ACC P14-3 – Clarence Corporation
Question # 00024286
Posted By:
Updated on: 08/27/2014 01:59 AM Due on: 08/27/2014
P14-3 – Perform ratio analysis and evalute financial position and operating results
Managerial Accounting, 6th Edition, by Weygandt, Kieso, and Kimmel
Primer on Using Microsoft Excel in Accounting by Rex A Schildhouse
Problem P14-3 Condensed balance sheet and income statement data for Clarence Corporation appear below:
CLARENCE CORPORATION
Balance Sheets
December 31
2014
2013
Cash
$25,000
$20,000
Receivables (net)
50,000
45,000
Other current assets
90,000
95,000
Investments
75,000
70,000
Plant and equipment (net)
400,000
370,000
$640,000
$600,000
Current liabilities
70,000
75,000
Long-term debt
80,000
85,000
Common stock, $10 par
345,000
315,000
Retained earnings
145,000
125,000
$640,000
$600,000
2012
$18,000
48,000
64,000
45,000
358,000
$533,000
70,000
50,000
300,000
113,000
$533,000
CLARENCE CORPORATION
Income Statement
For the Year Ended December 31
2014
$740,000
40,000
700,000
420,000
280,000
238,000
$42,000
Sales revenue
Less: Sales returns and allowances
Net sales
Cost of goods sold
Gross profit
Operating expenses (including income taxes)
Net income
Additional information:
1. The market price of Clarence's common stock was
for 2012, 2013, and 2014, respectively.
2. All dividends were paid in cash.
Instructions:
(a) Compute the following ratios for 2013 and 2014.
(a) (1) Profit margin.
2013
2014
(a) (2) Asset turnover.
2013
2014
$4.00
2013
$700,000
60,000
640,000
400,000
240,000
208,000
$32,000
$5.00
and
$8.00
=
=
=
times
=
times
(a) (3) Earnings per share. (Weighted average common shares in 2014 were
31,000
2013
32,000
and in 2013 were
=
2014
(a) (4) Price-earnings.
2013
2014
(a) (5) Payout.
2013
2014
(a) (6) Debt to total assets.
2013
2014
=
=
times
=
times
=
=
=
=
(b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2013
to 2014 of Clarence Corporation.
Managerial Accounting, 6th Edition, by Weygandt, Kieso, and Kimmel
Primer on Using Microsoft Excel in Accounting by Rex A Schildhouse
Problem P14-3 Condensed balance sheet and income statement data for Clarence Corporation appear below:
CLARENCE CORPORATION
Balance Sheets
December 31
2014
2013
Cash
$25,000
$20,000
Receivables (net)
50,000
45,000
Other current assets
90,000
95,000
Investments
75,000
70,000
Plant and equipment (net)
400,000
370,000
$640,000
$600,000
Current liabilities
70,000
75,000
Long-term debt
80,000
85,000
Common stock, $10 par
345,000
315,000
Retained earnings
145,000
125,000
$640,000
$600,000
2012
$18,000
48,000
64,000
45,000
358,000
$533,000
70,000
50,000
300,000
113,000
$533,000
CLARENCE CORPORATION
Income Statement
For the Year Ended December 31
2014
$740,000
40,000
700,000
420,000
280,000
238,000
$42,000
Sales revenue
Less: Sales returns and allowances
Net sales
Cost of goods sold
Gross profit
Operating expenses (including income taxes)
Net income
Additional information:
1. The market price of Clarence's common stock was
for 2012, 2013, and 2014, respectively.
2. All dividends were paid in cash.
Instructions:
(a) Compute the following ratios for 2013 and 2014.
(a) (1) Profit margin.
2013
2014
(a) (2) Asset turnover.
2013
2014
$4.00
2013
$700,000
60,000
640,000
400,000
240,000
208,000
$32,000
$5.00
and
$8.00
=
=
=
times
=
times
(a) (3) Earnings per share. (Weighted average common shares in 2014 were
31,000
2013
32,000
and in 2013 were
=
2014
(a) (4) Price-earnings.
2013
2014
(a) (5) Payout.
2013
2014
(a) (6) Debt to total assets.
2013
2014
=
=
times
=
times
=
=
=
=
(b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in financial position and operating results from 2013
to 2014 of Clarence Corporation.
-
Rating:
/5
Solution: ACC P14-3 – Clarence Corporation Solution