The following financial information is for Cullumber Company. CULLUMBER COMPANY Balance Sheets December 31 Assets 2022 2021 Cash $ 69,000 $ 69,000 Debt investments (short-term) 53,000 41,000 Accounts receivable (net) 103,000 92,000 Inventory 239,000 164,000 Prepaid expenses 25,000 29,000 Land 132,000 132,000 Building and equipment (net) 263,000 188,000 Total assets $884,000 $715,000 Liabilities and Stockholders’ Equity Notes payable (current) $170,000 $101,000 Accounts payable 66,000 54,000 Accrued liabilities 42,000 42,000 Bonds payable, due 2025 251,000 170,000 Common stock, $10 par 205,000 205,000 Retained earnings 150,000 143,000 Total liabilities and stockholders’ equity $884,000 $715,000 CULLUMBER COMPANY Income Statements For the Years Ended December 31 2022 2021 Net sales $890,000 $791,000 Cost of goods sold 643,000 576,000 Gross profit 247,000 215,000 Operating expenses 190,000 160,000 Net income $ 57,000 $ 55,000 Additional information: 1. Inventory at the beginning of 2021 was $115,000. 2. Accounts receivable (net) at the beginning of 2021 were $89,000. 3. Total assets at the beginning of 2021 were $637,000. 4. No common stock transactions occurred during 2021 or 2022. 5. All sales were on credit. The following are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2022, and (2) as of December 31, 2023, after giving effect to the situation. (Round return on common stockholders’ equity and price earnings ratio to 1 decimal place, e.g. 1.8 or 1.8%. Round debt to assets ratio and % change to 0 decimal places, e.g. 25%. If % change is a decrease show the numbers as negative, e.g. -25% or (25)%.) Situation Ratio 1. 20,000 shares of common stock were sold at par on July 1, 2023. Net income for 2023 was $52,000, and there were no dividends. Return on common stockholders’ equity 2. All of the notes payable were paid in 2023. All other liabilities remained at their December 31, 2022, levels. Total assets on December 31, 2023 were $859,000. Debt to assets ratio 3. The market price of common stock was $9 and $12 on December 31, 2022 and 2023, respectively. Net income for 2023 was $52,000. (Use a simple average calculation for EPS). Price-earnings ratio 2023 2022 % Change Return on common stockholders’ equity enter return on common stockholders equity in percentage rounded to 1 decimal place % enter return on common stockholders equity in percentage rounded to 1 decimal place % enter return on common stockholders equity in percentage rounded to 0 decimal places % Debt to assets ratio enter debt to asset ratio in percentage rounded to 0 decimal places % enter debt to asset ratio in percentage rounded to 0 decimal places % enter debt to asset ratio in percentage rounded to 0 decimal places % Price earnings ratio enter price earnings ratio in times rounded to 1 decimal place times enter price earnings ratio in times rounded to 1 decimal place times enter price earnings ratio in percentage rounded to 0 decimal places %

The following financial information is for Cullumber Company. CULLUMBER COMPANY Balance Sheets December 31 Assets 2022 2021 Cash $ 69,000 $ 69,000 Debt investments (short-term) 53,000 41,000 Accounts receivable (net) 103,000 92,000 Inventory 239,000 164,000 Prepaid expenses 25,000 29,000 Land 132,000 132,000 Building and equipment (net) 263,000 188,000 Total assets $884,000 $715,000 Liabilities and Stockholders’ Equity Notes payable (current) $170,000 $101,000 Accounts payable 66,000 54,000 Accrued liabilities 42,000 42,000 Bonds payable, due 2025 251,000 170,000 Common stock, $10 par 205,000 205,000 Retained earnings 150,000 143,000 Total liabilities and stockholders’ equity $884,000 $715,000 CULLUMBER COMPANY Income Statements For the Years Ended December 31 2022 2021 Net sales $890,000 $791,000 Cost of goods sold 643,000 576,000 Gross profit 247,000 215,000 Operating expenses 190,000 160,000 Net income $ 57,000 $ 55,000 Additional information: 1. Inventory at the beginning of 2021 was $115,000. 2. Accounts receivable (net) at the beginning of 2021 were $89,000. 3. Total assets at the beginning of 2021 were $637,000. 4. No common stock transactions occurred during 2021 or 2022. 5. All sales were on credit. The following are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2022, and (2) as of December 31, 2023, after giving effect to the situation. (Round return on common stockholders’ equity and price earnings ratio to 1 decimal place, e.g. 1.8 or 1.8%. Round debt to assets ratio and % change to 0 decimal places, e.g. 25%. If % change is a decrease show the numbers as negative, e.g. -25% or (25)%.) Situation Ratio 1. 20,000 shares of common stock were sold at par on July 1, 2023. Net income for 2023 was $52,000, and there were no dividends. Return on common stockholders’ equity 2. All of the notes payable were paid in 2023. All other liabilities remained at their December 31, 2022, levels. Total assets on December 31, 2023 were $859,000. Debt to assets ratio 3. The market price of common stock was $9 and $12 on December 31, 2022 and 2023, respectively. Net income for 2023 was $52,000. (Use a simple average calculation for EPS). Price-earnings ratio 2023 2022 % Change Return on common stockholders’ equity enter return on common stockholders equity in percentage rounded to 1 decimal place % enter return on common stockholders equity in percentage rounded to 1 decimal place % enter return on common stockholders equity in percentage rounded to 0 decimal places % Debt to assets ratio enter debt to asset ratio in percentage rounded to 0 decimal places % enter debt to asset ratio in percentage rounded to 0 decimal places % enter debt to asset ratio in percentage rounded to 0 decimal places % Price earnings ratio enter price earnings ratio in times rounded to 1 decimal place times enter price earnings ratio in times rounded to 1 decimal place times enter price earnings ratio in percentage rounded to 0 decimal places %

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter3: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 19SP

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Question

The following financial information is for Cullumber Company.

CULLUMBER COMPANY Balance Sheets December 31
Assets	2022	2021
Cash	$ 69,000	$ 69,000
Debt investments (short-term)	53,000	41,000
Accounts receivable (net)	103,000	92,000
Inventory	239,000	164,000
Prepaid expenses	25,000	29,000
Land	132,000	132,000
Building and equipment (net)	263,000	188,000
Total assets	$884,000	$715,000
Liabilities and Stockholders’ Equity
Notes payable (current)	$170,000	$101,000
Accounts payable	66,000	54,000
Accrued liabilities	42,000	42,000
Bonds payable, due 2025	251,000	170,000
Common stock, $10 par	205,000	205,000
Retained earnings	150,000	143,000
Total liabilities and stockholders’ equity	$884,000	$715,000

CULLUMBER COMPANY Income Statements For the Years Ended December 31
	2022	2021
Net sales	$890,000	$791,000
Cost of goods sold	643,000	576,000
Gross profit	247,000	215,000
Operating expenses	190,000	160,000
Net income	$ 57,000	$ 55,000

Additional information:

1.		Inventory at the beginning of 2021 was $115,000.
2.		Accounts receivable (net) at the beginning of 2021 were $89,000.
3.		Total assets at the beginning of 2021 were $637,000.
4.		No common stock transactions occurred during 2021 or 2022.
5.		All sales were on credit.

The following are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2022, and (2) as of December 31, 2023, after giving effect to the situation. (Round return on common stockholders’ equity and price earnings ratio to 1 decimal place, e.g. 1.8 or 1.8%. Round debt to assets ratio and % change to 0 decimal places, e.g. 25%. If % change is a decrease show the numbers as negative, e.g. -25% or (25)%.)

Situation	Ratio
1.	20,000 shares of common stock were sold at par on July 1, 2023. Net income for 2023 was $52,000, and there were no dividends.	Return on common stockholders’ equity
2.	All of the notes payable were paid in 2023. All other liabilities remained at their December 31, 2022, levels. Total assets on December 31, 2023 were $859,000.	Debt to assets ratio
3.	The market price of common stock was $9 and $12 on December 31, 2022 and 2023, respectively. Net income for 2023 was $52,000. (Use a simple average calculation for EPS).	Price-earnings ratio

	2023		2022		% Change
Return on common stockholders’ equity	enter return on common stockholders equity in percentage rounded to 1 decimal place	%		enter return on common stockholders equity in percentage rounded to 1 decimal place	%	enter return on common stockholders equity in percentage rounded to 0 decimal places	%
Debt to assets ratio	enter debt to asset ratio in percentage rounded to 0 decimal places	%		enter debt to asset ratio in percentage rounded to 0 decimal places	%	enter debt to asset ratio in percentage rounded to 0 decimal places	%
Price earnings ratio	enter price earnings ratio in times rounded to 1 decimal place	times		enter price earnings ratio in times rounded to 1 decimal place	times	enter price earnings ratio in percentage rounded to 0 decimal places	%

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