Intermediate Accounting 201 Prof Nussbaum
From the information given below, prepare the required schedules and financial statements using an excel spreadsheet being careful to use formulas whenever possible. Do not type in numbers that could otherwise be calculated or transferred from another schedule column or line item. When complete your file should then be e-mailed to my QC address: [email protected]. The spreadsheets will only be returned to you if there are problems with your work and you have met the deadline shown below.
You are thinking of investing in one of two corporations, both in the same industry, the Craig Corporation or the Lori Corporation. Selected data follows:
Sales and expense data for the year ended 12/31/16:
Craig: Gross revenue $41,285,000; Returns $1,710,000
Lori: Gross revenue $51,095,000; Returns $3,380,000
Selling expenses:
Craig: Payroll $3,342,000; benefits $1,050,000, travel $350,200; supplies $450,150, commissions $520,300, marketing $810,000, postage $210,300, misc $41,500.
Lori: Payroll $4,431,000; benefits $1,650,000, travel $420,200; supplies $560,350, commissions $622,300, marketing $790,000, postage $292,100, misc $182,300.
Administrative expenses:
Craig: Distribution $1,428,000, warehouse $959,000, IT $625,200, finance $529,400, human resources $413,250; administrative $310,000, depreciation $122,000
Lori: Distribution $1,712,310, warehouse $1,020,220, IT $516,420, finance $615,270, human resources $285,450; administrative $530,600, depreciation $156,100.
Other Gains and Losses
Craig: Sale of machine with a book value of $27,500 for $4,000 cash.
: Loss due to flood damage of $422,000.
Lori: Sold a marketable security at a loss of $113,200
: Sold a building at a gain of $102,200.
Irregular Items:
Craig: None.
Lori: Loss on sale of discontinued division of $875,000 before tax effect.
In addition Craig discovered an inventory error from 2015 which had the effect of overstating income for 2015 by $65,000 before tax.
Tax rates: 35% for both companies:
Outstanding shares of common stock:
Craig: 2,000,000 $1PV shares authorized, 800,000 shares issued and outstanding.
Lori: 3,100,000 $1PV shares authorized, 950,000 shares issued and outstanding.
Dividends: both companies paid cash dividends of $1.50 per share.
Selected Balance Sheet Information:
Craig: Cash $1,822,000; marketable securities (at cost $410,300, at fair value $495,400); Account receivable (gross $1,725,400 less allowance for doubtful accounts of $112,100); Finished goods inventory, opening balance $189,400, purchases $12,443,400, ending balance $175,610. Prepaid expenses $40,210. Plant assets at cost $21,400,000, accumulated depreciation $7,312,000. Accounts payable, $613,410, accrued expense payable $191,260, bonds payable $4,814,693, capital stock $1,450,000, beginning retained earnings $2,325,250.
Lori: Cash $2,310,000; marketable securities (at cost $652,430, at fair value $699,400); Account receivable (gross $2,935,400 less allowance for doubtful accounts of $172,300); Finished goods inventory, opening balance $322,640, purchases $14,892,400, ending balance $285,420. Prepaid expenses $61,310. Plant assets at cost $19,240,000, accumulated depreciation $8,245,000. Accounts payable, $693,450, accrued expense payable $201,220, bonds payable $1,809,466, Capital stock $2,210,000, beginning retained earnings $1,850,500.
Required:
1) Prepare a separate schedule comparing the selling and administrative expenses of the two companies. Separate subtotals are required for both selling and administrative expenses. You should have a column which compares the dollar difference by line item of the two companies.
2) Prepare a separate schedule of cost of goods sold for each of the companies.
3) Prepare a comparative income statement in good form for the two companies. Be sure the selling, administrative and cost of goods number comes from your first two schedules by way of formula. Do not simply type in numbers. Percentage of sale data should be presented for cost of goods sold, gross margin, selling expense and administrative expense and net income.
4) Prepare an EPS summary following your income statement.
5) Prepare a classified balance sheet as shown in chapter 5 of the text. Capital stock must be broken down between common stock and additional paid in capital.
6) Prepare a statement of Retained Earnings. Make sure the net income number is transferred from the income statement by formula and also that total Retained earnings is transferred to the balance sheet by formula.
7) Properly formatted numbers, the appropriate use of $ signs, underlines and double underlines are imperative. Style counts!
This assignment is due no later than November 23rd. Please work independently of your fellow classmates.