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

Solution:

Cashflow Statement Cashflow from operating activities Net Income                     71,279 Add: Depreciation                     24,800 Add:Interest Expense                     42,115 Less: Gain on sale of equipment -                     4,500 Less: Increase in accounts receivable -                     2,337 Add: Decrease in inventory                       6,960 Add: Decreade in prepaid expenses                       3,600 Add: Increase in accounts payable                     11,045 Add: Increase in unearned revenue                       3,000 Cashflow from operating activities                   155,962 Cashflow from investing activities Purchase of equipment -                  30,000 Sale of equipment                     16,000 Cashflow from investing activities -                  14,000 Cashflow from financing activities Dividend Paid -                  20,000 Paid interest -                  42,115 Payment of debt -                  50,000 Cashflow from financing activities -                112,115 Opening cash balance                     89,564 Add: Change in cash and cash equivalent                     29,847 Ending cash balance                   119,411

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