(See attached file for full problem description)
Prepare an income statement, balance sheet, and statement of changes in owners' equity; analyze results. The following information was obtained from the records of Breanna, Inc.:
Accounts receivable $ 10,000
Accumulated depreciation 52,000
Cost of goods sold 128,000
Income tax expense 8,000
Selling, general, and administrative expenses 34,000
Common stock (9,000 shares) 90,000
Accounts payable 15,000
Retained earnings, 1/1/04 23,000
Interest expense 6,000
Merchandise inventory 37,000
Long-term debt 40,000
Dividends declared and paid during 2004 12,000
Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2004, and that all income statement items reflect activities that occurred duringthe year ended December 31, 2004. There were no changes in paid-in capital during the year.
Prepare an income statement and statement of changes in owners' equity for the year ended December 31, 2004, and a balance sheet
At December 31, 2004, for Breanna, Inc.
Based on the financial statements that you have prepared for part a, answer the questions in parts b-e below. Provide brief explanations for each of your answers and state any
A. Assumptions you believe are necessary to ensure that your answers are correct.
B. What is the company's average income tax rate?
C. What interest rate is charged on long-term debt?
D. What is the par value per share of common stock?
E. Assumptions you believe are necessary to ensure that your answers are correct.
F. What is the company's average income tax rate?
G. What interest rate is charged on long-term debt?
QUESTION 3-18 INCLUDING CONTINUATION PROBLEM
Analysis of liquidity and profitability measures of Gateway, Inc. (Check our website for future updates.) The following summarized data (amounts in thousands) are taken from theDecember 31, 1999, and 1998, comparative financial statements of Gateway, Inc., a direct marketer and distributor of personal computers (PCs) and PC-related products:
(Amounts expressed in thousands) 1999 1998
For the Year Ended December 31:
Net sales $8,645,561 $7,467,925
Cost of goods sold 6,745,744 5,921,651
Operating income 595,670 494,227
Net income $ 427,944 $ 346,399
At December 31:
Cash and cash equivalents $1,127,654 $1,169,810
Marketable securities 208,717 158,657
Accounts receivable, net 646,339 558,851
Inventory 191,870 167,924
Other current assets 522,225 172,944
Property, plant, and equipment, net 745,660 530,988
Intangibles, net 52,302 65,944
Other noncurrent assets 459,921 65,262
Total assets $3,954,688 $2,890,380
Liabilities and Owners' Equity
Current maturities of long-term obligations $ 5,490 $ 11,415
Accounts payable 898,436 718,071
Accrued liabilities 609,132 415,265
Accrued royalties 153,840 167,873
Other current liabilities 142,812 117,050
Long-term obligations, net of current maturities 2,998 3,360
Warranty and other liabilities 124,862 112,971
Common stock and additional paid-in capital 660,070 367,552
Retained earnings 1,408,852 980,908
Other stockholders' equity (51,804) (4,085)
Total liabilities and stockholders' equity $3,954,688 $2,890,380
At December 31, 1997, total assets were $2,039,271 and total stockholders' equity was $930,044.
1. Calculate Gateway, Inc.'s working capital, current ratio, and acid-test ratio at December 31, 1999, and 1998.
2. Calculate Gateway's ROE for the years ended December 31, 1999, and 1998.
3. Calculate Gateway's ROI, showing margin and turnover, for the years ended December 31, 1999, and 1998.
4. Evaluate the company's overall liquidity and profitability.
5. Gateway, Inc., did not declare or pay any dividends during fiscal 1999 or fiscal 1998. What do you suppose is the primary reason for this?
Continuation Problem of 3.18-trend analysis.
The following historical data were derived from Gateway, Inc.'s consolidated financial statements. (It should be noted that past data are not necessarily indicative of the results of future operations.)
1995 1996 1997 1998 1999
Net sales $3,676,328 $5,035,228 $6,293,680 $7,467,925 $8,645,561
Net income 172,981 250,679 109,797 346,399 427,944
Total assets 1,124,011 1,673,411 2,039,271 2,890,380 3,954,688
Long-term obligations, net of current maturities 10,805 7,244 7,240 3,360 2,998
A. Are the trends expressed in the above data generally consistent with each other?
B. In your opinion, which of the above trends would be most
C. meaningful to a potential investor in common stock of Gateway, Inc.? Which trend would be least meaningful?
D. What other data (trend or otherwise) would you like to have
access to prior to making an investment in Gateway, Inc.?
The solution has two problems. Preparation of Income Statement and Balance Sheet for Breanna Inc and the calculation of various ratios for Gateway Inc