Comparative statement data for Lionel Company and Barrymore Company, two

competitors, appear below. All statement of fi nancial position data are as of December 31,
2017, and December 31, 2016.

Lionel Company Barrymore Company

2017 2016 2017 2016
Net sales 1,549,035 339,038
Cost of goods sold 1,053,345 237,325
Operating expenses 263,336 77,979
Interest expense 7,745 2,034
Income tax expense 61,960 8,476
Plant assets (net) 596,920 575,610 142,842 128,927
Current assets 401,584 388,020 86,450 82,581
Share capital—ordinary, £ 578,765 578,765 137,435 137,435
Retained earnings 252,224 225,358 55,528 47,430
Non-current liabilities 102,500 84,000 16,711 11,989
Current liabilities 65,015 75,507 19,618 14,654

Instructions
(a) Prepare a vertical analysis of the 2017 income statement data for Lionel Company and
Barrymore Company in columnar form.
(b) Comment on the relative profi tability of the companies by computing the
return on assets and the return on ordinary shareholders’ equity for both companies.
Net sales
Cost of goods sold
Gross Profit
Operating expenses
Income from Operati
Interest expense
Income before Incom
Income Taxes
Net Income

Return on Asset
Average total Asset
ROA

Return on Shareholders' Equity

Average total Equity
ROE
The comparative statements of Larker Tool SA are presented below.

LARKER TOOL SA
Income Statement
For the Years Ended December 31
2017 2016
Net sales 1,818,500 1,750,500
Cost of goods sold 1,011,500 996,000
Gross profi t 807,000 754,500
Selling and administrative expense 516,000 479,000
Income from operations 291,000 275,500
Interest expense 15,000 14,000
Income before income taxes 276,000 261,500
Income tax expense 84,000 77,000
Net income 192,000 184,500

LARKER TOOL SA
Statements of Financial Position
31-Dec

Assets 2017 2016

Plant assets (net) 600,300 520,300
Current assets
Inventory 110,950 115,500
Accounts receivable ( 105,750 102,800
Short-term investmen 69,000 50,000
Cash 60,100 345,800 64,200 332,500
Total assets 946,100 852,800

Equity and Liabilities

Equity
Share capital—ordinary (R$5 par) 300,000 300,000
Retained earnings 242,600 165,400
Total equity 542,600 465,400

Bonds payable 200,000 200,000

Current liabilities
Accounts payable 160,000 145400
Income taxes payable 43,500 42,000
Total current liabilities 203,500 187,400
Total liabilities 403,500 387,400
Total equity and liabilities 946,100 852,800

All sales were on account

Instructions
Compute the following ratios for 2017. (Weighted-average ordinary shares in 2017
were 60,000.)

(a) Earnings per share (f) Accounts receivable turnover

3.2 17.44
(b) Return on ordinary shareholders’ equity (g) Inventory turnover
38.1% 8.93
(c) Return on assets. (h) Times interest earned.
 21.3% 19.4
(d) Current ratio. (i) Asset turnover.
1.70 2.02
(e) Acid-test ratio. (j) Debt to assets ratio
Condensed statement of fi nancial position and income statement data for Clarence
Limited appear below

CLARENCE LIMITED
Statements of Financial Position
31-Dec

2017 2016 2015

Plant and equipment (net) 400,000 370,000 358,000
Investments 75,000 70,000 45,000
Other current assets 90,000 95,000 64,000
Accounts receivable (net) 50,000 45,000 48,000
Cash 25,000 20,000 18,000
640,000 600,000 533,000

Share capital—ordinary, £10 par 345,000 315,000 300,000

Retained earnings 145,000 123,000 113,000
Non-current liabilities 80,000 87,000 50,000
Current liabilities 70,000 75,000 70,000
640,000 600,000 533,000

CLARENCE LIMITED
Income Statement
For the Years Ended December 31

2017 2016
Sales revenue 740,000 700,000
Sales returns and allowances 40,000 60,000
Net sales 700,000 640,000
Cost of goods sold 420,000 400,000
Gross profit 280,000 240,000
Operating expenses (including i 236,000 210,000
Net income 44,000 30,000

Additional information:
1. The market price of Clarence’s ordinary shares was £4.00, £5.00, and £7.00 for 2015,
2016, and 2017, respectively
2. All dividends were paid in cash.

Instructions
(a) Compute the following ratios for 2016 and 2017.
2017 2016
(1) Profit margin.
6.29% 4.69%
(2) Asset turnover.
1.13 1.13
(3) Earnings per share. (Weighted-average ordinary shares in 2017 were 32,000 and in
2016 were 31,000.) 1.38 0.97

(4) Price-earnings ratio.

5.09 5.17
(5) Payout ratio.
 Cash Dividend 22,000 20,000
50.0% 66.7%
(6) Debt to assets ratio
23.4% 27.0%

(b) Based on the ratios calculated, discuss briefl y the improvement or lack thereof
in fi nancial position and operating results from 2016 to 2017 of Clarence Limited.
a. Secara profit meningkat, dengan meningkatnya net profit margin
Financial information for Ernie Bishop Company is presented below.
ERNIE BISHOP COMPANY
ERNIE BISHOP COMPANY Income Statement
Statements of Financial Position For the Years Ended December 31
31-Dec 2017 2016 2015
Assets 2017 2016 2015 Net sales 858,000 798,000
Land 130,000 130,000 Cost of goods sold 611,000 575,000
Building and equipment (net) 168,000 175,000 Gross profit 247,000 223,000
Prepaid expenses 29,000 23,000 Operating expenses 204,500 181,000
Inventory 125,000 135,000 Net income 50,000 42,500 42,000
Accounts receivable (net) 98,000 80,000
Short-term investments 52,000 40,000
Cash 70,000 65,000 Additional information:
700,000 672,000 648,000 1. Inventory at the beginning of 2015 was €118,000.
2. Total assets at the beginning of 2015 were €632,000.
Equity and Liabilities 3. No ordinary share transactions occurred during 2015 or 2016.
Share capital—ordinary, €10 par 380,000 200,000 200,000 4. All sales were on account.
Retained earnings 180,000 130,000 116,000 5. Accounts receivable (net) at the beginning of 2015 were €88,000.
Bonds payable, due 2019 150,000 150,000 150,000 6. Notes payable are classifi ed as a current liability
Notes payable 0 100,000 100,000
Accounts payable 48,000 48,000 42,000
Accrued liabilities 44,000 44,000 40,000
802,000 672,000 648,000

Instructions
(b) Given below are three independent situations and a ratio that may be affected. For
each situation, compute the affected ratio (1) as of December 31, 2016, and (2) as of
December 31, 2017, after giving effect to the situation. Net income for 2017 was
€50,000. Total assets on December 31, 2017, were €700,000.

Situation Ratio 2017 2016

1) 18,000 ordinary shares were sold at par on July 1, 2017. Return on ordinary shareholders’ equity 11.24% 13.16%
Retained Earning 2016 130,000
Add: Net Income 2017 50,000
Retained Earning 2017 180,000
Average Equity 445,000 323,000

2) All of the notes payable were paid in 2017. Debt to assets ratio 34.6% 50.9%
The only change in liabilities was that
the notes payable were paid

3) Market price of ordinary shares was €9 Price-earnings ratio 5.00 4.24

on December 31, 2016, and €12.50 on Shares outstanding 20,000 20,000
December 31, 2017. EPS 2.5 2.125
Selected fi nancial data of Target (USA) and Wal-Mart Stores, Inc. (USA) for a recent
year are presented below (in millions).

Target Wal-Mart Wal-Mart

Corporation Stores, Inc
Income Statement Data for Year
Net sales 72,596 476,294
Cost of goods sold 51,160 358,069
Selling and administrative expenses 16,816 91,353
Interest expense 1,126 2,335
Other income (expense) -391 -410
Income tax expense 1,132 8,105
Net income 1,971 16,022

Statement of Financial Position

Data (End of Year)

Non-current assets 32,980 143,566

Current assets 11,573 61,185
Total assets 44,553 204,751
Total equity 16,231 81,339
Non-current liabilities 15,545 54,067
Current liabilities 12,777 69,345
Total equity and liabilities 44,553 204,751

Beginning-of-Year Balances
Total assets 48,163 203,105
Total equity 16,558 81,738
Current liabilities 14,031 71,818
Total liabilities 31,605 131,287

Other Data
Average net accounts receivable 2,921 6,723
Average inventory 8,335 44,331
Net cash provided by operating activities 6,520 23,257

Instructions
(a) For each company, compute the following ratios
(1) Current ratio
(2) Accounts receivable turnover
(3) Average collection period
(4) Inventory turnover
(5) Days in inventory.
(6) Profi t margin
(7) Asset turnover
(8) Return on assets.
(9) Return on ordinary shareholders’ equity
(10) Debt to assets ratio.
(11) Times interest earned

(b) Compare the liquidity, profi tability, and solvency of the two companies.
The comparative statements of Beulah Company Limited are presented below

BEULAH COMPANY LIMITED

Income Statement
For the Years Ended December 31

2017 2016
Net sales (all on account) 500,000 420,000
Expenses
Cost of goods sold 315,000 254,000
Selling and administrative 120,800 114,800
Interest expense 7,500 6,500
Income tax expense 20,000 15,000
Total expense 463,300 390,300
Net income 36,700 29,700

BEULAH COMPANY LIMITED

Statements of Financial Position
31-Dec

Assets 2017 2016

Plant assets (net) 423,000 383,000
Current assets
Inventory 80,000 60,000
Accounts receivable (net) 85,000 75,000
Short-term investments 18,000 15,000
Cash 21,000 18,000
Total current assets 204,000 168,000
Total assets 627,000 551,000

Equity and Liabilities

Equity
Share capital—ordinary (£5 par) 150,000 150,000
Retained earnings 223,000 200,000
Total equity 373,000 350,000

Non-current liabilities
Bonds payable 120,000 80,000

Current liabilities
Accounts payable 122,000 110,000
Income taxes payable 12,000 11,000
Total current liabilities 134,000 121,000
Total liabilities 254,000 201,000
Total equity and liabilities 627,000 551,000

Additional data:
The ordinary shares recently sold at £19.50 per share

Instructions
Compute the following ratios for 2017.
(a) Current ratio
(b) Acid-test ratio
(c) Accounts receivable turnover
(d) Inventory turnover.
(e) Profi t margin
(f) Asset turnover
(g) Return on assets
(h) Return on ordinary shareholders’ equity
(i) Earnings per share.
(j) Price-earnings ratio
(k) Payout ratio
(l) Debt to assets ratio
(m) Times interest earned.
Presented below is an incomplete income statement and incomplete comparative
statements of fi nancial position of Bondi ASA

BONDI ASA
Income Statement
For the Year Ended December 31, 2017

Net sales 10,500,000

Cost of goods sold 6,786,500
Gross profit 3,713,500
Operating expenses 1,500,000
Income from operations 2,213,500
Interest expense 141,000
Income before income taxes 2,072,500
Income tax expense 550,000
Net income 1,522,500

BONDI ASA
Statements of Financial Position
31-Dec

2016 2017
Asset
Plant assets (net) 4,620,000 4,355,000
Current assets
Inventory 1,050,000 1,720,000
Accounts receivable ( 1,575,000 1,050,000
Cash 480,000 375,000
Total current assets 3,105,000 3,145,000
Total assets 7,725,000 7,500,000

Equity and Liabilities

Share capital—ordinary, €1 par 3,000,000 3,000,000
Retained earnings 400,000 375,000
Total equity 3,400,000 3,375,000
Long-term notes payable 925,000 3,300,000
Current liabilities 1,242,000 825,000
Total liabilities 4,325,000 4,125,000
Total equity and liabilities 7,725,000 7,500,000

Additional information:
1. The accounts receivable turnover for 2017 is 8 times. AR Turnover = Sales / Average AR
8 = sales / average AR
8 10,500,000 sales
average AR
average AR 1,312,500
average AR = (AR 2016 + AR 2017 ) / 2
1,312,500 (= AR 2016 + 1,050,000)/2
2,625,000 =AR 2016 + 1,050,000
AR 2016 1,575,000
2. All sales are on account. Informasi

3. The profit margin for 2017 is 14.5%. Profit margin = Net income / net sales
14.50% Net income / 10,500,000
Net Income 1,522,500

4. Return on assets is 20% for 2017 Return on Asset = Net Income / Average total Asset
20% =1,522,500/ average total asset
20% =1,522,500 / (total aset 2016 + total asset 2017)
20% =1,522,500 / (total aset 2016 + 7,500,000)/2
7,612,500 =(total aset 2016 + 7,500,000)/2
15,225,000 =(total aset 2016 + 7,500,000)
total aset 2016 7,725,000

5. The current ratio on December 31, 2017, is 2.5. current ratio =current aset / curent liabilities
2.5 3,105,000 / current liabilities
current liabilities 1,242,000

6. The inventory turnover for 2017 is 4.9 times. Inventory turnov=COGs/avergae inventory
4.9 COGS /
COGS 6,786,500

Instructions
Compute the missing information given the ratios above. Show computations. (Note: Start
with one ratio and derive as much information as possible from it before trying another
ratio. List all missing amounts under the ratio used to fi nd the information.)
verage total Asset
rage total asset
al aset 2016 + total asset 2017)/2
al aset 2016 + 7,500,000)/2
+ 7,500,000)/2
+ 7,500,000)

urent liabilities
/ current liabilities

1385000
Violet Bick SA owns a number of cruise ships and a chain of hotels. The hotels,
which have not been profi table, were discontinued on September 1, 2017. The 2017 operating
results for the company were as follows.

Operating revenues 12,900,000

Operating expenses 8,700,000
Operating income 4,200,000

Analysis discloses that these data include the operating results of the hotel chain, which
were operating revenues €2,000,000 and operating expenses €2,500,000. The hotels were
sold at a gain of €300,000 before taxes. This gain is not included in the operating results.
During the year, the company had an unrealized gain on non-trading securities of €150,000.
In 2017, the company had other expense of €200,000, which is not included in the operating
results. The corporation is in the 30% income tax bracket.

Instructions
Prepare a condensed statement of comprehensive income.
The ledger of Gower Limited at December 31, 2017, contains the following
summary data.

Net sales 1,580,000

Selling expenses 70,000
Other income and expense (6,000)
Cost of goods sold 1,100,000
Administrative expenses 90,000

Your analysis reveals the following additional information that is not included in the
above data.
1. The entire puzzles division was discontinued on August 31. The income from operations
for this division before income taxes was £15,000. The puzzles division was sold
at a loss of £74,000 before income taxes.
2. The company had an unrealized gain on non-trading securities of £120,000 before
income taxes for the year.
3. The income tax rate on all items is 30%.

Instructions
Prepare a statement of comprehensive income for the year ended December 31, 2017. Use
the format illustrated in the Practice Problem (page 741).
Gower Limited
Statement of Comprehensive Income
For the year ended Dec 31, 2017

Net Sales 1,580,000

COGS 1,100,000
Gross Profit 480,000
Selling expenses 70,000
Administrative expenses 90,000
Income from Operations 320,000
Other income and expense (6,000)
Income before Income Tax 314,000
Income Tax (30%) 94,200
Income from Continuing Operations 219,800

Discontinued Operations
Income from operations of discountinues division, net of 10,500
Loss on sale of discontinued operation, net of tax (51,800)

Net Income 178,500

Other Comprehensive Income

Unrealized gain on non trading securities, net of tax 84,000

Comprehensive Income 262,500