# Chapter 13 Homework

Chapter 13 Homework

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Utech Company has income before irregular items of \$345,800 for the year ended December 31, 2014. It also has the following items (before considering income taxes): (1) an extraordinary fire loss of \$48,900 and (2) a gain of \$29,100 from the disposal of a division. Assume all items are subject to income taxes at a 24% tax rate.

Prepare Utech Company’s income statement for 2014, beginning with “Income before irregular items.”

 Exercise 13-5
Suppose the comparative balance sheets of Nike, Inc. are presented here.

 NIKE, INC. Condensed Balance Sheet May 31 (\$ in millions) 2014 2013 Assets Current Assets \$9,557 \$8,724 Property, plant, and equipment (net) 1,827 1,765 Other assets 1,513 1,669 Total assets \$12,897 \$12,158 Liabilities and Stockholders’ Equity Current Liabilities \$3,176 \$3,227 Long-term liabilities 1,250 1,279 Stockholders’ equity 8,471 7,652 Total liabilities and stockholders’ equity \$12,897 \$12,158

(a) Prepare a horizontal analysis of the balance sheet data for Nike, using 2013 as a base. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000), (20%). Round percentages to 1 decimal place, e.g. 12.1%.)

 NIKE, INC. Condensed Balance Sheet May 31 (\$ in millions) 2014 2013 Increase (Decrease) Percentage Change from 2013 Assets Current Assets \$9,557 \$8,724 \$[removed] [removed] % Property, plant, and equipment (net) 1,827 1,765 [removed] [removed] % Other assets 1,513 1,669 [removed] [removed] % Total assets \$12,897 \$12,158 \$[removed] [removed] % Liabilities and Stockholders’ Equity Current Liabilities \$3,176 \$3,227 \$[removed] [removed] % Long-term liabilities 1,250 1,279 [removed] [removed] % Stockholders’ equity 8,471 7,652 [removed] [removed] % Total liabilities and stockholders’ equity \$12,897 \$12,158 \$[removed] [removed] %

(b) Prepare a vertical analysis of the balance sheet data for Nike for 2014.

 NIKE, INC. Condensed Balance Sheet May 31, 2014 \$ (in millions) Percent Assets Current Assets \$9,557 [removed] % Property, plant, and equipment (net) 1,827 [removed] % Other assets 1,513 [removed] % Total assets \$12,897 [removed] % Liabilities and Stockholders’ Equity Current Liabilities \$3,176 [removed] % Long-term Liabilities 1,250 [removed] % Stockholders’ equity 8,471 [removed] % Total liabilities and stockholders’ equity \$12,897 [removed] %

 Exercise 13-6
Here are the comparative income statements of Eudaley Corporation.

 EUDALEY CORPORATION Comparative Income Statement For the Years Ended December 31 2014 2013 Net sales \$623,280 \$526,140 Cost of goods sold 458,190 399,970 Gross Profit 165,090 126,170 Operating expenses 74,840 41,110 Net income \$ 90,250 \$ 85,060
Prepare a horizontal analysis of the income statement data for Eudaley Corporation, using 2013 as a base. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000), (20%). Round percentages to 1 decimal place, e.g. 12.1%.)

 EUDALEY CORPORATION Comparative Income Statement For the Years Ended December 31 Increase or (Decrease) During 2014 2014 2013 Amount Percentage Net sales \$623,280 \$526,140 \$[removed] [removed] % Cost of goods sold 458,190 399,970 [removed] [removed] % Gross Profit 165,090 126,170 [removed] [removed] % Operating expenses 74,840 41,110 [removed] [removed] % Net income \$ 90,250 \$ 85,060 \$[removed] [removed] %
Prepare a vertical analysis of the income statement data for Eudaley Corporation for both years. (Round percentages to 1 decimal place, e.g. 12.1%.)

 EUDALEY CORPORATION Comparative Income Statements For the Years Ended December 31 2014 2013 \$ Percent \$ Percent Net sales \$623,280 [removed] % \$526,140 [removed] % Cost of goods sold 458,190 [removed] % 399,970 [removed] % Gross Profit 165,090 [removed] % 126,170 [removed] % Operating expenses 74,840 [removed] % 41,110 [removed] % Net income \$ 90,250 [removed] % \$ 85,060 [removed] %

 Exercise 13-11
Here is the income statement for Eberle, Inc.

 EBERLE, INC. Income Statement For the Year Ended December 31, 2014 Sales revenue \$441,600 Cost of goods sold 207,300 Gross profit 234,300 Expenses (including \$12,500 interest and \$23,500 income taxes) 89,900 Net income \$ 144,400

 1 Common stock outstanding January 1, 2014, was 22,400 shares, and 39,200 shares were outstanding at December 31, 2014. 2 The market price of Eberle, Inc., stock was \$13 in 2014. 3 Cash dividends of \$19,000 were paid, \$6,800 of which were to preferred stockholders.

Compute the following measures for 2014. (Round all answers to 2 decimal places, e.g. 1.83 or 2.51%)

 (a) Earnings per share \$[removed] (b) Price-earnings ratio [removed] times (c) Payout ratio [removed] % (d) Times interest earned [removed] times

 Problem 13-5A
Suppose selected financial data of Target and Wal-Mart for 2014 are presented here (in millions).

 Target Corporation Wal-Mart Stores, Inc. Income Statement Data for Year Net sales \$65,038 \$410,365 Cost of goods sold 45,990 307,684 Selling and administrative expenses 15,224 75,219 Interest expense 660 1,920 Other income (expense) (71 ) (380 ) Income tax expense 1,308 6,733 Net income \$ 1,785 \$ 18,429 Balance Sheet Data (End of Year) Current assets \$17,269 \$45,356 Noncurrent assets 25,578 122,848 Total assets \$42,847 \$168,204 Current liabilities \$10,937 \$55,219 Long-term debt 18,294 43,370 Total stockholders’ equity 13,616 69,615 Total liabilities and stockholders’ equity \$42,847 \$168,204 Beginning-of-Year Balances Total assets \$44,595 \$163,195 Total stockholders’ equity 13,924 65,043 Current liabilities 10,224 54,308 Total liabilities 30,671 98,152 Other Data Average net accounts receivable \$7,454 \$3,882 Average inventory 6,855 33,975 Net cash provided by operating activities 5,574 26,667 Capital expenditures 1,773 12,167 Dividends 468 4,358

(a) For each company, compute the following ratios. (Round all answers to 2 decimal places, e.g. 1.83 or 12.61%.)

 Target Wal-Mart (1) Current ratio. [removed] :1 [removed] :1 (2) Accounts receivable turnover. [removed] times [removed] times (3) Average collection period. [removed] days [removed] days (4) Inventory turnover. [removed] times [removed] times (5) Days in inventory. [removed] days [removed] days (6) Profit margin. [removed] % [removed] % (7) Asset turnover. [removed] times [removed] times (8) Return on assets. [removed] % [removed] % (9) Return on common stockholders’ equity. [removed] % [removed] % (10) Debt to assets ratio. [removed] % [removed] % (11) Times interest earned. [removed] times [removed] times (12) Current cash debt coverage. [removed] times [removed] times (13) Cash debt coverage. [removed] times [removed] times (14) Free cash flow. \$[removed] \$[removed]

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