Analytical Review Apollo Shoes

The following refers to the Comparative Trial Balances, GA-7.1 through GA-7.5: Accounts Receivable, Other Receivables, Allowance for Doubtful Accounts, Bad Debt ExpenseInventories and Reserve for Inventory Obsolescence Prepaid Insurance and Insurance Expense

Machinery, Equipment, and Office Furniture
Accounts Payable
Taxes Payable
Line of Credit
Sales, Sales Returns, Net Sales – Relationship to Inventory Research & Development
Administrative Wage Expense
Miscellaneous Income
The following refers to GA-7.5 – Selected Ratio Comparison: Days Sales in Inventory
Days Sales in Accounts Receivable
Other points of interest:
7GA-7.1
Apollo Shoes, Inc.
Analytic Procedures
December 31, 2011
Audited
12/31/10 Unaudited 12/31/11 Change Acct. Account W/P Common Common # Title Ref. Balance Size Balance Size Amount Percentage ASSETS 10100 Cash on Hand 1,987.28 0.01% 2,275.23 0.00% 287.95 14.49% 10200 Regular Checking Acct. 198,116.52 0.54% 532,125.92 0.41% 334,009.40 168.59% 10300 Payroll Checking Acct. 0 0.00% 0 0.00% 0 na 10400 Savings Account 3,044,958.13 8.28% 3,670,599.15 2.85% 625,641.02 20.55% 11000 Accounts Receivable 16,410,902.71 44.60% 49,780,259.98 38.50% 33,369,357.27 203.34% 11400 Other Receivables – 0.00% 1,000,000.00 0.77% 1,000,000.00 nm 11500 Allow. For Doubtful (1,262,819.88) -3.43% (1,254,009.75) -0.97% 8,810.13 -0.70% 12000 Inventory 18,825,205.24 67,424,527.50 52.33% 48,599,322.26 258.16% 12300 Res. For Inv. Obsoles. (3,012,000.00) -8.19% (867,000.00) -0.67% 2,145,000.00 -71.22% 14100 Prepaid Insurance 743,314.38 2.02% 3,374,213.78 2.61% 2,630,899.40 353.94% 14200 Prepaid Rent 200,000.00 0.54% 0 0.00% (200,000.00) -100.00% 14300 Office Supplies 7,406.82 0.02% 8,540.00 0.01% 1,133.18 15.30% 14400

Notes Receivable – Curr0 0.00% 0 0.00% 0 na 14700 Other Current Assets 0 0.00% 0 0.00% 0 na 15000 Land 117,000.00 0.32% 117,000.00 0.09% 0 0.00% 15100 Buildings & Land Improv. 623,905.92 1.70% 674,313.92 0.52% 50,408.00 8.08% 15200 Mach, Equip, O Furniture 433,217.10 1.18% 2,929,097.13 2.27% 2,495,880.03 576.13% 17000 Accum. Depreciation (164,000.00) -0.45% (610,000.00) -0.47% (446,000.00) 271.95% 19000 Investments 612,691.08 1.67% 2,038,780.39 1.58% 1,426,089.31 232.76% 19900 Other Noncurrent Assets 13,840.59 0.04% 13,840.59 0.01% 0 0.00% Total Assets 36,793,725.89 100.00% 128,834,563.84 100.00% 92,040,837.95 250.15% na – not applicable (0 divided by 0)

nm – not meaningful (current amount divided by 0)GA-7.2
LIABILITIES 20000 Accounts Payable 4,633,118.09 12.59% 1,922,095.91 1.49% -2,711,022.18 4,633,118.09 23100 Sales Tax Payable – 0.00% – 0.00% – –
23200 Wages Payable 29,470.32 0.08% – -29,470.32 29,470.32 23300 FICA Employee Withhold 1,318.69 0.00% 8,439.65 0.01% 7,120.96 1,318.69 23350 Medicare Withholding 583.99 0.00% 11,414.99 0.01% 10,831.00 583.99 23400 Fed. Payroll Taxes Payab6,033.01 0.02% 118,086.12 0.09% 112,053.11 6,033.01 23500 FUTA Tax Payable – 0.00% – –

23600 State Payroll Taxes Payab2,815.47 0.01% 55,106.86 0.04% 52,291.39 2,815.47 23700 SUTA Tax Payable – 0.00% – –
23800 FICA Employer Withhold 1,318.69 0.00% 8,439.65 0.01% 7,120.96 1,318.69 23900 Medicare Employer With 583.99 0.00% 11,414.99 0.01% 10,831.00 583.99 24100 Line Of Credit 10,000,000.00 27.18% 44,053,000.00 34.19% 34,053,000.00 10,000,000.00 24200 Current Portion LT Debt – 0.00% –

24700 Other Current Liabilities – 0.00% –
27000 Notes Payable – Noncurrent – 0.00% 10,000,000.00 7.76% -1,000,000.00 NM- Total Liabilities 14,675,242.25 39.89% 56,187,998.17 43.61% 41,512,755.92 14,675,242.25 OWNER’S EQUITY 39003 Common Stock 8,105,000.00 22.03% 8,105,000.00 6.29% 0 8,105,000.00 39004 Paid-In Capital 7,743,000.00 21.04% 7,743,000.00 6.01% 0 7,743,000.00 39005 Retained Earnings 1,899,120.65 5.16% 6,270,483.64 4.87% 4,371,362.99 1,899,120.65 Current Net Income 4,371,362.99 11.88% $50,528,082.03 46,156,719.04 4,371,362.99 Total Owner’s Equity 22,118,483.64 60.11% 72,646,565.67 56.39% 50,528,082.03 22,118,483.64 Total Liabilities & Equity 36,793,725.89 100.00% 128,834,563.84 100.00% 92,040,837.95 36,793,725.89 GA-7.3

Audited
12/31/10 Unaudited 12/31/11 Change Acct. Account W/P Common Common # Title Ref. Balance Size Balance Size Amount Percentage REVENUE 40000 Sales 246,172,918.44 102.33% 245,213,452.88 106.40% -959,465.56 -0.39% 41000 Sales Returns 4,497,583.20 1.87% 13,600,220.89 5.90% 9,102,637.69 202.39% 42000 Warranty Exp 1,100,281.48 0.46% 1,158,128.47 0.50% 57,846.99 5.26% Net Sales 240,575,053.76 100.00% 230,455,103.52 100.00% (10,119,950.24) -4.21% EXPENSES 50000 COGS 141,569,221.61 58.85% 130,246,645.26 56.52% (11,322,576.35) -8.00% Gross Margin 99,005,832.15 41.15% 100,208,458.26 43.48% 1,202,626.11 1.21% GA-7.4 OPERATING EXPENSES 57500 Freight 4,302,951.46 1.79% 4,236,263.09 1.84% (66,688.37) -1.55% 60000 Advertising Expense 897,140.01 0.37% 986,854.01 0.43% 89,714.00 10.00% 61000 Auto Expenses 208,974.39 0.09% 214,502.80 0.09% 5,528.41 2.65% 62000 Research & Development 31,212,334.17 12.97% 543,870.44 0.09% (30,668,463.73) -98.26% 64000 Depreciation Expense 133,000.00 0.06% 446,000.00 0.19% 313,000.00 235.34% 64500 Warehouse Salaries 4,633,383.82 1.93% 4,720,715.56 2.05% 87,331.74 1.88% 65000 Property Tax Expense 80,495.32 0.03% 84,332.45 0.04% 3,837.13 4.77% 66000

Legal & Professional Exp 3,605,133.96 1.50% 4,902,224.45 0.83% 1,297,090.49) 35.98% 67000 Bad Debt Expense 1,622,425.99 0.67% – 0.00% (1,622,425.99) -100.00% 68000 Insurance Expense 853,942.65 0.35% 36,106.92 0.02% (817,835.73) -95.77% 70000 Maintenance Expense 61,136.04 0.03% 49,502.87 0.02% (11,633.17) -19.03% 70100 Utilities 135,642.99 0.06% 137,332.18 0.06% 1,689.19 1.25% 70110 Phone 76,373.78 0.03% 52,599.02 0.02% (23,774.76) -31.13% 70120 Postal 128,033.21 0.05% 77,803.61 0.03% (50,229.60) -39.23% 71000 Misc. Office Expense 17,023.27 0.01% 24,891.82 0.01% 7,868.55 46.22% 72000 Payroll Tax Expense 1,550,989.06 0.64% 1,577,811.85 0.68% 26,822.79 1.73% 73000 Pension/PS Plan Expense 3,000,000.00 1.25% 3,300,000.00 1.43% 300,000.00 10.00% 74000 Rent or Lease Expense 2,603,485.87 1.08% 1,203,574.00 0.52% (1,399,911.87) -53.77% 77500 Administrative Wage Exp 16,875,305.98 7.01% 16,197,225.43 7.03% (678,080.55) -4.02% Total Operating Expenses 71,997,771.97 29.93% $38,791,610.50 15.39% (33,206,161.47) -46.12%

Net Income from Operations 27,008,060.18 11.23% $61,416,847.76 28.10% 34,408,787.58 127.40% OTHER INCOME (EXPENSE) 45000 Income from Investments – 0.00% 1,426,089.31 0.62% 1,426,089.31 nm 46000 Interest Income 204,302.81 0.08% 131,881.46 0.06% (72,421.35) -35.45% 47000 Misc. Income – 0.00% 2,145,000.00 0.93% 2,145,000.00 nm 78000 Interest Expense (875,000.00) -0.36% (2,591,736.50) -1.12% 1,716,736.50 196.20% 80000 Loss on Legal Settlement (19,172,000.00) -7.97% – 0.00% (19,172,000.00) 100.00% Net Income before Tax 7,165,362.99 2.98% $62,528,082.03 28.58% 55,362,719.04 772.64% 78500 Income Tax Exp – Federal (2,369000.00) -0.98% -10,000,000.00 -5.67% -7,610,000.00 321.76% 78510 Income Tax Exp – State (404,000.00) -0.18% -2,000,000.00 -0.97% -1,596,000.00 395.04% 0.00% Net Income 4,371,362.99 1.82% $50,528,088.45 21.93% 46,156,725.46 1055.89% GA-7.5 Apollo Shoes, Inc. Selected Ratios 12/31/11 Audited Unaudited Percentage Ratios 12/31/10 12/31/11 Change Current Ratio 2.40 2.70 12.50% Debt Ratio 0.3989 0.4329 8.52% Debt-Equity Ratio 0.0740 0.0704 -4.86% Asset Turnover 6.54 1.78 -72.78% Liability Turnover 16.39 4.11 -74.92% Days Sales in Inventory 48.54 188.95 289.27% Days Sales in AR 24.90 78.84 216.63% Net Working Capital 20,481,828.85 78,176,811.69 57,694,982.84 281.69%