The Sleep Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $69,000 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2021 was $8 and $7 in 2022. The industry average earnings multiple for the mattress industry was 9 in 2022 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,600,000 shares of outstanding stock at the end of 2022. Balance Sheet, December 31, 20222021Cash$ 370,000$ 130,000Accounts Receivable$ 380,000$ 430,000Inventory$ 280,000$ 330,000Total Current Assets$ 1,030,000$ 890,000Long-lived Assets1,380,0001,400,000Total Assets$ 2,410,000$ 2,290,000Current Liabilities$ 230,000$ 330,000Long-term Debt630,000530,000Shareholder Equity1,550,0001,430,000Total Debt and Equity$ 2,410,000$ 2,290,000 Income Statement, for year ended December 31, 20222021Sales$ 4,900,000$ 4,650,000Cost of Sales4,220,0004,120,000Gross Margin680,000530,000Operating Expenses365,000415,000Operating Income315,000115,000Taxes126,00046,000Net Income$ 189,000$ 69,000 Cash Flow From Operations20222021Net Income$ 189,000$ 69,000Plus Depreciation Expense50,00050,000+ Decrease (-increase) in Accounts Receivable and Inventory100,0000+ Increase (-decrease) in Current Liabilities(100,000)0Cash Flow from Operations$ 239,000$ 119,000 The market value of the company's equity for 2022 is: Multiple Choice $4,420,000 $5,695,000 $5,320,000 $11,200,000 $9,925,000

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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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The Sleep Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $69,000 per year and made capital expenditures in both years of $30,000 per year. The company's stock price in 2021 was $8 and $7 in 2022. The industry average earnings multiple for the mattress industry was 9 in 2022 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,600,000 shares of outstanding stock at the end of 2022.

	2022	2021
Balance Sheet, December 31,
Cash	$ 370,000	$ 130,000
Accounts Receivable	$ 380,000	$ 430,000
Inventory	$ 280,000	$ 330,000
Total Current Assets	$ 1,030,000	$ 890,000
Long-lived Assets	1,380,000	1,400,000
Total Assets	$ 2,410,000	$ 2,290,000
Current Liabilities	$ 230,000	$ 330,000
Long-term Debt	630,000	530,000
Shareholder Equity	1,550,000	1,430,000
Total Debt and Equity	$ 2,410,000	$ 2,290,000

	2022	2021
Income Statement, for year ended December 31,
Sales	$ 4,900,000	$ 4,650,000
Cost of Sales	4,220,000	4,120,000
Gross Margin	680,000	530,000
Operating Expenses	365,000	415,000
Operating Income	315,000	115,000
Taxes	126,000	46,000
Net Income	$ 189,000	$ 69,000

Cash Flow From Operations	2022	2021
Net Income	$ 189,000	$ 69,000
Plus Depreciation Expense	50,000	50,000
+ Decrease (-increase) in Accounts Receivable and Inventory	100,000	0
+ Increase (-decrease) in Current Liabilities	(100,000)	0
Cash Flow from Operations	$ 239,000	$ 119,000

The market value of the company's equity for 2022 is:

Multiple Choice

$4,420,000
$5,695,000
$5,320,000
$11,200,000
$9,925,000

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