ACC 312 Study Guide - Midterm Guide: Sinking Fund, Life Insurance, Accounts Receivable

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greenwalrus59

1 Dec 2017

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An example would be vacant land owned by a restaurant company that is going to build (but has not yet built) a restaurant on the site: special funds that have a specific purpose. The most common of these is a sinking fund, in which monies are reserved and invested for use in the future. Investments are valued on the balance sheet at their fair market value. These are listed on the balance sheet at their original cost less their accumulated depreciation (see chapter 2): other assets are a non-current asset group that includes items that are mostly intangible. This includes the value of goodwill (the difference between the purchase price of an item and its fair market value). The follo(cid:449)i(cid:374)g approa(cid:272)hes to e(cid:448)aluatio(cid:374) are typically used by hospitality accountants when they seek to establish the (cid:448)alue of a (cid:272)o(cid:373)pa(cid:374)y"s assets: cost paid.

Related Questions

1. The net income reported on the income statement for thecurrent year was $288,417. Depreciation recorded on fixed assetsand amortization of patents for the year were $41,876, and $11,524,respectively. Balances of current asset and current liabilityaccounts at the end and at the beginning of the year are asfollows:

	End	Beginning
Cash	$46,710	$55,173
Accounts receivable	100,038	129,780
Inventories	87,496	101,142
Prepaid expenses	7,305	4,393
Accounts payable (merchandise creditors)	62,403	55,238

What is the amount of cash flows from operating activitiesreported on the statement of cash flows prepared by the indirectmethod?

a. $315,644

b. $389,458

c. $276,574

d. $385,205

Determine the relationship of $219,652 to $115,020, expressed asa ratio.

Select the correct answer.

a. 1.9 to 1

b. 1.1 to 1

c. 0.5 to 1

d. 0.7 to 1

Based on the following data for Privett Company, what is thequick ratio, rounded to one decimal point?

Privett Company
Accounts payable	$33,191
Accounts receivable	68,636
Accrued liabilities	6,715
Cash	23,006
Intangible assets	35,944
Inventory	88,660
Long-term investments	99,015
Long-term liabilities	71,468
Marketable securities	38,057
Notes payable (short-term)	23,392
Property, plant, and equipment	691,785
Prepaid expenses	1,629

a. 16.5

b. 1

c. 2

d. 3.5

The balance sheets at the end of each of the first two years ofoperations indicate the following:

Kellman Company
	Year 2	Year 1
Total current assets	$618,015	$564,556
Total investments	60,948	41,643
Total property, plant, and equipment	882,682	618,461
Total current liabilities	101,282	83,040
Total long-term liabilities	302,446	237,252
Preferred 9% stock, $100 par	84,252	84,252
Common stock, $10 par	521,610	521,610
Paid-in capital in excess of par-common stock	65,163	65,163
Retained earnings	486,892	233,343

Using the balance sheets for Kellman Company, if net income is$113,275 and interest expense is $33,061 for Year 2, what is thereturn on total assets for the year (round percent to two decimalpoints)?

a. 9.25%

b. 10.50%

c. 7.25%

d. 10.99%

lavenderserval911

Sometimes a business entity may change its method of accounting for certain items. It may classify the change as a change in accounting principle, a change in accounting estimate, or a change in reporting entity. The following are three situations faced by Hyde Company relating to accounting changes.

Situation I

Hyde determined that the depreciable lives of its fixed assets are presently too long to fairly match the cost of the fixed assets with the revenue produced. Hyde decided at the beginning of the current year to reduce the depreciable lives of all of its existing fixed assets by 5 years.

Situation II

On December 31, 2015, Hyde owned 51% of Patten Company, at which time Hyde reported its investment using the cost method, owing to political uncertainties in the country in which Patten was located. On January 2, 2016, the management of Hyde was satisfied that the political uncertainties were resolved and the assets of the company were in no danger of nationalization. Accordingly, Hyde will prepare consolidated financial statements for Hyde and Patten for the year ended December 31, 2016.

Situation III

Hyde decides in January 2016 to adopt the straight-line method of depreciation for equipment. The straight-line method will be used for new acquisitions, as well as for previously acquired equipment for which depreciation had been provided on an accelerated basis.

Directions

Choose one situation above, research the related generally accepted accounting principles and prepare a short memo to the president that explains the following: type of accounting change; manner of reporting the change under current generally accepted accounting principles, including a discussion, where applicable, of how amounts are computed; effect of the change on the balance sheet and income statement; and note disclosures that would be necessary. Cite your references and applicable paragraph numbers.

Spreadsheet and Statement of Cash Flows

The following information was taken from Lamberson Company's accounting records:

	Account Balances
Account Titles	January 1, 2016	December 31, 2016
Debits
Cash	$ 1,400	$ 2,400
Accounts Receivable (net)	2,800	2,690
Marketable Securities (at cost)	1,700	3,000
Allowance for Change in Value	500	800
Inventories	8,100	7,910
Prepaid Items	1,300	1,710
Investments (long-term)	7,000	5,400
Land	15,000	15,000
Buildings and Equipment	32,000	46,200
Discount on Bonds Payable	â	290
	$69,800	$85,400
Credits
Accumulated Depreciation	$16,000	$16,400
Accounts Payable	3,800	4,150
Income Taxes Payable	2,400	2,504
Wages Payable	1,100	650
Interest Payable	â	400
Note Payable (long-term)	3,500	â
12% Bonds Payable	â	10,000
Deferred Taxes Payable	800	1,196
Convertible Preferred Stock, $100 par	9,000	â
Common Stock, $10 par	14,000	21,500
Additional Paid-in Capital	8,700	13,700
Unrealized Increase in Value of Marketable Securities	500	800
Retained Earnings	10,000	14,100
	$69,800	$85,400

Additional information for the year:

Sales		$ 39,930
Cost of goods sold		(19,890)
Depreciation expense		(2,100)
Wages expense		(11,000)
Other operating expenses		(1,000)
Bond interest expense		(410)
Dividend revenue		820
Gain on sale of investments		700
Loss on sale of equipment		(200)
Income tax expense		(2,050)
Net income		$ 4,800

Dividends declared and paid totaled $700.

On January 1, 2016, convertible preferred stock that had originally been issued at par value were converted into 500 shares of common stock. The book value method was used to account for the conversion.

Long-term nonmarketable investments that cost $1,600 were sold for $2,300.

The long-term note payable was paid by issuing 250 shares of common stock at the beginning of the year.

Equipment with a cost of $2,000 and a book value of $300 was sold for $100. The company uses one Accumulated Depreciation account for all depreciable assets.

Equipment was purchased at a cost of $16,200.

The 12% bonds payable were issued on August 31, 2016, at 97. They mature on August 31, 2026. The company uses the straight-line method to amortize the discount.

Taxable income was less than pretax accounting income, resulting in a $396 increase in deferred taxes payable.

Short-term marketable securities were purchased at a cost of $1,300. The portfolio was increased by $300 to a $3,800 fair value at year-end by adjusting the related allowance account.

Prepare the statement of cash flows.

LAMBERSON COMPANY Statement of Cash Flows For Year Ended December 31, 2016

Operating Activities:

Prepare the statement of cash flows.

___________________ ____________

Adjustment for noncash income items:

___________________ ____________

Adjustments for cash flow effects from working capital items:

___________________ ____________

Net cash provided by operating activities ______________

Investing Activities:

___________________ ____________

Net cash used for investing activities ____________

Financing Activities:

___________________ ____________

Net cash provided by financing activites ____________

Cash, january 1, 2016 _____________

Cash, december 31, 2016 ____________

Compute the cash flow from operations to sales ratio and the profit margin ratio for 2016. Round your answers to one decimal place.

Cash flows from operations ratio ________:%

Profit margin:___________ %

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ACC 312 Study Guide - Midterm Guide: Sinking Fund, Life Insurance, Accounts Receivable

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