Module+2-Solutions+for+exercises+and+problems.doc - E2-27...

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E2-27 Barth CompanyIncome StatementFor Year Ended December 31, 2011Sales revenue.................................................................$400,000ExpensesCost of goods sold.....................................................$180,000Wages expense...........................................................40,000Supplies expense.......................................................6,000Total expenses............................................................226,000Net income......................................................................$174,000Barth CompanyBalance SheetDecember 31, 2011AssetsLiabilities and equityCash.....................................$ 48,000Accounts payable.........................................................$ 16,000Accounts receivable..........30,000Bonds payable..............................................................200,000Supplies inventory.............3,000Total liabilities...............................................................216,000Inventory.............................36,000Land.....................................80,000Common stock..............................................................150,000Equipment...........................70,000Retained earnings........................................................60,000Buildings.............................151,000Total equity....................................................................210,000Goodwill..............................8,000Total assets.........................$426,000Total liabilities and equity............................................$426,000E2-31 a. Staples, Inc. ($ millions)AmountClassificationSales......................................................................$ 24,545IAccumulated depreciation..................................3,566BDepreciation expense..........................................498IRetained earnings................................................6,492B
Net income............................................................889IProperty, plant and equipment, net....................2,148BSelling, general and admin expense..................4,913IAccounts receivable............................................1,954BTotal liabilities.......................................................6,960BStockholders' equity............................................6,951Bb.Total Assets = Total Liabilities + Stockholders’ EquityTotal Assets = $6,960 + $6,951 = $13,911Sales – Total Expenses = Net Income$24,545 – Total Expenses = $889Thus, Total Expenses = $23,656c.Net Profit Margin = Net income/Sales = $889/$24,545Net Profit Margin = 3.62%Total Liabilities-to-Equity Ratio = Total Liabilities/Stockholders’ EquityTotal Liabilities-to-Equity Ratio = $6,960/$6,951 = 1.00
E2-32 a. Target Corp ($ millions)AmountClassificationTotal revenues........................................................$ 67,390IAccumulated depreciation....................................11,555BDepreciation expense............................................2,084IRetained earnings..................................................12,698BNet income..............................................................2,920IProperty, plant & equipment ................................25,493BSelling, general & admin expense........................13,469ICredit card receivables..........................................6,153BTotal liabilities.........................................................28,218BStockholders' equity..............................................$ 15,487Bb.Total Assets = Total Liabilities + Stockholders’ EquityTotal Assets = $28,218 + $15,487 = $43,705Total Revenue – Total Expenses = Net Income$67,390 – Total Expenses = $2,920Thus, Total Expenses = $64,470c.Net Profit Margin = Net income / SalesNet Profit Margin = $2,920 / $67,390 = 4.33%Total Liabilities-to-Equity Ratio = Total Liabilities / Stockholders’ EquityTotal Liabilities-to-Equity Ratio = $28,218 / $15,487 = 1.82
E2-34 a. AAPLDELLSales........................................$65,225 $61,494COGS.......................................39,54160.6%50,09881.5%Gross profit.............................25,68439.4%11,39618.5%Total expenses........................11,67117.9%8,76114.2%Net income..............................$14,01321.5%$ 2,6354.3%AAPL’s gross profit margin is more than double DELL’s. This is likelydue to two factors: first, a large proportion of AAPL’s sales relate to theiPod, iPhone, and iPad which are all very high-margin products becausethey are premium priced. Second, DELL competes as the low-priceleader in the PC-sales segment. b. AAPLDELLCurrent assets........................$41,67855.4%$29,02175.2%Long-term assets...................33,50544.6%9,57824.8%Total assets.............................$75,183$38,599Current liabilities....................$20,72227.5%*$19,48350.5%Long-term liabilities...............6,6708.9%11,35029.4%Total liabilities.........................27,39236.4%30,83379.9%Stockholders' equity..............47,79163.6%7,76620.1%Total liabs and equity.............$75,183$38,599*roundedAAPL has a greater proportion of stockholders’ equity in its capitalstructure. Neither of these companies carries a large percentage of long-term liabilities. A greater proportion of debt is generally viewed as ariskier capital structure. However, Dell’s relatively high level of short-term debt arises from the fact that the company relies very heavily onsupplier financing. Dell is an important customer for many of itssuppliers, which gives Dell bargaining power over suppliers withrespect to credit terms. Dell’s high level of profitability also lessens anyconcerns one might have regarding its solvency. Apple’s equity growth

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