Please help! Prestige Worldwide - Trial balance as of December 31, 2018: Gross Service Revenue $...
Please help!
Prestige Worldwide - Trial balance as of December 31, 2018:
Gross Service Revenue $ 115,981,250
Bad Debt Expense $ 2,655,000
Discounts on Sales $ (3,575,000)
Salaries $ 55,825,000
Benefits $ 14,178,292
Administrative $ 4,342,500
Insurance $ 325,000
Interest $ 164,575
Depreciation $ 3,200,000
Maintenance $ 435,500
Purchased Services $ 6,146,500
Rent $ 2,240,000
Supplies $ 9,169,813
Utilities-Electricity $ 356,000
Cash and Cash Equivalents $ 9,545,000
Short-term Investments $ 2,750,000
Net Accounts Receivables $ 7,125,000
Inventory - Supplies $ 1,135,000
Property and Equipment $ 90,500,000
Accumulated Depreciation $ (43,500,000)
Investment Income $ 94,500
Account Payable $ 2,375,000
Accrued Expenses $ 9,125,000
Notes Payable $ 16,515,000
Contributions Received by Prestige $ 1,000,000
Long-Term Debt $ 26,500,000
Retained Earnings $ 13,040,000
Net revenues will reflect on Financial Statements what the finance organization actually expects to collect. Prestige Worldwide has a tax rate of 25% for 2018.
1. Using the information given above, construct the Income Statement and Balance Sheet for the Fiscal Year ended December 31, 2018.
2.If the benchmark for operating margin ratio is 20.06% for the entertainment industry, how does Prestige World wide’s compare to this benchmark? What are the implications to Prestige Worldwide of this ratio?
3. If the benchmark for net profit margin is 9.86% for the industry, how does PW's compare to this benchmark? What are the implications to PW's of this ratio?
4. What is the estimated Cash Flow using only the income statement or estimate the amount of cash generated during FY 2018 using the income statement. (Cash Flow = Net Income+Noncash expenses). The only Non-cash expense listed is depreciation expense. Why is this calculation Important to Manage?
5. What is PW’s Times Interest Earned ratio?
Homework Answers
1.
Income Statement
| Particulars | $ Debit | Particulars | $ Credit |
| Purchased Services | 6,146,500 | Gross Service Revenue | 115,981,250 |
| Discounts on Sales | 3,575,000 | Investment Income | 94,500 |
| Bad Debt Expense | 2,655,000 | ||
| Salaries | 55,825,000 | ||
| Benefits | 14,178,292 | ||
| Administrative | 4,342,500 | ||
| Insurance | 325,000 | ||
| Interest | 164,575 | ||
| Depreciation | 3,200,000 | ||
| Maintenance | 435,500 | ||
| Rent | 2,240,000 | ||
| Supplies | 9,169,813 | ||
| Tax @25% | 3454642.5 | ||
| Net profit/income | 10363927.5 | ||
| Total | 116075750 | Total | 116075750 |
Balance Sheet
| Liabilities | $ | Assets | $ |
| Accumulated Depreciation | (43,500,000) | Utilities-Electricity | 356,000 |
| Account Payable | 2,375,000 | Cash and Cash Equivalents | 9,545,000 |
| Accrued Expenses | 9,125,000 | Short-term Investments | 2,750,000 |
| Notes Payable | 16,515,000 | Net Accounts Receivables | 7,125,000 |
| Contributions Received by Prestige | 1,000,000 | Inventory - Supplies | 1,135,000 |
| Long-Term Debt | 26,500,000 | Property and Equipment | 90,500,000 |
| Retained Earnings | 13,040,000 | Suspense (bal. fig.) | 644000 |
| Total | 112055000 | Total | 112055000 |
2.
Operating margin = Operating profit / Net sales
15064645/ 112406250 = 13.4%
Operating margin of Prestige is lower than industry benchmark that is 20.06%, it implies prestige performing low.
3.
Net profit margin = net profit / net income
10363927.5 / 112500750 = 9.21%
Net profit margin of Prestige is almost equals to industry bench mark tat is 9.86%, it implites prestige performing at par with industry performance
4. Cash Flow = Net Income+Noncash expenses
= 10363927.5 + 3,200,000 = 13563927.5
5. Interest earned ratio = EBIT / Interest
= 13983145 / 164,575 = 84.96 times
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Please help!
Prestige Worldwide - Trial balance as of December 31, 2018:
Gross Service Revenue $...
Prestige Worldwide - Trial balance as of December 31, 2018: Gross Service Revenue $ 115,981,250 Bad...
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