LESSON 5-FINANCIAL STATEMENT ANALYSIS The accountant of Best Beauty Parlor had prepared the financial statements of...
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LESSON 5-FINANCIAL STATEMENT ANALYSIS The accountant of Best Beauty Parlor had prepared the financial statements of the company. However, while washing the hair of his aunt, the owner accidentally dropped the ledger and financial statements into a bowl of black dye, ruining the accounting records. Fortunately, he was able to gather some information from an old ledger as follows: The balances in accounts receivable and accounts payable at the end of 2013 were the same as their respective ending balances in 2012. The net profit margin was 7%, the gross profit ratio was 55%, and return on assets was 4%. Total equity was twice the total debt. Best is in the 50% tax bracket. Preferred dividends amounted to P75,000. The quick ratio was 7 to 2, and the current ratio was 5 to 1. Interest expense amounted to P150,000, and EPS for common stock was P1.00 per share. The days' sales in receivables were 115.2, and the average payment period was 72 days. Purchases for the year amounted to P1,225,000. The inventory was P325,000 on January 1, 2013. Times interest earned was 3.8 times. The ratio of the accumulated depreciation to the cost of fixed assets was 0.05 to 1. The ratio of selling expenses to sales is 20%, and the ratio of cash to accounts receivable is 75%. No-par common stock was issued at an average price of P7.88.- The par value of the 5% preferred stock is 75% of the issuance price. Required: 1. Prepare, in good form, the December 31, 2013 balance sheet and a multiple-step income statement for Best Beauty Parlor. In addition to the accounts divulged in the problem, you should include accounts for prepaid expenses, accrued expenses, and administrative expenses. Best Beauty Parlor Income Statement For the period Ending Dec. 31, 2013 Sales Less: Cost of Goods Sold Gross Profit Selling Expenses Solution Administrative Exp. Operating Incom Interest Expense Taxable Income Income Taxes Net Income P 3,000,000 (1,350,000) 1,650,000 (600,000) (480,000) 570,000 (150,000) 420,000 (210,000) P 210,000 181 LESSON 5-FINANCIAL STATEMENT ANALYSIS The accountant of Best Beauty Parlor had prepared the financial statements of the company. However, while washing the hair of his aunt, the owner accidentally dropped the ledger and financial statements into a bowl of black dye, ruining the accounting records. Fortunately, he was able to gather some information from an old ledger as follows: The balances in accounts receivable and accounts payable at the end of 2013 were the same as their respective ending balances in 2012. The net profit margin was 7%, the gross profit ratio was 55%, and return on assets was 4%. Total equity was twice the total debt. Best is in the 50% tax bracket. Preferred dividends amounted to P75,000. The quick ratio was 7 to 2, and the current ratio was 5 to 1. Interest expense amounted to P150,000, and EPS for common stock was P1.00 per share. The days' sales in receivables were 115.2, and the average payment period was 72 days. Purchases for the year amounted to P1,225,000. The inventory was P325,000 on January 1, 2013. Times interest earned was 3.8 times. The ratio of the accumulated depreciation to the cost of fixed assets was 0.05 to 1. The ratio of selling expenses to sales is 20%, and the ratio of cash to accounts receivable is 75%. No-par common stock was issued at an average price of P7.88.- The par value of the 5% preferred stock is 75% of the issuance price. Required: 1. Prepare, in good form, the December 31, 2013 balance sheet and a multiple-step income statement for Best Beauty Parlor. In addition to the accounts divulged in the problem, you should include accounts for prepaid expenses, accrued expenses, and administrative expenses. Best Beauty Parlor Income Statement For the period Ending Dec. 31, 2013 Sales Less: Cost of Goods Sold Gross Profit Selling Expenses Solution Administrative Exp. Operating Incom Interest Expense Taxable Income Income Taxes Net Income P 3,000,000 (1,350,000) 1,650,000 (600,000) (480,000) 570,000 (150,000) 420,000 (210,000) P 210,000 181
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Question Income Statement Sales Net Income 7 210000 7 3000000 Cost of Goods Sold COGS Sales Gross Profit 3000000 1650000 1350000 Gross Profit Sales 55 3000000 55 1650000 Selling Expenses Sales 20 3000... View the full answer
Related Book For
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman
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