Annual Report Project - Phase III for ACC2010

Principles of Accounting I:  ACC 2010

Annual Report Project – Phase III

Company: Willamette Valley Vineyards, Inc.

1)    Did the company pay cash dividends during the current year? No
a.    If so, how much per share? N/A
b.    Does this represent an increase, decrease or no change from last year? No change

2)    How many years of information does the Income Statement have? 2 (2011 & 2010)
a.    The Balance Sheet? 2 (2011 & 2010)
b.    The Statement of Cash Flows? 2 (2011 & 2010)

3)    Identify the amounts that your company reported for each of the following:
a.    Current assets: 2011: $14,767,960, 2010: $13,755,567
b.    Accounts receivable: 2011: $1,058,312, 2010: $1,264,966
c.    Property, plant, and equipment: 2011: $7,300,737, 2010: $6,243,990
d.    Goodwill and other intangible assets: 2011: $4,456, 2010: $4,456
e.    Long-term liabilities: 2011: $6,031,870, 2010: $3,901,830
f.    Current liabilities: 2011: $1,821,177, 2010: $2,301,447
g.    Contributed capital: 2011: N/A, 2010: N/A
h.    Retained earnings: 2011: $7,800,934, 2010: $6,943,179
i.    Treasury stock: 2011: N/A, 2010: N/A
j.    Cost of goods sold: 2011: $7,944,635, 2010: $9,679,414
k.    Operating expenses: 2011: $860,945, 2010: $517,655
l.    Taxation expense: 2011: $514,926, 2010: $273,351

4)    Does the income statement disclose any of the following? No  If so, how much?
a.    Extraordinary Item: N/A
b.    Accounting change: N/A
c.    Discontinued operations: N/A

5)    List the item and amount of the major source of cash inflows from the investing and financing activities sections during the year:
a.    Investing Activities: Payments received on note receivable: $53,104
b.    Financing Activities: Borrowings on long-term debt: $1,400,000

6)    What method(s) of depreciation does the company use? Straight-line basis over estimated useful lives as follows:
a.    Land Improvements: 15 years
b.    Winery building: 30 years
c.    Equipment: 3 – 10 years (depending on classification of the asset)

7)    What method(s) of inventory valuation does the company use? First-in, First-Out (FIFO)

8)    Ratio analysis – calculate the following ratios (show your workings):
a.    Asset Turnover:
Net Sales/Average Total Assets =
15661905/((24286727+21770200)/2) =
15661905/(46056927/2) =
15661905/23028463.5 =  0.68 times

b.    Profit Margin: 
Net Income/Net Sales =
857755/15661905 = 5.48%

c.    Return on equity:
Net Income/Average Stockholders’ Equity =
857755/((16433680+15566923)/2) =
857755/(32000603/2) =
857755/16000301.5 = 5.36%

d.    Return on Assets:
Net Income/Average Total Assets =
857755/((24286727+21770200)/2) =
857755/(46056927/2) =
857755/23028463.5 =  3.72%

9)    Does the company successfully use financial leverage? Yes
a.    Why?

The company’s current ratio is 8.11 to 1.  This means the company has $8.11 for every $1 of current liabilities.  That means they are capable of paying current debt.

Current Ratio: (current assets vs. current liabilities)
Current assets/Current liabilities =
14767960/1821177 = 8.11 to 1 ($8.11 current assets for every $1 current liabilities)


The company’s acid test ratio is 24.54 to 1.  This means that the company has $24.54 liquid assets available to pay off every $1 of current debt.

Acid-test ratio: (current assets available to pay current liabilities)
Cash+Current investements+Accounts receivable/Current liabilities =
3411292+0+1058312/182117 =
4469604/182117 = 24.54 to 1 ($24.54 current liquid assets for every $1 current liabilities)


The company’s debt to equity ratio is .47 to 1.  This means that they are capable of paying off their debts (both current and long-term).  The company is equipped to pay for the loans and interest from which they have borrowed.

Debt to equity ratio: (risk of bankruptcy)
Total liabilities/Stockholders’ equity =
7853047/16433680 = 47.78% ($0.47 liabilities for every $1 stockholders’ equity)


The company’s times interest earned ratio is 7.32.  This means that the company is capable of paying their interest expenses 7.32 times.  This is more than enough to pay interest expenses.

Times interest earned ratio: (interest payments vs. ability to pay)
Net income+Interest expense+Tax expense/Interest expense =
857755+217037+514926/217037 =
1589718/217037 = 7.32 (7.32 x amount needed for interest expense)

With these ratios we can determine that Willamette Valley Vineyards, Inc. is fiscally responsible and does not borrow money for which it cannot pay.  We can also determine that the company is clear from danger of bankruptcy and should the company close its operations today, it would have the resources to pay its debts.