AC499 Unit 9 Assignment Preparing Annual Report

AC499 Unit 9 Assignment Preparing Annual Report

Question
	
AC499 Unit 9 Assignment Preparing Annual Report Documents

For this 4-5 page project, you will create the (1) Financial Highlights, (2) Presidents Letter to the Stockholders and (3) Management Discussion and (4) Analysis reports that would be contained in a company’s annual report.

Companies normally issue these reports to the stockholders and other interested parties. These reports summarize the company’s operating activities for the past year and plans for the future. There are many variations in the order and form for presenting the major sections of the annual report.

These reports will be completed in Microsoft Word following APA format, and will require you to disclose your references.

VERY IMPORTANT NOTE: For purposes of this Final Project, you will use the Financial Data and ratios for the “Rainbow Paint Company”. This data is found in Unit 4 and is the “Review” problem. That data includes a Comparative Balance Sheet, Income Statement, and Statement of retained Earnings. You were given an opportunity to complete 19 different ratios for the Practice Set. All of that information is available for inclusion in this Final Project. The “Rainbow Paint Company” financial data and ratios will offer a very broad opportunity to present a highly robust and detailed Annual Report. The Rainbow Paint Company data includes a full set of comparative financial statements for 2 years.


Assignment checklist

• Financial Highlights
• Presidents Letter to the Stockholders
• Management Discussion and Analysis

Rainbow Paint Co.’s comparative financial statements for the years ending December 31, 2012 and 2011 are as follows. The market price of Rainbow Paint Co.’s common stock was $25 on December 31, 2012, and $30 on December 31, 2011.


Rainbow Paint Co.
Comparative Income Statement
For the Years Ended December 31, 2012 and 2011
2012 2011
Sales $ 5,125,000 $ 3,257,600
Sales returns and allowances 125,000 57,600
Net sales $ 5,000,000 $ 3,200,000
Cost of goods sold 3,400,000 2,080,000
Gross profit $ 1,600,000 $ 1,120,000
Selling expenses $ 650,000 $ 464,000
Administrative expenses 325,000 224,000
Total operating expenses $ 975,000 $ 688,000
Income from operations $ 625,000 $ 432,000
Other income 25,000 19,200
$ 650,000 $ 451,200
Other expense (interest) 105,000 64,000
Income before income tax $ 545,000 $ 387,200
Income tax expense 300,000 176,000
Net income $ 245,000
$ 211,200

Rainbow Paint Co.
Comparative Retained Earnings Statement
For the Years Ended December 31, 2012 and 2011
2012 2011
Retained earnings, January 1 $ 723,000 $ 581,800
Add net income for year 245,000 211,200
Total $ 968,000 $ 793,000
Deduct dividends:
On preferred stock $ 40,000 $ 40,000
On common stock 45,000 30,000
Total $ 85,000 $ 70,000
Retained earnings, December 31 $ 883,000 $ 723,000

Rainbow Paint Co.
Comparative Balance Sheet
December 31, 2012 and 2011
Assets 2012 2011
Current assets:
Cash $ 175,000 $ 125,000
Marketable securities 150,000 50,000
Accounts receivable (net) 425,000 325,000
Inventories 720,000 480,000
Prepaid expenses 30,000 20,000
Total current assets $ 1,500,000 $ 1,000,000
Long-term investments 250,000 225,000
Property, plant, and equipment (net) 2,093,000 1,948,000
Total assets $ 3,843,000
$ 3,173,000

Liabilities
Current liabilities $ 750,000 $ 650,000
Long-term liabilities:
Mortgage note payable, 10%, due 2015 $ 410,000 -
Bonds payable, 8%, due 2018 800,000 $ 800,000
Total long-term liabilities $ 1,210,000 $ 800,000
Total liabilities $ 1,960,000 $ 1,450,000
Stockholders' Equity
Preferred 8% stock, $100 par $ 500,000 $ 500,000
Common stock, $10 par 500,000 500,000
Retained earnings 883,000 723,000
Total stockholders' equity $ 1,883,000 $ 1,723,000
Total liabilities and stockholders' equity $ 3,843,000
$ 3,173,000

Instructions (Answers given to help with
Determine the following measures for 2012:
1. Working capital : $1,500,000 – $750,000=$750,000
2. Current ratio : $1,500,000 ÷ $750,000=2.0
3. Quick ratio : $750,000 ÷ $750,000=1.0
4. Accounts receivable turnover : $5,000,000 ÷ [($425,000 + $325,000) ÷ 2]= 13.3
5. Number of days' sales in receivables : $5,000,000 ÷ 365 days = $13,699, $375,000 ÷ $13,699=27.4 days
6. Inventory turnover : $3,400,000 ÷ [($720,000 + $480,000) ÷ 2]= 5.7
7. Number of days' sales in inventory : $3,400,000 ÷ 365 days = $9,315, $600,000 ÷ $9,315=64.4 days
8. Ratio of fixed assets to long-term liabilities : $2,093,000 ÷ $1,210,000=1.7
9. Ratio of liabilities to stockholders' equity : $1,960,000 ÷ $1,883,000=1.0
10. Number of times interest charges earned : ($545,000 + $105,000) ÷ $105,000=6.2
11. Number of times preferred dividends earned : $245,000 ÷ $40,000=6.1
12. Ratio of net sales to assets : $5,000,000 ÷ [($3,593,000 + $2,948,000) ÷ 2]= 1.5
13. Rate earned on total assets : ($245,000 + $105,000) ÷ [($3,843,000 + $3,173,000) ÷ 2]= 10.0%
14. Rate earned on stockholders' equity : $245,000 ÷ [($1,883,000 + $1,723,000) ÷ 2]= 13.6%
15. Rate earned on common stockholders' equity : ($245,000 – $40,000) ÷ [($1,383,000 + $1,223,000) ÷ 2]= 15.7%
16. Earnings per share on common stock : ($245,000 – $40,000) ÷ 50,000 shares=$4.10
17. Price-earnings ratio : $25 ÷ $4.10=6.1
18. Dividends per share of common stock : $45,000 ÷ 50,000 shares=$0.90
19. Dividend yield : $0.90 ÷ $25=3.6%