Kate is very pleased with the results of the first year of year on a high note, with the company's reputation for producing quality cards leading to more bsi. ness than she can currently manage. Kate is considering expanding and bringing in several emlay- ees. In order to do this, she will need to find a larger location and also purchase more this means additional financing. Kate has asked you to look at her year-end financial statements as if you were a banker considering giving Kate a loan. Comment on your findings and provide calcula- tions to support your comments. equipment. All
Kate is very pleased with the results of the first year of year on a high note, with the company's reputation for producing quality cards leading to more bsi. ness than she can currently manage. Kate is considering expanding and bringing in several emlay- ees. In order to do this, she will need to find a larger location and also purchase more this means additional financing. Kate has asked you to look at her year-end financial statements as if you were a banker considering giving Kate a loan. Comment on your findings and provide calcula- tions to support your comments. equipment. All
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![the nearest percent.
Which company has the most seasonal business? Briefly explain.
Which company is Toys "R" Us? The Gillette Company? Briefly explain.
c.
d.
SERIAL PROBLEM:KATE'S CARDS
Kate is very pleased with the results of the first year of operations for Kate's Cards. She ended the
year on a high note, with the company's reputation for producing quality cards leading to more basi-
ness than she can currently manage. Kate is considering expanding and bringing in several employ-
ees. In order to do this, she will need to find a larger location and also purchase more equipment. All
this means additional financing. Kate has asked you to look at her year-end financial statements as if
you were a banker considering giving Kate a loan. Comment on your findings and provide calcula-
tions to support your comments.
(Note: This is a continuation of the Serial Problem: Kate's Cards from Chapter 1 through Chapter 12.)
SP13.
KATE'S CARDS
Income Statement
Year Ended August 31, 2019
$185,000
106,000
Sales revenue.
Cost of goods sold
79,000
Gross profit..
Operating expenses
Wages
Consulting.
18,000
11,850
1,200
2,400
14,400
3,250
Insurance
Utilities ..
Rent....
Depreciation.
Total operating expenses
51,100
Income from operations
Interest expense.
27,900
900
Income before income tax
27,000
5,400
Income tax expense
Net income....
$ 21,600](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbbbfb338-1d23-4370-9366-8ef7b587a53e%2F4f1f7339-02bc-4fd5-9b67-9690558cdb03%2F707e8f_processed.jpeg&w=3840&q=75)
Transcribed Image Text:the nearest percent.
Which company has the most seasonal business? Briefly explain.
Which company is Toys "R" Us? The Gillette Company? Briefly explain.
c.
d.
SERIAL PROBLEM:KATE'S CARDS
Kate is very pleased with the results of the first year of operations for Kate's Cards. She ended the
year on a high note, with the company's reputation for producing quality cards leading to more basi-
ness than she can currently manage. Kate is considering expanding and bringing in several employ-
ees. In order to do this, she will need to find a larger location and also purchase more equipment. All
this means additional financing. Kate has asked you to look at her year-end financial statements as if
you were a banker considering giving Kate a loan. Comment on your findings and provide calcula-
tions to support your comments.
(Note: This is a continuation of the Serial Problem: Kate's Cards from Chapter 1 through Chapter 12.)
SP13.
KATE'S CARDS
Income Statement
Year Ended August 31, 2019
$185,000
106,000
Sales revenue.
Cost of goods sold
79,000
Gross profit..
Operating expenses
Wages
Consulting.
18,000
11,850
1,200
2,400
14,400
3,250
Insurance
Utilities ..
Rent....
Depreciation.
Total operating expenses
51,100
Income from operations
Interest expense.
27,900
900
Income before income tax
27,000
5,400
Income tax expense
Net income....
$ 21,600
![Chapter 13 Analysis and Interpretation of Financial Statemonts
679
pss Publishera
KATE'S CARDS
Balance Sheet
August 31, 2019
Assets
Current assets
Cash.
Accounts receivable
Inventory........
Prepaid insurance.
Year
.....
$17,400
11,000
$5,410.8
3,366.5
16.000
1,000
7,169.2
2,200.6
Total current assets
Equipment
Accumulated depreciation
45,400
17,500
3,250
Total assets
$59,650
Liabilities
Current liabilities
Accounts payable.
Unearned revenue
Other current liabilities
pund to
$ 6,200
und to
1,250
1,900
Total current liabilities
Note payable
9,350
15,000
Total liabilities.
24,350
Stockholders' equity
Common stock
500
Additional paid-in-capital
Preferred stock.
Retained earnings
9,500
5,000
20,300
che
si-
y-
11
Total ștockholders' equity.
35,300
$59,650
Total liabilities and stockholders' equity
KATE'S CARDS
Statement of Cash Flows
Year Ended August 31, 2019
Cash flow from operating activities
Net income.. .
Add depreciation
Increase in accounts receivable
Increase in inventory.
Increase in prepaid expenses.
Increase in accounts payable
Increase in unearned revenue
Increase in other current liabilities
$21,600
3,250
(11,000)
(16,000)
(1,000)
6,200
1,250
1,900
6,200
Cash provided by operating activities.
Cash flow from investing activities
Purchase of equipment.
(17,500)
(17,500)
Cash used by investing activities
Cash flow from financing activities
Proceeds from bank note
Issuance of common stock.
Issuance of preferred stock.
Cash dividends
15,000
10,000
5,000
(1,300)*
......
28,700
Cash provided by financing activities
17,400
Net increase in cash.
Cash at beginning of year.
Cash at end of year
$17,400
*Kate issued cash dividends on both the common stock and the preferred stock. There are 50 preferred shares
outstanding and 500 common shares outstanding. The dividends that Kate paid were $6 per share on the preferred
• 300
shares and $2 per share on the common shares.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbbbfb338-1d23-4370-9366-8ef7b587a53e%2F4f1f7339-02bc-4fd5-9b67-9690558cdb03%2Fwt4nxzq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Chapter 13 Analysis and Interpretation of Financial Statemonts
679
pss Publishera
KATE'S CARDS
Balance Sheet
August 31, 2019
Assets
Current assets
Cash.
Accounts receivable
Inventory........
Prepaid insurance.
Year
.....
$17,400
11,000
$5,410.8
3,366.5
16.000
1,000
7,169.2
2,200.6
Total current assets
Equipment
Accumulated depreciation
45,400
17,500
3,250
Total assets
$59,650
Liabilities
Current liabilities
Accounts payable.
Unearned revenue
Other current liabilities
pund to
$ 6,200
und to
1,250
1,900
Total current liabilities
Note payable
9,350
15,000
Total liabilities.
24,350
Stockholders' equity
Common stock
500
Additional paid-in-capital
Preferred stock.
Retained earnings
9,500
5,000
20,300
che
si-
y-
11
Total ștockholders' equity.
35,300
$59,650
Total liabilities and stockholders' equity
KATE'S CARDS
Statement of Cash Flows
Year Ended August 31, 2019
Cash flow from operating activities
Net income.. .
Add depreciation
Increase in accounts receivable
Increase in inventory.
Increase in prepaid expenses.
Increase in accounts payable
Increase in unearned revenue
Increase in other current liabilities
$21,600
3,250
(11,000)
(16,000)
(1,000)
6,200
1,250
1,900
6,200
Cash provided by operating activities.
Cash flow from investing activities
Purchase of equipment.
(17,500)
(17,500)
Cash used by investing activities
Cash flow from financing activities
Proceeds from bank note
Issuance of common stock.
Issuance of preferred stock.
Cash dividends
15,000
10,000
5,000
(1,300)*
......
28,700
Cash provided by financing activities
17,400
Net increase in cash.
Cash at beginning of year.
Cash at end of year
$17,400
*Kate issued cash dividends on both the common stock and the preferred stock. There are 50 preferred shares
outstanding and 500 common shares outstanding. The dividends that Kate paid were $6 per share on the preferred
• 300
shares and $2 per share on the common shares.
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