Chapter 13: Q13DQ (page 614)
Where on the income statement does a company report an unusual gain not expected to occur more often than once every two years or so?
The business entity reportsunusual gains as extraordinary items on the income statement.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Selected comparative financial statements of Haroun Company follow.
HAROUN COMPANY
Comparative Income Statements
For Years Ended December 31, 2017–2011
\( thousands 2017 2016 2015 2014 2013 2012 2011
Sales . . . . . . . . . . . . . . . . . . . . . . . \)1,694 \(1,496 \)1,370 \(1,264 \)1,186 \(1,110 \)928
Cost of goods sold . . . . . . . . . . . . 1,246 1,032 902 802 752 710 586
Gross profit . . . . . . . . . . . . . . . . . . 448 464 468 462 434 400 342
Operating expenses . . . . . . . . . . . 330 256 234 170 146 144 118
Net income . . . . . . . . . . . . . . . . . . \( 118 \) 208 \( 234 \) 292 \( 288 \) 256 \(224
HAROUN COMPANY
Comparative Balance Sheets
December 31, 2017–2011
\) thousands 2017 2016 2015 2014 2013 2012 2011
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \( 58 \) 78 \( 82 \) 84 \( 88 \) 86 \( 89
Accounts receivable, net . . . . . . . . . . . . . 490 514 466 360 318 302 216
Merchandise inventory . . . . . . . . . . . . . . . 1,838 1,364 1,204 1,032 936 810 615
Other current assets . . . . . . . . . . . . . . . . . 36 32 14 34 28 28 9
Long-term investments . . . . . . . . . . . . . . 0 0 0 146 146 146 146
Plant assets, net . . . . . . . . . . . . . . . . . . . . 2,020 2,014 1,752 944 978 860 725
Total assets . . . . . . . . . . . . . . . . . . . . . . . . \)4,442 \(4,002 \)3,518 \(2,600 \)2,494 \(2,232 \)1,800 Liabilities and Equity
Current liabilities . . . . . . . . . . . . . . . . . . . . \(1,220 \)1,042 \( 718 \) 614 \( 546 \) 522 \( 282
Long-term liabilities . . . . . . . . . . . . . . . . . 1,294 1,140 1,112 570 580 620 400
Common stock . . . . . . . . . . . . . . . . . . . . . 1,000 1,000 1,000 850 850 650 650
Other paid-in capital . . . . . . . . . . . . . . . . . 250 250 250 170 170 150 150
Retained earnings . . . . . . . . . . . . . . . . . . 678 570 438 396 348 290 318
Total liabilities and equity . . . . . . . . . . . . . \)4,442 \(4,002 \)3,518 \(2,600 \)2,494 \(2,232 \)1,800
Required
1. Compute trend percents for all components of both statements using 2011 as the base year. (Round percents to one decimal.)
Refer to the Simon Company information in Exercises 13-6 and 13-8. Compare the company’s long-term risk and capital structure positions at the end of 2017 and 2016 by computing these ratios:
(1) debt and equity ratios—percent rounded to one decimal,
(2) debt-to-equity ratio—rounded to two decimals, and
(3) times interest earned—rounded to one decimal. Comment on these ratio results.
Refer to the Simon Company information in Exercise 13-6. The company’s income statements for the years ended December 31, 2017, and 2016, follow. Assume that all sales are on credit and then compute:
(1) days’ sales uncollected,
(2) accounts receivable turnover,
(3) inventory turnover, and
(4) days’ sales in inventory.
Comment on the changes in the ratios from 2016 to 2017. (Round amounts to one decimal.)
For Year Ended December 31 | 2017 | 2016 | ||
Sales | \(673,500 | \)532,000 | ||
Cost of goods sold | \(411,225 | \)345,500 | ||
Other operating expenses | 209,550 | 134,980 | ||
Interest expense | 12,100 | 13,300 | ||
Income taxes | 9,525 | 8,845 | ||
Total costs and expenses | 642,400 | 502,625 | ||
Net income | \( 31,100 | \) 29,375 | ||
Earnings per share | \( 1.90 | \) 1.80 |
Why is working capital given special attention in the process of analyzing balance sheets?
Why is working capital given special attention in the process of analyzing balance sheets?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
