BRIEF EXERCISE 5-7
Beginning inventory ..................................................
Add: Purchases .......................................................
Cost of goods available for sale ...............................
Less: Ending inventory ............................................
Cost of goods sold ....................................................
$ 67,000
380,000
447,000
50,000
$397,000
EXERCISE 5-8
(a)
MISRA COMPANY
Income Statement
For the Year Ended December 31, 2012
Net sales .............................................
Cost of goods sold .............................
Gross profit.........................................
Operating expenses
Administrative expenses............
Selling expenses ........................
Total operating expenses ...
Income from operations ....................
Other revenues and gains
Interest revenue ..........................
Other expenses and losses
Loss on disposal of
plant assets ..............................
Interest expense .........................
Income before income taxes .............
Income tax expense ...........................
Net income ..........................................
Earnings per share
$2,050,000
987,000
1,063,000
$465,000
420,000
885,000
178,000
65,000
$83,500
71,000
(154,500)
$
(89,500)
88,500
25,000
63,500
$3.175
EXERCISE 5-9
(a)
THE CLOROX COMPANY
Income Statement
For the Year Ended June 30, 2009
(amounts in millions)
Net sales .............................................................
Cost of goods sold .............................................
Gross profit.........................................................
Operating expenses
Selling and administrative expenses ........
Advertising expense ...................................
Research and development expense ........
Total operating expenses ...................
Income from operations ....................................
Other expenses and losses
Interest expense .........................................
Other expense.............................................
Income before income taxes .............................
Income tax expense ...........................................
Net income ..........................................................
$5,450
3,104
2,346
$715
499
114
1,328
1,018
161
46
207
811
274
$ 537
EXERCISE 5-10
Inventory, September 1, 2011 ...................................
Purchases ..................................................................
Less: Purchase returns and allowances ................
Net purchases ............................................................
Add: Freight-in ........................................................
Cost of goods purchased ..........................................
Cost of goods available for sale ...............................
Inventory, August 31, 2012........................................
Cost of goods sold .............................................
$ 18,700
$154,000
5,000
149,000
8,000
157,000
175,700
(21,000)
$154,700
PROBLEM 5-1B
(a)
General Journal
Date
Apr. 2
4
5
6
11
13
14
16
18
20
Account Titles
Inventory ............................................................
Accounts Payable......................................
Debit
8,700
Accounts Receivable ........................................
Sales Revenue ...........................................
6,000
Cost of Goods Sold...........................................
Inventory ....................................................
3,700
Freight-out .........................................................
Cash ...........................................................
200
Accounts Payable .............................................
Inventory ....................................................
400
Accounts Payable ($8,700 – $400) ...................
Cash ...........................................................
Inventory ($8,300 X 2%).............................
8,300
Cash ...................................................................
Sales Discounts ($6,000 X 2%) .........................
Accounts Receivable ................................
5,880
120
Inventory ............................................................
Cash ...........................................................
4,700
Cash ...................................................................
Inventory ....................................................
500
Inventory ............................................................
Accounts Payable......................................
5,500
Inventory ............................................................
Cash ...........................................................
180
Credit
8,700
6,000
3,700
200
400
8,134
166
6,000
4,700
500
5,500
180
PROBLEM 5-1B (Continued)
General Journal
Date
Apr. 23
26
27
29
30
Account Titles
Cash ...................................................................
Sales Revenue ...........................................
Debit
8,300
Cost of Goods Sold ...........................................
Inventory ....................................................
5,580
Inventory ............................................................
Cash ...........................................................
2,300
Accounts Payable .............................................
Cash ...........................................................
Inventory ($5,500 X 2%).............................
5,500
Sales Returns and Allowances ........................
Cash ...........................................................
180
Inventory ............................................................
Cost of Goods Sold ...................................
120
Accounts Receivable ........................................
Sales Revenue ...........................................
3,980
Cost of Goods Sold ...........................................
Inventory ....................................................
2,500
Credit
8,300
5,580
2,300
5,390
110
180
120
3,980
2,500
PROBLEM 5-4B
(a)
PARKLAND DEPARTMENT STORE
Income Statement
For the Year Ended December 31, 2012
Sales revenues
Sales revenue .......................................
Less: Sales returns and
allowances.................................
Net sales ...............................................
Cost of goods sold ......................................
Gross profit ..................................................
Operating expenses
Salaries and wages expense ...............
Depreciation expense ..........................
Utilities expense ...................................
Insurance expense ...............................
Maintenance and repairs expense ......
Total operating expenses.............
Income from operations ..............................
Other revenues and gains
Gain on disposal of plant assets.........
Other expenses and losses
Interest expense ...................................
Income before income tax ...........................
Income tax expense .....................................
Net income ...................................................
$626,000
8,000
618,000
412,000
206,000
$111,000
23,400
11,000
8,400
6,200
Earnings per share .....................................
($28,300 / 15,000 shares)
160,000
46,000
$4,300
(7,000)
(2,700)
43,300
15,000
$ 28,300
$1.887
PARKLAND DEPARTMENT STORE
Retained Earnings Statement
For the Year Ended December 31, 2012
Retained earnings, January 1 .........................................................
Add: Net income ............................................................................
Less: Dividends ..............................................................................
Retained earnings, December 31 ....................................................
$19,200
28,300
47,500
15,000
$32,500
PROBLEM 5-4B (Continued)
PARKLAND DEPARTMENT STORE
Balance Sheet
December 31, 2012
Assets
Current assets
Cash ...................................................
Accounts receivable .........................
Inventory ............................................
Prepaid insurance .............................
Total current assets...................
Property, plant, and equipment
Buildings ............................................
Less: Accumulated depreciation—
buildings .................................
Equipment .........................................
Less: Accumulated depreciation—
equipment ...............................
Total assets ................................
$ 28,000
45,500
43,000
2,400
$118,900
$190,000
52,500
100,000
137,500
42,600
57,400
194,900
$313,800
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable ................................................
Mortgage payable .................................................
Salaries and wages payable ................................
Interest payable ....................................................
Total current liabilities .................................
Long-term liabilities
Mortgage payable ($62,500 – $20,000) ................
Total liabilities ...............................................
Stockholders’ equity
Common stock .....................................................
Retained earnings ................................................
Total stockholders’ equity ...........................
Total liabilities and stockholders’ equity ....
$ 73,300
20,000
3,500
2,000
$98,800
42,500
141,300
140,000
32,500
172,500
$313,800
BYP 5-2
COMPARATIVE ANALYSIS PROBLEM
(a)
Tootsie Roll
Profit margin ratio
(1) (net income/net
sales)
(2) Gross profit (000’s)
(net sales – CGS)
Gross profit rate
(3) (gross profit/net
sales)
$435,994
$53,475
$499,331
= 10.7%
$176,947 = ($495,592 – $318,645)
$176,947
$495,592
$5,298,668
= 8.2%
$2,053,137 = ($5,298,668 – $3,245,531)
$2,053,137
= 35.7%
(4) Operating income
(000’s)
$62,079
(5) Percent change in
operating income
$62,079 – 66,527
$66,527
Hershey Foods
$5,298,668
= 38.7%
$761,590
= –6.7%
$761,590 – 589,898
$589,898
= +29.1%
(b) Tootsie Roll’s higher profit margin ratio suggests that it was
better at turning sales dollars into net income. Its gross profit
rate suggests that Hershey Foods can command a higher markup
on its goods or that it is better at controlling its cost of goods
sold. Tootsie Roll’s operating income decreased 6.7% while
Hershey Foods’ increased by 29.1%. A major reason for Tootsie
Roll’s decline in operating income was due to $14,000 recognized
for impairment charges. (Without this charge operating income
would have increased by 14% rather than the 6.7% decline.)