ACC 101 Lecture Notes - Lecture 2: Financial Statement, Income Statement, Retained Earnings

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28 Jan 2019

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Benson company had assets of ,000 and liabilities of ,000 at the beginning of the year, and assets of. ,000 and liabilities of ,000 at the end of the year. During the year, ,000 was invested in the business, and dividends of ,000 were paid. For company m, liabilities are 1/4 of total assets and stockholders" equity is ,000. Complete the following financial statements by determining the amounts that correspond to the letters. Abc company had the following balance sheet accounts and balances on may 31, 2018. Create a balance sheet for the company for may 31, 2018. Then, a month later, the land was sold for ,000 cash. Prepare the balance sheet for june 30, 2018. Using the following information, prepare the income statement, the statement of retained earnings and the balance sheet for the painting, inc. , for the month of june 2018. business was opened on january 1, 2018.

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EXERCISE 15-8 Selected Financial Ratios (L015-2, LO15-3, L015-4] The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash.. Accounts receivable, net ................ Merchandise inventory ................. Prepaid expenses ..................... Total current assets ...................... Property and equipment, net ............... Total assets $ 6,500 35,000 70,000 3,500 115,000 185,000 $300,000 $ 50,000 80,000 130,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities .......... Bonds payable, 10% .......... Total liabilities ................. Stockholders' equity: Common stock, $5 per value ............. Retained earnings .... Total stockholders' equity ................. Total liabilities and equity ................. $ 30,000 140,000 170,000 $300,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales ..... Cost of goods sold... Gross margin Selling and administrative expenses......... Net operating income ....... Interest expense......................... Net income before taxes .................. Income taxes (30%) Net income ............ ................ $420,000 292,500 127,500 89,500 38,000 8,000 30,000 9,000 $ 21,000 Account balances at the beginning of the year were: accounts receivable, $25,000; and inven tory, $60,000. All sales were on account. EXERCISE 15-9 Financial Ratios for Assessing Profitability and Managing Debt [L015-4, LO15-5] Refer to the financial statements for Castile Products, Inc., in Exercise 15-8. Assets at the begin- ning of the year totaled $280,000, and the stockholders' equity totaled $161,600. Required: Compute the following: 1. Gross margin percentage. 2. Net profit margin percentage. 3. Return on total assets. 4. Return on equity. 5. Was financial leverage positive or negative for the year? Explain.

1. Cougar Corp rents out office space in a commercial building and pays rent in advance at the beginning of each year. When Cougar Corp makes the end-of-period adjusting entry to the "prepaid rent" account:

The prepaid rent account is credited

The prepaid rent account is debited

An expense account is credited

Cougar Corp is following the revenue recognition principle

If a company fails to record an adjusting entry for accrued revenue in a given year, then:

Stockholders' equity is overstated and liabilities are understated

Stockholders equity and assets are both overstated

Stockholders' equity is understated and liabilities are overstated.

Stockholders' equity and assets are both understated

None of the above

If a company fails to record an adjusting entry for accrued interest expense in a given year, then:

		Stockholders' equity is overstated and liabilities are understated.
		Stockholders' equity and assets are both overstated.
		Stockholders' equity is understated and liabilities are overstated.
		Stockholders' equity and assets are both understated.
		None of the above

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EXERCISE 15-8 Selected Financial Ratios (L015-2, LO15-3, L015-4] The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash.. Accounts receivable, net ................ Merchandise inventory ................. Prepaid expenses ..................... Total current assets ...................... Property and equipment, net ............... Total assets $ 6,500 35,000 70,000 3,500 115,000 185,000 $300,000 $ 50,000 80,000 130,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities .......... Bonds payable, 10% .......... Total liabilities ................. Stockholders' equity: Common stock, $5 per value ............. Retained earnings .... Total stockholders' equity ................. Total liabilities and equity ................. $ 30,000 140,000 170,000 $300,000 Castile Products, Inc. Income Statement For the Year Ended December 31 Sales ..... Cost of goods sold... Gross margin Selling and administrative expenses......... Net operating income ....... Interest expense......................... Net income before taxes .................. Income taxes (30%) Net income ............ ................ $420,000 292,500 127,500 89,500 38,000 8,000 30,000 9,000 $ 21,000 Account balances at the beginning of the year were: accounts receivable, $25,000; and inven tory, $60,000. All sales were on account. EXERCISE 15-10 Financial Ratios for Assessing Market Performance [LO15-6] Refer to the financial statements for Castile Products, Inc., in Exercise 15-8. In addition to the data in these statements, assume that Castile Products, Inc., paid dividends of $2.10 per share during the year. Also assume that the company's common stock had a market price of $42 at the end of the year and there was no change in the number of outstanding shares of common stock during the year. Required: Compute financial ratios as follows: 1. Earnings per share. 2. Dividend payout ratio. 3. Dividend yield ratio. 4. Price-earnings ratio. 5. Book value per share.

ACC 101 Lecture Notes - Lecture 2: Financial Statement, Income Statement, Retained Earnings

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