Problem 18-1A Comparative statement data for Farris Company and Ratzlaff Company

Question

Problem 18-1A Comparative statement data for Farris Company and Ratzlaff Company, two competitors, appear below. All balance sheet data 31, 2016. are as of December 31, 2017, and Decembe Farris CompanyRatzlaff Company 2016 2017 2016 2017 339,300 241,200 79,400 2,900 6,200 Net sales $1,560,000 1,100,000 Cost of goods sold 303,500 Operating expenses Interest expense Income tax expense Current assets Plant assets (net) Current liabilities 8,800 54,500 26,000 $314,500 83,500 78,600 19,600 497,900 141,000 125,100 66,000 75,800 36,600 29,800 107,80091,600 30,400 25,600 ong-term lablities stock, $10 98,000 498,000 122,500 122,500 173,800 147,000 35,000 25,800 par Retained earnings

Explanation / Answer

Condensed Income statement

= $93200 / ($812400 + $845600)/2

= $93200 / $829000

= 11.24%

= $9600 / ($203700 + $224500)/2

= $9600 / $214100

= 4.48%

= $93200 / ($645000 + $671800)/2

= $93200 / $658400

= 14.16%

= $9600 / ($148300 + $157500)/2

= $9600 / $152900

= 6.28%.

Particulars Farris company % Ratzlaff company % Net sales $1560000 100% $339300 100% Cost of goods sold ($1100000) 70.51% ($241200) 71.08% Gross profit $460000 29.48% $98100 28.91% Operating expenses ($303500) 19.45% ($79400) 23.40% EBIT $156500 10.03% $18700 5.51% Interest expense ($8800) 0.56% ($2900) 0.85% EBT $147700 9.46% $15800 4.65% Income tax expense ($54500) 3.49% ($6200) 1.83% Net income $93200 5.97% $9600 2.83%.

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