Question

[The following information applies to the questions displayed below.] The comparative financial statements for Prince Company are below: Year 2 Year 1 Income statement: Sales revenue $190,000 112,000 78,000 56,000 22,000 8,000 $167,000 100,000 67,000 53,000 14,000 4,000 $10,000 Cost of goods sold Gross profit Operating expenses and interest expense Pretax income Income tax $14,000 Net income Balance sheet: Cash Accounts receivable (net) Inventory 4,000 14,000 40,000 45,000 $ $7,000 18,000 34,000 38,000 $97,000 $ 17,000 45,000 30,000 5,000 97,000 Property and equipment (net) Total assets $103,000 $16,000 45,000 30,000 12,000 $103,000 Current liabilities (no interest) Long-term liabilities (10% interest) Common stock ($5 par value, 6,000 shares outstanding) Retained earnings Total liabilities and stockholde rs equity

Answer 1

Ans. 1	PRINCE COMPANY
	Income Statement
		Year 2
		Amount	Component %
	Sales revenue	$190,000	100.00%
	Cost of goods sold	$112,000	58.95%
	Gross profit	$78,000	41.05%
	Operating expenses	$56,000	29.47%
	Pretax income	$22,000	11.58%
	Income taxes	$8,000	4.21%
	Net income	$14,000	7.37%
	*In a component income statement, all precentages are calculated on the base of sales.
	Amount is percentage for year 2 =   Particular amount of year 2 / Sales * 100
Ans. 2	PRINCE COMPANY
	Balance Sheet
		Year 2
		Amount	Component %
	Cash	$4,000	3.88%
	Accounts receivables	$14,000	13.59%
	Inventory	$40,000	38.83%
	Operational assets	$45,000	43.69%
	Total assets	$103,000	100.00%
	Current liabilities	$16,000	15.53%
	Long term liabilities	$45,000	43.69%
	Common stock	$30,000	29.13%
	Retained earnings	$12,000	11.65%
	Total Liabilities and Owners' equity	$103,000	100.00%
	Amount is percentage from assets side =   Particular amount from assets side / Total assets * 100
	Amount is percentage from liabilities side =   Particular amount from liability side / Total liabilities and owner's equity   * 100
Ans. 3	Total assets turnover = Sales / Average operating assets
	$190,000 / $100,000
	1.90	times
	*Average assets = (Beginning assets + Ending assets) / 2
	($97,000 + $103,000) / 2
	$100,000
	Net Profit Margin =   Net income / Sales * 100
	$14,000 / $190,000 * 100
	7.37%