This is a minicase for the Analysis of a Financial Statement It is due by tomorrow night.
ACG2071 Managerial Accounting
Process Costing Systems
Minicase
Jeffersonian Corporation has been in business for over 50 years.
The company is looking to expand
operations into the Pacific Rim and would like an analysis of its financial statements to be prepared.
Review the financial statements below:
Jeffersonian Corporation
Comparative Income Statement
For years ended December 31, 2011 and 2010
2011 2010
Sales $ 2,486,000.00 $ 2,075,000.00
Cost of goods sold $ 1,523,000.00 $ 1,222,000.00
Gross Profit $ 963,000.00 $ 853,000.00
Operating Expenses
Salaries Expense $ 145,000.00 $ 100,000.00
Contract Labor Expense $ 240,000.00 $ 280,000.00
Insurance Expense $ 165,000.00 $ 200,000.00
Supplies expense $ 100,000.00 $ 45,000.00
Depreciation Expense $ 26,000.00 $ 35,000.00
Miscellaneous expense $ 85,000.00 $ 75,000.00
Marketing and Promotion expense $ 17,000.00 $ 15,000.00
Total operating expenses $ 778,000.00 $ 750,000.00
Operating Income $ 185,000.00 $ 103,000.00
Interest expense $ 44,000.00 $ 46,000.00
Income before taxes $ 141,000.00 $ 57,000.00
Income taxes $ 47,000.00 $ 19,000.00
Net Income $ 94,000.00 $ 38,000.00
ACG 2071 Managerial Accounting
Process Costing Systems
Minicase
Jeffersonian Corporation
Comparative Balance Sheet
For years ended December 31, 2011 and 2010
2011 2010
Assets
Current Assets
Cash $ 79,000.00 $ 42,000.00
Marketable Securities $ 65,000.00 $ 96,000.00
Accounts receivable $ 120,000.00 $ 100,000.00
Merchandise inventory $ 250,000.00 $ 265,000.00
Total current assets $ 514,000.00 $ 503,000.00
Fixed Assets
Store Equipment, net $ 400,000.00 $ 350,000.00
Office Equipment, et $ 45,000.00 $ 50,000.00
Building, net $ 625,000.00 $ 675,000.00
Land $ 100,000.00 $ 100,000.00
Total fixed assets $ 1,170,000.00 $ 1,175,000.00
Total assets $ 1,684,000.00 $ 1,678,000.00
Liabilities
Current Liabilities
Accounts payable $ 164,000.00 $ 190,000.00
Short term Liabilities $ 75,000.00 $ 90,000.00
Taxes payable $ 26,000.00 $ 12,000.00
Total current liabilities $ 265,000.00 $ 292,000.00
Long-term liabilities
Mortgage payable $ 400,000.00 $ 420,000.00
Total liabilities $ 665,000.00 $ 712,000.00
Stockholder’s Equity
Common Stock, $5 par value $ 475,000.00 $ 475,000.00
Retained earnings $ 544,000.00 $ 491,000.00
Total stockholder’s equity $ 1,019,000.00 $ 966,000.00
Total $ 1,684,000.00 $ 1,678,000.00
ACG 2071 Managerial Accounting
Process Costing Systems
Minicase
REQUIRED:
1. Prepare comparative income statements for year 2011 in comparison to year 2010.
2. Prepare common-size comparative balance sheet for years 2011 and 2010
3. Compute the following ratios for 2011.
Current ratio
Profit margin ratio
Acid-test ratio
Total asset turnover
Accounts receivable turnover
Return on total assets
Days’ sales uncollected
Earnings per share
Inventory turnover
Price earnings ratio
Debt-to-equity ratio
Dividend yield
Times interest earned
ACG2071 Chapter 13: Analysis of Financial Statements
Created by M. Mari
Fall 2011-1
1
Financial Statement Analysis
• Applies analytical tools to general purpose financial statements and related data for making
business decisions.
• Purpose:
• Internal users: it provides strategic information to improve company efficiency and
effectiveness in proving products and services
• External users: rely on financial statement analysis to make better and more informed
decisions in pursuing their own goals
• Common Goals:
• Evaluate company performance and financial conditions
• Evaluating past and current performance
• Evaluating current financial position
• Evaluating future performance and risk
Building Blocks of Analysis
Horizontal Analysis
• Refers to the examination of financial statements across time
• Comparative statements facilitates this.
• Its shows financial amounts in side-by-side columns on a single statement
• Includes:
• Dollar change = Current period amount – base period amount
• Percent Change = Current period amount – base period amount
• Base period amount
Liquidity and efficiency
Solvency
Profitability
Market prospects
ACG 2071 Chapter 13: Analysis of Financial Statements
Created by M. Mari
Fall 2011-1
2
Comparison of two years of operations by computing the dollar change and percentage change in the
line items.
ACG 2071 Chapter 13: Analysis of Financial Statements
Created by M. Mari
Fall 2011-1
3
Trend Analysis:
• Form of horizontal analysis that can reveal patterns in data across successive
periods.
• It involves computing trend percents for a series of financial numbers and is a
variation on the use of percent changes
• Trend Percent = Current period amount X 100
• Base period amount