ADM 1300 Lecture Notes - Accounts Payable, Cash Flow Statement, Promissory Note
ADM 1300 Full Course Notes
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In addition to presenting the computed answers, please also discuss how you arrived at each answers the accounting problem asks. The accounting problem presents a companyâs balance sheet and income statement. The Diamond Gem Cleaning and Maintenance Service Company is in the business of contracting its cleaning and maintenance services to office buildings. The balance sheet and income statement have blank lines. Determine the values that would be appropriate for each blank line. Provide a narrative of how you arrived at each value. In doing so, explain the account being valued and its relationship to the other financial data. For example, if the accounts payable line was missing, explain that you can derive its value based on knowing all the other values of the current liabilities section. Then explain what an account liability is, as well as why it would belong in the current liabilities section of the balance sheet
Please refer to the income statement and balance sheet of the Diamond Gem Cleaning and Maintenance Service Company available down:
Superior papers will mention and explain the following elements when responding to the assignment question:
Provide correct balances for the blank financial account lines.
Provide a narrative about how the values were determined.
Provide a definition and explanation of each account line that was completed
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| The Vanguard Group, Inc. has compiled the following financial statements and comparative | |||||||||
| financial raios for the year-end review. | |||||||||
| ________________________________________________________________________________ | |||||||||
| Balance Sheet | |||||||||
| Vanguard Group, Inc | |||||||||
| December 31, 2007 | |||||||||
| ________________________________________________________________________________ | |||||||||
| Assets | |||||||||
| Current assets | |||||||||
| Cash | $118,750 | ||||||||
| Accounts receivable | 296,250 | ||||||||
| Inventory | 303,750 | ||||||||
| Total current assets | $718,750 | ||||||||
| Gross fixed assets | $625,000 | ||||||||
| Less: Accumulated depreciation | 93,750 | ||||||||
| Net fixed assets | 531,250 | ||||||||
| Total assets | $1,250,000 | ||||||||
| Liabilities and stockholders' equity | |||||||||
| Current liabilities | |||||||||
| Accounts payable | $111,250 | ||||||||
| Notes payable | 211,250 | ||||||||
| Accruals | 108,750 | ||||||||
| Total current liabilities | $431,250 | ||||||||
| Long-term debt | 235,000 | ||||||||
| Total liabilities | $666,250 | ||||||||
| Stockholders' equity | |||||||||
| Common stock | 318,750 | ||||||||
| Retained earnings | 265,000 | ||||||||
| Total stockholders' equity | $583,750 | ||||||||
| Total liabilities and stockholders' equity | $1,250,000 | ||||||||
| ____________________________________________________________________________________ | |||||||||
| Income Statement | |||||||||
| Vanguard Group, Inc. | |||||||||
| for the Year Ended December 31, 2007 | |||||||||
| ____________________________________________________________________________________ | |||||||||
| Sales revenue | $1,680,000 | ||||||||
| Cost of sales | 1,362,480 | ||||||||
| Gross profits | $317,520 | ||||||||
| Less: Operating expenses | |||||||||
| Selling expense | $125,600 | ||||||||
| General and administrative expense | 81,600 | ||||||||
| Depreciation expense | 24,000 | ||||||||
| Total operating expense | $231,200 | ||||||||
| Operating profits | $86,320 | ||||||||
| Less: Interest expense | 15,600 | ||||||||
| Net profits before taxes | $70,720 | ||||||||
| Less: Taxes (40%) | 28,288 | ||||||||
| Net profits after taxes | $42,432 | ||||||||
| _____________________________________________________________________________________ | |||||||||
| _____________________________________________________________________________________ | |||||||||
| Historical and Industry Average Ratios | |||||||||
| Vanguard Group, Inc. | |||||||||
| _____________________________________________________________________________________ | |||||||||
| Ratio | 2005 | 2006 | 2007 | Industry Average | |||||
| ______________________________________________________________________________________ | 2007 | ||||||||
| Current ratio | 1.6 | 1.7 | 1.6 | ||||||
| Quick ratio | 0.9 | 1 | 0.9 | ||||||
| Inventory turnover | 6 | 5 | 8.4 | ||||||
| Average collection period | 40 days | 50 days | 40 days | ||||||
| Total asset turnover | 1.5 | 1.5 | 1.75 | ||||||
| Debt ratio | 60% | 56% | 50% | ||||||
| Times interest earned | 2.5 | 3.5 | 4 | ||||||
| Gross profit margin | 20% | 19.70% | 20% | ||||||
| Operating profit margin | 4.70% | 4.80% | 6% | ||||||
| Net profit margin | 2.00% | 2.30% | 3% | ||||||
| Return on investment | 3.00% | 3.50% | 5.25% | ||||||
| Return on equity | 7.50% | 7.95% | 10.50% | ||||||
| ______________________________________________________________________________________ | |||||||||
| 1. Calculate the firm's 2007 financial ratios. | |||||||||
| 2. What is the meaning of each ratio looking at its trend and its comparison to the industry average? | |||||||||