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ACC 100 Study Guide - Operating Expense, Profit Margin, Issued Shares

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taupegnat710
1 Mar 2014
School
Ryerson University
Department
Accounting
Course
ACC 100
Professor
Else Grech

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Document Summary

Exercise 2-1 characteristics of useful accounting information: reliability, relevance, representational faithfulness, consistency, verifiability, understandability, neutrality, comparability. Lo 3: ca, cl, nca, cl, cl, ca, ltl, nca. Bs = balance sheet; is = income statement; re = retained earnings statement: accounts payable bs, accounts receivable bs, advertising expense is, bad debts expense is, bonds payable bs, buildings bs, cash bs, common stock bs, deferred income taxes bs. 10. depreciation expense is: dividends re, land held for future expansion bs, loss on sale of equipment is, office supplies bs, organizational costs is, patent amortization expense is, retained earnings bs, re, sales is. Problem 2-3 classified balance sheet: classified balance sheet: ,250: current ratio = current assets/current liabilities. ,250/,155 = 2. 15 to 1: from the current ratio alone, ruth appears to be relatively liquid. To fully assess its liquidity, however, it would be useful to look more specifically at the composition of the current assets and liabilities.

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Related Questions

Financial Statement Analysis (Short Answer)




Mugs Company


Comparative Balance Sheet


December 31, 2007 2007 2006



Assets


Cash $25,000 $40,000


Marketable securities 20,000 60,000


Accounts Receivable (net) 40,000 30,000


Inventory 150,000 170,000


Property,plant


and equipment (net) 170,000 200,000


Total Assets $405,000 $500,000



Liabilities and stockholders' equity


Accounts payable $ 25,000 $ 30,000


Bond Interest payable 40,000 90,000


Bonds payable 75,000 160,000


Common Stock 175,000 145,000


Retained earnings 90,000 75,000


Total liabilities and


stockholders' equity $405,000 $500,000







Mugs Company


Income Statement


For the Year Ended 12/31/07


Net Sales $360,000


Cost of goods sold 184,000


Gross profit 176,000


Expenses


Interest Expense $21,000


Selling Expense 30,000


Administrative Expenses 20,000


Total expenses 71,000


Income before income taxes 105,000


Income tax expense 30,000


Net Income $75,000





Additional Information:



Cash dividends of $50,000 were declared and paid in 2007.


Weighted average number of shares of common stock outstandingduring 2007 were 62,000 shares.


Market value of common stock on December 31,2007 was $15 pershare.


Net cash provided by operating activities for 2007 was $65,000.


Using the financial statements and additional information, computethe following ratios for the Mugs Company for 2007. You need tolabel your ratios and show your calculations for maximum credit. (Iknow that's tedious, but it's very difficult to give partial creditfor incorrect answers if I can't see how you made thecalculation.)




1. Current ratio


2. Return on common stockholders' equity


3. Price-earnings ratio


4. Inventory turnover ratio


5. Average days in inventory


6. Receivable turnover


7. Average days to collect receivables


8. Profit margin ratio


9. Payout ratio


10.Return on assets (Points : 20)





Kohler Corporation reports the following components of stockholders’ equity on December 31, 2016:

Common stock—$15 par value, 100,000 shares authorized,
55,000 shares issued and outstanding		 $ 825,000
Paid-in capital in excess of par value, common stock 70,000
Retained earnings 460,000
Total stockholders' equity $ 1,355,000


In year 2017, the following transactions affected its stockholders’ equity accounts.

Jan. 1 Purchased 6,000 shares of its own stock at $20 cash per share.
Jan. 5 Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record.
Feb. 28 Paid the dividend declared on January 5.
July 6 Sold 2,250 of its treasury shares at $24 cash per share.
Aug. 22 Sold 3,750 of its treasury shares at $17 cash per share.
Sept. 5 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.
Oct. 28 Paid the dividend declared on September 5.
Dec. 31 Closed the $428,000 credit balance (from net income) in the Income Summary account to Retained Earnings.


Required:
1. Prepare journal entries to record each of these transactions for 2017.
2. Prepare a statement of retained earnings for the year ended December 31, 2017.
3. Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2017.

Journal Entries

1. Record the purchase of 6,000 shares of its own common stock for $20 cash per share.

2. Record the declaration of a cash dividend of $2 per share.

3. Record the payment of the cash dividend.

4. Record the reissue of 2,250 shares of the treasury stock for $24 cash per share.

5. Record the reissue of 3,750 shares of the treasury stock for $17 cash per share.

6. Record the declaration of a cash dividend of $2 per share.

7. Record the payment of the cash dividend.

8. Record the entry to close the income summary account having a credit balance of $428,000.

Prepare a statement of retained earnings for the year ended December 31, 2017. (Amounts to be deducted should be indicated by a minus sign.)

KOHLER CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2017
0
$0

Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2017

KOHLER CORPORATION
Stockholders' Equity Section of the Balance Sheet
December 31, 2017
Total contributed capital 0
Total stockholders' equity $0
Unit 6 GAAP Application-Conceptual Framework of Accounting TheConceptual Framework allows for the systematic adaptation ofaccounting standards to a changing business environment. The FASBuses the conceptual framework to aid in an organized and consistentdevelopment of new accounting standards. The conceptual frameworkoutlines the objectives of financial reporting and the qualities ofgood accounting information, precisely defines commonly used termssuch as asset and revenue, and provides guidance about appropriaterecognition, measurement, and reporting. Understanding theterminology associated with the framework is imperative. Match thenumbered statements below with the lettered terms. An answer(letter) may used more than once, and some terms require more thanone answer (letter). 1. Key ingredients in quality of relevance. 2.Traditional assumptions that influence the FASB's conceptualframework. 3. The idea that information should represent what itpurports to represent. 4. An important constraint relating to costsand benefits. 5. An example of conservatism 6. The availability ofinformation when it is needed. 7. Recording an item in theaccounting records. 8. Determines the threshold for recognition. 9.Implies consensus. 10. Transactions between independent parties. a)Cost-effectiveness b) Representational faithfulness c) Recognitiond) Verifiability e) Time periods f) Unrealized g) Completeness h)Timeliness i) Materiality j) Predictive value k) Economic entity l)Lower-of-cost-or-market rule m) Phrenology n) Arm's-lengthtransactions Now that you have reviewed the terminology, for eachsituation listed below, indicate by letter the appropriatequalitative characteristic(s) or accounting concept(s) applied. Aletter may be used more than once, and more than one characteristicor concept may apply to a particular situation. Explain why youchose your answer.

1. Goodwill is recorded in the accounts only when it arises fromthe purchase of another entity at a price higher than the fairmarket value of the purchased entity's identifiable assets. 2. Landis valued at cost. 3. All payments out of petty cash are debited toMiscellaneous Expense. 4. Plant assets are classified separately asland or buildings, with an accumulated depre-ciation account forbuildings. 5. Periodic payments of $1,500 per month for services ofH. Hay, who is the sole propri-etor of the company, are reported aswithdrawals. 6. Small tools used by a large manufacturing firm are^recorded as expenses when purchased. 7. Investments in equitysecurities are initially recorded at cost. 8. A retail storeestimates inventory rather than taking a complete physical countfor purposes of preparing monthly financial statements. 9. A notedescribing the company's possible liability in a lawsuit isincluded with the financial statements even though no formalliability exists at the balance sheet date. 10. Depreciation onplant assets is consistently computed each year by thestraight-line method. a) Understandability b) Verifiability c)Timeliness d) Representational faithfulness e) Neutrality f)Relevance g) Going concern h) Economic entity i) Historical cost j)Measurability k) Materiality l) Comparability Type your answers ina Word Document, and submit to the Drop Box.