The following accounts (in no particular order) are for Perfect Reb Corporation
ID: 2423414 • Letter: T
Question
The following accounts (in no particular order) are for Perfect Reb Corporation for the fiscal year ended December
31, 2015. (S/T = Short-Term; L/T = Long-Term)
REQUIRED:
A) Calculate Perfect Reb Corporation’s net income or net loss for the 2015 fiscal year. You may solve this in any
manner that you wish, but it is highly recommended to prepare a multiple step income statement.
B) Using proper form, prepare Perfect Reb Corporation’s balance sheet for 2015.
C) Using the information provided, solve for the requested ratios and respond to the corresponding questions.
Common Stock (13,000 shares
outstanding)
$52,000 Sales Discounts $5,000
Accrued Expenses (Payables)
20,000 Income Tax Expense (25% of IBIT) ???
Miscellaneous Operating Expenses
50,000 Cash 142,000
Accounts Receivable
20,000 Interest Expense 4,000
Buildings
186,000 Marketable Securities 62,000
Retained Earnings
??? Notes Payable (due in 5 years) 12,000
Wages Expense
60,000 Rent Expense 11,000
Inventory
40,000 Unearned Revenue 19,000
Accumulated Depreciation – Buildings
48,000 Allowance for Uncollectible
Accounts
15,000
Accounts Payable
41,000 Sales 433,000
Gain on Sale of Equipment
62,000 Mortgage Payable ($12,000 S/T) 144,000
Land
50,000 Sales Returns & Allowances 12,000
Bad Debt Expense
2,000 Depreciation Expense 11,000
L/T Investments
7,000 Cost of Goods Sold 109,000
Notes Receivable ($2,000 S/T)
13,000 Interest Revenue 3,000
A) NET INCOME (10 points) – SHOW ALL WORK AND CALCULATIONS!!!!
B) CLASSIFIED BALANCE SHEET (15 points)
Perfect Reb Corporation
Balance Sheet
December 31, 2015
ASSETS LIABILITIES
Current Assets Current Liabilities
Total Current Liabilities
Total Current Assets
Long-Term Assets Long-Term Liabilities
Total Long-Term Assets Total Long Term Liabilities
Fixed Assets
Total Liabilities
EQUITY
Total Fixed Assets
Total Equity
TOTAL ASSETS
TOTAL LIABILITIES & EQUITY
C) RATIOS AND ANALYSIS (15 points):
Use the financial statements and additional information to calculate the ratios. Round your answers to two decimal
places. Be sure to label your answer correctly (example, %, times, days, etc.). IF AN ANSWER SHOULD BE
EXPRESSED AS A PERCENTAGE, DO NOT LEAVE IT IN DECIMAL FORM!!!! (i.e. 0.5015 = 50.15%!!!!)
Previous (December 31, 2014) year end balances for:
Accounts receivable, net of allowance $2,000
Inventory 15,000
Stockholders’ Equity 139,000
Market price per share for one share of common stock at Dec 31, 2015 $94.50/share
Dividend per share for one share of common stock for FYE Dec 31, 2015 $1.25/share
No new shares of common stock were issued during 2015. The company’s credit policy is net 15.
RATIO CALCULATION ANSWER
1) Quick (Acid-Test) Ratio (2 points)
2) Dividend Yield (2 points)
3) Gross Profit Percentage (2 points)
4) Average Days’ Sales Uncollected 2 points)
5) Inventory Turnover (2 points)
6) Price-Earnings Ratio (2 points)
7) Using the liquidity ratios (and general accepted norms for the current ratio and quick/acid-test ratio), comment
on the company’s financial position. (3 points)
Explanation / Answer
Sales 433,000
less:sales discount (5,000)
sales return (12,000) $416,000
less: cost of goods sold 109,000
Gross profit $50,000
Less:expenses
Miscellaneous expense 50,000
Wage expense 60,000
Rent expense 11,000
Bad debt expense 2,000
Depreciation expense 11,000 (134,000)
Income before interest and tax 173,000
Less:interest 4,000
Income after interest 169,000
Other revenues
Gain on sale of equipment 62,000
interest revenue 3,000 65,000
Net income before tax 234,000
Less:Tax @25% 58,500
Net income $175,500
Balance sheet
Current assets Current liabilties
Cash 142,000 Accrued expense 20,000
Account receivable 20,000 unearned revenue 19,000
less:allowance 15,000 5,000 Accounts payable 41,000
Marketable securities 62,000 Mortgage payable 12,000
inventory 40,000
notes receivable 2,000 long term liabiltiies
notes payable 12,000
Investments 7,000 mortgage payable 132,000
notes receivable 9,000
PP&E Common stock 52,000
Buildings 186,000 Retained earnings 167,000
less:Dep 48,000 138,000
total Assets $455,000 total $455,000
1)Quick ratio =( cash + marketable securities + notes receivable + a/c recievab;e)/ current liabilties
= 236,000/92,000
=2.56
2) Dividends yeild = annual dividend per share/ price per share
= 1.25/94.5
= 0.013
3)Gross profit = 302,000/416,000
= 72.60%
4) Average days sales collected = 365* a/c receivable
net credit sales
5) Inventory turnover =cost of goods sold/ inventory
= 109,000/40,000 = 2.725 times
6)PE ratio = price per share/ earnings per share
Earnings per share = 125,500/13,000 = 9.65 per share
PE = 94.5/9.65 = 9.79
7) Current ratio = 266,000/92,000 = 2.89
Its liquidity postion is good since ratio of more than 1 is considered good
Sales 433,000
less:sales discount (5,000)
sales return (12,000) $416,000
less: cost of goods sold 109,000
Gross profit $50,000
Less:expenses
Miscellaneous expense 50,000
Wage expense 60,000
Rent expense 11,000
Bad debt expense 2,000
Depreciation expense 11,000 (134,000)
Income before interest and tax 173,000
Less:interest 4,000
Income after interest 169,000
Other revenues
Gain on sale of equipment 62,000
interest revenue 3,000 65,000
Net income before tax 234,000
Less:Tax @25% 58,500
Net income $175,500