FM Midterm January 2013: T-Account Analysis During 2012 the following events took place for a small distribution company. You are required to prepare the accounting entries for each event by: -...

Part 1 T Account Analysis
1 Accounts Receivable

Sales

Cost Of Goods Sold

Merchandise Inventory
5000
5000
3500
3500
2 Prepaid Insurance

Bank

Insurance Expenses
500 166.67
500
166.67
3 Cash

Machinery
Loss on Sale Of
Machinery
1500
1500
5500
5500
4 Wages

Wages Payable
750
750
5
Electricity
Expense
Electricity Expense
Payable
100
100
6 Bad Debt
Sundry Debto
2000
2000
7 Dividend
Dividend Payable
7000
7000
8 No journal entry will be made, only disclosure will be given.
9 Accounts Payable

Bank
6000
6000
10 Loan to Director

Cash
1000
1000
11 Accounts Receivable

Sales
Cost Of Goods
Sold
Merchandise
Inventory
10000
10000
8000
8000
12. No entry will be made for the same, as no transaction has taken place.
Part 2 – Vertical Analysis of Company A & B
Company A
Comparative Income Statement (Vertical)
For the year ended December 31, 2011
2011 2010 2009
Percentage of Net Sales
2011 2010 2009
Sales $1,023,762,049 $816,263,414 $544,522,993
100.00% 100.00% 100.00%
Net Sales $1,023,762,049 $816,263,414 $544,522,993
100.00% 100.00% 100.00%
Cost of Goods Sold $662,181,714 $520,573,101 $366,968,216
64.68% 63.78% 67.39%
Gross Profit $361,580,335 $295,690,313 $177,554,777
35.32% 36.22% 32.61%
Operating Expenses
Engineering, Research
& Development $81,634,158 $64,100,411 $47,128,086
7.97% 7.85% 8.65%
Selling, General &
Administrative $48,578,252 $40,617,833 $35,807,622
4.75% 4.98% 6.58%
Total operating
expenses $130,212,410 $104,718,244 $82,935,708
12.72% 12.83% 15.23%
Income from
Operations $231,367,925 $190,972,069 $94,619,069
22.60% 23.40% 17.38%
Other Income
(Expense)
Investment Income $4,165,809 $2,901,956 $3,321,853
0.41% 0.36% 0.61%
Impairment Loss on
available for sale
securities -
- ($1,290,590)
0.00% 0.00% -0.24%
Other, net $8,898,077 $9,565,989 ($298,029)
0.87% 1.17% -0.05%
Total other Income $13,063,886 $12,467,945 $1,733,234
1.28% 1.53% 0.32%
Income before Tax $244,431,811 $203,440,014 $96,352,303
23.88% 24.92% 17.69%
Provision for Tax $79,763,583 $65,706,045 $31,715,218
7.79% 8.05% 5.82%
NET INCOME $164,668,228 $137,733,969 $64,637,085
16.08% 16.87% 11.87%
Company A
Comparative Balance Sheet (Vertical)
For the year ended December 31, 2011
Yea
Dec,31 2011 Dec,31 2010
Percentage of Total
Assets
ASSETS
Amount ($) Amount($)
2011 2010
Cu
ent Assets
Cash and Cash Equivalents
$357,986,774 $348,349,773
30.44% 40.49%
Short Term Investment
60808237 86447596
5.17% 10.05%
Trade Accounts Receivable
110,389,715 95,647,612
9.39% 11.12%
Inventories
188,753,312 100,728,730
16.05% 11.71%
Prepaid Expenses
34,354,946 24,095,563
2.92% 2.80%
Total Cu
ent Assets
$752,292,984 $655,269,274
63.97% 76.16%
Land Building & Improvements
130,290,789 120,578,714
11.08% 14.01%
Machinery & Equipment
415,394,183 352,618,391
35.32% 40.98%
Construction -in-process
58,244,561 13,351,954
4.95% 1.55%
Less : Accumulated depreciation &
Amortization Expenses
(321,387,945) (281,441,303)
-27.33% -32.71%

$282,541,588 $205,107,756
24.03% 23.84%
Long Term Investment
128,168,165 129,091,167
10.90% 15.00%
Patents and other assets (net)
13,024,265 13,222,442
1.11% 1.54%
Total Assets

$1,176,027,002 $860,377,030
100.00% 100.00%
Liabilities and Shareholder's Equity

Amount $ Amount $
2011 2010
Cu
ent Liabilities

2011 2010
Accounts Payable
$65,470,573 $40,295,464
5.57% 4.02%
Accrued Expenses and other cu
ent Liabilities
$35,223,927 $31,793,165
3.00% 3.17%
Total Cu
ent Liabilities
$100,694,500 $72,088,629
8.56% 7.19%
Defe
ed Income Taxes
48213981 37071184
4.10% 3.70%
Total Liabilities
$148,908,481 $109,159,813
12.66% 10.89%
Stockholders' Equity
Common Stock
8,644,174 8,537,528
0.74% 0.85%
Additional paid-in capital
395,229,891 347,834,218
33.61% 34.69%
Retained Earnings
610,702,253 514,842,177
51.93% 51.35%
Accumulated Other Comprehensive Income
12,542,203 22,316,903
1.07% 2.23%
Total Stockholder's Equity
$1,027,118,521 $893,530,826
87.34% 89.11%
Total liabilities and stockholders' equity $1,176,027,002 $1,002,690,639 100.00% 100.00%
Company B
Comparative Income Statement (Vertical)
For the year ended December 31, 2011
Year

2011 2010 Percentage of Net Sales
Sales $422,310 $395,379 100.00% 100.00% 100.00%
Net Sales $422,310 $395,379 100.00% 100.00% 100.00%
Cost of Goods Sold $220,381 $215,329 52.18% 54.46% 50.99%
Gross Profit $201,929 $180,050 47.82% 45.54% 49.01%
Operating Expenses
Restructuring & Organization
-
- 0.00% 0.00% 2.59%
Engineering, Research &
Development $38,416 $39,145 9.10% 9.90% 10.91%
Selling, General & Administrative $78,407 $75,255 18.57% 19.03% 21.27%
Total operating expenses $116,823 $114,400 27.66% 28.93% 34.77%
Income from Operations $85,106 $65,650 20.15% 16.60% 14.25%
Other Income (Expense)
Equity in net Income of affiliate $7,255 $7,092 1.72% 1.79% 1.98%
Impairment of Investment ($3,477)
- -0.82% 0.00% 0.00%
Income before interest and income
tax expense $88,884 $72,742 21.05% 18.40% 16.23%
Interest Income $27 $14 0.01% 0.00% 0.01%
Interest Expense ($564) ($984) -0.13% -0.25% -0.36%
Income before Tax $88,347 $71,772 20.92% 18.15% 15.88%
Income Tax Expense $35,056 $27,294 8.30% 6.90% 4.93%
NET INCOME $53,291 $44,478 12.62% 11.25% 10.95%
Company B
Comparative Balance Sheet (Vertical)
For the year ended December 31, 2011
Year

Dec,31 2011 Dec,31 2000
Percentage of Total
Assets
ASSETS Amount ($) Amount($) 2011 2010
Cu
ent Assets
Cash and Cash Equivalents $19,715 $18,925 8.25% 8.26%
Trade Accounts Receivable 62,886 59,808 26.32% 26.09%
Prepaid Expenses 7,141 11,332 2.99% 4.94%
Defe
ed Tax Asset 6,398 4,758 2.68% 2.08%
Total Cu
ent Assets $96,140 $94,823 40.23% 41.36%
Equity & Other Investment 14,913 18,385
Property & equipment (net) 70,651 70,332 29.57% 30.68%
Goodwill, net 45,430 38,895 19.01% 16.97%
Other Intangibles, net 10,526 6,272 4.40% 2.74%...