1.Comment on the management's ability to manage the accounts receivable over the past two years. 2. What is a possible explanation for the decrease to the Wages and Salaries expense? 3. Explain the reason for the increase to the bank loan. 4. Comment on the current ratio. Is is good/bad? Why 5. Using all the information, make comments about the company’s overall performance over the past 2 years. • Complete this question using point form but fully justify your findings. • Comment on liquidity, solvency, and profitability • Would you recommend with company to investors? RETURN OF EQUITY IS 12.7%

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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1.Comment on the management's ability to manage the accounts receivable over the past two years.

2. What is a possible explanation for the decrease to the Wages and Salaries expense?

3. Explain the reason for the increase to the bank loan.

4. Comment on the current ratio. Is is good/bad? Why

5. Using all the information, make comments about the company’s

overall performance over the past 2 years.

• Complete this question using point form but fully justify your

findings.

• Comment on liquidity, solvency, and profitability

• Would you recommend with company to investors?

RETURN OF EQUITY IS 12.7%

 

9
Perry's Carpentry
Comparative Income Statement
For the years ended December 31, 20-6, 20-5
10
11
12
13
Increase (+) Decrease (-)
$'s
14
20-6
20-5
%
15
Revenue
16
Sales
152,500 133,400
19,100
14.3%
2,040
131,360
17
Sales Returns and Allowances
2,900
860
42.2%
18
Net Sales
149,600
18,240
13.9%
19
20
Cost of Goods Sold
| 21
Inventory January 1
24,000
20,300
3,700
18.2%
22
104,300
128,300
23,100
Net Purchases
86,240
18,060
21.0%
23
Cost of Goods for Sale
106,540
21,760
20.4%
24 Inventory December 31
18,000
5,100
28.3%
88,540
42,820
25
Cost of Goods Sold
105,200
44,400
16,660
1,580
18.8%
26
Gross Profit
3.7%
27
Operating Expenses
29 Advertising
Wages and Salaries
Auto expense
Depreciation
Telephone
34
28
1,530
10,700
2,030
1,070
1,390
1,450
1,110
1,400
11,590
1,970
1,240
1,110
1,370
130
9.3%
30
-890
-7.7%
31
60
3.0%
32
-170
-13.7%
33
280
25.2%
Utilities
80
5.8%
35
Bad Debt
965
145
15.0%
Interest & Bank Charges
Total Operating Expenses
38
4,510
23,790
36
4,380
24,025
130
-235
3.0%
-1.0%
37
39
Net income
20,610
18,795
1,815
9.7%
| 40
Transcribed Image Text:9 Perry's Carpentry Comparative Income Statement For the years ended December 31, 20-6, 20-5 10 11 12 13 Increase (+) Decrease (-) $'s 14 20-6 20-5 % 15 Revenue 16 Sales 152,500 133,400 19,100 14.3% 2,040 131,360 17 Sales Returns and Allowances 2,900 860 42.2% 18 Net Sales 149,600 18,240 13.9% 19 20 Cost of Goods Sold | 21 Inventory January 1 24,000 20,300 3,700 18.2% 22 104,300 128,300 23,100 Net Purchases 86,240 18,060 21.0% 23 Cost of Goods for Sale 106,540 21,760 20.4% 24 Inventory December 31 18,000 5,100 28.3% 88,540 42,820 25 Cost of Goods Sold 105,200 44,400 16,660 1,580 18.8% 26 Gross Profit 3.7% 27 Operating Expenses 29 Advertising Wages and Salaries Auto expense Depreciation Telephone 34 28 1,530 10,700 2,030 1,070 1,390 1,450 1,110 1,400 11,590 1,970 1,240 1,110 1,370 130 9.3% 30 -890 -7.7% 31 60 3.0% 32 -170 -13.7% 33 280 25.2% Utilities 80 5.8% 35 Bad Debt 965 145 15.0% Interest & Bank Charges Total Operating Expenses 38 4,510 23,790 36 4,380 24,025 130 -235 3.0% -1.0% 37 39 Net income 20,610 18,795 1,815 9.7% | 40
41
Perry's Carpentry
Comparative Balance Sheet
December 31, 20-6, 20-5
42
43
44
45
46
Increase (+) Decrease (-)
$'s
47
20-6
20-5
%
48
49
Assets
50
Current Assets
Cash
7,400
3,360
23,100
300
34,160
51
4,670
3,510
21,000
200
29,380
2,730
58.5%
52
Accounts Receivable
-150
-4.3%
2,100
100
4,780
53
Inventory
Prepaid Expenses
10.0%
50.0%
16.3%
54
55
Total Current Assets
56
57
Capital Equipment
Office Equipment
1,030
25,100
22.5%
167.3%
0.0%
0.0%
13.8%
58
5,600
40,100
50,000
120,000
215,700
4,570
15,000
59
Vehicles
60
Land
Building
Total Capital Equipment
50,000
120,000
189,570
61
62
26,130
63
64
Total Assets
249,860
218,950
30,910
14.1%
65
66
Liabilities
67
Current Liabilities
Accounts Payable
1,760
1,760
68
2,010
2,010
-250
-12.4%
69
Total Current Liabilities
-250
-12.4%
70
Long-Term Liabilities
Long-term bank loan
Mortgage Payable
Total Long-Term Liabilities
71
21,400
54,000
75,400
11,400
-850
10,550
114.0%
-1.5%
72
10,000
54,850
64,850
73
74
16.3%
75
76
Total Liabilities
77,160
66,860
10,300
15.4%
77
78
Owner's Equity
79
G. Perry, Capital
172,700
152,090
20,610
13.6%
80
81
Total Liabilities and Owner's Equ 249,860
218,950
30,910
14.1%
82
Transcribed Image Text:41 Perry's Carpentry Comparative Balance Sheet December 31, 20-6, 20-5 42 43 44 45 46 Increase (+) Decrease (-) $'s 47 20-6 20-5 % 48 49 Assets 50 Current Assets Cash 7,400 3,360 23,100 300 34,160 51 4,670 3,510 21,000 200 29,380 2,730 58.5% 52 Accounts Receivable -150 -4.3% 2,100 100 4,780 53 Inventory Prepaid Expenses 10.0% 50.0% 16.3% 54 55 Total Current Assets 56 57 Capital Equipment Office Equipment 1,030 25,100 22.5% 167.3% 0.0% 0.0% 13.8% 58 5,600 40,100 50,000 120,000 215,700 4,570 15,000 59 Vehicles 60 Land Building Total Capital Equipment 50,000 120,000 189,570 61 62 26,130 63 64 Total Assets 249,860 218,950 30,910 14.1% 65 66 Liabilities 67 Current Liabilities Accounts Payable 1,760 1,760 68 2,010 2,010 -250 -12.4% 69 Total Current Liabilities -250 -12.4% 70 Long-Term Liabilities Long-term bank loan Mortgage Payable Total Long-Term Liabilities 71 21,400 54,000 75,400 11,400 -850 10,550 114.0% -1.5% 72 10,000 54,850 64,850 73 74 16.3% 75 76 Total Liabilities 77,160 66,860 10,300 15.4% 77 78 Owner's Equity 79 G. Perry, Capital 172,700 152,090 20,610 13.6% 80 81 Total Liabilities and Owner's Equ 249,860 218,950 30,910 14.1% 82
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