ACCTG 230 Chapter Notes - Chapter 09: Sinking Fund, Capital Structure, Interest Expense
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LUXIO GOLF CORP. | ||||
2009 Income Statement | ||||
Sales | $ 285,760.00 | |||
Cost of Goods Sold | 205,132.00 | |||
Depreciation | 21,950.00 | |||
Earnings Before Interest & Tax | $ 58,678.00 | |||
Interest Paid | 9,875.00 | |||
Taxable Income | $ 48,803.00 | |||
Taxes (35%) | 17,081.05 | |||
Net Income | $ 31,721.95 | |||
Dividends | $ 18,000.00 | |||
Addition to Retained Earnings | 13,721.95 | |||
LUXIO GOLF CORP. | |||||||||||
2008 & 2009 Balance Sheets | |||||||||||
Assets | Liabilities & Owner's Equity | ||||||||||
2008 | 2009 | 2008 | 2009 | ||||||||
Current Assets | Current Liabilities | ||||||||||
Cash | $ 18,270.00 | $ 22,150.00 | 7.75% | Accounts Payable | $ 16,215.00 | $ 17,318.00 | |||||
Accounts Receivable | 12,315.00 | 13,865.00 | 4.85% | Notes Payable | 8,000.00 | 10,000.00 | |||||
Inventory | 21,584.00 | 24,876.00 | 8.71% | Other | 11,145.00 | 14,451.00 | |||||
Total Assets | $ 52,169.00 | $ 60,891.00 | Total | $ 35,360.00 | $ 41,769.00 | ||||||
Long-term Debt | $ 80,000.00 | $ 85,000.00 | |||||||||
Fixed Assets | |||||||||||
Net Plant & Equipment | $168,326.00 | $184,735.00 | Owner's Equity | ||||||||
Common Stock & paid in Surplus | $ 20,000.00 | $ 20,000.00 | |||||||||
Retained Earnings | 85,135.00 | 98,857.00 | |||||||||
Total | $105,135.00 | $118,857.00 | |||||||||
Total Assets | $220,495.00 | $245,626.00 | Total Liabilities & Owner's Equity | $220,495.00 | $245,626.00 | ||||||
- Using the financial statements for 2009 as your ‘base’, assume that Luxio’s sales are 20% higher for 2010. Use this projection to prepare the pro forma statements following the requirements listed below. Assume the change in sales is permanent.
- For the Income Statement:
- Cost of Goods Sold rate is expected to remain constant;
- ‘Depreciation’ and ‘Interest paid’ expenses are expected not to change;
- The Tax rate is expected to decrease to 32%; and
- Management is expected to increase the amount of dividends paid by 5% (therefore, the Dividend payout rate will increase by 5%).
- For the Balance Sheet:
- ‘Current assets’ change in direct proportion to sales;
- ‘Fixed assets’ are being operated at 100% of capacity;
- ‘Accounts payable’ changes in direct proportion to sales;
- ‘Notes payable’ and ‘Other’ current liabilities do not change;
- ‘Common stock’ remains unchanged; and
- Use ‘Long-term debt’ as the plug variable.
- Determine the amount of External Financing Needed (EFN) under the pro forma assumptions. Detail how this external financing is distributed.
A fire destroyed your firmâs ending balance sheet and income statement after the year-end
but before the financial statements are released. However, you have been successful in obtaining the
numbers for the beginning balance sheet and the statement of cash flows, which are provided to you and
your team members in Excel format. Fields representing the missing balance sheet and income statement
are End of year2 in the Excel sheet
CONSOLIDATED BALANCE SHEETS (USD $) | End of year 2 | End of year 1 | |
In Thousands, unless otherwise specified | |||
Current assets: | |||
Cash and cash equivalents | ã | 598 | |
Receivables, net | ã | 230 | |
Inventories, net | ã | 2309 | |
Other current assets | ã | 47 | |
Total current assets | ã | 3184 | |
Property and equipment, net of accumulated depreciation | ã | 1292 | |
Assets held for sale | ã | 1 | |
Goodwill | ã | 76 | |
Intangible assets, net | ã | 29 | |
Other assets, net | ã | 32 | |
Assets, Total | ã | 4614 | |
Current liabilities: | ã | 0 | |
Current portion of long-term debt | ã | 0 | |
Accounts payable | ã | 2030 | |
Accrued expenses | ã | 380 | |
Other current liabilities | ã | 150 | |
Total current liabilities | ã | 2560 | |
Long-term debt | ã | 604 | |
Other long-term liabilities | ã | 239 | |
Commitments and Contingencies | ã | 0 | |
Stockholders Equity Attributable to Parent [Abstract] | ã | 0 | |
Preferred stock, nonvoting, $00001 par value | ã | 0 | |
Common stock, voting, $00001 par value | ã | 0 | |
Additional paid-in capital | ã | 520 | |
Treasury stock, at cost | ã | -27 | |
Accumulated other comprehensive income (loss) | ã | 3 | |
Retained earnings | ã | 715 | |
Total stockholders equity | ã | 1210 | |
Liabilities and Stockholders Equity, Total | ã | 4613 | |
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Year 2 | ||
Net sales | ã | ||
Cost of sales, including purchasing and warehousing costs | ã | ||
Gross profit | ã | ||
Selling, general and administrative expenses | ã | ||
Operating income | ã | ||
Interest expense | ã | ||
Other income, net | ã | ||
Total other, net | ã | ||
Income before provision for income taxes | ã | ||
Provision for income taxes | ã | ||
Net income | ã | ||
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | ||
In Thousands, unless otherwise specified | Year 2 | ||
Cash flows from operating activities: | |||
Net income | $392 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 208 | ||
Share-based compensation | 13 | ||
Loss on property and equipment, net | 1 | ||
Other | 2 | ||
Provision for deferred income taxes | -2 | ||
Excess tax benefit from share-based compensation | -16 | ||
Increase Decrease in Operating Capital | |||
Receivables, net | -32 | ||
Inventories, net | -204 | ||
Other assets | 11 | ||
Accounts payable | 113 | ||
Accrued expenses | 63 | ||
Other liabilities | -4 | ||
Net cash provided by operating activities | 545 | ||
Cash flows from investing activities: | |||
Purchases of property and equipment | -196 | ||
Payments to Acquire Businesses, Gross | -186 | ||
Sale of certain assets of acquired business | 19 | ||
Proceeds from sales of property and equipment | 1 | ||
Net cash used in investing activities | -362 | ||
Cash flows from financing activities: | |||
(Decrease) increase in bank overdrafts | -3 | ||
Decrease in financed vendor accounts payable | 0 | ||
Issuance of senior unsecured notes | 449 | ||
Payment of debt related costs | -9 | ||
Borrowings under credit facilities | 0 | ||
Payments on credit facilities | 0 | ||
Dividends paid | -18 | ||
Proceeds from the issuance of common stock, primarily exercise of stock options | 4 | ||
Tax withholdings related to the exercise of stock appreciation rights | -22 | ||
Excess tax benefit from share-based compensation | 16 | ||
Repurchase of common stock | -81 | ||
Contingent payment accrued on acquisitions | 5 | ||
Other | -1 | ||
Net cash provided by (used in) financing activities | 331 | ||
Net increase (decrease) in cash and cash equivalents | 514 | ||
Cash and cash equivalents, beginning of period | 598 | ||
Cash and cash equivalents, end of period | 1,112 | ||
Supplemental cash flow information: | |||
Interest paid | 35 | ||
Income tax payments | 219 | ||
Non-cash transactions: | |||
Accrued purchases of property and equipment | 21 | ||
Retirement of common stock | 0 | ||
Contingent consideration accrued on acquisitions | 0 | ||
Changes in other comprehensive income | 1 | ||
Declared but unpaid cash dividends | $4 |
Auditing and Assurance service 16th edition, alvin arens, page258-259
Pinnacle Manufacturing: part I
A) refer to the finanical statement data in figure 8-9 for thecurrent year and prior two years. analyze the year-to-year changein account balance for at least five financial statement lineitems. documents the trend analysis in a format similar to thefollowing:
Account Balance _________%change 2015-2016___________%change2014-2015
Net sales
B) calculate at least five common ratios shown in chapter 7 onpage 196-199 and document them in format similar to thefollowing:
Ratio____________________2016__________2015________2014
current ratio
C) based on the analytical procedures calculated in parts a andb, summarize your observation about pinnacle's business, includingyour assessment of the clients's business risk.
D) go to the pinnacle link on the textbookweb site(www.personhighered.com/arens) and open the pinnacle incomestatement, which is located in the pinnacle income statementworksheet of the pinnacle_financials excel file. use the incomestatement information to prepare a common-size income statement forall three years (see figure 8-4 pg. 233) for an example. use theinformation to identify accounts for which you believe there is aconcern about material misstatements. use a format to thefollowing:
account balance____________________estimate of $amount ofpotential misstatement
E) use the three divisional income statements in thepinnacle_financials excel file on the web site to prepare acommon-size income statement for each of the three divisions forall three years. each division's income statement is in separateworksheet excel file. use the information to identify accounts forwhich you believe there is a concern about material misstatements.use a format similar to the one in requirement D.
F) explain whether you believe the information is requirement Dor E provides the most useful data for evaluting the potential formisstatements. explain why.
G) analyze the account balances for accounts receivable,inventory, and short/current long-tern debt. describe anyobservation about those accounts and discuss additional informationyou want to consider duuring the current year audit.
H) based on your calculations, assess thelikelihood(high,medium,low) that pinnacle is likely to failfinancially in the next 12 months.
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