FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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  • Determine the following measures for both 20Y8 and 20Y9, rounding percentages and ratios other than per-share amounts to one decimal place. Briefly explain how or why management would use this information and comment on the trend from 20Y8 and 20Y9.
  1. Working capital
  2. Current ratio
  3. Quick ratio
  4. Accounts receivable turnover
  5. Number of days’ sales in receivables
  6. Inventory turnover
  7. Number of days’ sales in inventory
  8. Ratio of fixed assets to long-term liabilities
  9. Ratio of liabilities to stockholders’ equity
  10. Times interest earned
  11. Asset turnover
  12. Return on total assets
  13. Return on stockholders’ equity
  14. Return on common stockholders’ equity
  15. Earnings per share on common stock
  16. Price-earnings ratio
  17. Dividends per share
  18. Dividend yield

 

Rainbow Paint Co.'s comparative financial statements for the years ending
December 31, 20Y9 and 20Y8, are as follows. The market price of Rainbow
Paint's common stock was $25 on December 31, 20Y9, and $30 on
December 31, 20YB
Rainbow Paint Co.
Comparative Income Statement
For the Years Ended December 31, 20Y9 and 20Y8
20Y9
20Υ8
Sales.....
$5,000,000
$3,200,000
Cost of merchandise sold.
3,400,000
2,080,000
$1,120,000
$ 464,000
224,000
$ 688,000
$ 432,000
Rainbow Paint Co.
Gross profit.......
Selling expenses.......
Administrative expenses..
Total operating expenses..
Income from operations...
Other revenue and expense:
Other revenue..........
Other expense (interest).....
Income before income tax expense.
$1,600,000
$ 650,000
325,000
$ 975,000
$ 625,000
Comparative Balance Sheet
December 31, 20Y9 and 20Y8
20Υ9
20Υ8
Assets
Current assets:
25,000
19,200
Cash,....
$ 175,000
$ 125,000
Temporary investments,...
Accounts receivable (net).......
150,000
425,000
(105,000)
$ 545,000
(64,000)
$ 387,200
50,000
325,000
Income tax expense....
300,000
$ 245,000
176,000
Inventories,....
720,000
480,000
Net income...
$ 211,200
Prepaid expenses...
30,000
$1,500,000
20,000
$1,000,000
225,000
Total current assets....
Long-term investments,....
Property, plant, and equipment (net)..
250,000
2,093,000
1,948,000
Rainbow Paint Co.
Total assets...
$3,843,000
$3,173,000
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y9 and 20Y8
Liabilities
Current liabilities...
$ 750,000
$ 650,000
20Y9
$723,000
20Y8
Long-term liabilities:
Mortgage note payable, 10%, due in five years
Bonds payable, 8%, due in 15 years...
Total long-term liabilities,...................
Retained earnings, January 1......
$581,800
$ 410,000
$4
Net income...
245,000
211,200
800,000
800,000
$ 800,000
$1,450,000
Dividends:
$1,210,000
Preferred stock dividends....
(40,000)
(40,000)
Total liabilities,..
$1,960,000
Common stock dividends...
(45,000)
$883,000
(30,000)
$723.000
Stockholders' Equity
Retained earnings, December 31....
Preferred 8% stock, $100 par....
Common stock, $10 par..........
$ 500,000 $ 500,000
500,000
500,000
Retained earnings....
Total stockholders' equity.......
Total liabilities and stockholders' equity...
883,000
723,000
$1,883,000
$1,723,000
$3,843,000
$3,173,000
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Transcribed Image Text:Rainbow Paint Co.'s comparative financial statements for the years ending December 31, 20Y9 and 20Y8, are as follows. The market price of Rainbow Paint's common stock was $25 on December 31, 20Y9, and $30 on December 31, 20YB Rainbow Paint Co. Comparative Income Statement For the Years Ended December 31, 20Y9 and 20Y8 20Y9 20Υ8 Sales..... $5,000,000 $3,200,000 Cost of merchandise sold. 3,400,000 2,080,000 $1,120,000 $ 464,000 224,000 $ 688,000 $ 432,000 Rainbow Paint Co. Gross profit....... Selling expenses....... Administrative expenses.. Total operating expenses.. Income from operations... Other revenue and expense: Other revenue.......... Other expense (interest)..... Income before income tax expense. $1,600,000 $ 650,000 325,000 $ 975,000 $ 625,000 Comparative Balance Sheet December 31, 20Y9 and 20Y8 20Υ9 20Υ8 Assets Current assets: 25,000 19,200 Cash,.... $ 175,000 $ 125,000 Temporary investments,... Accounts receivable (net)....... 150,000 425,000 (105,000) $ 545,000 (64,000) $ 387,200 50,000 325,000 Income tax expense.... 300,000 $ 245,000 176,000 Inventories,.... 720,000 480,000 Net income... $ 211,200 Prepaid expenses... 30,000 $1,500,000 20,000 $1,000,000 225,000 Total current assets.... Long-term investments,.... Property, plant, and equipment (net).. 250,000 2,093,000 1,948,000 Rainbow Paint Co. Total assets... $3,843,000 $3,173,000 Comparative Retained Earnings Statement For the Years Ended December 31, 20Y9 and 20Y8 Liabilities Current liabilities... $ 750,000 $ 650,000 20Y9 $723,000 20Y8 Long-term liabilities: Mortgage note payable, 10%, due in five years Bonds payable, 8%, due in 15 years... Total long-term liabilities,................... Retained earnings, January 1...... $581,800 $ 410,000 $4 Net income... 245,000 211,200 800,000 800,000 $ 800,000 $1,450,000 Dividends: $1,210,000 Preferred stock dividends.... (40,000) (40,000) Total liabilities,.. $1,960,000 Common stock dividends... (45,000) $883,000 (30,000) $723.000 Stockholders' Equity Retained earnings, December 31.... Preferred 8% stock, $100 par.... Common stock, $10 par.......... $ 500,000 $ 500,000 500,000 500,000 Retained earnings.... Total stockholders' equity....... Total liabilities and stockholders' equity... 883,000 723,000 $1,883,000 $1,723,000 $3,843,000 $3,173,000
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