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    Conrad Air reported net income of $1,365,000 for 2013. Depending on how the earnings were allocated: a) If reinvested in marketable securities, assets would increase and retained earnings would increase. b) If $500,000 paid as dividends and the rest to pay long-term debt, assets and liabilities would decrease as debt is paid off. c) If $500,000 paid as dividends and rest for new hangar, assets would increase as building increases and retained earnings would decrease. d) If all $1,365,000 paid as dividends, retained earnings would decrease fully as dividends are paid out.

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    Conrad Air reported net income of $1,365,000 for 2013. Depending on how the earnings were allocated: a) If reinvested in marketable securities, assets would increase and retained earnings would increase. b) If $500,000 paid as dividends and the rest to pay long-term debt, assets and liabilities would decrease as debt is paid off. c) If $500,000 paid as dividends and rest for new hangar, assets would increase as building increases and retained earnings would decrease. d) If all $1,365,000 paid as dividends, retained earnings would decrease fully as dividends are paid out.

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    Conrad Air reported net income of $1,365,000 for 2013. Depending on how the earnings were allocated: a) If reinvested in marketable securities, assets would increase and retained earnings would increase. b) If $500,000 paid as dividends and the rest to pay long-term debt, assets and liabilities would decrease as debt is paid off. c) If $500,000 paid as dividends and rest for new hangar, assets would increase as building increases and retained earnings would decrease. d) If all $1,365,000 paid as dividends, retained earnings would decrease fully as dividends are paid out.

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    380 views2 pages

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    Freya Evangeline
    Conrad Air reported net income of $1,365,000 for 2013. Depending on how the earnings were allocated: a) If reinvested in marketable securities, assets would increase and retained earnings would increase. b) If $500,000 paid as dividends and the rest to pay long-term debt, assets and liabilities would decrease as debt is paid off. c) If $500,000 paid as dividends and rest for new hangar, assets would increase as building increases and retained earnings would decrease. d) If all $1,365,000 paid as dividends, retained earnings would decrease fully as dividends are paid out.

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    RATIO ANALYSIS

    1. Impact of a net income on a firm’s balance sheet Conrad Air, Inc., reported net income of $1,365,000
    for the year ended December 31,2013. Show how corporation balance sheet would change from 2012
    to 2013 depending on how Conrad allocate those earnings as described in the scenarios that appear
    below.

    Conrad Air, Inc. Balance Sheet as of December 31, 2012


    Assets Liabilities and Stockholders’ Equity
    Cash $120,000 Accounts payable $70,000
    Marketable securities 35,000 Short-term notes 55,000
    Accounts receivable 45,000 Current liabilities 125,000
    Inventories 130,000 Long-term debt 2,700,000
    Current assets 330,000 Total liabilities 2,825,000
    Equipment 2,970,000 Common stock 500,000
    Buildings 1,600,000 Retained earnings 1,575,000
    Fixed assets 4,570,000 Stockholders’ equity 2,075,000
    Total assets 4,900,000 Total liabilities and 4,900,000
    equity

    a. Conrad paid no dividends during the year and invested the funds in the marketable securities
    b. Conrad paid dividends totaling $500,000 and used the balance of the net income to retire (pay-
    off) long-term debt
    c. Conrad paid dividends totaling $500,000 and invested the balance of the net income in building
    a new hangar
    d. Conrad paid out all $1,365,000 as dividends to its stockholders.

    2. Complete the balance sheet and sales information as follows:

    Balance Sheet
    Cash Account Payable
    Accounts Receivable Long term Debt $60.000
    Inventories Common Stock
    Fixed Asset Retained Earning 97.500
    Total asset $300.000 Total Liabilities and
    Equities
    Sales Cost of Good Sold

    Additional Information:
    Debt Ratio 50%
    Current Ratio 1,8x
    Total Asset Turnover 1,5x
    Average Collection Period 36,5 hari
    Gross Profit Margin 25%
    Inventory Turnover 5x
    *1 year = 365 days

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