profit performance and financial position

profit performance and financial position

14a. The Verifine Department Stores Inc., chief executive officer (CEO) has asked you to compare the companys profit performance and financial position with the average for the industry. The CEO has given you the companys income statement and balance sheet as well as the industries average data for retailers.Provided informationVerifine Department Stores, Inc.Income Statement Compared with Industry AverageYear Ended December 31, 2010IndustryVerifineAverageNet sales$780,000100.0 %Cost of goods sold525,72065.8 Gross profit254,28034.2 Operating expenses162,24019.7 Operating income92,04014.5 Other expenses4,6800.4 Net income$87,36014.1 %Verifine Department Stores, Inc.Balance Sheet Compared with Industry AverageDecember 31, 2010IndustryVerifineAverageCurrent assets$311,88070.9 %Fixed assets, net115,92023.6 Intangible assets, net9,6600.8 Other assets22,5404.7 Total assets$460,000100.0 %Current liabilities$215,28048.1 %Long??term liabilities105,80016.6 Stockholders equity138,92035.3 Total liabilities and stockholders equity$460,000100.0 %Requirements1. Prepare a common-size income statement and balance sheet for Verifine. The first column of each statement should present Verifines common-size statement, and the second column, the industry averages.2. For the profitability analysis, compute Verifines (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 Verifines profit performance better or worse than the industry average?3. For the analysis of financial position, compute Verifines (a) ratio of current assets to total assets and (b) ratio of stockholders equity to total assets. Compare these ratios with the industry averages. Is Verifines financial position better or worse than the industry averages?14b.) Financial Statement Data of Modern Traveler Magazine include the following items (dollars in thousands)Cash$18,000Accounts receivable, net$81,000Inventories$183,000Total assets$635,000Short??term notes payable$45,000Accounts payable$104,000Accrued liabilities$38,000Long??term liabilities$223,000Net income$70,000Common shares outstanding60,000Requirements1. Compute Modern Travelers current ratio, debt ratio and earnings per share. Round all ratios to 2 decimal places.2. Compute the 3 ratios after evaluating the effect of each transaction as follows. Consider each transaction separately.a. Purchased inventory of $44,000 on account.b. Borrowed $124,000 on a long-term note payable.c. Issued 6,000 shares of common stock, receiving cash of $108,000.d. Received cash on account $4,000.16a) Hummingbird design Inc. is a website design and consulting firm. The firm uses a job order costing system, in which each client is a different job. Hummingbird design traces direct labor, licensing costs, and travel costs directly to each job. It allocates indirect costs to jobs based on predetermined indirect cost allocation rate, computed as a percentage of direct labor costs.Information Given Direct labor hours (professional)7,500hrsDirect labor costs (professional)$1,500,000Support staff salaries180,000Computer leases46,000Office supplies24,000Office rent65,000MaynardDelightful DiningChocolatesDirect labor hours730 hours30 hoursSoftware licensing costs$2,100$300Travel costs11,000Requirements1. Compute Hummingbird Designs predetermined indirect cost allocation rate for 2011.2. Compute the total cost of each job.3. If Jacquin wants to earn profits equal to 20% of service revenue, how much (what fee) should it charge each of these 2 clients?4. Why does Hummingbird design assign costs to jobs?16b)Sloan manufacturing makes carrying cases for portable devices. Its costing records yield the following information.Information providedTotalTotalManufacturingJobDateCost of JobCosts AddedNo.StartedFinishedSoldat November 30in December111/311/1211/13$1,100211/311/3012/12,000311/1712/2412/27300$1,300411/2912/291/38001,300512/812/1212/14650612/231/61/9100Requirements1. Which type of costing system is Sloan using? What piece of data did you base your answer on?2. Using the dates provided to identify the status of each job, compute Sloans account balances at November 30 for work in process inventory, finished inventory and costs of goods sold. Compute account balances at December 31 for work in process inventory and cost of goods sold.3. Record summary journal entries for the transfer of completed units from work in process to finished goods for November and December.4. Record the sale of Job 3 for $1900.5. What is the gross profit for Job 3? What other costs must this gross profit cover?


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