6 The condensed financial statements of Underwood Company for the years 2017 and 2018 are presented as follows. (Amounts in thousands.) This is the 2nd portion of questions. Thanks. UNDERWOOD COMPANY Balance Sheets December 31 2018 2017 Current assets Cash and cash equivalents $330 $360 Accounts receivable (net) 470 400 Inventory 460 390 Prepaid expenses 120 160 Total current assets 1,380 1,310 Investments 10 10 Property, plant, and equipment 420 380 Intangibles and other assets 530 510 Total assets $2,340 $2,210 Current liabilities $900 $790 Long-term liabilities 410 380 Stockholders’ equity—common 1,030 1,040 Total liabilities and stockholders’ equity $2,340 $2,210 UNDERWOOD COMPANY Income Statements For the Years Ended December 31 2018 2017 Sales revenue $3,800 $3,460 Costs and expenses Cost of goods sold 955 890 Selling & administrative expenses 2,400 2,330 Interest expense 25 20 Total costs and expenses 3,380 3,240 Income before income taxes 420 220 Income tax expense 126 66 Net income $294 $154 Compute the following ratios for 2018 and 2017. d.Return on assets. (Assets on 12/31/16 were $1,900.) e.Return on common stockholders’ equity. (Stockholders’ equity on 12/31/16 was $900.) f. Debt to assets ratio.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
6 The condensed financial statements of Underwood Company for the years 2017 and 2018 are presented as follows. (Amounts in thousands.)
This is the 2nd portion of questions. Thanks.
|
UNDERWOOD COMPANY |
||
|
2018 |
2017 |
|
|
Current assets |
||
|
Cash and cash equivalents |
$330 |
$360 |
|
|
470 |
400 |
|
Inventory |
460 |
390 |
|
Prepaid expenses |
120 |
160 |
|
Total current assets |
1,380 |
1,310 |
|
Investments |
10 |
10 |
|
Property, plant, and equipment |
420 |
380 |
|
Intangibles and other assets |
530 |
510 |
|
Total assets |
$2,340 |
$2,210 |
|
Current liabilities |
$900 |
$790 |
|
Long-term liabilities |
410 |
380 |
|
|
1,030 |
1,040 |
|
Total liabilities and stockholders’ equity |
$2,340 |
$2,210 |
|
|
|
UNDERWOOD COMPANY |
||
|
2018 |
2017 |
|
|
Sales revenue |
$3,800 |
$3,460 |
|
Costs and expenses |
||
|
Cost of goods sold |
955 |
890 |
|
Selling & administrative expenses |
2,400 |
2,330 |
|
Interest expense |
25 |
20 |
|
Total costs and expenses |
3,380 |
3,240 |
|
Income before income taxes |
420 |
220 |
|
Income tax expense |
126 |
66 |
|
Net income |
$294 |
$154 |
|
|
Compute the following ratios for 2018 and 2017.
d.Return on assets. (Assets on 12/31/16 were $1,900.)
e.Return on common stockholders’ equity. (Stockholders’ equity on 12/31/16 was $900.)
f. Debt to assets ratio.
g.Times interest earned.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
