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Kate is considering expanding and bringing in several employees. To do this she will need a larger facility and to purchase more equipment. Which means additional financing. Answer this: look at the

Kate is considering expanding and bringing in several employees. To do this she will need a larger facility and to purchase more equipment. Which means additional financing. 
Answer this: look at the financial statements as if you were a banker considering her for a loan comment on your findings and use calculations to support your answer. 

Company
Net Sales
Gross profit.
Compute the percentage of annual net sales generated each quarter by Company C. Round to
b. Compute the percentage of annual net sales generated each quarter by Company D. Round to
Required
a.
Which company has the most seasonal business? Briefly explain.
Which company is Toys "R" Us? The Gillette Company? Briefly explain.
the nearest percent.
the nearest percent.
C.
d.
(Note: This is a continuation of the Serial Problem: Kate's Cards from Chapter 1 through Chapter 12.)
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 busi-
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-
SERIAL PROBLEM: KATE'S CARDS
SP13.
tions to support your comments.
KATE'S CARDS
Income Statement
Year Ended August 31, 2019
Sales revenue. . ..
Cost of goods sold.. . ..
Gross profit. ...
. $185,000
106,000
79,000
Operating expenses
Wages
Consulting..
18,000
Insurance ...
11,850
Utilities .....
1,200
Rent ... ..
Depreciation. ..
Total operating expenses. . .
Income from operations... ..
Interest expense. . . . .
2,400
14,400
3,250
51,100
27,900
Income before income tax .... .
Income tax expense.. ...
Net income.....
900
27,000
5,400
$ 21,600
DS
Balance Sheet
August 31, 2019
Assets
Current assets
Cash..
Accounts receivable..
ar
Inventory. .
Prepaid insurance. ..
Total current assets .
Equipment ... . .
Accumulated depreciation .
$17,400
11,000
O.8
6.5
16,000
.2
6
1,000
45,400
17,500
Total assets .
3,250
Liabilities
Current liabilities
Accounts payable...
Unearned revenue .
Other current liabilities..
$59,650
to
to
6,200
1,250
1,900
Total current liabilities. .
Note payable
9,350
15,000
Total liabilities.
24,350
Stockholders' equity
Common stock.. . .
Additional paid-in-capital
Preferred stock. . .
Retained earnings.
Total stockholders' equity. ...
Total liabilities and stockholders' equity
500
9,500
5,000
20,300
35,300
$59,650
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
$21,600
3,250
(11,000)
(16,000)
(1,000)
6,200
1,250
1,900
Increase in other current liabilities
Cash provided by operating activities.. . ..
Cash flow from investing activities
Purchase of equipment...
6,200
(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... ..
Net increase in cash.....
Cash at beginning of year. . ..
Cash at end of year . . .
17,400
0
$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
shares and $2 per share on the common shares.

Sep 19 2020 View more View Less

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