Chapter 14 Financial Statement Analysis 657
Rainbow Paint Co.
Comparative Income Statement
For the Years Ended December 31, 2007 and 20062007 2006
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 $ 211,200Dec. 31, Dec. 31,
2007 2006
Assets
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 2011 $ 410,000 $ —
Bonds payable, 8%, due 2014 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 $3,173,000Rainbow Paint Co.
Comparative Balance Sheet
December 31, 2007 and 2006