ch24_sol

Instructions for the Microsoft Excel Templates by Rex A Schildhouse

Be advised, the template workbooks and worksheets are not protected. Overtyping any data may remove it. Extensive detail and information is contained within the help function of Microsoft Excel and in the provided text. You should enter your name, date, instructor's name, and course into the cells at the top of the page. This information will be printed on the top of each page if the template requires more than one page. Each template is set to print with File Name, Page # of # Page(s), the print date, and the print time to assist in assembly of multiple pages. If more than one page is required by the template, manual page breaks have been set to provide consistent presentation. All of the cells have been correctly formatted for presentation and should not require any adjustment. For example, if the text requires one, two, or three significant digits in a presentation, the template has been set for that presentation in the appropriate cells. In general, the yellow highlighted cells are the cells which work and effort should be presented. These entries may include date(s), account title(s), values, memorandum appropriate to the entry, or text answers to questions. And information or data which may be required by the solution will be entered in cells with borders to help identify them. Where a yellow highlighted cell shows "Date" enter the appropriate date for that step of the challenge. This may be any date format that Microsoft Excel accepts. Some of these formats include "1/1/12", "01/01/12", and "01/01/2012." All of these will return January 01, 2012, in the format set in the template. Where a yellow highlighted cell shows "Acct Nbr" enter the appropriate account number, provided in the template and in the text for that step of the challenge. This is entry may be a "Look to" formula to another cell where that information has been provided or previously entered. Where a yellow highlighted cell shows "Account Title" enter the appropriate account title for that step of the challenge. This is a text entry and most of those cells are set for the proper indentation for that step. Frequently the chart of accounts appropriate to the challenge is provided and you can use the "look to" formula to reference the appropriate account title without typing it. Check with your instructor to see if abbreviated account titles are acceptable. For example "A/R" for Accounts Receivable, "A/P" for Accounts Payable. If your instructor is using a comparison process between workbooks for grading, these abbreviates may not be acceptable. Where a yellow highlighted cell shows titles such as "Values," "Amounts," or "Quantities" enter the appropriate numerical value for that step of the challenge. The cell is formatted for proper presentation of the entered information. If a dollar sign is appropriate, it should not be entered, Microsoft Excel will place it there through formatting. Commas and significant digits (decimals) are also set through formatting for common presentation. Since the formatting of the templates is not protected by any password, you may change any of the formatting found in the templates to meet your desires. Where a yellow highlighted cell shows titles such as "Formula" you may enter the appropriate formula or enter a numerical value appropriate for that step of the challenge. Most of the values necessary for the appropriate formula are located on the template in cells with borders or in other yellow highlighted cells. The formula may be a simple "Look to" formula, an equal sign and a cell reference, "=E27" or more complex as "=E27*5," or something similar to the time-value-of-money formula. These are addressed in the tutorial text provided for Microsoft Excel.

Where a yellow highlighted cell shows titles such as "Formula" you may enter the appropriate formula or enter a numerical value appropriate for that step of the challenge. Most of the values necessary for the appropriate formula are located on the template in cells with borders or in other yellow highlighted cells. The formula may be a simple "Look to" formula, an equal sign and a cell reference, "=E27" or more complex as "=E27*5," or something similar to the time-value-of-money formula. These are addressed in the tutorial text provided for Microsoft Excel. Where a yellow highlighted cell shows "Text" enter the appropriate text for that step of the challenge. This may be a memorandum entry for a journal entry or a lengthy text answer discussing the results of an analysis of a company's financials. These titles can simply be typed over. Where a yellow highlighted cell shows titles such as "Journal Number" or "Journ #" you should enter the appropriate number provided in the template and in the text for that step of the challenge. In general this will appear in instances such as "Record the following events in General Journal number six." The print area is defined to fit onto 8 1/2" × 11" sheets in portrait or landscape mode as required. Margins are generally set to no less than 1/2" so most printers can print them without a problem. If you printer cannot accept margins less than 1" you may have to reformat the margins through Page Setup. The display may have "Freeze Pane" invoked so column titles remain visible during data entry. This can be removed by utilizing the View menu and selecting "Unfreeze Panes" under "Freeze Panes." When negative values are required, enter them by starting with a minus sign, "-". Negative values may be shown as ($400) or -$400. Negative values in formulas can be created by putting a minus sign in front of the cell reference - "=E10*-E11" will return a negative value if both cells E10 and E11 contain positive values. Microsoft Office and Microsoft Excel are products of, and copyrighted by, Microsoft Corporation, One Microsoft Way, Redmond, Washington 98052-6399

Solution Name: Date: Instructor: Course: Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse E24-2 (Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose. 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end. 2. Introduction of a new product line. 3. Loss of assembly plant due to fire. 4. Sale of a significant portion of the company's assets. 5. Retirement of the company president. 6. Issuance of a significant number of shares of common stock. 7. Loss of a significant customer. 8. Prolonged employee strike. 9. Material loss on a year-end receivable because of customer's bankruptcy. 10. Hiring of a new president. 11. Settlement of prior year's litigation against the company. 12. Merger with another company of comparable size. 1 2 3 4 5 6

a c b b c b

7 8 9 10 11 12

c c a c a b

153010974.xlsx.ms_office, Exercise 24-2 Solution, Page 3 of 18, 6/20/2013, 6:59 AM

Name: Date: Instructor: Course: Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse E24-2 (Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose. 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end. 2. Introduction of a new product line. 3. Loss of assembly plant due to fire. 4. Sale of a significant portion of the company's assets. 5. Retirement of the company president. 6. Issuance of a significant number of shares of common stock. 7. Loss of a significant customer. 8. Prolonged employee strike. 9. Material loss on a year-end receivable because of customer's bankruptcy. 10. Hiring of a new president. 11. Settlement of prior year's litigation against the company. 12. Merger with another company of comparable size. 1 2 3 4 5 6

Enter letter Enter letter Enter letter Enter letter Enter letter Enter letter

7 8 9 10 11 12

Enter letter Enter letter Enter letter Enter letter Enter letter Enter letter

153010974.xlsx.ms_office, Exercise 24-2, Page 4 of 18, 6/20/2013, 6:59 AM

Solution Name: Date: Instructor: Course: Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse E24-3 (Segmented Reporting) LaGreca Company is involved in four separate industries. The following information is available for each of the four industries. Operating Total Operating Identifiable W $60,000 $15,000 $167,000 X 10,000 1,500 83,000 Y 23,000 (2,000) 21,000 Z 9,000 1,000 19,000 $102,000 $15,500 $290,000 Instructions: Determine which of the operating segments are reportable based on the: (a) Revenue test. Revenue test: 10% × $102,000 = $10,200. Segments W ($60,000) and Y ($23,000) both meet this test. (b) Operating profit (loss) test. Operating profit test: 10% × ($15,000 + $1,500 + $1,000) = $1,750. Segments W ($15,000) and Y ($2,000 absolute amount) both meet this test. (c) Identifiable assets test. Identifiable assets test: 10% × $290,000 = $29,000. Segments W ($167,000) and X ($83,000) both meet this test.

153010974.xlsx.ms_office, Exercise 24-3 Solution, Page 5 of 18, 6/20/2013, 6:59 AM

Name: Date: Instructor: Course: Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse E24-3 (Segmented Reporting) LaGreca Company is involved in four separate industries. The following information is available for each of the four industries. Operating Total Operating Identifiable W $60,000 $15,000 $167,000 X 10,000 1,500 83,000 Y 23,000 (2,000) 21,000 Z 9,000 1,000 19,000 $102,000 $15,500 $290,000 Instructions: Determine which of the operating segments are reportable based on the: (a) Revenue test. Enter answer in this area Enter answer in this area (b) Operating profit (loss) test. Enter answer in this area Enter answer in this area (c) Identifiable assets test. Enter answer in this area Enter answer in this area

153010974.xlsx.ms_office, Exercise 24-3, Page 6 of 18, 6/20/2013, 6:59 AM

Solution Name: Date: Instructor: Course: Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse P24-3 (Ratio Computations and Additional Analysis) Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,000 notes, which are due on June 30, 2013, and September 30, 2013. Another note of $6,000 is due on March 31, 2014, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn’s cash flow problems are due primarily to the company’s desire to finance a $300,000 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal years. BRADBURN CORPORATION Statement of Financial Position March 31 Assets Cash Notes receivable Accounts receivable (net) Inventories (at cost) Plant & equipment (net of depreciation) Total assets

2013 $18,200 148,000 131,800 105,000 1,449,000 $1,852,000

2012 $12,500 132,000 125,500 50,000 1,420,500 $1,740,500

Liabilities and Owners' Equity Accounts payable Notes payable Accrued liabilities Common stock (130,000 shares, $10 par) Retained earningsa Total liabilities and owners' equity

$79,000 76,000 9,000 1,300,000 388,000 $1,852,000

$91,000 61,500 6,000 1,300,000 282,000 $1,740,500

a

Cash dividends were paid at the rate of $1.00 per share in fiscal year 2012 and $2.00 per share in fiscal year 2013. BRADBURN CORPORATION Income Statement For The Fiscal Year Ended March 31 Sales Cost of goods sold Gross margin Operating expenses Income before income taxes Income taxes Net income after income taxes

2013 $3,000,000 1,530,000 1,470,000 860,000 610,000 244,000 $366,000

2012 $2,700,000 1,425,000 1,275,000 780,000 495,000 198,000 $297,000

Depreciation charges on the plant and equipment of $100,000 and $102,500 for the fiscal years ended March 31, 2012, and 2013, respectively, are included in cost of goods sold.

153010974.xlsx.ms_office, Problem 24-3 Solution, Page 7 of 18, 6/20/2013, 6:59 AM

Solution Name: Date: Instructor: Course: Instructions: Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield Fill in the provided matrix and utilize it as the matrix for "VLOOKUP" formulas within the cells below. Column 4 2013 77,500 1,796,250 1,688,500 1,740,500 1,852,000 1,530,000 403,000 164,000 130,000 102,500 1,470,000 610,000 244,000

Average inventory - 2011 Average total assets Total Assets = Mar 31, 2009 Total Assets = Mar 31, 2010 Total Assets = Mar 31, 2011 Cost of goods sold Current assets Current liabilities Dividends Depreciation Gross margin Income before taxes Income taxes (40%) Inventories = EOY 2010 Inventories = EOY 2011 Net income after taxes Operating expenses Sales

105,000 366,000 860,000 3,000,000

Column 5 2012 1,714,500

1,425,000 320,000 158,500 130,000 100,000 1,275,000 495,000 198,000 50,000 297,000 780,000 2,700,000

(a) Compute the following items for Bradburn Corporation: (1) Current ratio for fiscal years 2012 and 2013.

2012 Current ratio =

Current assets ----------------------- = Current liabilities

$320,000 ---------------- = $158,500

2.02

to 1

2013 Current ratio =

Current assets ----------------------- = Current liabilities

$403,000 ---------------- = $164,000

2.46

to 1

(2) Acid-test (quick) ratio for fiscal years 2012 and 2013.

2012 Quick ratio =

Current assets - Inventories ----------------------- = Current liabilities

$270,000 ---------------- = $158,500

1.70 to 1

2013 Quick ratio =

Current assets - Inventories ----------------------- = Current liabilities

$298,000 ---------------- = $164,000

1.82 to 1

Cost of goods sold ------------------------------------ = Average inventory

$1,530,000 ---------------- = $77,500

19.74 to 1

(3) Inventory turnover for fiscal year 2013.

2013 Inventory Turnover =

153010974.xlsx.ms_office, Problem 24-3 Solution, Page 8 of 18, 6/20/2013, 6:59 AM

Solution Name: Date: Instructor: Course: (4) Return on assets for fiscal ,years 2012 and 2013. (Assume total were Intermediate Accounting 14th Edition by Kieso, Weygandt, andassets Warfield

$1,688,500

at March 31, 2009.)

2012 Return on assets =

Net income ----------------------- = Average total assets

$297,000 ---------------- = $1,714,500

17.3%

2013 Return on assets =

Current assets ----------------------- = Current liabilities

$366,000 ---------------- = $1,796,250

20.4%

(5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2012 to 2013. Omit "000" from the values.

Sales Cost of goods sold Gross margin Net income after taxes

2012 $3,000 1,530 1,470 366

2013 $2,700 1,425 1,275 297

Change $300 105 195 69

Percent Change 11.11% 7.37% 15.29% 23.23%

(b) Identify and explain what other financial reports and/or financial analyses might be helpful to the commercial loan officer of Topeka National Bank in evaluating Daniel Brown’s request for a time extension on Bradburn’s notes. Other financial reports and financial analyses which might be helpful to the commercial loan officer of Topeka National Bank include: 1

The statement of cash flows would highlight the amount of cash provided by operating activities, the other sources of cash, and the uses of cash for the acquisition of long-term assets and longterm debt requirement.

2

Projected financial statements for 2014 including a projected statement of cash flows. In addition, a review of Bradburn’s comprehensive budgets might be useful. These items would present management’s estimates of operations for the coming year.

3

A closer examination of Bradburn’s liquidity by calculating some additional ratios, such as day’s sales in receivables, accounts receivable turnover, and day’s sales in inventory.

4

An examination as to the extent that leverage is being used by Bradburn.

153010974.xlsx.ms_office, Problem 24-3 Solution, Page 9 of 18, 6/20/2013, 6:59 AM

Solution Name: Date: Instructor: Course: (c) Assume that the percentage ,changes experienced fiscal yearand 2013 as compared with fiscal year 2012 Intermediate Accounting 14th Edition by Kieso, in Weygandt, Warfield for sales and cost of goods sold will be repeated in each of the next 2 years. Is Bradburn’s desire to finance the plant expansion from internally generated funds realistic? Discuss. Bradburn Corporation should be able to finance the plant expansion from internally generated funds as shown in the calculations presented below.

Sales Cost of goods sold Gross margin Operating expenses Income before taxes Income taxes (40%) Net income

2013 $3,000.0 1,530.0 1,470.0 860.0 610.0 244.0 $366.0

Add: Depreciation Deduct: Dividends Note repayment Funds available for plant expansion Plant expansion Excess funds

2014 $3,333.3 1,642.7 1,690.6 948.2 742.4 297.0 $445.4 102.5 (260.0) (6.0) 281.9 (150.0) $131.9

2015 $3,703.7 1,763.8 1,939.9 1,045.5 894.5 357.8 $536.7 102.5 (260.0) 379.2 (150.0) $229.2

Assumptions: Sales increase at a rate of [($3,000,000 - $2,700,000) / $2,700,000] 11.11% Cost of goods sold increases at rate of [($1,530,000 - $1,425,000) / $1,425,000] 7.37% despite depreciation remaining constant. Other operating expenses increase at the same rate experienced from 2010 to 2011; i.e., at [($860,000 - $780,000) / $780,000) 10.26% Depreciation remains constant at $102,500 Dividends remain at per share. $2.00 Plant expansion is financed equally over the two years( each year). $150,000 Loan extension is granted. (d) Should Topeka National Bank grant the extension on Bradburn’s notes considering Daniel Brown’s statement about financing the plant expansion through internally generated funds? Discuss. Topeka National Bank should probably grant the extension of the loan, if it is really required, because the projected cash flows for 2014 and 2015 indicate that an adequate amount of cash will be generated from operations to finance the plant expansion and repay the loan. In actuality, there is some question whether Bradburn needs the extension because the excess funds generated from 2014 operations might cover the $70,000 loan repayment. However, Bradburn may want the loan extension to provide a cushion because its cash balance is low. The financial ratios indicate that Bradburn has a solid financial structure. If the bank wanted some extra protection, it could require Bradburn to appropriate retained earnings for the amount of the loan and/or restrict cash dividends for the next two years to the 2013 amount of $2.00 per share.

153010974.xlsx.ms_office, Problem 24-3 Solution, Page 10 of 18, 6/20/2013, 6:59 AM

Name: Date: Instructor: Course: Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse P24-3 (Ratio Computations and Additional Analysis) Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,000 notes, which are due on June 30, 2013, and September 30, 2013. Another note of $6,000 is due on March 31, 2014, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn’s cash flow problems are due primarily to the company’s desire to finance a $300,000 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal years. BRADBURN CORPORATION Statement of Financial Position March 31 Assets Cash Notes receivable Accounts receivable (net) Inventories (at cost) Plant & equipment (net of depreciation) Total assets

2013 $18,200 148,000 131,800 105,000 1,449,000 $1,852,000

2012 $12,500 132,000 125,500 50,000 1,420,500 $1,740,500

Liabilities and Owners' Equity Accounts payable Notes payable Accrued liabilities Common stock (130,000 shares, $10 par) Retained earningsa Total liabilities and owners' equity

$79,000 76,000 9,000 1,300,000 388,000 $1,852,000

$91,000 61,500 6,000 1,300,000 282,000 $1,740,500

a

Cash dividends were paid at the rate of $1.00 per share in fiscal year 2012 and $2.00 per share in fiscal year 2013. SANDBURG CORPORATION Income Statement For The Fiscal Year Ended March 31 Sales Cost of goods sold Gross margin Operating expenses Income before income taxes Income taxes Net income after income taxes

2013 $3,000,000 1,530,000 1,470,000 860,000 610,000 244,000 $366,000

2012 $2,700,000 1,425,000 1,275,000 780,000 495,000 198,000 $297,000

Depreciation charges on the plant and equipment of $100,000 and $102,500 for the fiscal years ended March 31, 2012, and 2013, respectively, are included in cost of goods sold.

153010974.xlsx.ms_office, Problem 24-3, Page 11 of 18, 6/20/2013, 6:59 AM

Name: Date: Instructor: Course: Instructions: Intermediate Accounting, 14th Edition by Kieso, Weygandt, and Warfield Fill in the provided matrix and utilize it as the matrix for "VLOOKUP" formulas within the cells below. Column 4 2013 Formula Formula Formula Formula Amount Amount Amount Amount Amount Amount Amount Amount Amount

Average inventory - 2011 Average total assets Total Assets = Mar 31, 2009 Total Assets = Mar 31, 2010 Total Assets = Mar 31, 2011 Cost of goods sold Current assets Current liabilities Dividends Depreciation Gross margin Income before taxes Income taxes (40%) Inventories = EOY 2010 Inventories = EOY 2011 Net income after taxes Operating expenses Sales

Amount Amount Amount Amount

Column 5 2012 Formula

Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount

(a) Compute the following items for Bradburn Corporation: (1) Current ratio for fiscal years 2012 and 2013.

2012 Current ratio =

Current assets ----------------------- = Current liabilities

Amount ---------------- = Amount

Formula

to 1

2013 Current ratio =

Current assets ----------------------- = Current liabilities

Formula ---------------- = Formula

Formula

to 1

(2) Acid-test (quick) ratio for fiscal years 2012 and 2013.

2012 Quick ratio =

Current assets - Inventories ----------------------- = Current liabilities

Formula ---------------- = Formula

Formula to 1

2013 Quick ratio =

Current assets - Inventories ----------------------- = Current liabilities

Formula ---------------- = Formula

Formula to 1

Cost of goods sold ------------------------------------ = Average inventory

Amount ---------------- = #N/A

Formula to 1

(3) Inventory turnover for fiscal year 2013.

2013 Inventory Turnover =

153010974.xlsx.ms_office, Problem 24-3, Page 12 of 18, 6/20/2013, 6:59 AM

Name: Date: Instructor: Course: (4) Return on assets for fiscal ,years 2012 and 2013. (Assume total were Intermediate Accounting 14th Edition by Kieso, Weygandt, andassets Warfield

$1,688,500

at March 31, 2011.)

2012 Return on assets =

Net income ----------------------- = Average total assets

Formula ---------------- = Formula

Formula

2013 Return on assets =

Current assets ----------------------- = Current liabilities

Formula ---------------- = Formula

Formula

(5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2012 to 2013. Omit "000" from the values. Percent Change 2012 2013 Change Sales Formula Formula Formula Formula Formula Cost of goods sold Formula Formula Formula Formula Gross margin Formula Formula Formula Formula Net income after taxes Formula Formula Formula Note: The formulas in some cell formulas are "live" and need values placed in their source cells. (b) Identify and explain what other financial reports and/or financial analyses might be helpful to the commercial loan officer of Topeka National Bank in evaluating Daniel Brown’s request for a time extension on Bradburn’s notes. Other financial reports and financial analyses which might be helpful to the commercial loan officer of Spokane National Bank include: 1

Enter text answer as appropriate.

2

Enter text answer as appropriate.

3

Enter text answer as appropriate.

4

Enter text answer as appropriate.

153010974.xlsx.ms_office, Problem 24-3, Page 13 of 18, 6/20/2013, 6:59 AM

Name: Date: Instructor: Course: (c) Assume that the percentage ,changes experienced fiscal yearand 2013 as compared with fiscal year 2012 Intermediate Accounting 14th Edition by Kieso, in Weygandt, Warfield for sales and cost of goods sold will be repeated in each of the next 2 years. Is Bradburn’s desire to finance the plant expansion from internally generated funds realistic? Discuss. Enter text answer as appropriate.

Sales Title Gross margin Title Income before taxes Title Net income

2013 Formula Formula Formula Formula Formula Formula Formula

Add: Title Deduct: Title Note repayment Funds available for plant expansion Plant expansion Excess funds

2014 Formula Formula Formula Formula Formula Formula Formula

2015 Formula Formula Formula Formula Formula Formula Formula

Amount Amount Amount Formula Amount Formula

Amount Amount Formula Amount Formula

Assumptions: Sales increase at a rate of Cost of goods sold increases at rate of despite depreciation remaining constant. Other operating expenses increase at the same rate experienced from 2010 to 2011; i.e., at Depreciation remains constant at Dividends remain at per share. Plant expansion is financed equally over the two years( Loan extension is granted.

each year).

(d) Should Topeka National Bank grant the extension on Bradburn’s notes considering Daniel Brown’s statement about financing the plant expansion through internally generated funds? Discuss. Enter text answer here.

153010974.xlsx.ms_office, Problem 24-3, Page 14 of 18, 6/20/2013, 6:59 AM

Solution Name: Date: Instructor: Course: th Intermediate Accounting, 14 Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse P 24-4 (Horizontal and Vertical Analysis) Presented below are comparative balance sheets for the Gilmour Company. GILMOUR COMPANY Comparative Balance Sheet December 31, 2013 and 2012 2013 2012 Assets Cash $180,000 $275,000 Accounts receivable (net) 220,000 155,000 Short-term investments 270,000 150,000 Inventories 1,060,000 980,000 Prepaid expense 25,000 25,000 Fixed assets 2,585,000 1,950,000 Accumulated depreciation (1,000,000) (750,000) $3,340,000 $2,785,000 Liabilities and Stockholders' Equity Accounts payable Accrued expenses Bonds payable Capital stock Retained earnings

$50,000 170,000 450,000 2,100,000 570,000 $3,340,000

$75,000 200,000 190,000 1,770,000 550,000 $2,785,000

Instructions: (Round to two decimal places.) (a) Prepare a comparative balance sheet of Gilmour Company showing the percent each item is of the total assets or total liabilities and stockholders' equity.

Cash Accounts receivable (net) Short-term investments Inventories Prepaid expense Fixed assets Accumulated depreciation Total

Accounts payable Accrued expenses Bonds payable Capital stock Retained earnings Total

GILMOUR COMPANY Comparative Balance Sheet December 31, 2013 and 2012 December 31 2013 2012 Assets $180,000 5.39% $275,000 9.87% 220,000 6.59% 155,000 5.57% 270,000 8.08% 150,000 5.39% 1,060,000 31.74% 980,000 35.19% 25,000 0.75% 25,000 0.90% 2,585,000 77.40% 1,950,000 70.02% (1,000,000) -29.94% (750,000) -26.93% $3,340,000 100.00% $2,785,000 100.00% Liabilities and Stockholders’ Equity $50,000 1.50% $75,000 170,000 5.09% 200,000 450,000 13.47% 190,000 2,100,000 62.87% 1,770,000 570,000 17.07% 550,000 $3,340,000 100.00% $2,785,000

2.69% 7.18% 6.82% 63.55% 19.75% 100.00%

153010974.xlsx.ms_office, Problem 24-4 Solution, Page 15 of 18, 6/20/2013, 6:59 AM

Solution Name: Date: Instructor: Course: th Intermediate Accounting, 14 Edition by Kieso, Weygandt, and Warfield (b) Prepare a comparative balance sheet of Gilmour Company showing the dollar change and the percentage change for each item. GILMOUR COMPANY Comparative Balance Sheet December 31, 2013 and 2012 December 31 Increase or (Decrease) Assets 2013 2012 $ Change % Change Cash $180,000 $275,000 ($95,000) -34.55% Accounts receivable (net) 220,000 155,000 65,000 41.94% Short-term investments 270,000 150,000 120,000 80.00% Inventories 1,060,000 980,000 80,000 8.16% Prepaid expense 25,000 25,000 0 0.00% Fixed assets 2,585,000 1,950,000 635,000 32.56% Accumulated depreciation (1,000,000) (750,000) (250,000) 33.33% Total $3,340,000 $2,785,000 $555,000 19.93% Liabilities and Stockholders’ Equity Accounts payable $50,000 Accrued expenses 170,000 Bonds payable 450,000 Capital stock 2,100,000 Retained earnings 570,000 Total $3,340,000

$75,000 200,000 190,000 1,770,000 550,000 $2,785,000

($25,000) (30,000) 260,000 330,000 20,000 $555,000

-33.33% -15.00% 136.84% 18.64% 3.64% 19.93%

(c) Of what value is the additional information provided in part (a)? The component percentage (common-size) balance sheet makes easier analysis possible. It actually reduces total assets and total liabilities and stockholders’ equity to a common base. Thus, the statement is simplified into figures that can be more readily grasped. It can also show relationships that might be out of line. For example, management might believe that accounts receivable of 6.59% is rather low. Perhaps the company is not granting enough credit. The increased percentage of bonds payable from 6.82% to 13.47% indicates increased leverage which may reflect negatively on the company’s debtpaying ability and long-run solvency. These percentages can be compared with those of other successful firms to see how the firm stands and to see where possible improvements could be made.

(d) Of what value is the additional information provided in part (b)? A statement such as that in part (b) is a good analysis and breakdown of the total change in assets and liabilities and stockholders’ equity. The statement breaks down the 19.93% increase and makes it easier for analysts to spot any unusual items. The increase is explained on the asset side by an increase in accounts receivable, short-term investments, and fixed assets and on the liability side by an increase in bonds payable and capital stock. This statement makes analysis of the year’s operations generally easier.

153010974.xlsx.ms_office, Problem 24-4 Solution, Page 16 of 18, 6/20/2013, 6:59 AM

Name: Date: Instructor: Course: th Intermediate Accounting, 14 Edition by Kieso, Weygandt, and Warfield Primer on Using Excel in Accounting by Rex A Schildhouse P 24-4 (Horizontal and Vertical Analysis) Presented below are comparative balance sheets for the Gilmour Company. GILMOUR COMPANY Comparative Balance Sheet December 31, 2013 and 2012 2013 2012 Assets Cash $180,000 $275,000 Accounts receivable (net) 220,000 155,000 Short-term investments 270,000 150,000 Inventories 1,060,000 980,000 Prepaid expense 25,000 25,000 Fixed assets 2,585,000 1,950,000 Accumulated depreciation (1,000,000) (750,000) $3,340,000 $2,785,000 Liabilities and Stockholders' Equity Accounts payable Accrued expenses Bonds payable Capital stock Retained earnings

$50,000 170,000 450,000 2,100,000 570,000 $3,340,000

$75,000 200,000 190,000 1,770,000 550,000 $2,785,000

Instructions: (Round to two decimal places.) (a) Prepare a comparative balance sheet of Gilmour Company showing the percent each item is of the total assets or total liabilities and stockholders' equity.

Cash Accounts receivable (net) Short-term investments Inventories Prepaid expense Fixed assets Accumulated depreciation Total

Accounts payable Accrued expenses Bonds payable Capital stock Retained earnings Total

GILMOUR COMPANY Comparative Balance Sheet December 31, 2013 and 2012 December 31 2013 2012 Assets Amount Formula Amount Amount Formula Amount Amount Formula Amount Amount Formula Amount Amount Formula Amount Amount Formula Amount Amount Formula Amount Formula Formula Formula Liabilities and Stockholders’ Equity Amount Formula Amount Formula Amount Formula Amount Formula Amount Formula Formula Formula

Amount Amount Amount Amount Amount Formula

Formula Formula Formula Formula Formula Formula Formula Formula

Formula Formula Formula Formula Formula Formula

153010974.xlsx.ms_office, Problem 24-4, Page 17 of 18, 6/20/2013, 6:59 AM

Name: Date: Instructor: Course: th Intermediate Accounting, 14 Edition by Kieso, Weygandt, and Warfield (b) Prepare a comparative balance sheet of Gilmour Company showing the dollar change and the percentage change for each item. GILMOUR COMPANY Comparative Balance Sheet December 31, 2013 and 2012 December 31 Increase or (Decrease) Assets 2013 2012 $ Change % Change Cash Amount Amount Formula Formula Accounts receivable (net) Amount Amount Formula Formula Short-term investments Amount Amount Formula Formula Inventories Amount Amount Formula Formula Prepaid expense Amount Amount Formula Formula Fixed assets Amount Amount Formula Formula Accumulated depreciation Amount Amount Formula Formula Total Formula Formula Formula Formula Liabilities and Stockholders’ Equity Accounts payable Accrued expenses Bonds payable Capital stock Retained earnings Total

Amount Amount Amount Amount Amount Formula

Amount Amount Amount Amount Amount Formula

Formula Formula Formula Formula Formula Formula

Formula Formula Formula Formula Formula Formula

(c) Of what value is the additional information provided in part (a)? Enter text answer as appropriate.

(d) Of what value is the additional information provided in part (b)? Enter text answer as appropriate.

153010974.xlsx.ms_office, Problem 24-4, Page 18 of 18, 6/20/2013, 6:59 AM