Demonstration Problem for Chapter 9

Demonstration Problem for Chapter 9 - Demonstration Problem...

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Demonstration Problem for Chapter 9 Demonstration Problem 9-1 Analyzing Financial Statements Information below comes from the financial statements of Rosson Company. Income Statement 2008 2007 Revenues: Net Sales ............................................. $299,000 $246,000 Other Revenues ................................... 8,000 9,000 Total Revenues ................................ 307,000 255,000 Expenses: Cost of Goods Sold ............................. 172,000 138,000 S,G&A Expenses ................................. 44,000 40,000 Interest Expense .................................. 4,000 4,500 Income Tax Expense .......................... 31,000 25,400 Total Expenses ................................ 251,000 207,900 Income Before Extraordinary Items ........ 56,000 47,100 Extraordinary Gain (net of tax) ............... 9,000 0 Net Income .............................................. $ 65,000 $ 47,100 Balance Sheet Assets Current Assets: Cash .................................................... $ 7,500 $ 12,500 Marketable Securities .......................... 1,000 1,500 Accounts Receivable ........................... 50,000 47,500 Inventories ........................................... 150,000 145,000 Prepaid Expenses ................................ 5,000 2,500 Total Current Assets ........................ 213,500 209,000 Plant and Equipment (net) ....................... 147,000 157,000 Intangibles ............................................... 30,500 0 Total Assets ......................................... $391,000 $366,000 Liabilities and Stockholders’ Equity Liabilities: Current Liabilities: Accounts Payable ............................ $ 58,000 $ 79,500 Other Accrued Liabilities ................ 25,000 22,500 Total Current Liabilities ................ 83,000 102,000 Bonds Payable ..................................... 90,000 100,000 Total Liabilities ............................... 173,000 202,000 Stockholders’ Equity: Common Stock ($5 par) ...................... 130,000 130,000 Paid-In Capital in Excess of Par of Par ................................................ 20,000 20,000 Retained Earnings ............................... 68,000 14,000 Total Stockholders’ Equity .............. 218,000 164,000 Total Liabilities and Stockholders’ Equity ........................................... $391,000 $366,000 Common stock market price at year-end $14.00 $8.55 Dividend payments amounted to $11,000 in 2008 and $5,000 in 2007.
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