Question

CHAPTER 3 Tricome Statement and Statement of Stockholders' Equity 147 3.14. LA Theatres Inc, ha A Theatres Inc. has two distinct revenue sources, ticket and concession revenues. The follow the information from LA Theatres Inc. income statements for the past three years is available 2014 (in millions) 2016 2015 2014 $1,120 792 $150,000 108,000 $ 42,000 20,000 $ 22,000 7.000 $ 15,000 Ticket revenue Concessions revenue Total revenue Cost of goods sold-tickets Cost of goods sold-concessions Total cost of goods sold Gross profit $1,642 687 $2,329 $ 854 $1,531 5 549 $2,523 $ 951 70 $1,021 $1,502 69 $ 923 $1,406 $ 597 $937 Following single (a) Calculate gross profit margins for tickets and concessions for all three years Calculate an overall gross profit margin for LA Theatres Inc. for all three years. (b) Analyze the changes in gross profit margin for all three years. 3.15. Writing Skills Problem Income statements are presented for the Elf Corporation for the years ending December 31 2016, 2015, and 2014. Elf Corporation Income Statements for the Years Ending December 31, 2016, 2015, and 2014 (in millions) 2016 2015 2014 Sales $700 $650 $550 Cost of goods sold 350 275 Gross profit $350 $275 Operating expenses: Administrative 100 100 Advertising and marketing Operating profit $200 $150 Interest expense 20 $130 S100 $ 70 Earnings before tax Tax expense (50%) 65 5.50 5 65 Net income $ 35 325 $333 100 $100 50 er 31, 2016, 2015 and analyze the Required: Write a one-paragraph analysis of Elf Corporation's profit performance for the period. to the Students The focus of this exercise is on analyzing financial data rather than simply describing the numbers and trends. Analysis involves breaking the information into parts For study, relating the pieces, making comparisons, drawing conclusions, and evaluating cause and effect. 3.16. Research Problem 2014 $134 + of a company automobile mate the gross Failer-grocercial statement all companiculated short essay Locate the income statement of a company in each of the following industries pharma eutical, technology, retailer-groceries, and automobile manufacturer. (See Chapter 1 of help in locating a company's financial statements.) Calculate the gross profit margin "perating profit margin, and net profit margin for all companies. Write a short essay plaining the differences you find between the profit margins calculated and why you think the profit margins differ. ($ 31) 3.17. Internet Problem Look up the FASB home page that are currently on the the potential change (11) ok up the FASB home page on the Internet at the following address: www.fasb.org/ nd the list of technical projects that are currently on the board's agenda. Choose one of e projects that will affect the income statement. Describe the potential change and how the income statement may be affected.

Question 3.11 - Using the information provided in the problem on page 145, calculate/answer the following:

a. Sales growth percentage from 2014 to 2015.

b. Sales growth percentage from 2015 to 2016.

c. Cost of goods sold percentage for 2014.

d. Cost of goods sold percentage for 2015.

e. Cost of goods sold percentage for 2016.

f. Gross profit margin percentage for 2014.

g. Gross profit margin percentage for 2015.

h. Gross profit marginpercentage for 2016.

i. Operating profit margin percentage for 2014.

j. Operating profit margin percentage for 2015.

k. Operating profit margin percentage for 2016.

l. Average tax rate percentage for 2014.

m. Average tax rate percentage for 2015.

n. Average tax rate percentage for 2016.

o. Net profit margin percentage for 2014.

p. Net profit margin percentage for 2015.

q. Net profit margin percentage for 2016.

r - t. Answer the multiple choice questions using the information you calculated in parts a - k.

Question 3.12 - Prepare a multiple-step income statement for JackRabbit, Inc. from the single-step statement provided on Page 146 and answer the following questions using the multiple-step statement.

a. The gross profit.

b. Operating profit.

c. Other income (expense) total.

d. Pre-tax income.

Question 3.13 - Prepare common-size income statements for December 31, 2016, 2015, and 2014 using the income statements for Yarrick Company on Page 146 of your text and answer the following questions:

a. Cost of goods sold percentage for 2014.

b. Cost of goods sold percentage for 2015.

c. Cost of goods sold percentage for 2016.

d. Gross profit percentage for 2014.

e. Gross profit percentage for 2015.

f. Gross profit percentage for 2016.

g. Selling, general and administrative expenses percentage for 2014.

h. Selling, general and administrative expenses percentage for 2015.

i. Selling, general and administrative expenses percentage for 2016.

j. Research and development percentage for 2014.

k. Research and development percentage for 2015.

l. Research and development percentage for 2016.

m. Operating profit percentage for 2014.

n. Operating profit percentage for 2015.

o. Operating profit percentage for 2016.

p. Income tax expense (benefit) percentage for 2014.

q. Income tax expense (benefit) percentage for 2015.

r. Income tax expense (benefit) percentage for 2016.

s. Net profit percentage for 2014.

t. Net profit percentage for 2015.

u. Net profit percentage for 2016.

v - x. Answer the multiple choice questions using the information from the common-size income statement information.

Question 3.14 - Calculate the gross profit margins for tickets and concessions for all three years (2014, 2015, 2016). Calculate an overall gross profit margin for LA Theatres for all three years using the information provided on page 147 and answer the following questions:

a. Gross profit margin for tickets for 2014.

b. Gross profit margin for tickets for 2015.

c. Gross profit margin for tickets for 2016.

d. Gross profit margin for concessions for 2014.

e. Gross profit margin for concessions for 2015.

f. Gross profit margin for concessions for 2016.

g. Total gross profit margin for 2014.

h. Total gross profit margin for 2015.

i. Total gross profit margin for 2016.

j - l. Answer the multiple choice questions using the information you calculated in parts a - i above.

Answer 1

Answer to Question 3.11:

Moon Company Income statement
For the Year Ended December 31, 2016,2015 and 2014
	2016		2015		2014		2015 vs 2014		2016 vs 2015
	Amount	%	Amount	%	Amount	%	Amount	%	Amount	%
Net Sales	220,000	100%	196,000	100%	150,000	100%	46,000	23%	24,000	11%
Cost of Goods Sold	169,000	77%	147,000	75%	108,000	72%
Gross Profit	51,000	23%	49,000	25%	42,000	28%
Operating Expense	26,000	12%	25,000	13%	20,000	13%
Operating Profit	25,000	11%	24,000	12%	22,000	15%
Income Taxes	7,800	4%	7,500	4%	7,000	5%
Net Income	17,200	8%	16,500	8%	15,000	10%

Answer to Question 3.12:

Income Statement of Jackrabbit Inc.
For the Year Ended xxxxx
Description		Amount	%
Net Sales		1,840,000	100%
Cost of Goods Sold		1,072,000	58%
Gross Profit		768,000	42%
Operating Expense
Selling Expenses	270,000
General and Administrative Expense	155,000
Total Operating Expenses		425,000	23%
Operating Income		343,000	19%
Non-Operating or Other Revenue and Expense
Gain on sale of equipment	15,000
Interest Income	13,000
Depreciation	(24,000)
Equity Losses	(9,000)
Interest Expense	(16,000)
Income/(Loss) from non-operating or other revenue and Expense		(21,000)	-1%
Net Income before taxes		322,000	18%
Income Tax Expense		96,000	5%
Net Income after taxes		226,000	12%

Answer to question 3.13:

Yarrick Company Income statement
For the years ended December31, 2016,2015 and 2014
	2016		2015		2014
(in millions)	Amount	%	Amount	%	Amount	%
Net Sales	237	100%	155	100%	134	100%
Cost of Goods Sold	138	58%	84	54%	72	54%
Gross Profit	99	42%	71	46%	62	46%
Sales, General and administrative expense	42	18%	31	20%	39	29%
Research and Development	38	16%	33	21%	54	40%
Operating Profit	19	8%	7	5%	(31)	-23%
Income Tax Expense	7	3%	2	1%	(11)	-8%
Net Profit	12	5%	5	3%	(20)	-15%

Answer to Question 3.14:

LA Theatres Inc income statement
For the years ended December31, 2016,2015 and 2014
	2016			2015			2014
	Ticket	Concessions	Total	Ticket	Concessions	Total	Ticket	Concessions	Total
Revenue	1,731	792	2,523	1,642	687	2,329	1,120	411	1,531
Cost of Goods Sold	951	70	1,021	854	69	923	549	48	597
Gross Profit	780	722	1,502	788	618	1,406	571	363	934
Gross Profit in % to sales	45%	91%	60%	48%	90%	60%	51%	88%	61%

Gross Profit in % to sales remains almost same for all 3 years with very minimal difference; whereas Gross profit has increased by 34% in year 2015 as compared to year 2014; and 6% in year 2016 as compared to year 2015, which comes mainly from increase/decrease in Revenue between years.