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Hi there, I need help with the followin...
This question was answered on Feb 15, 2013. View the Answer
Hi there,
I need help with the following. I have attached the excel sheet which include the requirements.

1.Prepare a common-size income statement and balance sheet for McDonough Products. The first column of each statement should present McDonough Products’ common-size statement, and the second column should show the industry averages.
2.For the profitability analysis, compute McDonough Products’ (a) ratio of gross profit to net sales (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is McDonough Products’ profit performance better or worse than the average for the industry?
3.For the analysis of financial position, compute McDonough Products’ (a) Current ratio and (b) Debt ratio. Compare these ratios with the industry averages. Is McDonough Products’ financial position better or worse than the average for the industry?
ACCT212_CourseProject2_Template_03062012.xlsx

FINANCIAL ACCOUNTING - Eighth Edition

Solutions Manual

ACCT212:CourseProject2

LearningObjectives:Preparingcommonsizestatements;analyzing
profitability;makingcomparisonswiththeindustry

TopmanagersofMcDonoughProducts,Inc.,haveaskedforyourhelpin comparingthe
companysprofitperformanceandfinancialpositionwiththeaveragefortheindustry.The
accountanthasgivenyouthecompanysincomestatementandbalancesheetandalsothe
followingdatafortheindustry.TheproblemisthatMcDonoughisindollarsandtheIndustry
Averageisinpercentages.TocompletetheanalysisyouwillneedtoconvertMcDonoughs
dollaramountstopercentages.

McDonough Products, Inc.
Income Statement Compared with Industry Average
Year Ended December 31, 2010
McDonough
Netsales...............................................................................
Costofgoodssold..............................................................
Grossprofit..........................................................................
Operatingexpenses...........................................................
Operatingincome................................................................
Otherexpenses....................................................................
Netincome..........................................................................

$700,000
490,000
210,000
175,000
35,000
7,000
$28,000

Industry
Average
100.0%
57.3
42.7
29.4
13.3
2.5
10.8%

McDonough Products, Inc.
Balance Sheet Compared with Industry Average
December 31, 2010
Industry
McDonough

Average

Currentassets......................................................................
Fixedassets,net.................................................................
Intangibleassets,net..........................................................
Otherassets.........................................................................
Total.....................................................................................

$471,200
114,700
21,080
13,020
620,000

72.1%
19.0
4.8
4.1
100.0%

Currentliabilities.................................................................
Longtermliabilities............................................................
Stockholdersequity............................................................
Total.....................................................................................

240,560
135,160
244,280
$620,000

47.2%
21.0
31.8
100.0%

IndustryAverageCurrentRatio

1.53

IndustryAverageTotalDebttoTotalAssets

0.68

Seeredtriangleforhelpfulhints.

Requirements
1.

PrepareacommonsizeincomestatementandbalancesheetforMcDonoughProducts.
ThefirstcolumnofeachstatementshouldpresentMcDonoughProductscommonsize
statement,andthesecondcolumnshouldshowtheindustryaverages.

2.

Fortheprofitabilityanalysis,computeMcDonoughProducts(a)ratioofgrossprofittonet
sales(b)ratioofoperatingincometonetsales,and(c)ratioofnetincometonetsales.
Comparethesefigureswiththeindustryaverages.IsMcDonoughProductsprofit
performancebetterorworsethantheaveragefortheindustry?

3.

Fortheanalysisoffinancialposition,computeMcDonoughProducts(a)Currentratioand
(b)Debtratio.Comparetheseratioswiththeindustryaverages.IsMcDonoughProducts
financialpositionbetterorworsethantheaveragefortheindustry?

Chapter 13: Financial Statement Analysis

Page 1 of 3

Requirement #1
McDonough Products, Inc.
Common-Size Income Statement Compared to Industry Average
Year Ended December 31, 2010
McDonough

Industry

Products

Average

Netsales
Costofgoodssold..
Grossprofit...
Operatingexpenses.
Operatingincome.
Otherexpenses.
Netincome

McDonough Products, Inc.
Common-Size Balance Sheet Compared to Industry Average
Year Ended December 31, 2010
McDonough
Currentassets..
Fixedassets,net..
Intangibleassets,net
Otherassets.
Totalassets..
Currentliabilities...
Longtermliabilities..
Stockholdersequity.
Totalliabilitiesandstockholdersequity

Requirement #2

Requirement #3

Industry

Products

Average

Project2GradingRubric

Criteria
CommonSizeAnalysis:(50pts

Excellent

Good

Poor

VeryPoor

poss)

awarded

Completeness25ptsposs Allrequirementsare
completedin
accordancewiththe

Allrequirementsare

MostrequirementsareManyrequirements

completedandmostly completedthatmostly arenotcompleted
followthedirections, followthedirections, and/orthedirections

directions,labeledandlabeledandfairly
organizedwellin
organizedin

missingsomelabels
andonlysomewhat

weregenerallynot
followed,missing

worksheet.

organized.

labelsand
unorganized.

25pts
Accuracy25ptsposs

Points

Allratiosare
calculatedwith

worksheet.
2224pts

1921pts

018pts

80%plusofratiosare 6079%ofratiosare Lessthan60%of
calculatedwith
calculatedwith
ratiosarecalculated

accurateresultsand accurateresultsand
appropriatetermsof mostlyappropriate

accurateresultsand
someappropriate

withaccurateresults
andsomeappropriate

expression.

termsofexpression.

termsofexpression.

25pts

termsofexpression.
2224pts

1921pts

018pts

ProfitabilityRatios:(50ptsposs)
Completeness25ptsposs Allrequirementsare
completedin

Allrequirementsare MostrequirementsareManyrequirements
completedandmostly completedthatmostly arenotcompleted

accordancewiththe followthedirections, followthedirections, and/orthedirections
directions,labeledandlabeledandfairly
missingsomelabels weregenerallynot
organizedwellin
worksheet.

organizedin
worksheet.

andonlysomewhat
organized.

followed,missing
labelsand
unorganized.

25pts
Accuracy25ptsposs

Allratiosare

2224pts

1921pts

018pts

80%plusofratiosare 6079%ofratiosare Lessthan60%of

calculatedwith
calculatedwith
accurateresultsand accurateresultsand

calculatedwith
accurateresultsand

ratiosarecalculated
withaccurateresults

appropriatetermsof mostlyappropriate
expression.
termsofexpression.

someappropriate
termsofexpression.

andsomeappropriate
termsofexpression.

25pts

2224pts

1921pts

018pts

AnalysisofFinancialPosition:(50
ptsposs)
Completeness25ptsposs Allrequirementsare
completedin
accordancewiththe

Allrequirementsare

MostrequirementsareManyrequirements

completedandmostly completedthatmostly arenotcompleted
followthedirections, followthedirections, and/orthedirections

directions,labeledandlabeledandfairly
organizedwellin
organizedin

missingsomelabels
andonlysomewhat

weregenerallynot
followed,missing

worksheet.

organized.

labelsand
unorganized.

25pts
Accuracy25ptsposs

Allratiosare

worksheet.
2224pts

1921pts

018pts

80%plusofratiosare 6079%ofratiosare Lessthan60%of

calculatedwith
calculatedwith
accurateresultsand accurateresultsand

calculatedwith
accurateresultsand

ratiosarecalculated
withaccurateresults

appropriatetermsof mostlyappropriate

someappropriate

andsomeappropriate

expression.

termsofexpression.

termsofexpression.

25pts

termsofexpression.
2224pts

1921pts

018pts
TotalPointsEarned
0
Outof 150pts

View the entire interaction

Hi Student, please find the attached solution. Regards, Mmahajan View the full answer

8432535.xlsx

FINANCIAL ACCOUNTING - Eighth Edition

Solutions Manual

ACCT212:CourseProject2

LearningObjectives:Preparingcommonsizestatements;analyzing
profitability;makingcomparisonswiththeindustry...

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