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ACC120 Study Guide - Final Guide: Capital Account, Accounts Receivable, Financial Statement

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greenmuskrat329
12 Mar 2019
School
Seneca College
Department
ACC
Course
ACC120
Professor
Terry Margel

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EXERCISE 4-16
(a)
March 28, 2015
Working Capital
$421,955
–
$223,239
=
$198,716
Current
=
$421,955
=
1.89
Ratio
$223,239
Acid-test
=
=
0.93
ratio
$223,239
Working Capital
$387,323
–
$197,627
=
$189,696
Current
=
$387,323
=
1.96
Ratio
$197,627
Acid-test
=
=
0.83
ratio
Working Capital
$438,374
–
$214,031
=
$ 224,343
Current
=
$438,374
=
2.05
Ratio
$214,031
Acid-test
=
=
1.02
ratio
(b) Indigo’s liquidity at March 28, 2015 is very similar to that of
the two previous fiscal years. Ratios are strong, due in part to
very few sales on account.
4-48
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*EXERCISE 4-17
GARDENS DESIGNS
Work Sheet
Month Ended April 30, 2017
Unadjusted Trial
Adjustments
Adjusted Trial
Income Statement
Balance Sheet
Balance
Balance
Account Titles
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash
11,430
11,430
11,430
Accounts receivable
8,780
8,780
8,780
Prepaid rent
4,875
4,875
4,875
Equipment
24,000
24,000
24,000
Accum.deprec.–equip.
6,000
(2)250
6,250
6,250
Accounts payable
5,650
5,650
5,650
Notes payable
12,000
12,000
12,000
Unearned revenue
1,500
(1) 500
1,000
1,000
Interest payable
(3) 60
60
60
T. Muzyka, capital
25,960
25,960
25,960
T. Muzyka, drawings
4,150
4,150
4,150
Service revenue
15,400
(1) 500
15,900
15,900
Salaries expense
9,865
9,865
9,865
Depreciation expense
2,750
2)250
3,000
3,000
Interest expense
660
3) 60
720
720
Totals
Profit
66,510
66,510
810
810
66,820
66,820
13,585
15,900
53,235
50,920
Totals
2,315
2,315
15,900
15,900
53,235
53,235
Manual 4-49 Chapter 4
© 2016 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is prohibited.
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*EXERCISE 4-18
SWIFT CREEK ENGINEERING
Work Sheet
Year Ended December 31, 2017
Unadjusted Trial
Adjustments
Adjusted Trial
Income Statement
Balance Sheet
Balance
Balance
Account Titles
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Dr.
Cr.
Cash
8,450
8,450
8,450
Accounts
6,250
10,440
16,690
16,690
receivable
Interest receivable
120
120
120
Supplies
5,260
3,510
1,750
1,750
Prepaid insurance
7,440
4,340
3,100
3,100
Notes receivable
12,000
12,000
12,000
Equipment
27,800
27,800
27,800
Acc. depr.—equip.
8,340
2,780
11,120
11,120
Accounts payable
4,560
4,560
4,560
H. Duguay, capital
34,900
34,900
34,900
H. Duguay, draw.
53,500
53,500
53,500
Service revenue
112,300
10,440
122,740
122,740
Interest revenue
120
120
120
Depr. expense
2,780
2,780
2,780
Insurance exp.
4,340
4,340
4,340
Salaries expense
39,400
39,400
39,400
Supplies expense
3,510
3,510
3,510
Totals
160,100
160,100
21,190
21,190
173,440
173,440
50,030
122,860
123,410
50,580
Profit
72,830
______
______
72,830
Totals
122,860
122,860
123,410
123,410
Manual 4-50 Chapter 4
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Document Summary

1. 02 (b) indigo"s liquidity at march 28, 2015 is very similar to that of the two previous fiscal years. Ratios are strong, due in part to very few sales on account. *exercise 4-19 (a) (1) dec. 31 accounts receivable 31 income summary 89,850: masterson, capital *exercise 4-19 (continued) (a), (b), and (c) (continued) It would be useful to prepare reversing entries for adjustments. 1, 4, and 6. (b) (1) may (4) may (6) may. Property tax expense (,912 12 4) 1,304 future the recording of (c) reversing entries are useful for these adjustments because it simplifies transactions. Without reversing entries, transactions 1, 4, and 6 would require compound journal entries. If reversing entries are prepared, the future transactions can be recorded with simple journal entries. You will not have to remember what has gone before. The use of reversing entries does not change the amounts reported in the financial statements. It simply makes it easier to record future transactions.

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Related Questions

PROBLEM 15-15 Comprehensive Ratio Analysis (L015-2, L015-3, L015-4, L015-5, L015-6] You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety hel- mets. Your boss has asked you to perform a comprehensive analysis of the company's financial statements, including comparing Lydex's performance to its major competitors. The company's financial statements for the last two years are as follows: Lydex Company Comparative Balance Sheet This Year Last Year $ 960,000 0 2,700,000 3,900,000 240,000 7,800,000 9,300,000 $17,100,000 $ 1,260,000 300,000 1,800,000 2,400,000 180,000 5,940,000 8,940,000 $14,880,000 Assets Current assets: Cash .... Marketable securities ......... Accounts receivable, net ........ Inventory .......... Prepaid expenses.......... Total current assets. ........ Plant and equipment, net ..... Total assets ............. Liabilities and Stockholders' Equity Liabilities: Current liabilities. Note payable, 10% ................. Total liabilities .... .......... Stockholders' equity: Common stock, $78 par value ......... Retained earnings .................. Total stockholders' equity .............. Total liabilities and stockholders' equity.... $ 3,900,000 3,600,000 7,500,000 $2,760,000 3,000,000 5,760,000 7,800,000 1,800,000 9,600,000 $17,100,000 7,800,000 1,320,000 9,120,000 $14,880,000 Lydex Company Comparative Income Statement and Reconciliation This Year Last Year Sales (all on account) $15,750,000 $12,480,000 Cost of goods sold .. 12,600,000 9,900,000 Gross margin ....................... 3,150,000 2,580,000 Selling and administrative expenses ...... 1,590,000 1,560,000 Net operating income.................. 1,560,000 1,020,000 Interest expense ...................... 360,000 300,000 Net income before taxes ............... 1,200,000 720,000 Income taxes (30%) 360,000 216,000 Net income ........................ 840,000 504,000 Common dividends .................. 360,000 252,000 Net income retained 480,000 252,000 Beginning retained earnings ........ 1,320,000 1,068,000 Ending retained earnings ............... $ 1,800,000 $1,320,000 To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: 2.3 1.2 Current ratio ...................... Acid-test ratio ..... Average collection period ...... Average sale period .... Return on assets .... Debt-to-equity ratio .......... Times interest earned ratio ......... Price-earnings ratio .......... 30 days 60 days 9.5% 0.65 5.7 10 Required: 1. You decide first to assess the company's performance in terms of debt management and profit- ability. Compute the following for both this year and last year: a. The times interest earned ratio. b. The debt-to-equity ratio. c. The gross margin percentage. d. The return on total assets. (Total assets at the beginning of last year were $12.960,000.) e. The return on equity. (Stockholders' equity at the beginning of last year totaled $9,048,000. There has been no change in common stock over the last two years.) f. Is the company's financial leverage positive or negative? Explain. You decide next to assess the company's stock market performance. Assume that Lydex's stock price at the end of this year is $72 per share and that at the end of last year it was $40. For both this year and last year, compute: a. The earnings per share. b. The dividend yield ratio. c. The dividend payout ratio. d. The price-earnings ratio. How do investors regard Lydex Company as compared to other companies in the industry? Explain. e. The book value per share of common stock. Does the difference between market value per share and book value per share suggest that the stock at its current price is a bargain? Explain. 3. You decide, finally, to assess the company's liquidity and asset management. For both this year and last year, compute: a. Working capital. b. The current ratio. The acid-test ratio. d. The average collection period. (The accounts receivable at the beginning of last year totaled $1,560,000.) e. The average sale period. (The inventory at the beginning of last year totaled $1,920,000.) f. The operating cycle. g. The total asset turnover. (The total assets at the beginning of last year totaled $14,500,000.) 4. Prepare a brief memo that summarizes how Lydex is performing relative to its competitors.

BradburnCorporation was formed 5 years ago through a public subscription ofcommon stock. Daniel Brown,
who owns 15% owns 15% of the common stock, was one of theorganizers of Bradburn and is its
current president. The companyhas been successful, but it currently is experiencing a shortage offunds. On
June 10, Daniel Brownapproached the Topeka National Bank, asking for a 24-monthextension on two $35,000
notes, which are due on June30, 2013, and September 30, 2013. Another note of $6,000 is due
on March 31, 2014, but heexpects no difficulty in paying this note on its due date. Brownexplained that
Bradburn’s cash flow problemsare due primarily to the company’s desire to finance a $300,000 plant
expansion over the next 2fiscal years through internally generated funds.
The commercialloan officer of Topeka National Bank requested financial reportsfor the last 2 fiscal years.
BRADBURN CORPORATION
Statement of FinancialPosition
March 31
Assets 2013 2012
Cash $18,200 $12,500
Notes receivable 148,000 132,000
Accounts receivable (net) 131,800 125,500
Inventories (at cost) 105,000 50,000
Plant & equipment (net ofdepreciation) 1,449,000 1,420,500
Total assets $1,852,000 $1,740,500
Liabilities and Owners'Equity
Accounts payable $79,000 $91,000
Notes payable 76,000 61,500
Accrued liabilities 9,000 6,000
Common stock (130,000 shares,$10 par) 1,300,000 1,300,000
Retainedearningsa 388,000 282,000
Total liabilities and owners'equity $1,852,000 $1,740,500
aCash dividends were paid at the rate of $1.00 per sharein fiscal year 2012
and $2.00 per share in fiscal year 2013.
SANDBURG CORPORATION
Income Statement
For The Fiscal Year EndedMarch 31
2013 2012
Sales $3,000,000 $2,700,000
Cost of goods sold 1,530,000 1,425,000
Gross margin 1,470,000 1,275,000
Operating expenses 860,000 780,000
Income before incometaxes 610,000 495,000
Income taxes 244,000 198,000
Net income after incometaxes $366,000 $297,000
Depreciation charges on theplant and equipment of $100,000 and $102,500
for the fiscal years endedMarch 31, 2012 and 2013, respectively, are included in cost ofgoods sold.
Instructions:
Fill in the provided matrixand utilize it as the matrix for "VLOOKUP" formulas within thecells below.
Column 4 Column 5
2013 2012
Average inventory - 2011 Formula
Average total assets Formula 1,714,500
Total Assets = Mar 31, 2009 1,688,500
Total Assets = Mar 31, 2010 1,740,500
Total Assets = Mar 31, 2011 Amount
Cost of goods sold Amount 1,425,000
Current assets Amount Amount
Current liabilities Amount Amount
Dividends Amount Amount
Depreciation Amount Amount
Gross margin Amount Amount
Income before taxes Amount Amount
Income taxes (40%) 244,000 Amount
Inventories = EOY 2010 Amount
Inventories = EOY 2011 Amount
Net income after taxes Amount Amount
Operating expenses 860,000 Amount
Sales 3,000,000 2,700,000
(a) Compute the followingitems for Bradburn Corporation:
(1) Current ratio for fiscalyears 2012 and 2013.
Note: The formulas in somecell formulas are "live" and need values placed in their sourcecells.
2012 Current ratio = Currentassets
----------------------- =
Current liabilities		 Amount
---------------- = Formula to 1
Amount
2013 Current ratio = Currentassets
----------------------- =
Current liabilities		 Formula
---------------- = Formula to 1
Formula
(2) Acid-test (quick) ratiofor fiscal years 2012 and 2013.
2012 Quick ratio = Current assets -Inventories
----------------------- =
Current liabilities		 Formula
---------------- = Formula
Formula to 1
2013 Quick ratio = Current assets -Inventories
----------------------- =
Current liabilities		 Formula
---------------- = Formula
Formula to 1
(3) Inventory turnover forfiscal year 2013.
2013 Inventory Turnover = Cost of goodssold
------------------------------------ =
Average inventory		 Amount
---------------- = Formula
#N/A to 1
(4) Return on assets forfiscal years 2012 and 2013. (Assume total assets were $1,688,500
at March 31, 2011.)
2012 Return on assets = Net income
----------------------- =
Average total assets		 Formula
---------------- = Formula
Formula
2013 Return on assets = Net income
----------------------- =
Average total assets		 Formula
---------------- = Formula
Formula
(5)Percentage change in sales, cost of goods sold, gross margin, andnet income after taxes from fiscal year
2012 to 2013. Omit "000" from thevalues.
2012 2013 Change Percent Change
Sales $3,000 $2,700 $300 11.11%
Cost of goods sold #VALUE! Formula Formula Formula
Gross margin #VALUE! Formula Formula Formula
Net income after taxes #VALUE! Formula Formula Formula
Note: The formulas in somecell formulas are "live" and need values placed in their sourcecells.
(b)Identify and explain what other financial reports and/or financialanalyses might be helpful to the
commercial loan officer of Topeka NationalBank in evaluating Daniel Brown’s request for a timeextension
on Bradburn’s notes.
Otherfinancial reports and financial analyses which might be helpful tothe commercial loan officer of Spokane National Bank include:
1 Enter text answeras appropriate.
2 Enter text answeras appropriate.
3 Enter text answeras appropriate.
4 Enter text answeras appropriate.
(c)Assume that the percentage changes experienced in fiscal year 2013as compared with fiscal year 2012
for sales and cost of goods sold will berepeated in each of the next 2 years. Is Bradburn’s desire to
finance the plant expansion frominternally generated funds realistic? Discuss.
Entertext answer as appropriate.
2013 2014 2015
Sales $3,000.0 $3,000.0 $3,000.0
Cost of goods sold Formula Formula Formula
Gross margin Formula Formula Formula
Operating expenses Formula Formula Formula
Income before taxes Formula Formula Formula
Income taxes (40%) Formula Formula Formula
Net income Formula Formula Formula
Add: Depreciation Amount Amount
Deduct: Dividends Amount Amount
Note repayment Amount
Funds available for plant expansion Formula Formula
Plant expansion Amount Amount
Excess funds Formula Formula
Assumptions: Complete as appropriate.
Sales increase at a rate of
Cost of goods sold increases at rate of
despite depreciation remaining constant.
Other operating expenses increase at the same rateexperienced from 2012 to 2013;
i.e., at
Depreciation remains constant at
Dividends remain at per share.
Plant expansion is financed equally over the twoyears( each year).
Loan extension is granted.
(d)Should Topeka National Bank grant the extension on Bradburn’s notesconsidering Daniel Brown’s statement
about financing the plant expansionthrough internally generated funds? Discuss.
Enter text answer as appropriate.

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 net income or net lossfor the 2015 fiscal year. You may solve this in any

manner that you wish, but it is highly recommended to prepare amultiple step income statement.

B) Using proper form, prepare Perfect Reb Corporation’s balancesheet for 2015.

C) Using the information provided, solve for the requestedratios and respond to the corresponding questions.

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 decimal

places. Be sure to label your answer correctly (example, %,times, days, etc.). IF AN ANSWER SHOULD BE

EXPRESSED AS A PERCENTAGE, DO NOT LEAVE IT IN DECIMAL FORM!!!!(i.e. 0.5015 = 50.15%!!!!)

Previous (December 31, 2014) year end balances for:

Accounts receivable, net of allowance $2,000

Inventory 15,000

Stockholders’ Equity 139,000

Market price per share for one share of common stock at Dec 31,2015 $94.50/share

Dividend per share for one share of common stock for FYE Dec 31,2015 $1.25/share

No new shares of common stock were issued during 2015. Thecompany’s credit policy is net 15.

RATIO CALCULATION ANSWER

1) Quick (Acid-Test) Ratio (2 points)

2) Dividend Yield (2 points)

3) Gross Profit Percentage (2 points)

4) Average Days’ Sales Uncollected 2 points)

5) Inventory Turnover (2 points)

6) Price-Earnings Ratio (2 points)

7) Using the liquidity ratios (and general accepted norms forthe current ratio and quick/acid-test ratio), comment

on the company’s financial position. (3 points)