Answer To: Module 02 Written Assignment – The Income Statement Review the account balances of Ma and Pa Grocery...
Khushboo answered on Jan 19 2021
Module 02
Required: Complete the purple areas of the chart, and the questions in the text boxes below.
List the years in order of most recent as year 1, next most recent as year 2, etc. Example: If
the most recent fiscal year was 2015, then replace Year 1 with 2015, replace Year 2 with 2014,
and replace Year 3 with 2013.
In the References box, include an APA reference for all information retrieved, whether from the Tootsie Roll website
itself, specific forms (i.e. 10k) from the Tootsie Roll website, or other outside sources.
Instructions for citing a 10k or Annual Report: http://rasmussen.libanswers.com/faq/32821 For general APA help,
visit the APA Guide: http://guides.rasmussen.edu/apa
Tootsie Roll Industries Inc.
Income Statement 2018 2017 2016
Total Revenue 518,920 519,289 521,100
Product Cost of Goods Sold 329,880 326,411 320,869
Rental and Royalty Cost 867 972 1,019
Total Gross Margin 188,173 191,906 199,212
Selling, Marketing and Administrative Expenses 117,691 121,484 107,979
Earnings from Operations 70,482 70,422 91,233
Other income 2,724 14,139 6,679
Income Taxes 16,401 3,907 30,593
Net Earnings 56,805 80,654 67,319
Question 1: What is Tootsie Roll's Gross Profit Margin? (Hint: Divide Total Gross Margin by Total Revenue). What does this figure represent?
The gross profit margin in the year 2018 is 36% (188,173/518920). In the year 2017 it is 37% and in the year 2016 it is 38%. This number represents the profit earned after deducting the costs associated with the selling and production of the product. It also determines the effciiency of the company in producing the goods and services. The gross margin of the entity has reduced in the current year as compared to previous year.
Question 2:What is Tootsie Roll's Profit Margin? (Hint: Profit margin is calculated by dividing Net Earnings by Total Sales). What does this figure represent?
The net profit margin in the year 2018 is 11% (56,805/518920). In the year 2017 it is 16% and in the year 2016 it is 13%. This number represents the profitability of the entity and profit earned by the entity through its various business operations of the entity. The net profit margin of the entity is lower in current as compared to previous year.
Question 3: What are Tootsie Roll's earnings per share in the three years presented? (Hint: Check the income statement after Net Earnings for this information.)
The earnings per share of the entity is calculated by dividing the net income attributable to shareholders by the number of shares outstanding. The earnings per share of the entity in the year 2018 is $0.89 and in the year 2017 it is $1.24 and in the year 2016 the earnings per share is $1.02.
Question 4: According to note 1 in the Notes to the Consolidated Financial Statements, how does Tootsie Roll Industries, Inc. recognize revenue?
The revenue of the entity basically from net product sales result from the sale of goods is based on the customer purchase order. The entity records revenue based on five step model according to accounting standard. Further the adjustment for estimated cash discounts on payment, product return are variable consideration and recorded as reduction from sales in the same period and such estimates are recorded on historical avearges. The net product sale is recorded when the entity delivers the product to the customer.
Question 5: Has Net Product Sales shown an increasing or decreasing trend over the past three years? Interpret this trend. Should this be a concern for the company? Why or why not?
There is decreasing trend in the net product sales of the entity over the past three years. This represents that the sales of the entity has decreased over the years and this should be taken seriously by the entity as there is decrease in sales and this resulted in the decrease in the net profit and gross profit of the entity. This is cause for concern as sales plays an impoerant role and this will affect the profitability and turnover ratio of the entity.
Question 6: Has the Net Earnings shown an increasing or decreasing trend over the past three years? Interpret this trend. Should this be a concern for the company? Why or why not?
The net earning trend of the entity is showing decreasing trend over the past three years and this reprsents that the profitability of the entity has reduced over the period of three years. This is cause of concern for the entity as decrease in profitability is not a good sign as profit earning capapcity should not decrease as compared to previous year. The decrease in profit represents inefficiency of the entity to generate good profitability from the operations of the entity.
Question 7: Compare the Net Product Sales trend and the Net Earnings trend. Are these two items trending the same? Interpret any differences and infer what those may mean in relation to the company's operating decisions over the past three years.
The net product...