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11.12 Whittaker, Inc: Income statement and ratio analysis

See attached case study for Whittaker, IncProblem Description:

Presented below are partially completed financial statements for Whittaker, Inc.:

WHITTAKER, INC.
Income Statement
For the Year Ended December 31, 2011

Sales $ ?
Cost of goods sold ?
Gross profit $ ?
Operating expenses ?
Income from operations $ ?
Interest expense ?
Income before taxes $ ?
Income taxes (20%) ?
Net income $ ?

WHITTAKER, INC.
Balance Sheet
December 31, 2011

Current assets:
Cash $ ?
Accounts receivable ?
Merchandise inventory ?
Total current assets $171,000
Property, plant and equipment, net ?
Total assets $ ?

Current liabilities $ ?
Bonds payable, 15% 70,000
Total liabilities $ ?
Owners' equity:
Common stock, $2 par value 10,000
Additional paid-in-capital 15,000
Retained earnings ?
Total owners' equity ?
Total liabilities and owners' equity $ ?

Additional information:
Financial ratios computed from these financial statements include the following:
Current ratio 1.9 to 1
Acid-test ratio 1.3 to 1
Debt/equity ratio 2.0 to 1
Inventory turnover 4.0 times
Accounts receivable turnover 6.8 times
Times interest earned 4.45 times
Gross profit ratio 40%
Return on investment 12%
Earnings per share $5.52

All sales during the year were made on account. Cash collections during the year exceeded sales
by $14,000, and no uncollectible accounts were written off.

The balance of the accounts receivable account was $57,000 on January 1, 2011.

No common stock was issued during the year.

Dividends declared and paid during the year were $7,600.

The balance of the inventory account was $48,000 on January 1, 2011.

Interest expense on the income statement relates to the 15% bonds payable; $10,000 of these bonds
were issued on May 1, 2011; the remaining amount of bonds payable were outstanding throughout
the year. All bonds were issued at face value.

Instructions:

Please proceed to the "Analysis" worksheet and complete the basic problem requirements. Complete the problem
requirements by entering appropriate amounts or formulas in shaded worksheet cells:

a. Complete the income statement and balance sheet for Whittaker, Inc. Show how each amount was determined.
b. After completing part a, use your answers to recompute each of the financial ratios provided as additional
information.

After completing the "Analysis" worksheet, please proceed to the "What the Numbers Mean" worksheet and respond
to the additional requirements presented.

Attachments

Solution Summary

Your tutorial is in Excel. Click in cells to see formula. I added a few notes so you can follow the work. I interpreted the ratios with just a word or two.

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