AFM101 Lecture Notes - Lecture 18: Contingent Liability, Promissory Note, Current Liability
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The following accounts (in no particular order) are for PerfectReb Corporation for the fiscal year ended December 31, 2015. (S/T =Short-Term; L/T = Long-Term)
REQUIRED:
A) Calculate Perfect Reb Corporation’s netincome or net loss for the 2015 fiscal year. You may solve this inany
manner that you wish, but it is highly recommended to prepare amultiple step income statement.
B) Using proper form, prepare Perfect RebCorporation’s balance sheet for 2015.
C) Using the information provided, solve forthe requested ratios and respond to the correspondingquestions.
Common Stock (13,000 shares outstanding) | $52,000 | Sales Discounts | $5,000 | |
Accrued Expenses (Payables) | 20,000 | Income Tax Expense (25% of IBIT) | ??? | |
Miscellaneous Operating Expenses | 50,000 | Cash | 142,000 | |
Accounts Receivable | 20,000 | Interest Expense | 4,000 | |
Buildings | 186,000 | Marketable Securities | 62,000 | |
Retained Earnings | ??? | Notes Payable (due in 5 years) | 12,000 | |
Wages Expense | 60,000 | Rent Expense | 11,000 | |
Inventory | 40,000 | Unearned Revenue | 19,000 | |
Accumulated Depreciation – Buildings | 48,000 | Allowance for Uncollectible Accounts | 15,000 | |
Accounts Payable | 41,000 | Sales | 433,000 | |
Gain on Sale of Equipment | 62,000 | Mortgage Payable ($12,000 S/T) | 144,000 | |
Land | 50,000 | Sales Returns & Allowances | 12,000 | |
Bad Debt Expense | 2,000 | Depreciation Expense | 11,000 | |
L/T Investments | 7,000 | Cost of Goods Sold | 109,000 | |
Notes Receivable ($2,000 S/T) | 13,000 | Interest Revenue | 3,000 |
A) NET INCOME (10 points) – SHOW ALL WORK ANDCALCULATIONS!!!!
B) CLASSIFIED BALANCE SHEET (15 points)
Perfect Reb Corporation Balance Sheet December 31,2015 | ||||||
ASSETS | LIABILITIES | |||||
Current Assets | Current Liabilities | |||||
Total Current Liabilities | ||||||
Total Current Assets | ||||||
Long-Term Assets | Long-Term Liabilities | |||||
Total Long-Term Assets | Total Long Term Liabilities | |||||
Fixed Assets | ||||||
Total Liabilities | ||||||
EQUITY | ||||||
Total Fixed Assets | ||||||
Total Equity | ||||||
TOTAL ASSETS | TOTAL LIABILITIES & EQUITY | |||||
C) RATIOS AND ANALYSIS (15 points):
Use the financial statements and additional information tocalculate the ratios. Round your answers to two decimalplaces. Be sure to label your answer correctly (example,%, times, days, etc.). IF AN ANSWER SHOULD BE EXPRESSED ASA PERCENTAGE, DO NOT LEAVE IT IN DECIMAL FORM!!!! (i.e. 0.5015 =50.15%!!!!)
Previous (December 31, 2014) year end balancesfor:
Accounts receivable, net of allowanceInventory
Stockholders’ Equity
Market price per share for one share of common stock atDec 31, 2015 Dividend per share for one share of common stock forFYE Dec 31, 2015
$2,000 15,000 139,000
$94.50/share $1.25/share
No new shares of common stock were issued during 2015.The company’s credit policy is net 15.
RATIO | CALCULATION | ANSWER |
1) Quick (Acid-Test) Ratio (2points) | ||
2) Dividend Yield (2points) | ||
3) Gross Profit Percentage (2points) | ||
4) Average Days’ Sales Uncollected 2points) | ||
5) Inventory Turnover (2points) | ||
6) Price-Earnings Ratio (2points) |
7) Using the liquidity ratios (and generalaccepted norms for the current ratio and quick/acid-test ratio),comment on the company’s financial position. (3points)
