Ans Doc282Y

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On January 1, 2007, Rothchild Inc. had these stockholders’ equity balances.
Common Stock, $1 par (2,000,000 shares authorized, 800,000 shares issued and outstanding)$8,00,000
Paid-in Capital in Excess of Par Value15,00,000
Retained Earnings6,00,000
During 2007, the following transactions and events occurred.
1. Issued50,000shares of$1 par value common stock for$3 per share.
2. Issued40,000shares of common stock for cash at$4 per share.
3. Purchased15,000shares of common stock for the treasury at$3.50 per share.
4. Declared and paid a cash dividend of$1,15,000
5. Earned net income of$3,00,000
Instructions:
Prepare the stockholders’ equity section of the balance sheet at December 31, 2007.
Grania Company’s income statement contained the condensed information below.
GRANIA COMPANY
Income Statement
For the Year Ended December 31, 2007
Revenues
$9,70,000
Operating expenses, excluding depreciation$6,24,000
Depreciation expense60,000
Loss on sale of equipment16,0007,00,000
Income before income taxes
2,70,000
Income tax expense
40,000
Net income
$2,30,000
Grania’s balance sheet contained the comparative data at December 31, shown here:
2007
2006
Accounts receivable$75,000
$60,000
Accounts payable41,000
28,000
Income taxes payable11,000
7,000
Accounts payable pertain to operating expenses.
Instructions:
Prepare the operating activities section of the statement of cash flows using the indirect method.
Condensed balance sheet and income statement data for Here and There Corporation are presented here.
HERE AND THERE CORPORATION
Balance Sheets
December 31
2007
2006
2005
Cash$30,000
$20,000
$18,000
Receivables (net)50,000
45,000
48,000
Other current assets90,000
85,000
64,000
Investments55,000
70,000
45,000
Plant and equipment (net)5,00,000
3,70,000
2,58,000
$7,25,000
$5,90,000
$4,33,000
Current liabilities$85,000
$80,000
$30,000
Long-term debt1,85,000
85,000
20,000
Common stock, $10 par3,20,000
3,00,000
3,00,000
Retained earnings1,35,000
1,25,000
83,000
$7,25,000
$5,90,000
$4,33,000
HERE AND THERE CORPORATION
Income Statement
For the Years Ended December 31
2007
2006
Sales$6,40,000
$5,00,000
Less: Sales returns and allowances40,000
30,000
Net sales6,00,000
4,70,000
Cost of goods sold4,25,000
3,00,000
Gross profit1,75,000
1,70,000
Operating expenses (Including income taxes)1,17,000
94,000
$58,000
$76,000
Additional information:
1. The market price of Here and There’s common stock was$6 $9 $7 for 2005, 2006, and
2007, respectively.
2. You must compute dividends paid. All dividends were paid in cash.
Instructions:
(a) (1) Compute the profit margin ratio for 2006 and 2007.
=16.2%
=36.2%
(a) (3) Compute the asset turnover ratio for 2006 and 2007.
Times
Times
(a) (4) Compute the earnings per share ratio for 2006 and 2007.
(a) (5) Compute the price-earnings ratio for 2006 and 2007.
(a) (6) Compute the payout ratio for 2006 and 2007.
(a) (7) Compute the debt to total assets ratio for 2006 and 2007.
(b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in the financial position and operating results from 2006 to 2007 of Here and There Corporation.