Company A has the following information available for years ending May 31, 2017,
ID: 2392612 • Letter: C
Question
Company A has the following information available for years ending May 31, 2017, 2016, and 2015:
Additional Information:
During the year ended May 31, 2017, the company had one of its operations destroyed by a flood. The area where this operation was located had not flooded in over 100 years. The company incurred a before-tax loss of $300,000 as a result of this event.
On February 1, 2016, the company sold a segment of the company for $2,400,000 less than the segment’s book value. The segment had revenues of $3,000,000 for 2016 and $2,600,000 for 2015. Cost of goods sold was $750,000 in 2016 and $600,000 in 2015. Operating expenses were $700,000 in 2016 and $550,000 in 2015.
The company had a tax rate of 25% for all years. Assume no deferred taxes.
The company had 10 million shares of common stock outstanding on June 1, 2014. On April 1, 2015, an additional 600,000 shares were issued. On November 1, 2016, the company purchased 300,000 shares of their own stock as treasury stock. On December 1, 2017, the company declared and issued a 20% stock dividend.
The company issued 1,000 bonds on January 2, 2014 at par. The bonds are 10-year bonds with a par value of $1,000 and a face interest rate of 6%. Each bond is convertible into 25 shares of Company A common stock. At December 31, 2017, none of the bonds have been converted.
On June 1, 2015 the company issued 50,000 stock options to its CEO. The options allow the CEO to purchase common stock shares for $20 per share. The CEO may begin exercising the options on June 1, 2017 provided she is still employed by the company. She currently remains CEO of the company.
The average market price of Company A common stock for year ended May 31, 2016 was $30 and for year ended May 31, 2017, it was $38. The May 31 closing market price for Company A common stock was $42 for 2016 and $40 for 2017.
Required: Prepare, in good form, the Income Statement for year ended May 31, 2017 with the two prior years shown for comparative purposes. Include all earnings per share amounts required to be reported in the financial statements on the face of the comparative Income Statement.
2017 2016 2015 Revenues 20,000,000 28,000,000 26,000,000 Cost of Goods Sold 11,800,000 16,240,000 15,200,000 Operating Expenses 4,100,000 5,400,000 5,200,000 Interest Expense 1,100,000 1,300,000 1,450,000Explanation / Answer
The steadiness sheet (B/S) is likely one of the four most important monetary statements that publicly held companies have to post every quarter and yr. The B/S summarizes the company's monetary function at one point in time. In fact, some organizations and most govt companies put up their stability sheets under the other right identify for the B/S, assertion of financial position.
The opposite three mandatory statements are the revenue announcement, the declaration of retained gains, and the statement of alterations in monetary role.
In principle, a firm would publish a new and special stability sheet every day. In apply, they commonly achieve this handiest on the end of fiscal quarters and years. The B/S heading names a date with a phrase comparable to this: "...At 31 December 2016." A balance sheet, as a result, is a "image" of the organization's monetary position on that date. The B/S, thus, differs from different statements, which file exercise for a precise timespan.
What Does the steadiness Sheet document?
For a given date, the balance sheet indicates the next for the organization:
firstly, complete assets. Items of value the organization owns or controls, which it makes use of to earn revenues.
Secondly, whole Liabilities. What the corporation owes.
Thirdly, complete house owners Equities. What the organization owns outright.
Extra properly, the steadiness sheet indicates end-of-interval balances in the corporation's assets, Liabilities, and owners fairness debts. However, its identify entails "steadiness" for a different purpose. Note particularly that its three important sections represent the accounting equation:
assets = Liabilities + owners fairness
The time period balance applies considering the fact that the sum of the firm's belongings ought to equal (balance) the sum of its liabilities and proprietorâs equities. This balance holds, continually, whether or not the corporation's economic function is high-quality or horrible. Double entry ideas in accrual accounting ensure that each alternate to the whole on one aspect brings an equal, offsetting change on the other aspect.
The place is "financial position" on the steadiness Sheet?
Analysts evaluate a firm's fiscal position no longer via the size of the assets complete, or its balancing counterparts, however as a substitute with the aid of evaluating numbers on the sheet.
The firm's liquidity, for instance, is given by metrics that compare stability sheet figures, similar to current ratio and dealing capital.
The firm's capital and financial structures, for illustration, are constructed as ratios of stability sheet figures for house owners Equities and Liabilities. These buildings define the company's Capitalization and stage of leverage.
Other metrics compare stability sheet and income declaration figures to measure the organization's inventory valuation, potentialities for progress, and capacity to make use of belongings successfully.
Explaining the steadiness Sheet in Context
Sections below further define, describe and illustrate stability sheet. Be aware specially that the time period appears in context with related terms and ideas, including the next:
financial PositionIncome StatementRetained EarningsSCFPCash drift StatementAssetsAnnual ReportChart of debts DebitCreditAccounting CycleTrial steadiness interval"Capital" structure"financial" StructureFinancial Metrics
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.