Question: Financial information for Bradford Company is
Financial information for Bradford Company is presented here.
Additional information:
1. Inventory at the beginning of 2013 was $330,000.
2. Accounts receivable at the beginning of 2013 were $80,000.
3. Total assets at the beginning of 2013 were $1,175,000.
4. No common stock transactions occurred during 2013 or 2014.
5. All sales were on account.
Instructions:
(a) Indicate, by using ratios, the change in liquidity and profitability of the company from 2013 to 2014.
(b) Given below are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio
(1) as of December 31, 2014, and
(2) as of December 31, 2015, after giving effect to the situation. Net income for 2015 was $135,000. Total assets on December 31, 2015, were $1,350,000.
Situation Ratio
1. 10,000 shares of common stock were Return on common stockholders’
sold at par on July 1, 2015. equity
2. All of the notes payable were paid in 2015. Debt to assets ratio
3. The market price of common stock on Price-earnings ratio
December 31, 2014, was $15. The market
price on December 31, 2015, was $18.
Transcribed Image Text:
BRADFORD COMPANY Balance Sheets December 31 Assets 2014 2013 $ 50,000 $ 42,000 50,000 77,000 320,000 31,000 75,000 400,000 Cash Debt investments (short-term) Accounts receivable 80,000 100,000 Inventory Prepaid expenses 410,000 30,000 Land 75,000 570,000 Building and equipment (net) Total assets $1,315,000 $995,000 Liabilities and Stockholders' Equity Notes payable Accounts payable Accrued liabilities $ 120,000 $ 25,000 160,000 50,000 90,000 50,000 100,000 Bonds payable, due 2014 Common stock, $5 par Retained earnings Total liabilities and Stockholders' Equity 180,000 500,000 305,000 500,000 230,000 $1,315,000 $995,000 BRADFORD COMPANY Income Statements For the Years Ended December 31 2014 2013 Sales revenue $1,050,000 $940,000 Cost of goods sold Gross profit Operating expenses 680,000 635,000 370,000 240,000 305,000 215,000 Net income $ 130,000 $ 90,000
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