FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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The Sleep Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $61,800 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2021 was $8 and $7 in 2022. The industry average earnings multiple for the mattress industry was 9 in 2022 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,000,000 shares of outstanding stock at the end of 2022.

 

Balance Sheet, December 31,
  2022 2021
Cash $ 346,000 $ 106,000
Accounts Receivable $ 356,000 $ 406,000
Inventory $ 256,000 $ 306,000
Total Current Assets $ 958,000 $ 818,000
Long-lived Assets 1,140,000 1,160,000
Total Assets $ 2,098,000 $ 1,978,000
Current Liabilities $ 206,000 $ 306,000
Long-term Debt 606,000 506,000
Shareholder Equity 1,286,000 1,166,000
Total Debt and Equity $ 2,098,000 $ 1,978,000

 

Income Statement, for year ended December 31,
  2022 2021
Sales $ 4,780,000 $ 4,530,000
Cost of Sales 4,124,000 4,024,000
Gross Margin 656,000 506,000
Operating Expenses 353,000 403,000
Operating Income 303,000 103,000
Taxes 121,200 41,200
Net Income $ 181,800 $ 61,800

 

Cash Flow From Operations 2022 2021
Net Income $ 181,800 $ 61,800
Plus Depreciation Expense 50,000 50,000
+ Decrease (-increase) in Accounts Receivable and Inventory 100,000 0
+ Increase (-decrease) in Current Liabilities (-100,000) 0
Cash Flow from Operations $ 231,800 $ 111,800

 

Return on equity for 2022 is (rounded):

 

Multiple Choice
  •  

    13.9%

  •  

    10.9%

  •  

    12.8%

  •  

    18.2%

  •  

    14.8%

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