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Financial Statement Analysis

Below are accounting questions/calculations regarding financial statement analysis. If you could also provide the calculations used to get the solutions, I would really appreciate it!

Thanks!

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Exercise 17-13 (Algorithmic)
Ratio of liabilities to stockholders' equity and number of times interest charges are earned
The following data were taken from the financial statements of Weal Construction Inc. for December 31, 2010 and 2009:

Dec. 31, 2010 Dec. 31, 2009
Accounts payable $168,000 $178,000
Current maturities of serial bonds payable 240,000 260,000
Serial bonds payable, 10%, issued 2005, due 2015 1,160,000 1,560,000
Common stock, $1 par value 80,000 100,000
Paid-in capital in excess of par 860,000 870,000
Retained earnings 2,980,000 2,360,000

The income before income tax was $434,000 and $382,200 for the years 2010 and 2009, respectively.
a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.

Dec. 31, 2010:
Dec. 31, 2009:

b. Determine the number of times the bond interest charges are earned during the year for both years. Round to one decimal place.

Dec. 31, 2010:
Dec. 31, 2009:

>> Exercise 17-19 (Algorithmic)
Six measures of solvency or profitability
The following data were taken from the financial statements of Olvideo Enterprises Inc. for the current fiscal year. Assume that long-term investments totaled $2,088,000 throughout the year and that total assets were $3,967,000 at the beginning of the year.

Property, plant, and equipment (net) $2,665,700
Liabilities:
Current liabilities $233,000
Mortgage note payable, 10%, issued 1999, due 2015 1,159,000
Total liabilities $1,392,000
Stockholders' equity:
Preferred $4 stock, $100 par (no change during year) $835,200
Common stock, $10 par (no change during year) 835,200
Retained earnings:
Balance, beginning of year $890,000
Net income 378,000 $1,268,000
Preferred dividends $33,408
Common dividends 120,992 154,400
Balance, end of year 1,113,600
Total stockholders' equity $2,784,000
Net sales $10,314,200
Interest expense $94,294

Determine the following: (a) ratio of fixed assets to long-term liabilities, (b) ratio of liabilities to stockholders' equity, (c) ratio of net sales to assets, (d) rate earned on total assets, (e) rate earned on stockholders' equity, and (f) rate earned on common stockholders' equity. When required, round to one decimal place.

a. Ratio of fixed assets to long-term liabilities:
b. Ratio of liabilities to stockholders' equity:
c. Ratio of net sales to assets:
d. Rate earned on total assets: %
e. Rate earned on stockholders' equity: %
f. Rate earned on common stockholders' equity: %

Exercise 17-20 (Algorithmic)
Six measures of solvency or profitability
The balance sheet for Bearing Industries Inc. at the end of the current fiscal year indicated the following:

Bonds payable, 6% (issued in 2000, due in 2020) $1,000,000
Preferred $10 stock, $50 par 34,000
Common stock, $13 par 751,400

Income before income tax was $144,000, and income taxes were $21,600, for the current year. Cash dividends paid on common stock during the current year totaled $52,020. The common stock was selling for $20 per share at the end of the year.
Determine each of the following. Round to one decimal place, except as indicated otherwise below.
a. Number of Times Bond Interest Charges Are Earned: times
b. Number of Times Preferred Dividends Are Earned: times
c. Earnings per Share on Common Stock: (Enter as dollars and cents.) $
d. Price-Earnings Ratio:
e. Dividends per Share of Common Stock: (Enter as dollars and cents) $
f. Dividend Yield: %

Solution Preview

>> Exercise 17-13 (Algorithmic)
Ratio of liabilities to stockholders' equity and number of times interest charges are earned
The following data were taken from the financial statements of Weal Construction Inc. for December 31, 2010 and 2009:

Dec. 31, 2010 Dec. 31, 2009
Accounts payable $168,000 $178,000
Current maturities of serial bonds payable 240,000 260,000
Serial bonds payable, 10%, issued 2005, due 2015 1,160,000 1,560,000
Common stock, $1 par value 80,000 100,000
Paid-in capital in excess of par 860,000 870,000
Retained earnings 2,980,000 2,360,000

The income before income tax was $434,000 and $382,200 for the years 2010 and 2009, respectively.
a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.

Dec. 31, 2010:
Dec. 31, 2009:

Dec 31, 2010 = Total liabilities/Total Equity = (168,000+240,000+1,160,000)/(80,000+860,000+2,980,000) = 0.40
Dec 31, 2009 = (178,000+260,000+1,560,000)/(100,000+870,000+2,360,000) = 0.60
b. Determine the number of times the bond interest charges are earned during the year for both years. Round to one decimal place.

Dec. 31, 2010:
Dec. 31, 2009:

Number of times bond interest charges are earned = Income before tax + interest/interest
Dec 31, 2010 - Interest amount = (240,000+1,160,000) X 10% = 140,000
Number of times = (434,000+140,000)/140,000 = 4.1 times
Dec 31, 2009 - Interest amount = ...

Solution Summary

The solution explains some questions relating to Financial Statement Analysis

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