ACCOUNTING QUESTIONS

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FUNDAMENTALS OF ACCOUNTING II: 352923 / Project

*Problem 13-4A
The following financial information is for Cheaney Company.

CHEANEY COMPANY
Balance Sheets
December 31

Assets 2012 2011
Cash $ 71,500 $ 65,100
Short-term investments 54,800 39,200
Receivables 103,400 89,200
Inventories 238,900 168,400
Prepaid expenses 29,800 27,500
Land 134,400 134,400
Building and equipment (net) 259,100 183,300

Total assets $891,900 $707,100

Liabilities and Stockholders’ Equity
Notes payable $170,600 $107,100
Accounts payable 68,600 54,100
Accrued liabilities 39,200 39,200
Bonds payable, due 2015 249,900 171,800
Common stock, $10 par 199,800 199,800
Retained earnings 163,800 135,100

Total liabilities and stockholders’ equity $891,900 $707,100

CHEANEY COMPANY
Income Statements

For the Years Ended December 31
2012 2011

Sales $893,300 $797,500
Cost of goods sold 644,900 575,600
Gross profit 248,400 221,900
Operating expenses 191,400 159,700

Net income $ 57,000 $ 62,200

Additional information:

1. Inventory at the beginning of 2011 was $115,500.
2. Receivables (net) at the beginning of 2011 were $89,100.
3. Total assets at the beginning of 2011 were $638,700.
4. No common stock transactions occurred during 2011 or 2012.
5. All sales were on account.

*(a)

Attempts: 2 of 2 used

Attempts: 0 of 2 used

Your answer is partially correct. Try again.

Compute the liquidity and profitability ratios of Cheaney Company for 2011 and 2012. (Round all answers to 2
decimal places, e.g. 1.83 or 12.61%. If % change is a decrease show the numbers as negative, e.g.
-12.61% or (12.61%).)

2011 2012 % Change

LIQUIDITY

Current :1 :1 %

Receivables turnover times times %

Inventory turnover times times %

2011 2012 % Change
PROFITABILITY
Profit margin

% % %

Asset turnover times times %
Return on assets % % %

Earnings per share $ $ %

*(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, 2012, and (2) as of December 31, 2013, after giving effect to the situation.
Net income for 2013 was $51,300. Total assets on December 31, 2013, were $904,200. (Round all answers to 2
decimal places, e.g. 1.83 or 12.61%. If % change is a decrease show the numbers as negative, e.g.
-12.61% or (12.61%).)

Situation Ratio
1. 18,100 shares of common stock were sold at par on July 1, 2013. Return on common

stockholders’ equity
2. All of the notes payable were paid in 2013. Debt to total assets
3. The market price of common stock was $9 and $12 on December 31, 2012

and 2013, respectively.
Price-earnings

2012 2013 % Change
Return on common
stockholders’ equity

% % %

Debt to total assets % % %

Price earnings ratio times times %

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1.94 1.79 -7.73

8.94 9.28 -3.80

4.05 3.17 -21.73

7.80 6.38 17.95

1.19 1.12 -5.88
9.24 7.13 -22.84
3.11 2.86 8.04