Chapter 2 Class Notes Figure the net income and ending retained earnings.
Prepare a classified balance sheet as of December 31, 2003 for Gladstones Inc. Compute the following ratios: Earning per Share (EPS) = (Net income Preferred Stock Dividends) / Average Common Stock Shares Outstanding Free Cash Flow = Cash provided by operations Capital Expenditures Cash Dividends Price-Earnings Ratio = Market value per share / Earnings Per Share (EPS) Current Ratio = Current Assets / Current Liabilities Debt to Total Assets Ratio = Total Liabilities / Total Assets Working Capital = Current Assets Current Liabilities Current Assets Assets that a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer. Examples: o Cash & Cash Equivalent, Short-Term Investment, Account Receivable, Inventories, Prepaid expenses and other current assets
Long-Term Investments Investments in stocks and bonds of other companies that are held for more than one year. Investments in long-term assets such as land or buildings not currently being used in operating activities.
Property,Plant and Equipment Long useful lives Currently used in operations Depreciation - allocating the cost of assets to a number of years. Accumulated depreciation - total amount of depreciation expensed thus far in the assets life. Examples: o Land and Land Improvements o Buildings, machinery and equipment, molds, cores, and rings
Intangible Assets Assets that do not have physical substance. Examples: o Goodwill, Film Library, Customer lists, Cable Television Franchises, Sport Franchises, Brands, Trademarks, and other intangible assets
Current Liabilities Obligations the company is to pay within the coming year. Usually list notes payable first, followed by accounts payable. Other items follow in order of magnitude.
Long-Term Liabilities Obligations a company expects to pay after one year. Examples: o Long-term debt o Deferred income taxes o Other non-current liabilities
Stockholders Equity Common stock - investments of assets into the business by the stockholders. Retained earnings - income retained for use in the business.
Accounts Payable $47,000 Accounts Receivable $4,600 Accumulated Depreciation, Furniture and Fixtures $3,000 Cash $12,450 Common Stock $10,000 Cost of Good Sold $90,800 Depreciation Expense $600 Dividends declared during the year $54,100 Furniture and Fixtures $33,200 Insurance Expense $1,000 Interest Payable $200 Inventory $40,200 Notes Payable (due in three years) $11,700 Notes Receivable $8,000 Prepaid Insurance $200 Rent Expense $8,400 Retained Earnings, January 1, 2003 $25,900 Sales Revenue $165,900 Supplies $100 Supplies Expense $550 Unearned Sales Revenue $700 Wages Expense $10,200 Additional information: Average outstanding shares of common stock are 10,000.
NET INCOME Revenue
Unearned Sales Revenue: $700 Sales Revenue: $165,900 Total Revenue: $166,600 Expense Cost of Goods Sold: $90,800 Depreciation Expense: $600 Insurance Expense $1,000 Rent Expense $8,400 Supplies Expense $550 Wages Expense $10,200 Total Expense: $111,550 Net Income: $50,050 RETAINED EARNINGS Retained Earnings, January 1, 2003: $25,900 Add Net Income: $50,050 Less Dividends: $54,100 Retained Eanrings, December 31, 2003: $21,850
Classified Balance Sheet Assets
Current Assets Cash: $12,450 Short-Term Investments: $0 Accounts Receivable: $4,600 Notes Receivable: $8,000 Inventory: $40,200 Supplies: $100 Prepaid Insurance: $200 o Total Currents Assets: $65,550
Long-Term Investments None
Property, Plant, and Equipment Furniture and Fixtures: $33,200 o Accumulated Depreciation, Furniture and Fixtures: $3,000 Total Property, Plant, and Equipment: $30,200
Intangible Assets None
Total Assets: $95,750 Liabilities and Stockholders Equity Current Liabilities Accounts Payable: $47,000 Unearned Sales Revenue: $700 Interest Payable: $200 o Total Current Liabilities: $47,900
Long-Term Liabilities
Notes Payable (due in three years): $11,700
Stockholders Equity Common Stock: $10,000 Retained Earnings: $21,850 o Total Stockholders Equity: $31,850
Total Liabilities and Stockholders Equity: $91,450