Sanborn Corporation's condensed comparative income statement and balance sheet for20X8 and 20X7 appears below.Sanborn CorporationComparative Income Statements in €For the Years Ended December 31, 20X8 and 20X720X820X73,146,4003,276,800(2,088,800) (2,008.400)1,188,0001,138,000Net SalesCost of goodsGross marginOperating expensesSelling expensesGeneral & administrative expensesTotal operating expensesIncome from operationsInterest expenseNet income before taxesIncome taxesNet income after taxesEarnings per share(476,800)(447,200)(924,000)264,000(65,600)198,400(62,400)136,0003.40(518,000)(423,200)(941,200)196,800(39,200)157,600(56,800)100,8002.52 AssetsFixed assets:Property, plantequipment (net)Total fixed assetsCurrent assets:InventoryandAccounts Receivable (net)Cash and cash equivalentsTotal current assetsTotal assets20X8750,000750,000574,800235,60081,200891,6001,641,600Sanborn CorporationComparative Balance Sheets in €December 31, 20X8 and 20X7Liabilities20X7720,000720,000594,800229,20040,800864,8001,584,800Stockholders' EquityStockholders' equity:Common stock 10 parvalueRetained earningsTotalequityLong-term liabilities:Bonds payableTotalstockholders'long-termliabilitiesCurrent liabilities:Notes payableAccounts payableTotal current liabilitiesTotal liabilitiesTotal liabilitiesstockholders' equity20X8400,000374,000774,000400,000400,000200,000267.600467,600867,600& 1,641,60020X7400,000307,600707,600400,000477,200877,200877,2001,584,800Comment on the results in requirements 1 and 2 by identifying favourable andunfavourable changes in the components and composition of the statementsPrepare schedules showing the amount and percentage changes from 20X7 to 20X8for the comparative income statements and the balance sheetsPrepare common-size income statements and balance sheets for 20X7 and 20X8

Schedule of Amount and Percentage Changes: a) Comparative Income Statement: Sanborn Corporation…

Answered: Prepare schedules showing the amount…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sanborn Corporation's condensed comparative income statement and balance sheet for
20X8 and 20X7 appears below.
Sanborn Corporation
Comparative Income Statements in €
For the Years Ended December 31, 20X8 and 20X7
20X8
20X7
3,146,400
3,276,800
(2,088,800) (2,008.400)
1,188,000
1,138,000
Net Sales
Cost of goods
Gross margin
Operating expenses
Selling expenses
General & administrative expenses
Total operating expenses
Income from operations
Interest expense
Net income before taxes
Income taxes
Net income after taxes
Earnings per share
(476,800)
(447,200)
(924,000)
264,000
(65,600)
198,400
(62,400)
136,000
3.40
(518,000)
(423,200)
(941,200)
196,800
(39,200)
157,600
(56,800)
100,800
2.52

Assets
Fixed assets:
Property, plant
equipment (net)
Total fixed assets
Current assets:
Inventory
and
Accounts Receivable (net)
Cash and cash equivalents
Total current assets
Total assets
20X8
750,000
750,000
574,800
235,600
81,200
891,600
1,641,600
Sanborn Corporation
Comparative Balance Sheets in €
December 31, 20X8 and 20X7
Liabilities
20X7
720,000
720,000
594,800
229,200
40,800
864,800
1,584,800
Stockholders' Equity
Stockholders' equity:
Common stock 10 par
value
Retained earnings
Total
equity
Long-term liabilities:
Bonds payable
Total
stockholders'
long-term
liabilities
Current liabilities:
Notes payable
Accounts payable
Total current liabilities
Total liabilities
Total liabilities
stockholders' equity
20X8
400,000
374,000
774,000
400,000
400,000
200,000
267.600
467,600
867,600
& 1,641,600
20X7
400,000
307,600
707,600
400,000
477,200
877,200
877,200
1,584,800
Comment on the results in requirements 1 and 2 by identifying favourable and
unfavourable changes in the components and composition of the statements
Prepare schedules showing the amount and percentage changes from 20X7 to 20X8
for the comparative income statements and the balance sheets
Prepare common-size income statements and balance sheets for 20X7 and 20X8

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Follow-up Question

Balances for selective accounts of Sanborn at the end of 20X6 were:
accounts receivable (net) 206,800; inventory 547,200; total assets 1,465,600; accounts payable 386,600; and stockholders’ equity 641,200.

Can we perform a comprehensive ratio analysis calculating the ratios mentioned below and round all answers to one decimal place:

1. A liquidity analysis by calculating for each year the: current ratio; acid-test ratio; receivable turnover; average collection period; inventory turnover; average inventory on hand period; accounts payable turnover; average accounts payable outstanding period.

2. A profitability analysis by calculating for each year the net profit margin; asset turnover; return on total assets (using net income after taxes and ignoring interest expenses) and return on equity.

Whether each ratio improved or deteriorated from 20X7 to 20X8 (use F for favorable and U for unfavorable and consider change of .1 or less to be neutral)?

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Follow-up Question

Why does a decrease in receivable turnover create the need for cash from
operating activities? (4%)
b. Why would ratios that include one balance sheet account and one income
statement account such as receivable turnover or return on assets, be
questionable if they came from quarterly or other interim financial reports?

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