Rainbow Paint Co.'s comparative financial statements for the years ending December 31, 2006 and 2005 are as follows. The market price of Rainbow Paint Co.'s common stock was $30 on December 31, 1999 and $25 on December 31, 2006. Rainbow Paint Co. Comparative Income Statement For the Years Ended December 31, 2006 and 2005 2006 2005 Sales $ 5,125,000 $ 3,257,600 Sales returns and allowances 125,000 57,600 Net sales $ 5,000,000 $ 3,200,000 Cost of goods sold 3,400,000 2,080,000 Gross profit $ 1,600,000 $ 1,120,000 Selling expenses $ 650,000 $ 464,000 Administrative expenses 325,000 224,000 Total operating expenses $ 975,000 $ 688,000 Income from operations $ 625,000 $ 432,000 Other income 25,000 19,200 $ 650,000 $ 451,200 Other expense (interest) 105,000 64,000 Income before income tax $ 545,000 $ 387,200 Income tax expense 300,000 176,000 Net income $ 245,000 $ 211,200 Rainbow Paint Co. Comparative Retained Earnings Statement For the Years Ended December 31, 2006 and 2005 2006 2005 Retained earnings, January 1 $ 723,000 $ 581,800 Add net income for year 245,000 211,200 Total $ 968,000 $ 793,000 Deduct dividends: On preferred stock $ 40,000 $ 40,000 On common stock 45,000 30,000 Total $ 85,000 $ 70,000 Retained earnings, December 31 $ 883,000 $ 723,000 Rainbow Paint Co. Comparative Balance Sheet December 31, 2006 and 2005 Assets 2000 1999 Current assets: Cash $ 175,000 $ 125,000 Marketable securities 150,000 50,000 Accounts receivable (net) 425,000 325,000 Inventories 720,000 480,000 Prepaid expenses 30,000 20,000 Total current assets $ 1,500,000 $ 1,000,000 Long-term investments 250,000 225,000 Property, plant, and equipment (net) 2,093,000 1,948,000 Total assets $ 3,843,000 $ 3,173,000 Liabilities Current liabilities $ 750,000 $ 650,000 Long-term liabilities: Mortgage note payable, 10%, due 2009 $ 410,000 - Bonds payable, 8%, due 2012 800,000 $ 800,000 Total long-term liabilities $ 1,210,000 $ 800,000 Total liabilities $ 1,960,000 $ 1,450,000 Stockholders' Equity Preferred 8% stock, $100 par $ 500,000 $ 500,000 Common stock, $10 par 500,000 500,000 Retained earnings 883,000 723,000 Total stockholders' equity $ 1,883,000 $ 1,723,000 Total liabilities and stockholders' equity $ 3,843,000 $ 3,173,000 Instructions Determine the following measures for both 20Y8 and 20Y9, rounding percentages and ratios other than per-share amounts to one decimal place. Briefly explain how or why management would use this information and comment on the trend from 20Y8 and 20Y9. Price-earnings ratio Dividends per share Dividend yield
Rainbow Paint Co.'s comparative financial statements for the years ending December 31, 2006 and 2005 are as follows. The market price of Rainbow Paint Co.'s common stock was $30 on December 31, 1999 and $25 on December 31, 2006. Rainbow Paint Co. Comparative Income Statement For the Years Ended December 31, 2006 and 2005 2006 2005 Sales $ 5,125,000 $ 3,257,600 Sales returns and allowances 125,000 57,600 Net sales $ 5,000,000 $ 3,200,000 Cost of goods sold 3,400,000 2,080,000 Gross profit $ 1,600,000 $ 1,120,000 Selling expenses $ 650,000 $ 464,000 Administrative expenses 325,000 224,000 Total operating expenses $ 975,000 $ 688,000 Income from operations $ 625,000 $ 432,000 Other income 25,000 19,200 $ 650,000 $ 451,200 Other expense (interest) 105,000 64,000 Income before income tax $ 545,000 $ 387,200 Income tax expense 300,000 176,000 Net income $ 245,000 $ 211,200 Rainbow Paint Co. Comparative Retained Earnings Statement For the Years Ended December 31, 2006 and 2005 2006 2005 Retained earnings, January 1 $ 723,000 $ 581,800 Add net income for year 245,000 211,200 Total $ 968,000 $ 793,000 Deduct dividends: On preferred stock $ 40,000 $ 40,000 On common stock 45,000 30,000 Total $ 85,000 $ 70,000 Retained earnings, December 31 $ 883,000 $ 723,000 Rainbow Paint Co. Comparative Balance Sheet December 31, 2006 and 2005 Assets 2000 1999 Current assets: Cash $ 175,000 $ 125,000 Marketable securities 150,000 50,000 Accounts receivable (net) 425,000 325,000 Inventories 720,000 480,000 Prepaid expenses 30,000 20,000 Total current assets $ 1,500,000 $ 1,000,000 Long-term investments 250,000 225,000 Property, plant, and equipment (net) 2,093,000 1,948,000 Total assets $ 3,843,000 $ 3,173,000 Liabilities Current liabilities $ 750,000 $ 650,000 Long-term liabilities: Mortgage note payable, 10%, due 2009 $ 410,000 - Bonds payable, 8%, due 2012 800,000 $ 800,000 Total long-term liabilities $ 1,210,000 $ 800,000 Total liabilities $ 1,960,000 $ 1,450,000 Stockholders' Equity Preferred 8% stock, $100 par $ 500,000 $ 500,000 Common stock, $10 par 500,000 500,000 Retained earnings 883,000 723,000 Total stockholders' equity $ 1,883,000 $ 1,723,000 Total liabilities and stockholders' equity $ 3,843,000 $ 3,173,000 Instructions Determine the following measures for both 20Y8 and 20Y9, rounding percentages and ratios other than per-share amounts to one decimal place. Briefly explain how or why management would use this information and comment on the trend from 20Y8 and 20Y9. Price-earnings ratio Dividends per share Dividend yield
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Rainbow Paint Co.'s comparative financial statements for the years ending December 31, 2006 and 2005 are as follows. The market price of Rainbow Paint Co.'s common stock was $30 on December 31, 1999 and $25 on December 31, 2006.
|
Rainbow Paint Co. |
||||
| 2006 | 2005 | |||
| Sales | $ 5,125,000 | $ 3,257,600 | ||
| Sales returns and allowances | 125,000 | 57,600 | ||
| Net sales | $ 5,000,000 | $ 3,200,000 | ||
| Cost of goods sold | 3,400,000 | 2,080,000 | ||
| Gross profit | $ 1,600,000 | $ 1,120,000 | ||
| Selling expenses | $ 650,000 | $ 464,000 | ||
| Administrative expenses | 325,000 | 224,000 | ||
| Total operating expenses | $ 975,000 | $ 688,000 | ||
| Income from operations | $ 625,000 | $ 432,000 | ||
| Other income | 25,000 | 19,200 | ||
| $ 650,000 | $ 451,200 | |||
| Other expense (interest) | 105,000 | 64,000 | ||
| Income before income tax | $ 545,000 | $ 387,200 | ||
| Income tax expense | 300,000 | 176,000 | ||
| Net income | $ 245,000 | $ 211,200 | ||
|
Rainbow Paint Co. |
||||
| 2006 | 2005 | |||
| Retained earnings, January 1 | $ 723,000 | $ 581,800 | ||
| Add net income for year | 245,000 | 211,200 | ||
| Total | $ 968,000 | $ 793,000 | ||
| Deduct dividends: | ||||
| On |
$ 40,000 | $ 40,000 | ||
| On common stock | 45,000 | 30,000 | ||
| Total | $ 85,000 | $ 70,000 | ||
| Retained earnings, December 31 | $ 883,000 | $ 723,000 | ||
|
Rainbow Paint Co. |
||||
| Assets | 2000 | 1999 | ||
| Current assets: | ||||
| Cash | $ 175,000 | $ 125,000 | ||
| Marketable securities | 150,000 | 50,000 | ||
| |
425,000 | 325,000 | ||
| Inventories | 720,000 | 480,000 | ||
| Prepaid expenses | 30,000 | 20,000 | ||
| Total current assets | $ 1,500,000 | $ 1,000,000 | ||
| Long-term investments | 250,000 | 225,000 | ||
| Property, plant, and equipment (net) | 2,093,000 | 1,948,000 | ||
| Total assets | $ 3,843,000 | $ 3,173,000 | ||
| Liabilities | ||||
| Current liabilities | $ 750,000 | $ 650,000 | ||
| Long-term liabilities: | ||||
| Mortgage note payable, 10%, due 2009 | $ 410,000 |
- |
||
| Bonds payable, 8%, due 2012 | 800,000 | $ 800,000 | ||
| Total long-term liabilities | $ 1,210,000 | $ 800,000 | ||
| Total liabilities | $ 1,960,000 | $ 1,450,000 | ||
| Preferred 8% stock, $100 par | $ 500,000 | $ 500,000 | ||
| Common stock, $10 par | 500,000 | 500,000 | ||
| Retained earnings | 883,000 | 723,000 | ||
| Total stockholders' equity | $ 1,883,000 | $ 1,723,000 | ||
| Total liabilities and stockholders' equity | $ 3,843,000 | $ 3,173,000 |
Instructions
- Determine the following measures for both 20Y8 and 20Y9, rounding percentages and ratios other than per-share amounts to one decimal place. Briefly explain how or why management would use this information and comment on the trend from 20Y8 and 20Y9.
- Price-earnings ratio
- Dividends per share
- Dividend yield
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