USA: +1(669)289-8683 
Sign in
WEEK 5: ACC/400
M. Portugal
The condensed financial statements of Leeward Corporation for 2006 and 2005 are presented below.
Leeward Corporation
Leeward Corporation
Balance Sheet
Income Statement
December 31, 2006
For the Year Ended December 31, 2006
Assets
Revenues
$2,500,000
Current assets
Expenses
Cash and temporary
Cost of goods sold
1,080,000
investments
$ 50,000
Selling and administrative
Accounts receivable
70,000
expenses
495,000
Inventories
120,000
Interest expense
30,000
Total current assets
240,000
Total expenses
1,605,000
Property, plant, and
Income before income taxes
895,000
equipment (net)
780,000
Income tax expense
268,500
Total assets
$1,020,000
Net income
$ 626,500
Liabilities and Stockholders’ Equity
Current liabilities
$ 100,000
Long-term liabilities
300,000
Common stockholders’ equity
620,000
Total liabilities and
stockholders’ equity
$1,020,000
Leeward Corporation
Leeward Corporation
Balance Sheet
Income Statement
December 31, 2005
For the Year Ended December 31, 2005
Assets
Revenues
Current assets
Expenses
Cash and temporary
Cost of goods sold
1,750,000
investments
$ 40,000
Selling and administrative
Accounts receivable
90,000
expenses
500,000
Inventories
150,000
Interest expense
30,000
Total current assets
280,000
Total expenses
2,280,000
Property, plant, and
Income before income taxes
220,000
equipment (net)
800,000
Income tax expense
66,000
Total assets
$1,080,000
Net income
$ 154,000
Liabilities and Stockholders’ Equity
Current liabilities
$ 140,000
Long-term liabilities
320,000
Common stockholders’ equity
620,000
Total liabilities and
stockholders’ equity
$1,080,000
Instructions
1. Compute the following listed ratios for 2006.
(a)
Current ratio =
.
(b)
Debt to total assets =
.
(d)
Profit margin ratio =
.
(e)
Return on common stockholders’ equity =
.
(f)
Return on assets =
.
2. Perform horizontal analysis on both the balance sheet and income statement.
Leeward Corporation
Balance Sheet
Horizontal Analysis
|
2006 |
2005 |
Change |
Percent |
||||||||||||
| Assets | |||||||||||||||
|
Cash and temporary investments |
$50,000 |
$40,000 |
|||||||||||||
|
$70,000 |
$90,000 |
||||||||||||||
|
$120,000 |
$150,000 |
||||||||||||||
|
Total current assets |
$240,000 |
$280,000 |
|||||||||||||
|
Property, plant and equipment |
$780,000 |
$800,000 |
|||||||||||||
|
Total assets |
$1,020,000 | $1,080,000 | |||||||||||||
|
Liabilities & Stockholder’s Equity |
|||||||||||||||
| Current liabilities |
$100,000 |
$140,000 |
|||||||||||||
| Long-term liabilities |
$300,000 |
$320,000 |
|||||||||||||
|
Common stockholder’s equity |
$620,000 |
||||||||||||||
|
Total liabilities and stockholder’s equity |
Leeward Corporation
Income Statement
Horizontal Analysis
|
Cost of goods sold |
$1,750,000 |
||||
|
Selling & administrative expense |
$495,000 |
$500,000 |
|||
|
Interest expense |
$30,000 |
||||
|
Total Expenses |
$1,605,000 |
$2,280,000 |
|||
|
$895,000 |
$220,000 |
||||
| Income tax expense |
$268,500 |
$66,000 |
|||
|
Net Income |
$626,500 |
$154,000 |
3. Perform vertical analysis on both the balance sheet and income statement for 2005 and 2006.
Leeward Corporation
Balance Sheet
Vertical Analysis
|
Amount |
|||
Leeward Corporation
Income Statement
Vertical Analysis
4. Assess the financial performance of Leeward, using your analysis in #2 and #3 above. How have things changed from 2005 to 2006?
5. If the company wanted to perform industry comparison analysis, what references would you recommend it use?
