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(a) ACCRA CORPORATION
Condensed Income Statements
For the Years Ended December 31
Increase or (Decrease)
During 2005
2006 2005 Amount Percentage
Net sales $600,000 $500,000 $100,000 20.0%
Cost of goods sold 480,000 420,000 60,000 14.3%
Gross profit 120,000 80,000 40,000 50.0%
Operating expenses 57,200 44,000 13,200 30.0%
Net income $ 62,800 $ 36,000 $ 26,800 74.4%
(b) ACCRA CORPORATION
Condensed Income Statements
For the Years Ended December 31
2006 2005
Amount Percent Amount Percent
Net sales $600,000 100.0% $500,000 100.0%
Cost of goods sold 480,000 80.0% 420,000 84.0%
Gross profit 120,000 20.0% 80,000 16.0%
Operating expenses 57,200 9.5% 44,000 8.8%
Net income $ 62,800 10.5% $ 36,000 7.2%
PROBLEM 194
(a) LIQUIDITY
2005 2006 Change
$343,000 $374,000
Current = 1.9:1 =1.9:1 No change
$182,000 $198,000
$195,000 $216,000
Acidtest = 1.1:1 = 1.1:1 No change
$182,000 $198,000
An overall increase in shortterm liquidity has occurred.
PROFITABILITY
Profitability has remained relatively the same.
PROBLEM 194 (Continued)
(b) 2006 2007 Change
1. Return on
common $36,000 $45,000
stockhold $326,000 (a) = 11.0% = 10.0% Decrease
$448,500 (b)
ers’ equity
(a) ($200,000 + $136,000 + $200,000 + $116,000) ÷ 2.
(b) ($380,000 + $181,000 + $200,000 + $136,000) ÷ 2.
(c) $45,000 ÷ 20,000.
PROBLEM 195
($24,154 + $19,490) ÷ 2 ($83,451 + $78,130)
a c
÷ 2
($7,860 + $6,519) ÷ 2 ($35,102 + $31,343)
b d
÷ 2
(b) The comparison of the two companies shows the following:
Liquidit y—Target’s current ratio of 1.4:1 is slightly better
than WalMart’s 1.0:1. However, WalMart has a better
inventory turnover ratio than Target and its receivables
turnover is significantly better than Target’s.
Solvenc y—WalMart betters Target in both of the solvency
ratios. Thus, it is more solvent than Target.
Profitabilit y—With the exception of profit margins, Wal
Mart betters Target in all of the profitability ratios. Thus, it
is more profitable than Target.