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Required information
Exercise 13-8 Liquidity analysis and interpretation LO P3
[The following information applies to the questions displayed below.]
 
Simon Company’s year-end balance sheets follow.
 

At December 31	2017			2016			2015
Assets
Cash	$	25,264		$	29,531		$	31,076
Accounts receivable, net		89,800			62,200			55,500
Merchandise inventory		111,000			82,000			59,000
Prepaid expenses		8,136			7,752			3,453
Plant assets, net		202,741			195,190			171,271
Total assets	$	436,941		$	376,673		$	320,300
Liabilities and Equity
Accounts payable	$	106,622		$	62,385		$	41,434
Long-term notes payable secured by mortgages on plant assets		80,502			84,902			69,371
Common stock, $10 par value		162,500			162,500			162,500
Retained earnings		87,317			66,886			46,995
Total liabilities and equity	$	436,941		$	376,673		$	320,300

The company’s income statements for the years ended December 31, 2017 and 2016, follow. Assume that all sales are on credit:
 

For Year Ended December 31	2017						2016
Sales				$	568,023					$	448,241
Cost of goods sold	$	346,494					$	291,357
Other operating expenses		176,087						113,405
Interest expense		9,656						10,310
Income taxes		7,384						6,724
Total costs and expenses					539,621						421,796
Net income				$	28,402					$	26,445
Earnings per share				$	1.75					$	1.63

Exercise 13-8 Part 1
(1) Compute days' sales uncollected.

 
(2) Compute accounts receivable turnover.
 

 
(3) Compute inventory turnover.
 

 
 
(4) Compute days' sales in inventory.
 

 
Debt and equity ratios.

Debt-to-equity ratio.

Times interest earned.
 

(2) Total asset turnover.
 
 
Which of the following best describes the appropriation of retained​ earnings?
 
restricting part of retained earnings for expansion or contingencies
   
Declaring and paying dividends causes an increase in both assets and​ stockholders' equity of the corporation.
 
False
   
Preferred stock is stock​ ________.
 
that gives its owners certain advantages over common stockholders
   
Preferred Stock is included in the​ long-term assets section of the balance sheet.
 
False
 

​

Midtown, Inc. had the following transactions in​ 2018, its first year of​ operations:

 

Issued 35,000 shares of common stock.

Stock has par value of $1.00 per

share and was issued at $23.00 per share.

Earned net income of $73,000.

Paid no dividends.

 

At the end of​ 2018, what is total​ stockholders' equity?

 

$878,000

 

 

Treasury stock is a contra equity account.

 

True

 

 

Which of the following is a reason for a company to announce a stock​ split?

 

to decrease the market price at which the stock is trading

 

 

Newcastle Enterprises had net income for 2018 of $110,000. Newcastle had 33,000 shares of common stock outstanding at the

beginning of the year and 42,000 shares of common stock outstanding at the end of the year. There were 9,000 shares of preferred

stock outstanding all year. During​ 2018, Newcastle declared and paid preferred dividends of $26,000.

 

What is​ Newcastle's earnings per​ share? (Round the answer to two decimal​ places.)

 

$2.24

 

 

July 15                  Declared a cash dividend payable to common stockholders of $165,000.

August 15            Date of record is August 15 for the cash dividend declared on July 15.

August 31            Paid the dividend declared on July 15.

 

Prepare journal entries to record the above transactions for Emerson Corporation. (If no journal entry

is required, select " No journal entry required" in the first account field.)

 

 

 

Foxburo Company expects to pay a $2.34 per share cash dividend this year on its common stock.

The current market value of Foxburo stock is $32.50 per share

 

 

 

a. Prepare the journal entry to record Zende Company's issuance of 75 ,000 shares of $5 par value

common stock assuming the shares sell for $5 cash per share

 

 

b. Prepare the journal entry to record Zende Company' s issuance of 75,000 shares of

$5 par value common stock assuming the shares sell for $6 cash per share.

 

 

 

The stockholders' equity section of Montel Company' s balance sheet follows. The preferred stock's call price is $40.

 

                                                                                                                                                                                             

 

 

The following information is from the December​ 31, 2018 balance sheet of May Corporation.

 

Preferred ​ Stock, $100 par                                             $390,000

​Paid-In Capital in Excess of Par—Preferred           25,000

Common ​ Stock, $1 par                                                   152,000

​Paid-In Capital in Excess of Par—Common            346,000

Retained Earnings                                                            83,900

Total ​ Stockholders' Equity                                            $996,900

 

What was the total​ paid-in capital as of December​ 31, 2018?

 

$913,000

 

Preferred Stock + common stock + paid in capital + paid in capital

390,000 + 25,000 + 152,000 + 346,000 = 913,000

 

 

The equity section of Cyril Corporation's balance sheet shows the following.

 

 

 

 

A corporation issued 4,000 shares of $5 par value common stock for $35 ,000 cash.

 

 

A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $40,00 0.

The stock has a $ 1 per share stated value.

 

 

A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $40,000.

The stock has no stated value.

 

 

A corporation issued 1,000 shares of $50 par value preferred stock for $60,000 cash.

 

 

 

Compute the price-earnings ratio for each of these four separate companies.

 

 

 

Which stock might an analyst likely investigate as being potentially undervalued by the market?

 

company 1

company 2

company 3

company 4

 

 

Stockholders' equity of Ernst Comp any consists of 80,000 shares of $5 par value, 8% cumulative preferred stock and

250,000 shares of $1 par value common stock. Both classes of stock have been outstanding since the company' s inception.

Ernst did not declare any dividends in the prior year, but it now declares and pays a $ 11 0,000 cash dividend at the current year-end.

Determine the amount distributed to each cl ass of stockholders for this two -year-old company

 

 

Of the following statements, which are true for the corporate form of organization? (Select all that apply.)

 

 

 

Sudoku Company issues 7,000 shares of $7 par value common stock in exchange for land and a building.

The land is valued at $45,000 and the building at $85,000. Prepare the journal entry to record issuance of

the stock in exchange for the land and building.

 

 

Ecker Company reports $2,700,000 of net income for 20 13 and declares $388,020 of cash dividends on its preferred stock for 2013.

At the end of 20 13, the company had 678,000 weighted-average shares of common stock

 

 

Prepare the issuer's journal entry for each separate transaction

 

 

On April 1, OP Co. issues no-par value common stock for $70,000 cash

 

 

On April 6, MPG issues 2,000 shares of $25 par value common stock for $45,000 of inventory,

$145,000 of machinery and accepts a $94,000 note payable.

 

 

 

Prepare the journal entry to record Autumn Company's issuance of 63,000 shares of no-par value

common stock assuming the shares sell for $29 cash per share.

 

 

Prepare the journal entry to record Autumn Company's issuance of 63,000 shares of no-par value common stock

assuming the shares are exchanged for land v alu ed at $1,827,000.

 

 

Prepare the journal entry to record Tamasine Company's issuance of 5,000 shares of $100 par value

7% cumulative preferred stock for $102 cash per share.

 

 

Assuming the facts in part 1, if Tamasine declares a year-end cash dividend, what is the amount of dividend paid to preferred shareholders?

(Assume no dividends in arrears.)

 

 

 

On May 3, Zirbal Corporation purchased 4,000 shares of its own stock for $36,000 cash. On November 4, Zirbal reissued 850 shares

of this treasur1 stock for $8,500.

Prepare the May 3 and November 4 journal entries to record Zirbal's purchase and reissuance of treasury stock.

 

 

 

Compute the dividend yield for each of these four separate companies

 

 

 

Which company's stock would probably not be classified as an income stock?

 

company 1

company 2

company 3

company 4

 

 

The following informa tion is av ai l abl e for Amos Company for the year end ed De cemb er 3 1, 2013.

 

a. Balance of retained earnings, December 31, 2012, prior to discovery of error, $1,375,000.

b. Cash dividends declared and paid during 20 13, $43,000.

c.  It neglected to record 2011 depreciation expense of $55,500, which is net of $4,500 in income taxes.

d. The company earned $126,000 in 2013 net income.

Prepare a 2013 statement of retained earnings for Amos Company. (Amounts to be deducted should be indicated with a minus sign.)

 

 

 

Epic Company earned net income of $900 ,000 this year. The number of common shares outstanding

during the entire year was 400,000, and preferred shareholders received a $20 ,000 cash dividend.

Compute Epic Company's basic earnings per share.

 

                                                                                                                                                                                       

 

 

 Prepare the journal entry to record Jevonte Company' s issuance of 36 ,000 shares of its common

stock assuming the shares have a $2 par value and sell for $18 cash per share.

 

 

b.  Prepare the journal entry to record Jevonte Company's issuance of 36 ,000 shares of its common stock assuming the shares have

a $2 stated value and sell for $18 cash per share.

 

 

 

Compute Topp Company' s price-earnings ratio if its co mm on stock has a market value of $20.54 per share and its EPS is $3.95

 

 

 

The stockholders' equity section of Jun Company' s balance sheet as of April 1 follows. On April 2, Jun declares and

distributes a 10% stock dividend. The stock's per share market value on April 2 is $20

(prior to the dividend).

 

 

Murray Company reports net income of $770,000 for the year.

It has no preferred stock, and its weighted-average common shares outstanding is 280,000 shares.

Compute its basic earnings per share.

 

 

 

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2