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ACCT 1201 Chapter Notes - Chapter 9: Pension, Private Placement, Operating Lease

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lilacmule890
22 Mar 2016
School
Northeastern University
Department
Accounting
Course
ACCT 1201
Professor
Ganesh Krishnamoorthy

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Document Summary

Capital structure the mix of debt and fund provided by owners (equity) used to finance the acquisition of assets. (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) Liabilities probable debts or obligations of the entity that result from past transactions. Liquidity a company is considered to have liquidity if it can be meet its current obligations. Many current liabilities have a direct relationship to the operating activities of a business. Accounts payable turnover = cost of goods sold / average accounts. Are expense that been incurred before the end of an accounting period but have not been paid: recorded as a adjusting entry at the end of the year. Accrued taxes payable: taxes owed for that period. Accrued compensation and related costs: unpaid salaries and benefit packages. Benefits such as paid vacation must be recorded when they are earned. When the vacation is taken there is then an adjusting entry made.

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Related Questions

Weller Corporation
Comparative Balance Sheet
(dollars in thousands)
This Year Last Year
Assets
Current assets:
Cash $ 1,280 $ 1,560
Accounts receivable, net 12,300 9,100
Inventory 9,700 8,200
Prepaid expenses 1,800 2,100
Total current assets 25,080 20,960
Property and equipment:
Land 6,000 6,000
Buildings and equipment,net 19,200 19,000
Total property andequipment 25,200 25,000
Total assets $ 50,280 $ 45,960
Liabilities andStockholders' Equity
Current liabilities:
Accounts payable $ 9,500 $ 8,300
Accrued liabilities 600 700
Notes payable, short term 300 300
Total current liabilities 10,400 9,300
Long-term liabilities:
Bonds payable 5,000 5,000
Total liabilities 15,400 14,300
Stockholders' equity:
Common stock 800 800
Additional paid-in capital 4,200 4,200
Total paid-in capital 5,000 5,000
Retained earnings 29,880 26,660
Total stockholders' equity 34,880 31,660
Total liabilities andstockholders' equity $ 50,280 $ 45,960
Weller Corporation
Comparative Income Statement and Reconciliation
(dollars in thousands)
This Year Last Year
Sales $ 79,000 $ 74,000
Cost of goods sold 52,000 48,000
Gross margin 27,000 26,000
Selling and administrativeexpenses:
Selling expenses 8,500 8,000
Administrative expenses 12,000 11,000
Total selling and administrativeexpenses 20,500 19,000
Net operating income 6,500 7,000
Interest expense 600 600
Net income before taxes 5,900 6,400
Income taxes 2,360 2,560
Net income 3,540 3,840
Dividends to commonstockholders 320 600
Net income added to retainedearnings 3,220 3,240
Beginning retained earnings 26,660 23,420
Ending retained earnings $ 29,880 $ 26,660

Required:

Compute the following financial data for this year:

1. Accounts receivable turnover. (Assume that all sales are onaccount.) (Round your answer to 2 decimalplaces.)

2. Average collection period. (Use 365 days in a year.Round your intermediatecalculations and final answer to 2 decimal places.)

3. Inventory turnover. (Round your answer to 2 decimalplaces.)

4. Average sale period. (Use 365 days in a year.Round your intermediatecalculations and final answer to 2 decimal places.)

5. Operating cycle. (Round your intermediatecalculations and final answer to 2 decimal places.)

6. Total asset turnover. (Round your answer to 2 decimalplaces.)

Using the financial statements for the Snider Corporation,calculate the 13 basic ratios found in the chapter.

SNIDER CORPORATION
Balance Sheet
December 31, 2013
Assets
Current assets:
Cash $ 51,800
Marketable securities 24,200
Accounts receivable (net)174,000
Inventory 227,000


Total currentassets $ 477,000
Investments 63,500

Plant and equipment. $ 646,000
Less: Accumulated depreciation246,000


Net plant and equipment 400,000


Total assets $ 940,500


Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 91,100
Notes payable 73,400
Accrued taxes 18,400


Total currentliabilities $ 182,900
Long-term liabilities:
Bonds payable 156,700


Total liabilities $ 339,600
Stockholders' equity
Preferred stock, $50 par value $100,000
Common stock, $1 par value80,000
Capital paid in excess of par190,000
Retained earnings 230,900


Total stockholders'equity $ 600,900


Total liabilities and stockholders' equity $940,500

SNIDER CORPORATION
Income Statement
For the Year Ending December 31, 2013
Sales (on credit) $ 2,034,000
Cost of goods sold 1,308,000

Gross profit $ 726,000
Selling and administrative expenses 488,000 *

Operating profit (EBIT) $ 238,000
Interest expense 34,900

Earnings before taxes (EBT) $ 203,100
Taxes 89,300

Earnings after taxes (EAT) $ 113,800

*Includes $36,600 in lease payments.

Using the above financial statements for the Snider Corporation,calculate the following ratios.

a.

Profitability ratios. (Do not round intermediate calculations.Input your answers as a percent rounded to 2 decimal places.)


Profitability Ratios
Profit margin %
Return on assets (investment) %
Return on equity %


b.

Assets utilization ratios. (Do not round intermediatecalculations. Round your answers to 2 decimal places.)


Assets Utilization Ratios
Receivable turnover times
Average collection period days
Inventory turnover times
Fixed asset turnover times
Total asset turnover times


c.

Liquidity ratios. (Do not round intermediate calculations. Roundyour answers to 2 decimal places.)


Liquidity Ratios
Current ratio times
Quick ratio times


d.

Debt utilization ratios. (Do not round intermediatecalculations. Input your debt to total assets answer as a percentrounded to 2 decimal places. Round your other answers to 2 decimalplaces.)


Debt Utilization Ratios
Debt to total assets %
Times interest earned times
Fixed charge coverage times

The bookkeeper for Geronimo Company has prepared the followingbalance sheet as of July 31, 2014.

GERONIMO COMPANY
BALANCE SHEET
AS OF JULY 31, 2014

Cash $ 72,170 Notes and accounts payable $ 48,240
Accounts receivable (net) 44,740 Long-term liabilities 78,170
Inventory 63,170 Stockholders’ equity 158,670
Equipment (net) 84,000 $285,080
Patents 21,000
$285,080


The following additional information is provided.

1. Cash includes $1,200 in a petty cash fund and $15,100 in a bondsinking fund.
2. The net accounts receivable balance is comprised of thefollowing two items: (a) accounts receivable $48,240 and (b)allowance for doubtful accounts $3,500.
3. Inventory costing $5,700 was shipped out on consignment on July31, 2014. The ending inventory balance does not include theconsigned goods. Receivables in the amount of $5,700 wererecognized on these consigned goods.
4. Equipment had a cost of $116,240 and an accumulateddepreciation balance of $32,240.
5. Income taxes payable of $9,280 were accrued on July 31.Geronimo Company, however, had set up a cash fund to meet thisobligation. This cash fund was not included in the cash balance,but was offset against the income taxes payable amount.


Prepare a corrected classified balance sheet as of July 31, 2014,from the available information, adjusting the account balancesusing the additional information. (List Current Assetsin order of liquidity)