Question

Lydex Company Comparative Balance Sheet This Year Last Year   Assets   Current assets:      Cash $ 940,000    ...

Lydex Company
Comparative Balance Sheet
This Year Last Year
  Assets
  Current assets:
     Cash $ 940,000     $ 1,200,000    
     Marketable securities 0     300,000    
     Accounts receivable, net 2,620,000     1,720,000    
     Inventory 3,580,000 2,300,000    
     Prepaid expenses 250,000     190,000    
  Total current assets 7,390,000     5,710,000    
  Plant and equipment, net 9,480,000     9,030,000    
  Total assets $ 16,870,000     $ 14,740,000    
Liabilities and Stockholders' Equity
  Liabilities:
     Current liabilities $ 3,880,000     $ 2,940,000    
     Note payable, 10% 3,660,000     3,060,000    
  Total liabilities 7,540,000     6,000,000    
  Stockholders' equity:
      Common stock, $75 par value 7,500,000     7,500,000    
      Retained earnings 1,830,000     1,240,000    
  Total stockholders' equity 9,330,000     8,740,000    
  Total liabilities and stockholders' equity $ 16,870,000     $ 14,740,000    
Lydex Company
Comparative Income Statement and Reconciliation
This Year Last Year
  Sales (all on account) $ 15,840,000    $ 13,380,000   
  Cost of goods sold 12,672,000    10,035,000   
  Gross margin 3,168,000    3,345,000   
  Selling and administrative expenses 1,473,429    1,596,000   
  Net operating income 1,694,571    1,749,000   
  Interest expense 366,000    306,000   
  Net income before taxes 1,328,571    1,443,000   
  Income taxes (30%) 398,571    432,900   
  Net income 930,000    1,010,100   
  Common dividends 340,000    505,050   
  Net income retained 590,000    505,050   
  Beginning retained earnings 1,240,000    734,950   
  Ending retained earnings $ 1,830,000    $ 1,240,000   
  Current ratio 2.4   
  Acid-test ratio 1.2   
  Average collection period 40 days     
  Average sale period 60 days     
  Return on assets 9.1 %          
  Debt-to-equity ratio 0.69
  Times interest earned ratio 5.7
  Price-earnings ratio 10
Required:
1.

Present the balance sheet in common-size format. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.)

Lydex Company
Common-Size Balance Sheets
This Year Last Year
Assets
Current assets:
Cash 0.0 % 0.0 %
Marketable securities 0.0 0.0
Accounts receivable, net 0.0 0.0
Inventory 0.0 0.0
Prepaid expenses 0.0 0.0
Total current assets 0.0 0.0
Plant and equipment, net 0.0 0.0
Total assets 0.0 % 0.0 %
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities 0.0 % 0.0 %
Note payable, 10% 0.0 0.0
Total liabilities 0.0 0.0
Stockholders’ equity:
Common stock, $75 par value 0.0

0.0

Retained earnings 0.0 0.0
Total stockholders’ equity 0.0 0.0
Total liabilities and equity 0.0 % 0.0 %
2b.

Present the income statement in common-size format down through net income. (Round your percentage answers to 1 decimal place i.e., 0.123 is considered as 12.3. Due to rounding, figures may not fully reconcile down a column.

Lydex Company
Common-Size Income Statements
This Year Last Year
Sales 0 % 0 %
Cost of goods sold 0 0
Gross margin 0 0
Selling and administrative expenses 0 0
Net operating income 0 0
Interest expense 0 0
Net income before taxes 0 0
Income taxes (30%) 0 0
Net income 0 % 0 %

Homework Answers

Answer #1
1
Lydex Company
Common-Size Balance Sheets
This Year Last Year
Assets
Current assets:
Cash 5.6% 8.1%
Marketable securities 0.0% 2.0%
Accounts receivable, net 15.5% 11.7%
Inventory 21.2% 15.6%
Prepaid expenses 1.5% 1.3%
Total current assets 43.8% 38.7%
Plant and equipment, net 56.2% 61.3%
Total assets 100.0% 100.0%
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities 23.0% 19.9%
Note payable, 10% 21.7% 20.8%
Total liabilities 44.7% 40.7%
Stockholders’ equity:
Common stock, $75 par value 44.5% 50.9%
Retained earnings 10.8% 8.4%
Total stockholders’ equity 55.3% 59.3%
Total liabilities and equity 100.0% 100.0%
2
Lydex Company
Common-Size Income Statements
This Year Last Year
Sales 100.0% 100.0%
Cost of goods sold 80.0% 75.0%
Gross margin 20.0% 25.0%
Selling and administrative expenses 9.3% 11.9%
Net operating income 10.7% 13.1%
Interest expense 2.3% 2.3%
Net income before taxes 8.4% 10.8%
Income taxes (30%) 2.5% 3.2%
Net income 5.9% 7.5%
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