SNIDER CORPORATION Balance Sheet December 31, 2010 Assets Current assets: Cash $

Question

SNIDER CORPORATION Balance Sheet December 31, 2010 Assets Current assets: Cash $ 55,600 Marketable securities 22,000 Accounts receivable (net) 198,000 Inventory 239,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total current assets $ 514,600 Investments 62,400 Plant and equipment. 683,000 Less: Accumulated depreciation (216,000) Net plant and equipment 467,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total assets $ 1,044,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 94,600 Notes payable 72,800 Accrued taxes 12,800 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total current liabilities 180,200 Long-term liabilities: Bonds payable 150,400 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total liabilities $ 330,600 Stockholders' equity Preferred stock, $50 par value 100,000 Common stock, $1 par value 80,000 Capital paid in excess of par 190,000 Retained earnings 343,400 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total stockholders' equity 713,400 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 1,044,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SNIDER CORPORATION Income Statement For the Year Ending December 31, 2010 Sales (on credit) $ 2,009,000 Less: Cost of goods sold 1,354,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Gross profit 655,000 Less: Selling and administrative expenses 529,000 * -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Operating profit (EBIT) 126,000 Less: Interest expense 26,800 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Earnings before taxes (EBT) 99,200 Less: Taxes 86,400 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Earnings after taxes (EAT) $ 12,800 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- *Includes $37,000 in lease payments. Using the above financial statements for the Snider Corporation, calculate the following ratios. (Enter only numeric values rounded to 2 decimal places. Omit the "%" sign in your response.) (a) Profitability ratios Profitability ratios Profit margin % Return on assets (investment) % Return on equity % -------------------------------------------------------------------------------- (b) Assets utilization ratios Assets utilization ratios Receivable turnover Average collection period days Inventory turnover Fixed asset turnover Total asset turnover -------------------------------------------------------------------------------- (c) Liquidity ratios Liquidity ratios Current ratio Quick ratio -------------------------------------------------------------------------------- (d) Debt utilization ratios Debt utilization ratios Debt to total assets % Times interest earned Fixed charge coverage

Explanation / Answer

4th Qtr. of 2009 Year 2009 Total Sales budget (8,000 units at $35) $84,000 $280,000 Direct materials used 17,000 69,400 Direct labor 12,500 56,600 Manufacturing overhead applied 10,000 54,000 Selling and administrative expenses 18,000 76,000 To meet sales requirements and to have 3,000 units of finished goods on hand at December 31, 2009, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $20. Glendo Industries uses the first-in, first-out (FIFO) inventory costing method. Selling and administrative expenses include $4,000 for depreciation on equipment. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 30% of income before income taxes. All sales and purchases are on account. It is expected that 60% of quarterly sales are collected in cash within the quarter and the remainder is collected in the following quarter. Direct materials purchased from suppliers are paid 50% in the quarter incurred and the remainder in the following quarter. Purchases in the fourth quarter were the same as the materials used. In 2009, the company expects to purchase additional equipment costing $19,000. It expects to pay $8,000 on notes payable plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2009, includes amounts due suppliers (see above) plus other accounts payable of $5,700. In 2009, the company expects to declare and pay a $5,000 cash dividend. Unpaid income taxes at December 31 will be $5,000.The company's cash budget shows an expected cash balance of $7,950 at December 31, 2009. Prepare a budgeted income statement for 2009 and a budgeted balance sheet at December 31, 2009. In preparing the income statement, you will need to compute cost of goods manufactured (direct materials + direct labor + manufacturing overhead) and finished goods inventory (December 31, 2009). (For the balance sheet, list assets in order of liquidity and liabilities from largest to smallest eg 10, 5, 3, 2.)

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