ADMS 1500 Study Guide - Quiz Guide: Historical Cost, Inventory Turnover, Asset Turnover

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violeteel391

27 Mar 2014

School

York University

Department

Administrative Studies

Course

ADMS 1500

Professor

all

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Document Summary

2: in the balance sheet assets are presented: a) b) c) d) e) most highly liquid, through to least liquid; in order of acquisition; at appraised values; least liquid through to most highly liquid; none of the above. 5: long-term assets should be reported in the balance sheet at: a) b) c) d) e) historic cost, less an allowance for depreciation; realizable value; replacement value; marketable value; all, or none, of the above. 6: freda"s flowers ltd. has inventory of flowers on hand as at 24th december that had cost ,000. Due to closing for the christmas holidays it is unlikely that these will be fit for sale when they reopen in january. The balance sheet valuation of inventory of flowers should be: a) b) c) d) e) ,000, based on net realizable value; nil, based on net realizable value; , as a compromise between cost and realizable value; nil, based on the first-in-first-out inventory flow model.

Related Questions

A current ratio of 2.0 indicates:

a. inventories are too high

b. the firm does not have enough cash

c. the firm is using long term liabilities, preferred stock or equity to finance a portion of its current assets

d. the firm is matching financing across the balance sheet

e. the firm is financing fixed assets with current liabilities

A compensating balance is:

a. a bank discount

b. a credit discount given by a bank

c. a rebate

d. a form of inventory financing

e. none of the above

A formal agreement between a bank and a borrower indicating the maximum pre-arranged credit the bank will extend to borrower is:

a. Line of credit

b. Compensating balance

c. Discount loan

d. Operating loan

e. None of the above

aquamarinetoad671

Rockwater plans to acquire $30,000,000 in long- term assets. One financing option is to purchase the assets by making a $4,000,000 down payment, signing a ten-year note to borrow the remaining $26,000,000 with interest and a $2,000,000 principal payment due next year. A second option is to use a lease that is structured to qualify for off-balance sheet financing. The lease terms are to sign a ten- year lease with a present value of $30,000,000 with no down payment required and equal annual lease payments. Further, Rockwater has a bank loan with Bank that contains a covenant which states that its current ratio cannot be lower than 1.8 and its debt-to-equity ratio cannot be larger than 1.25.

1. Using a simplified balance sheet depicted in Table 1, calculate Rockwater's current ratio and debt-to equity ratio for the following:

(a) The period before the long-term assets are acquired: (b) If the long-term assets are leased;
(c) If the long-term assets are purchased

2. Explain how each method (purchasing or leasing) to acquire the long-term assets affects Rockwater's loan covenant agreement with Bank.

Table 1
Simplified Balance Sheet Rockwater

Assets
Current Assets	$14,000,000
Long-Term Assets	76,000,000
Total Assets	$90,000,000
Liabilities
Current Liabilities	$ 7,000,000
Long-Term Liabilities	38,000,000
Total Liabilities	$45,000,000
Owners' Equity	$45,000,000
Total liabilities & Owners' Equity	$90,000,000

ochresnake128

24. In 2012, the JCrew Company's sales were $15.0 million. Its balance sheet at year end 2012 is shown below. JCrew's 2013 sales are expected to be $21 million. Earnings after tax is expected to be 6.0% of sales, and annual dividends of $575,000 are expected to be paid in 2013. The company presently has excess plant and equipment capacity. As a result, assume that the net fixed asset figure on the balance sheet will remain constant for 2013. Assuming that the ratios of assets (except fixed assets, net) to sales and accounts payable to sales in 2012 remain the same in 2013, calculate the total amount, i.e., one number, of external financing required for 2013, using the percentage of sales method.

JCrew Co. Balance Sheet
(December 31, 2012)($ millions)
Current assets: Current liabilities:
Cash $0.5 Accts. payable $0.7
Accts. Rec. 1.5 Notes payable 0.8
Inventory 2.5 Long-term debt 2.3
Fixed assets, net 1.5 Stockholders' equity 2.2
Total Assets $6.0 Total Liabilities and Equity $6.0 (Points : 3.5)

A. $750,000
B. $220,000
C. $835,000
D. None of the above

ultramarinefish329

ADMS 1500 Study Guide - Quiz Guide: Historical Cost, Inventory Turnover, Asset Turnover

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