Chapter 15: Q11SE (page 838)

Old Mills’s income statement appears as follows (amounts in thousands):
Use the following ratio data to complete Old Mills’s income statement:

1. Inventory turnover is 3.70 (beginning Merchandise Inventory was $810; ending
Merchandise Inventory was $770).
2. Profit margin ratio is 14%.

Short Answer

Expert verified

Answer

Complete income statement given below.

Step by step solution

Preparation of Income Statement

Income Statement- Old Mills Company
For year ended 31 Dec, 2018
Particulars	Amount
Net sales Revenue	$6,900.00
Cost of Goods Sold	2,923.00
Gross Profit	3,977.00
Selling and Administrative Expenses	1,710.00
Interest Expense ($3,977-1,710-120-1,150)	997.00
Other Expenses	120.00
Income Before Income Taxes	1,150.00
Income Tax Expense ($1,150-$966)	184.00

Net Income	$966.00

Working Notes

Inventory Turnover= 3.70

Cost of goods sold/ Average Inventory= 3.70

Average Inventory =($810+770)/2 = $790

Cost of Goods Sold = 3.70x 790 = $2,923

Net Sales = $6,900

Profit Margin ratio= 14%

Net Income = $6,900x14% = $966.00

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XYZ ATHLETIC SUPPLY, INC.
Five-Year Financial Summary (Partial; adapted)
(Dollar amounts in thousands except per share data)	2018	2017	2016	2015	2014	2016
Net sales revenue	\(275,000	\)222,000	\(199,000	\)171,000	131,000
Net Sales Revenue Increase	24%	12%	16%	31%	17%
Domestic Comparative Store Sales Increase	6%	6%	5%	8%	10%
Other Income—Net	2,090	1,780	1,770	1,700	1,310
Cost of Goods Sold	208,725	169,386	154,822	134,235	103,883
Selling and Administrative Expenses	41,280	36,340	31,670	27,450	22,540
Interest:
Interest Expense	(1,070)	(1,370)	(1,330)	(1,100)	(800)
Interest Income	140	155	150	230	140
Income Tax Expense	4,420	3,900	3,610	3,390	2,730
Net Income	21,735	12,939	9,488	6,755	2,497
Per Share of Common Stock:
Net Income	1.10	0.80	0.70	0.50	0.28
Dividends	0.45	0.43	0.39	0.35	0.31
Financial Position
Current Assets, Excluding Merchandise Inventory	\(30,900	\)27,200	\(26,800	\)24,400	$21,800
Merchandise Inventory	24,700	22,400	21,600	19,300	17,000	16,800
Property, Plant, and Equipment, Net	51,600	46,200	40,500	35,000	25,200
Total Assets	107,200	95,800	88,900	78,700	64,000
Current Liabilities	32,600	27,800	28,800	25,600	17,000
Long-term Debt	23,000	21,200	16,800	18,600	12,900
Stockholders’ Equity	51,600	46,800	43,300	35,500	34,100
Financial Ratios
Acid-Test Ratio	0.9	1.0	0.9	1.0	1.3
Rate of Return on Total Assets	22.5%	15.5%	12.8%	10.9%	9.9%
Rate of Return on Common Stockholders’ Equity	44.2%	28.7%	24.1%	19.4%	18.9%

	All digital	Green Zone
Net sales revenue (all on credit)	\(417,925	\)493,115
Cost of goods sold	209,000	258,000
Interest expenses	0	14,000
Net income	58,000	72,000

	All digital	Green Zone
Current assets:
Cash	\(23,000	\)18,000
Short-term investment	37,000	17,000
Accounts receivables, Net	39,000	49,000
Merchandise inventory	64,000	102,000
Prepaid expenses	21,000	17,000
Total current assets	\(184,000	\)203,000
Total assets	\(263,000	\)326,000
Total current liabilities	105,000	99,000
Total liabilities	105,000	134,000
Common stock:
\(1 par (10,000 shares)	10,000
\)2 par (14,000 shares)		28,000
Total stockholder’s equity	158,000	192,000
Market price per share of common stock	92.80	128.50
Dividend paid per common share	1.20	0.90

	All digital	Green Zone
Balance sheet:
Accounts receivables, Net	\(41,000	\)54,000
Merchandise inventory	81,000	89,000
Total assets	258,000	277,000
Common stock:
\(1 par (10,000 shares)	10,000
\)2 par (14,000 shares)		28,000

Old Mills’s income statement appears as follows (amounts in thousands):
Use the following ratio data to complete Old Mills’s income statement:

1. Inventory turnover is 3.70 (beginning Merchandise Inventory was \(810; ending
Merchandise Inventory was \)770).
2. Profit margin ratio is 14%.

Short Answer

Step by step solution

Preparation of Income Statement

Working Notes

One App. One Place for Learning.

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Old Mills’s income statement appears as follows (amounts in thousands):Use the following ratio data to complete Old Mills’s income statement:1. Inventory turnover is 3.70 (beginning Merchandise Inventory was \(810; endingMerchandise Inventory was \)770).2. Profit margin ratio is 14%.

Short Answer

Step by step solution

Preparation of Income Statement

Working Notes

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Business Operations

Managerial Economics

Business Development

Business Case Studies

Organizational Behavior

Managers

Study anywhere. Anytime. Across all devices.

Old Mills’s income statement appears as follows (amounts in thousands):
Use the following ratio data to complete Old Mills’s income statement:

1. Inventory turnover is 3.70 (beginning Merchandise Inventory was \(810; ending
Merchandise Inventory was \)770).
2. Profit margin ratio is 14%.