This is a comprehensive problem all contained on this spreadsheet tab. You are t

Question

This is a comprehensive problem all contained on this spreadsheet tab. You are to prepare a cash flow statement, a vertical analysis, a horizontal analysis, and some ratio calculations. Scroll down the spreadsheet to complete each part. Philadelphia Widget Corporation is in the process of preparing financial statements for the year ended 12/31/2015. They have completed the balance sheet and income statement as shown. Philadelphia Widget Corporation Income Statement For the year ended 12/31/2015 Revenue          1,235,000 Cost of Goods Sold              806,356 Gross Profit              428,644 Administrative Expenses: Salaries              212,450 Rent                 82,500 Depreciation                 24,800 Total Administrative Expense              319,750 Operating Profit              108,894 Gain on Sale of Equipment                  4,500 Interest Expense              (42,115) Net Income                71,279 Philadelphia Widget Corporation Balance Sheet As of 12/31/2015, 12/31/2014, and 12/31/2013 2015 2014 2013 Cash              119,411                 89,564                 105,644 Accounts Receivable                85,455                 83,118                   78,400 Inventory                41,600                 48,560                   62,600 Prepaid Expenses                14,500                 18,100                   24,000 Total Current Assets              260,966               239,342                 270,644 Land                50,000                 50,000                   50,000 Buildings and Equipment              182,450               172,450               166,800 Accumulated Depreciation                 78,900              103,550                 62,600               109,850                 54,580                 112,220 Total Assets              414,516               399,192                 432,864 Accounts Payable                62,525                 51,480                   45,200 Wages payable                  4,500                    4,500                     1,500 Unearned Revenue                  3,000                           -                              -   Current Portion of Long-Term Debt                50,000                 50,000                   50,000 Total Current Liabilities              120,025               105,980                   96,700 Long-Term Debt              175,000               225,000                 275,000 Common Stock, 3500 shares outstanding                 35,000                 35,000                 35,000 Retained Earnings                 84,491                 33,212                 26,164 Total Stockholders' Equity              119,491                 68,212                   61,164 Total Liabilities and Equity              414,516               399,192                 432,864 A. Prepare a Statement of Cash Flow using the indirect method for 2015 using the above statements and the following additional information:    1. Equipment costing $30,000 was purchased in 2015.    2. Equipment having an original cost of $20,000 and accumulated depreciation of $8,500 was sold for $16,000 during 2015.    3. A dividend of $20,000 was declared and paid in 2015. Philadelphia Widget Corporation Statement of Cash Flow For the year ended 12/31/2015 B. Prepare a vertical analysis (1 year) of the income statement above and a horizontal analysis (2 years) of the balance sheet. Philadelphia Widget Corporation Vertical Analysis of Income Statement Philadelphia Widget Corporation Horizontal Analysis of Balance Sheet * n/c = not calculable C. Calculate the following ratios based on 12/31/2015 numbers:    1. Earnings per share    2. Return on common stockholder's equity    3. Return on assets    4. Current ratio    5. Acid-test ratio    6. Accounts receivable turnover This is a comprehensive problem all contained on this spreadsheet tab. You are to prepare a cash flow statement, a vertical analysis, a horizontal analysis, and some ratio calculations. Scroll down the spreadsheet to complete each part. Philadelphia Widget Corporation is in the process of preparing financial statements for the year ended 12/31/2015. They have completed the balance sheet and income statement as shown. Philadelphia Widget Corporation Income Statement For the year ended 12/31/2015 Revenue          1,235,000 Cost of Goods Sold              806,356 Gross Profit              428,644 Administrative Expenses: Salaries              212,450 Rent                 82,500 Depreciation                 24,800 Total Administrative Expense              319,750 Operating Profit              108,894 Gain on Sale of Equipment                  4,500 Interest Expense              (42,115) Net Income                71,279 Philadelphia Widget Corporation Balance Sheet As of 12/31/2015, 12/31/2014, and 12/31/2013 2015 2014 2013 Cash              119,411                 89,564                 105,644 Accounts Receivable                85,455                 83,118                   78,400 Inventory                41,600                 48,560                   62,600 Prepaid Expenses                14,500                 18,100                   24,000 Total Current Assets              260,966               239,342                 270,644 Land                50,000                 50,000                   50,000 Buildings and Equipment              182,450               172,450               166,800 Accumulated Depreciation                 78,900              103,550                 62,600               109,850                 54,580                 112,220 Total Assets              414,516               399,192                 432,864 Accounts Payable                62,525                 51,480                   45,200 Wages payable                  4,500                    4,500                     1,500 Unearned Revenue                  3,000                           -                              -   Current Portion of Long-Term Debt                50,000                 50,000                   50,000 Total Current Liabilities              120,025               105,980                   96,700 Long-Term Debt              175,000               225,000                 275,000 Common Stock, 3500 shares outstanding                 35,000                 35,000                 35,000 Retained Earnings                 84,491                 33,212                 26,164 Total Stockholders' Equity              119,491                 68,212                   61,164 Total Liabilities and Equity              414,516               399,192                 432,864 A. Prepare a Statement of Cash Flow using the indirect method for 2015 using the above statements and the following additional information:    1. Equipment costing $30,000 was purchased in 2015.    2. Equipment having an original cost of $20,000 and accumulated depreciation of $8,500 was sold for $16,000 during 2015.    3. A dividend of $20,000 was declared and paid in 2015. Philadelphia Widget Corporation Statement of Cash Flow For the year ended 12/31/2015 B. Prepare a vertical analysis (1 year) of the income statement above and a horizontal analysis (2 years) of the balance sheet. Philadelphia Widget Corporation Vertical Analysis of Income Statement Philadelphia Widget Corporation Horizontal Analysis of Balance Sheet * n/c = not calculable C. Calculate the following ratios based on 12/31/2015 numbers:    1. Earnings per share    2. Return on common stockholder's equity    3. Return on assets    4. Current ratio    5. Acid-test ratio    6. Accounts receivable turnover

Explanation / Answer

1. EPS = Earnings after tax/No. of equity shares

= 71279/3500

= 20/37

2. Return on common stock hlder's equity = 71279/35000 x 100 = 203/65%

3. Return on Assets = Net income/Total assets

= 71279/414516 x100

= 17.20%

4. Current ration = Current assets/current liabilities

= 260966/120025

= 2.17

5. Acid test Ratio = (Current asset - cash)/current liabilities

= (260966 - 119411)/120025

= 1.18

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