sheet with horizontal analysis for 2005 and
2006.
REVIEW EXERCISES
T15-7
REVIEW EXERCISES | CHAPTER 15—SECTION I
27b.
Northern Industries, Inc.
Comparative Balance Sheet
June 30, 2005 and 2006
Increase/Decrease
Assets
Current Assets
Cash
Accounts Receivable
Merchandise Inventory
Prepaid Maintenance
Office Supplies
Total Current Assets
Property, Plant, and Equipment
Land
Buildings
Fixtures
Vehicles
Computers
Total Property, Plant, and Equipment
Investments and Other Assets
Investments
Goodwill
Total Assets
2006
2005
Amount
Percent
$ 40,200
131,400
92,200
3,700
6,200
273,700
$ 44,300
127,600
88,100
4,100
4,000
268,100
($4,100)
3,800
4,100
(400)
2,200
5,600
(9.3)
3.0
4.7
(9.8)
55.0
2.1
154,000
231,700
23,900
55,100
16,800
481,500
154,000
237,000
21,400
64,000
13,000
489,400
0
(5,300)
2,500
(8,900)
3,800
7,900
0
(2.2)
11.7
(13.9)
29.2
1.6
36,400
22,000
$813,600
32,000
20,000
$809,500
4,400
2,000
4,100
13.8
10.0
.5
51,800
25,100
19,000
95,900
55,700
23,200
38,000
116,900
(3,900)
1,900
(19,000)
(21,000)
(7.0)
8.2
(50.0)
(18.0)
88,900
165,000
253,900
91,300
165,000
256,300
(2,400)
0
(2,400)
(2.6)
0
(.9)
349,800
350,000
113,800
463,800
$813,600
373,200
350,000
86,300
436,300
$809,500
(23,400)
0
27,500
27,500
4,100
(6.3)
0
31.9
6.3
.5
Liabilities and Owner’s Equity
Current Liabilities
Accounts Payable
Salaries Payable
Notes Payable
Total Current Liabilities
Long-Term Liabilities
Mortgage Payable
Debenture Bonds
Total Long-Term Liabilities
Total Liabilities
Owner’s Equity
Common Stock
Retained Earnings
Total Owner’s Equity
Total Liabilities and Owner’s Equity
BUSINESS DECISION
|
CHAPTER 15—SECTION I
Prepare a horizontal analysis of the Current Assets section comparing 2003 and
2004.
Prepare a vertical analysis of the Current Liabilities section for 2004.
a.
b.
28. From the consolidated balance sheets for Wal-Mart on page 510.
THE BALANCE SHEET
T15-8
T15-9
BUSINESS DECISION | CHAPTER 15—SECTION I
28a.
Wal-Mart
Comparative Balance Sheet
January 31, 2003–2004
(Amounts in millions)
January 31
Assets
Current Assets:
Cash and Cash Equivalent
Receivables
Inventories
Prepaid Expenses and Other
Current Assets of
Discontinued Operations
Total Current Assets
28b.
2004
2003
Amount
Percent
$ 5,199
1,254
26,612
1,356
$ 2,736
1,569
24,401
837
$ 2,463
(315)
2,211
519
90.00
(20.0)
9.1
62.0
34,421
1,179
30,722
3,699
12.0
Wal-Mart
Balance Sheet
January 31, 2004
Liabilities
Current Liabilities
Commercial Paper
Accounts payable
Accrued liabilities
Accrued income taxes
Long-term debt due within one year
Obligations under capital leases due within one year
Total Current Liabilities
Review Exercises
$ 3,267
19,332
10,342
1,377
2,904
196
$37,418
8.7
51.7
27.6
3.7
7.8
0.5
100.0%
REVIEW EXERCISES
|
CHAPTER 15—SECTION I
$257,000
$132,300
$880,000
Cost of
Goods Sold
$108,000
$354,780
$334,160
$202,200
$760,000
$418,530
Operating
Expenses
Gross
Margin
$84,370
$94,200
$405,220
Net
Profit



Gross sales
$315,450
Less:
Sales returns 1 allowance
23,100
Sales discounts
18,700
Net sales
$273,650
4. For the third quarter of 2005, Carpet Boutique had gross sales of $315,450; sales returns
and allowances of $23,100; and sales discounts of $18,700. What were the net sales?
1. $334,500
2. $1,640,000
3. $675,530
Net
Sales
Calculate the missing information based on the format of the income statement:
T15-10
T15-11
REVIEW EXERCISES | CHAPTER 15—SECTION I I
5. For the month of August, Far East Imports, Inc., had the following financial information: merchandise inventory, August 1, $244,500; merchandise inventory, August
31, $193,440; gross purchases, $79,350; purchase returns and allowances, $8,700; and
freight in, $970.
a.
What is the amount of the goods available for sale?
Inventory (August 1)
$244,500
Net purchases
70,650 ( 79,350 2 8,700)
Freight in
1 970
Goods available for sale 5 $316,120
b.
What is the cost of goods sold for August?
Goods available for sale $316,120
Inventory (August 31) 2 $193,440
Cost of goods sold 5
$122,680
c.
If net sales were $335,000, what was the gross margin for August?
Net sales
$335,000
Cost of goods sold 2 $122,680
Gross margin 5
$212,320
d.
If total operating expenses were $167,200, what was the net profit?
Gross margin
$212,320
Operating expenses 2 $167,200
Net profit 5
$45,120
REVIEW EXERCISES
|
CHAPTER 15—SECTION II
6. a.
Kwik-Mix Concrete, Inc.
Income Statement
January 1 to March 31, 2005
As the assistant accounting manager for Kwik-Mix Concrete, Inc., construct an
income statement with vertical analysis for the first quarter of 2005 from the following information: gross sales, $240,000; sales discounts, $43,500; beginning inventory, Jan. 1, $86,400; ending inventory, March 31, $103,200; net purchases,
$76,900; total operating expenses, $108,000; income tax, $14,550.
Prepare the following statements on separate sheets of paper.
T15-12
6a.
|
44.0
39.1
83.1
52.5
30.6
69.4
55.0
14.5
7.4
7.0
86,400
76,900
163,300
103,200
60,100
136,400
108,000
28,400
14,550
$ 13,850
122.1
22.1
100.0
$240,000
43,500
$196,500
CHAPTER 15—SECTION II
Kwik-Mix Concrete, Inc.
Income Statement
January 1 to March 31, 2005
REVIEW EXERCISES
Revenue
Gross Sales
Less: Sales Discounts
Net Sales
Cost of Goods Sold
Merchandise Inventory, Jan. 1
Net Purchases
Goods Available for Sale
Less: Merchandise Inventory, Mar. 31
Cost of Goods Sold
Gross Margin
Operating Expenses
Income before Taxes
Income Tax
Net Income
T15-13
6. b.
REVIEW EXERCISES
|
CHAPTER 15—SECTION II
Kwik-Mix Concrete, Inc.
Comparative Income Statement
First and Second Quarter, 2005
You have just received a report with the second quarter figures. Prepare a comparative income statement with horizontal analysis for the first and second quarter of 2005: gross sales, $297,000; sales discounts, $41,300; beginning inventory,
April 1, $103,200; ending inventory, June 30, $96,580; net purchases, $84,320; total operating expenses, $126,700; income tax, $16,400.
T15-14
6b.
|
$240,000
43,500
196,500
86,400
76,900
163,300
103,200
60,100
136,400
108,000
28,400
14,550
$ 13,850
103,200
84,320
187,520
96,580
90,940
164,760
126,700
38,060
16,400
$ 21,660
1st Qtr.
$297,000
41,300
255,700
2nd Qtr.
16,800
7,420
24,220
(6,620)
30,840
28,360
18,700
9,660
1,850
7,810
$57,000
(2,200)
59,200
Amount
19.4
9.6
14.8
(6.4)
51.3
20.8
17.3
34.0
12.7
56.4
23.8
(5.1)
30.1
Percent
Increase/Decrease
CHAPTER 15—SECTION II
Kwik-Mix Concrete, Inc.
Comparative Income Statement
First and Second Quarter, 2005
REVIEW EXERCISES
Revenue
Gross Sales
Less: Sales Discounts
Net Sales
Cost of Goods Sold
Merchandise Inventory, Beginning
Net Purchases
Goods Available for Sale
Less: Merchandise Inventory, Ending
Cost of Goods Sold
Gross Margin
Operating Expenses
Income before Income Tax
Income Tax
Net Income
T15-15
7. a.
REVIEW EXERCISES
|
CHAPTER 15—SECTION II
Tasty Treats Food Wholesalers, Inc.
Income Statement, 2005
Use the following financial information to construct a 2005 income statement with
vertical analysis for the Tasty Treats Food Wholesalers, Inc.: gross sales, $2,249,000;
sales returns and allowances, $143,500; sales discounts, $54,290; merchandise inventory, Jan. 1, 2005, $875,330; merchandise inventory, Dec. 31, 2005, $716,090; net purchases, $546,920; freight in, $11,320; salaries, $319,800; rent, $213,100; depreciation,
$51,200; utilities, $35,660; advertising, $249,600; insurance, $39,410; administrative
expenses, $91,700; miscellaneous expenses, $107,500; and income tax, $38,450.
T15-16
T15-17
7a.
REVIEW EXERCISES | CHAPTER 15—SECTION I I
Tasty Treats Food Wholesalers, Inc.
Income Statement
For the year ended December 31, 2005
Revenue
Gross Sales
Less: Sales Returns and Allowances
Sales Discounts
Net Sales
Cost of Goods sold
Merchandise Inventory, Jan.1
Net Purchases
Freight In
Goods Available for Sale
Less: Merchandise Inventory, Dec. 31
Cost of Goods Sold
Gross Margin
Operating Expenses
Salaries
Rent
Depreciation
Utilities
Advertising
Insurance
Administrative Expenses
Miscellaneous Expenses
Total Operating Expenses
Income before Taxes
Income Tax
Net Income
$2,249,000
143,500
54,290
$2,051,210
109.6
7.0
2.6
100.0
875,330
546,920
11,320
1,433,570
716,090
717,480
1,333,730
42.7
26.7
.6
69.9
34.9
35.0
65.0
319,800
213,100
51,200
35,660
249,600
39,410
91,700
107,500
1,107,970
225,760
38,450
$ 187,310
15.6
10.4
2.5
1.7
12.2
1.9
4.5
5.2
54.0
11.0
1.9
9.1
7. b.
REVIEW EXERCISES
|
CHAPTER 15—SECTION II
Tasty Treats Food Wholesalers, Inc.
Comparative Income Statement, 2005 and 2006
The following data represents Tasty Treats’ operating results for 2006. Prepare a
comparative income statement with horizontal analysis for 2005 and 2006: gross
sales, $2,125,000; sales returns and allowances, $126,400; sales discounts, $73,380;
merchandise inventory, Jan. 1, 2006, $716,090; merchandise inventory, Dec. 31,
2006, $584,550; net purchases, $482,620; freight in, $9,220; salaries, $340,900; rent,
$215,000; depreciation, $56,300; utilities, $29,690; advertising, $217,300; insurance,
$39,410; administrative expenses, $95,850; miscellaneous expenses, $102,500; and
income tax, $44,530.
T15-18
T15-19
7b.
REVIEW EXERCISES | CHAPTER 15—SECTION I I
Tasty Treats Food Wholesalers, Inc.
Comparative Income Statement
For the years ended December 31, 2005 and 2006
Increase/Decrease
2006
Revenue
Gross Sales
Less: Sales Returns and Allowances
Sales Discounts
Net Sales
Cost of Goods Sold
Merchandise Inventory, Jan. 1
Net Purchases
Freight In
Goods Available for Sale
Less: Merchandise Inventory, Dec. 31
Cost of Goods Sold
Gross Margin
Operating Expenses
Salaries
Rent
Depreciation
Utilities
Advertising
Insurance
Administrative Expenses
Miscellaneous Expenses
Total Operating Expenses
Income before Income Tax
Income Tax
Net Income
2005
Amount
Percent
$2,125,000
126,400
73,380
1,925,220
$2,249,000
143,500
54,290
2,051,210
($124,000)
(17,100)
19,090
(125,990)
(5.5)
(11.9)
35.2
(6.1)
716,090
482,620
9,220
1,207,930
584,550
623,380
1,301,840
875,330
546,920
11,320
1,433,570
716,090
717,480
1,333,730
(159,240)
(64,300)
(2,100)
(225,640)
(131,540)
(94,100)
(31,890)
(18.2)
(11.8)
(18.6)
(15.7)
(18.4)
(13.1)
(2.4)
340,900
215,000
56,300
29,690
217,300
39,410
95,850
102,500
1,096,950
204,890
44,530
$ 160,360
319,800
213,100
51,200
35,660
249,600
39,410
91,700
107,500
1,107,970
225,760
38,450
$ 187,310
21,100
1,900
5,100
(5,970)
(32,300)
0
4,150
(5,000)
(11,020)
(20,870)
6,080
(26,950)
7.0
.9
10.0
(16.7)
(13.0)
0
4.5
(4.7)
(1.0)
(9.2)
15.8
(14.4)
T15-20
BUSINESS DECISION | CHAPTER 15—SECTION I I
THE INCOME STATEMENT
8. From the following income statements for Microsoft Corporation,
a.
Prepare a horizontal analysis of the operating income section comparing 2002 and 2003.
b.
Prepare a vertical analysis of the operating expenses section for 2002.
Microsoft—2003 Annual Report
Income Statements
In Millions, Except Earnings
per Share/Year Ended June 30
Revenue
Operating Expenses:
Cost of Revenue
Research and Development
Sales and Marketing
General and Administrative
Total Operating Expenses
Operating Income
Losses on Equity Investees and Other
Investment Income/(Loss)
Income before Income Taxes
Provision for Income Taxes
Income before Accounting Change
Cumulative Effect of Accounting Change
(Net of Income Taxes of $185)
Net Income
2001
2002
2003
$25,296
$28,365
$32,187
3,455
4,379
4,885
857
13,576
11,720
(159)
(36)
11,525
3,804
7,721
(375)
$ 7,346
5,191
4,307
5,407
1,550
16,455
11,910
(92)
(305)
11,513
3,684
7,829
—
$ 7,829
5,686
4,659
6,521
2,104
18,970
13,217
(68)
1,577
14,726
4,733
9,993
—
$ 9,993
T15-21
BUSINESS DECISION | CHAPTER 15—SECTION I I
8a.
Microsoft
Comparative Income Statement
2002 and 2003
(in millions)
Revenue
Operating expenses:
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total operating expenses
Operating income
8b.
2003
2002
Amount
$32,187
$28,365
$3,822
13.5%
5,686
4,659
6,521
2,104
18,970
$13,217
5,191
4,307
5,407
1,550
16,455
$11,910
495
352
1,114
554
2,515
$1,307
9.5
8.2
20.6
35.7
15.3
10.9%
Microsoft
Balance Sheet
June 30, 2002
Operating expenses
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total operating expenses
Percent
$ 5,191
4,307
5,407
1,550
$16,455
31.5%
26.2
32.9
9.4
100%
Percent
T15-22
REVIEW EXERCISES | CHAPTER 15—SECTION I I I
Calculate the amount of working capital and the current ratio for the following companies:
Company
1.
2.
3.
4.
Roadway Trucking, Inc.
Camera Corner, Inc.
Royal Dry Cleaners
Computer Warehouse, Inc.
Current
Assets
Current
Liabilities
Working
Capital
$125,490
14,540
3,600
1,224,500
$74,330
19,700
1,250
845,430
$51,160
$(5,160)
$2,350
$379,070
Current
Ratio
1.69:1
.74:1
2.88:1
1.45:1
Use the additional financial information below to calculate the quick assets and acid
test ratio for the companies in Questions 1–4.
Company
5.
6.
7.
8.
Cash
Roadway Trucking, Inc.
$12,320
Camera Corner, Inc.
2,690
Royal Dry Cleaners
1,180
Computer Warehouse, Inc. 24,400
Marketable Accounts
Securities Receivable
$30,000
0
0
140,000
$53,600
4,330
985
750,300
Quick
Assets
Acid Test
Ratio
$95,920
$7,020
$2,165
$914,700
1.29:1
.36:1
1.73:1
1.08:1
9. Calculate the average collection period for Roadway Trucking, Inc., from Exercise 5
if the credit sales for the year amounted to $445,000.
Accounts receivable 3 365
Credit sales
19,564,000
53,600 3 365
5
5 44 Days
Average collection period 5
445,000
445,000
Average collection period 5
T15-23
10. a.
REVIEW EXERCISES | CHAPTER 15—SECTION I I I
Calculate the average collection period for Computer Warehouse, Inc., from Exercise 8 if the credit sales for the year amounted to $8,550,000.
Average collection period 5
750,300 3 365
273,859,500
5
5 32 Days
8,550,000
8,550,000
b. If the industry average for similar firms is 48 days, evaluate the company’s ratio.
5 48 Days
Industry average
Computer warehouse average 5 32 Days
5 16 Days faster than competition
Computer warehouse
Calculate the average inventory and inventory turnover ratio for the following companies:
Company
11.
12.
13.
14.
The Bookworm
Eastern Wholesalers
Alliance Corporation
Walgreens Pharmacy
Beginning
Inventory
Ending
Inventory
$121,400
856,430
90,125
313,240
$89,900
944,380
58,770
300,050
Average
Cost of
Inventory
Inventory Goods Sold Turnover
$105,650
$900,405
$74,447.50
$306,645
$659,000
3,437,500
487,640
4,356,470
6.2
3.8
6.6
14.2
15. Lakewood Enterprises had net sales of $1,354,600 last year. If the total assets of the
company are $2,329,500, what is the asset turnover ratio?
Net sales
Total sales
1,354,600
5
5 .58:1
2,329,500
Asset turnover ratio 5
REVIEW EXERCISES
|
$232,430
512,900
2,875,000
$115,320
357,510
2,189,100
Total
Liabilities
.50:1
.70:1
.76:1
Owner’s
Equity
$117,110
$155,390
$685,900
.98:1
2.30:1
3.20:1
Debt-toEquity
Ratio
$743,500
324,100
316,735
$489,560
174,690
203,655
Cost of
Goods Sold
Operating
Expenses
$175,410
99,200
85,921
Gross
Profit
$253,940
$149,410
$113,080
22. Ace Manufacturing
23. Europa Cafe
24. Pet Supermarket
$434,210
615,400
397,000
Owner’s Equity
18.1
8.2
6.8
Return on Investment (%)
Using the owner’s equity information below, calculate the return on investment for
the companies in Exercises 19–21:
19. Ace Manufacturing
20. Europa Cafe
21. Pet Supermarket
Company
Net
Sales
$78,530
$50,210
$27,159
Net
Profit
Calculate the gross and net profits and the two profit margins for the following companies:
16. Big Ben Clock Company
17. Far East Furniture
18. Magnum Industries
Company
Total
Assets
Debt-toAssets
Ratio
34.2
46.1
35.7
Gross
Profit
Margin (%)
10.6
15.5
8.6
Net
Profit
Margin (%)
CHAPTER 15—SECTION III
Calculate the amount of owner’s equity and the two leverage ratios for the following
companies:
T15-24
REVIEW EXERCISES
|
CHAPTER 15—SECTION III
Net Sales
Net Income
Total Assets
Stockholder’s Equity
2005
107.5
124.3
109.7
105.9
2005
Net Sales
$238,339
Net Income
68,770
Total Assets
513,220
Stockholder’s Equity 254,769
2003
$239,448
55,010
491,100
256,070
2004
127.3
128.5
107.4
120.3
2003
108.0
99.4
105.0
106.4
King Tire Company
Trend Analysis Chart
2004
$282,283
71,125
502,126
289,560
King Tire Company
5-year Selected Financial Data
2002
97.1
104.2
97.7
94.5
2002
$215,430
57,680
457,050
227,390
2001
100.0
100.0
100.0
100.0
2001
$221,800
55,343
467,720
240,600
25. Prepare a trend analysis chart from the following financial data for the King Tire
Company.
T15-25
T15-26
BUSINESS DECISION | CHAPTER 15—SECTION I I I
FINANCIAL RATIOS
26. Use the financial information for Starbucks shown below to answer a through e.
a.
Calculate the asset turnover ratio for 2002 and 2003.
Asset turnover ratio 5
b.
Net revenue
Total assets
2002 5
3,288,908
5 1.49
2,214,392
2003 5
4,075,522
5 1.49
2,729,746
Calculate the net profit margin for 2001, 2002, and 2003.
Net income (earnings)
Net profit margin 5
Net revenue
180,335
2001 5
5 6.8%
2,648,980
2002 5
212,686
5 6.5%
3,288,908
2003 5
268,346
5 6.6%
4,075,522
T15-27
BUSINESS DECISION
|
CHAPTER 15—SECTION III