Blige Inc. Comparative Retained Earnings Statement For the Years Ended December
ID: 2758664 • Letter: B
Question
Blige Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 2014 and 2013
2014
2013
Retained earnings, January 1
$2,498,375
$2,124,425
Add net income for year
524,400
435,100
Total
$3,022,775
$2,559,525
Deduct dividends
On preferred stock
$7,000
$7,000
On common stock
54,150
54,150
Total
$61,150
$61,150
Retained earnings, December 31
$2,961,625
$2,498,375
Blige Inc.
Comparative Income Statement
For the Years Ended December 31, 2014 and 2013
2014
2013
Sales
$3,697,600
$3,401,800
Sales returns and allowances
18,400
11,960
Net sales
$3,679,200
$3,389,840
Cost of goods sold
1,403,060
1,290,820
Gross profit
$2,276,140
$2,099,020
Selling expenses
$783,890
$941,250
Administrative expenses
667,750
552,790
Total operating expenses
1,451,640
1,494,040
Income from operations
$824,500
$604,980
Other income
43,400
38,620
$867,900
$643,600
Other expense (interest)
272,000
149,600
Income before income tax
$595,900
$494,000
Income tax expense
71,500
58,900
Net income
$524,400
$435,100
Blige Inc.
Comparative Balance Sheet
December 31, 2014 and 2013
Dec. 31, 2014
Dec. 31, 2013
Assets
Current assets
Cash
$784,930
$465,590
Temporary investments
1,188,000
771,550
Accounts receivable (net)
678,900
635,100
Inventories
511,000
394,200
Prepaid expenses
148,492
93,120
Total current assets
$3,311,322
$2,359,560
Long-term investments
1,415,091
29,456
Property, plant, and equipment (net)
3,740,000
3,366,000
Total assets
$8,466,413
$5,755,016
Liabilities
Current liabilities
$1,034,788
$316,641
Long-term liabilities
Mortgage note payable, 8%, due 2019
$1,530,000
$0
Bonds payable, 8%, due 2015
1,870,000
1,870,000
Total long-term liabilities
$3,400,000
$1,870,000
Total liabilities
$4,434,788
$2,186,641
Stockholders' Equity
Preferred $0.70 stock, $50 par
$500,000
$500,000
Common stock, $10 par
570,000
570,000
Retained earnings
2,961,625
2,498,375
Total stockholders' equity
$4,031,625
$3,568,375
Total liabilities and stockholders' equity
$8,466,413
$5,755,016
Required:
Determine the following measures for 2014, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Some calculations are to use an average calculation as noted in the textbook. This means (beginning $$$ – ending $$$)/2.
Assume 365 days a year.
Working capital
Current ratio
Quick ratio
Accounts receivable turnover
Inventory turnover
Ratio of fixed assets to long-term liabilities
Ratio of liabilities to stockholders' equity
Blige Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 2014 and 2013
2014
2013
Retained earnings, January 1
$2,498,375
$2,124,425
Add net income for year
524,400
435,100
Total
$3,022,775
$2,559,525
Deduct dividends
On preferred stock
$7,000
$7,000
On common stock
54,150
54,150
Total
$61,150
$61,150
Retained earnings, December 31
$2,961,625
$2,498,375
Explanation / Answer
1. Current ratio = current assets / current liabilities
Current ratio for 2014 = 3311322 /3400000 = 0.9739
Current ratio for 2013 = 2359560 /1870000 = 1.261
2. Quick ratio = (Current Assets - Inventory) / Current liabilities
Quick ratio for 2014 = (3311322 - 511000)/343400000 = 0.8236
Quick ratio for 2013 = (2359560 - 394200 /1870000 = 1.0509
3. Accounts Receivable Turnover = Credit Sales / Average Receivable Balance.