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Acct 504 week 8 final exam all four sets 1, 2, 3 and 4 solution

  Set 1 Question 1. 1. (TCOs A, B, and C) Which type of corporate information is not available to […]

 
Set 1
Question 1. 1. (TCOs A, B, and C) Which type of corporate information is not available to investors? (Points : 3)Dividend historyForecast of cash needs for the upcoming yearCash provided by investing activitiesBeginning cash balanceQuestion 2. 2. (TCO C) Debt securities sold to investors that must be repaid at a particular date some years in the future are called (Points : 3)accounts payable.notes receivable.taxes payable.bonds payable.Question 3. 3. (TCO C) Buying and selling products are examples of (Points : 3)operating activities.investing activities.financing activities.delivering activities.Question 4. 4. (TCO A) The cost of assets consumed or services used is also known as (Points : 3)a revenue.an expense.a liability.an asset.Question 5. 5. (TCO C) Finley Company recorded the following cash transactions for the year.Paid $90,000 for salariesPaid $40,000 to purchase office equipmentPaid $10,000 for utilitiesPaid $4,000 in dividendsCollected $150,000 from customers
What was Finley’s net cash provided by operating activities? (Points : 3)$50,000$10,000$60,000$46,000
Question 6. 6. (TCO A) On a classified balance sheet, prepaid insurance is classified as (Points : 3)an intangible asset.property, plant, and equipment.a current asset.a long-term investment.Question 7. 7. (TCO A) An intangible asset (Points : 3)may have the capacity to earn revenue for its owner.is worthless because it has no physical substance.is converted into a tangible asset during the operating cycle.cannot be reported on the balance sheet because it lacks physical substance.
Question 8. 8. (TCO A) The following are selected account balances on December 31, 2010.
-Land (location of the corporation’s office building): $100,000-Land (held for future use): 150,000-Corporate Office Building: 600,000-Inventory: 200,000-Equipment: 450,000-Office Furniture: 100,000-Accumulated Depreciation: 300,000What is the total NET amount of property, plant, and equipment that will appear on the balance sheet? (Points : 3)$1,300,000$1,100,000$1,600,000$950,000Question 9. 9. (TCO B) For 2010, Landford Corporation reported net income of $30,000; net sales $400,000; and average share outstanding 6,000. There were no preferred stock dividends. What was the 2010 earnings per share? (Points : 3)$4.66$0.20$66.67$5.00Question 10. 10. (TCO B) At December 31, 2010, Shorts Company had retained earnings of $2,184,000. During 2010 they issued stock for $98,000, and paid dividends of $34,000. Net income for 2010 was $402,000. The retained earnings balance at the beginning of 2010 was: (Points : 3)$2,552,000$1,816,000$1,914,000$2,454,000Question 11. 11. (TCO D) Money collected from customers before the work is done is treated as (Points : 3)prepaid expenses.accrued revenues.unearned revenues.accrued expenses.Question 12. 12. (TCO D) An account is a part of the financial information system and is described by all except which one of the following? (Points : 3)An account has a debit and credit side.An account has to be in paper form.An account has a zero or nonzero balance.An account has a title.Question 13. 13. (TCO D) Which of the following describes the classification and normal balance of the retained earnings account? (Points : 3)Asset, debitStockholders’ equity, creditRevenues, creditExpense, debitQuestion 14. 14. (TCO D) In recording an accounting transaction in a double-entry system (Points : 3)the number of debit accounts must equal the number of credit accounts.there must always be entries made on both sides of the accounting equation.the amount of the debits must equal the amount of the credits.there must only be two accounts affected by any transaction.Question 15. 15. (TCO D) Which of the following accounts follows the rules of debit and credit in relation to increases and decreases in the opposite manner? (Points : 3)Prepaid insurance and dividendsDividends and medical fees earnedInterest payable and common stockAdvertising expense and landQuestion 16. 16. (TCO E) An accounting time period that is 1 year in length is called (Points : 3)a fiscal year.an interim period.the time period assumption.a reporting period.Question 17. 17. (TCO E) In a service-type business, revenue is considered earned (Points : 3)at the end of the month.at the end of the year.when the service is performed.when cash is received.Question 18. 18. (TCO E) Why do generally accepted accounting principles require the application of the revenue recognition principle? (Points : 3)Failure to apply the revenue recognition principle could lead to an overstatement of revenue.It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve.Recording revenue when cash is received is an objective application of the revenue recognition principle.Accounting software has made the revenue recognition easy to apply.
Question 19. 19. (TCO E) The following is selected information from G Corporation for the fiscal year ending October 31, 2010.
-Cash received from customers: $150,000-Revenue earned: 175,000-Cash paid for expenses: 85,000-Expenses incurred: 100,000Based on the accrual basis of accounting, what is G Corporation’s net income for the year ending October 31, 2010? (Points : 3)$57,000$75,000$41,000$85,000
Question 20. 20. (TCO E) Accounts often need to be adjusted because (Points : 3)there are never enough accounts to record all the transactions.many transactions affect more than one time period.there are always errors made in recording transactions.management can’t decide what they want to report.
Question 21. 21. (TCOs A and B) Which of the following expressions is incorrect? (Points : 3)Gross profit – operating expenses = net incomeSales – cost of goods sold – operating expenses = net incomeNet income + operating expenses = gross profitOperating expenses – cost of goods sold = gross profit
Question 22. 22. (TCO B) Hunter Company purchased merchandise inventory with an invoice price of $12,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Hunter Company pays within the discount period? (Points : 3)$11,040$10,800$11,760$12,000Question 23. 23. (TCOs A and B) Jake’s Market recorded the following events involving a recent purchase of merchandise.
-Received goods for $20,000, terms 2/10, n/30.-Returned $400 of the shipment for credit.-Paid $100 freight on the shipment.-Paid the invoice within the discount period.
As a result of these events, the company’s merchandise inventory (Points : 3)increased by $19,208.increased by $19,700.increased by $19,306.increased by $19,308.
Question 24. 24. (TCO A) If goods in transit are shipped FOB destination (Points : 3)the seller has legal title to the goods until they are delivered.the buyer has legal title to the goods until they are delivered.the transportation company has legal title to the goods while the goods are in transit.no one has legal title to the goods until they are delivered.
Question 25. 25. (TCO A) Which statement is false? (Points : 3)Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand.No matter whether a periodic or perpetual inventory system is used, all companies need to determine inventory quantities at the end of each accounting period.An inventory count is generally more accurate when goods are not being sold or received during the counting.Companies that use a perpetual inventory system must take a physical inventory to determine inventory on hand on the balance-sheet date and to determine cost of goods sold for the accounting period.
Question 26. 26. (TCO A) Of the following companies, which one would not likely employ the specific identification method for inventory costing? (Points : 3)Music store specializing in piano salesCustom jewelry storeAntique shopHardware storeQuestion 27. 27. (TCO A) Which of the following statements is correct with respect to inventories? (Points : 3)The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold.It is generally good business management to sell the most recently acquired goods first.Under FIFO, the ending inventory is based on the latest units purchased.FIFO seldom coincides with the actual physical flow of inventory.Question 28. 28. (TCO A) In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the (Points : 3)FIFO method.LIFO method.average cost method.tax method.Question 29. 29. (TCO B) In a perpetual inventory system, cost of goods sold is recorded (Points : 3)on a daily basis.on a monthly basis.on an annual basis.each time a sale occurs.Question 30. 30. (TCO B) The primary source of revenue for a retailer is (Points : 3)investment income.service revenue.the sale of merchandise.the sale of plant assets the company owns.
Question 31. 31. (TCO D) An account is an important accounting record where financial information is stored until needed. Briefly explain (1) the nature of an account, (2) the different types of accounts, and (3) the manner in which an account is increased and decreased, and the normal balance of each type of accounts. (Points : 25)
Question 32. 32. (TCOs B and E) The adjusted trial balance of Gertz Company included the following selected accounts.
Debit CreditSales $575,000Sales returns and allowances $ 50,000Sales discounts 9,500Cost of goods sold 347,000Freight-out 2,000Advertising expense 15,000Interest expense 19,000Store salaries expense 74,000Utilities expense 18,000Depreciation expense 3,500Interest revenue 25,000
Instructions:
1.Use the above information to prepare a multiple-step income statement for the year ended December 31, 2010.2.Calculate the profit margin ratio and gross profit rate. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings.(Points : 35)
Set 2
1. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?Reduced legal liability for investorsHarder to transfer ownershipLower taxesMost common form of organization
2. Dividends _____.represent an expense and are an operating activityrepresent an obligation and are an operating activityrepresent a distribution of earnings and are a financing activityrepresent an asset and are an investing activity
3. Below is a partial list of account balances for LBJ Company:Cash $15,000Prepaid insurance 5,000Accounts receivable 2,500Accounts payable 3,000Notes payable 6,000Common stock 10,000Dividends 500Revenues 15,000Expenses 13,000
What did LBJ Company show as total debits?$34,000$36,000$70,000$31,000
4. Under the accrual basis of accounting, revenues are recorded and reported _____.
when companies receive payments for jobs performed or products providedwhen companies have provided products or performed serviceswhen companies receive payments prior to providing products or performing serviceswhen companies receive payments after providing products or performing services
5. In a period of increasing prices, which inventory cost flow assumption will result in the highest amount of net income?
LIFOThe average cost methodFIFOIncome tax expense for the period will be the same under all assumptions.
6. Equipment was purchased for $55,000 on January 1, 2011. Freight charges of $2,200 were incurred and there was a cost of $1,800 for installation. It is estimated the equipment will have a $5,500 salvage value at the end of its 5-year useful life. Depreciation expense for 2011 using the straight-line method will be _____.
$10,340$10,700$10,260$9,900
7. Payne Corporation issues 100 twenty-year, 6%, $1,000 bonds dated July 1, 2010, at 94. The journal entry to record the issuance will show a _____.
debit to Cash of $100,000
credit to Bonds Payable of $94,000
credit to Premium on Bonds Payable of $4,000
debit to Discount on Bonds Payable of $6,000
8. Accounts receivable arising from sales to customers amounted to $80,000 and $120,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $2,000,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____.$2,040,000
$2,000,000
$1,200,000
$1,960,000
9. If you are making comparisons within a company to detect changes in financial relationships and significant trends, you are performing what type of analysis?
Industry averages analysis
Intercompany analysis
Common-size analysis
Intracompany analysis
10. The formula for performing horizontal analysis is _____.
(Current Year Amount minus Base Year Amount) divided by Current Year Amount
Base Year Amount divided by Current Year Amount
Current Year Amount minus Base Year Amount
(Current Year Amount minus Base Year Amount) divided by Base Year Amount
11.Horizontal analysis of comparative financial statements includes the _____.
development of common-size statements
calculation of liquidity ratios
calculation of dollar amount changes and percentage changes from the previous year to the current year
evaluation of financial statement data that expresses each item in a financial statement as a percentage of a base amount
12. A common measure of solvency is the _____.
asset turnover
current cash debt coverage ratio
cash debt coverage ratio
current ratio
13. Stockholders would be most interested in which of the following ratios?
Days in inventory
Free cash flow
Current ratio
Average collection period
14. To calculate the market value of a bond, we need to _____.
multiply the bond price times the interest rate
calculate the present value of the principal only
calculate the present value of the interest only
calculate the present value of both the principal and interest payments
15. (TCO A) Use the following partial financial statement information below to calculate the liquidity and profitability ratios. This information can be used to correctly solve each of the ratios below.Average common shares $10,000 Current liabilities $100,000 Capital expenditures 20,000 Net income 21,000Cash provided by operations 28,000 Net sales 150,000Common stock dividends paid 5,000 Total liabilities 105,000 Current assets 150,000 Total assets 175,000 Instructions: Compute the following.a) Current ratiob) Working capitalc) Earnings per shared) Debt-to-total-assets ratioe) Free cash flowMust show the formula you are using, show your computations, and explain the meaning of each of your ratio results.
16.) Please indicate which section of the statement of cash flows should contain each of the following items and whether each item would result in an inflow or outflow of cash. The sections are Operating, Investing, and Financing.a) Payment of dividendsb) Bought assets needed to operate the businessc) Depreciation of equipmentd) Increase in inventorye) Sale of building
17. (TCOs D, E) Please prepare the following journal entries. Indicate which account should be debited with the abbreviation DR in front of the account name and which account should be credited with the abbreviation CR in front of the account name along with the dollar amount of the debit and credit.a) Investors invested $600,000 in exchange for 30,000 shares of common stock.b) Company paid rent of $3,000c) Company billed $5,000 for services performedd) Company purchased supplies of $3,000e) Company received $20,000 for services not yet performed
18) (TCO D) Your friend Dean has hired you to evaluate the following internal control procedures.
a) Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which principle relates to each of the internal controls.
b) For the weaknesses, you also need to state a recommendation for improvement.
1. Bonding of the cashiers is not required because all of the cashiers have significant experience.
2. The treasurer is the only one allowed to sign checks.
3. All employees may operate cash registers.
4. Blank checks are stored in the safe.
5. Supervisors count cash receipts daily.
19) The following items are taken from the financial statements of Grove Company for 2010.
Accounts payable $ 18,500 Accounts receivable 4,000
Accumulated depreciation 4,800 Bonds payable 18,000
Cash 24,000 Common stock 25,000
Cost of coods sold 13,000 Depreciation expense 4,800
Dividends 5,300 Equipment 48,000
Interest expense 2,500 Patents 7,500
Retained earnings, January 1 16,000 Salaries expense 5,200 Sales revenue 36,500 Supplies 4,500
Instructions: Prepare an income statement and a retained earnings statement for Grove Company.
Set 3:
1. (TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013:
Accounts Payable
$38,080
Accounts Receivable
6,768
Cash
7,781
Common Stock
3,952
Cost of Goods Sold
352,488
Income Tax Expense
7,981
Interest Expenses
2,064
Membership Revenues
3,048
Net Sales
466,114
Operating, Selling and Administrative Expenses
88,873
Retained Earnings
72,978
Required:
Using the information provided above:1. Prepare a multiple-step income statement2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.(Points : 36)
3. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:Cash flow from operating activities
In millions
In millions
For the year ended 2012
For the year ended 2011
Net (loss) earnings
$(12,650)
$7,074
Depreciation and amortization
5,095
4,984
Impairment of goodwill and purchased intangible assets
18,035
885
Stock-based compensation expense
635
685
Provision for doubtful accounts
142
81
Provision for inventory
277
217
Restructuring charges
2,266
645
Deferred taxes on earnings
(711)
166
Excess tax benefit from stock-based competition
(12)
(163)
Other, net
265
(46)
Accounts and financing receivables
1,269
(227)
Inventory
890
(1,252)
Accounts payable
(1,414)
275
Taxes on earnings
(320)
610
Restructuring
(840)
(1,002)
Other assets and liabilities
(2,356)
(293)
Net cash provided by operating activities
10,571
12,639
Cash flows from investing activities:
Investment in property, plant, and equipment
(3,706)
(4,539)
Proceeds from sale of property, plant, and equipment
617
999
Purchases of available-for-sale securities and other investments
(972)
(96)
Maturities and sales of available-for-sale securities and other investment
662
68
Payments in connection with business acquisitions, net of cash acquired
(141)
(10,480)
Proceeds from business divestiture, net
87
89
Net cash used in investing activities
(3,453)
(13,959)
Cash flow from financing activities:
(Payments) issuance of commercial paper and notes payable, net
(2,775)
(1,270)
Issuance of debt
5,154
11,942
Payment of debt
(4,333)
(2,336)
Issuance of common stock under employee stock plans
716
896
Repurchase of common stock
(1,619)
(10,117)
Excess tax benefit from stock-based compensation
12
163
Cash dividends paid
(1,015)
(844)
Net cash used in financing activities
(3,860)
(1,566)
Increase (decrease) in cash and cash equivalents
3,258
(2,886)
Cash and cash equivalents at beginning of period
8,043
10,929
Cash and cash equivalents at end of period
$11,301
$8,043
Required:1) Please calculate the percentage increase or decrease in cash for the operating, investing, and financing sections and explain the major reasons for the increase or decrease for each of these sections.2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio.(Points : 36)
5. (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.
Ratio Name
Johnson & Johnson
Pfizer
Profit margin
16.1%
24.7%
Inventory turnover ratio
3.1
1.7
Average collection period
59.4 days
69.1 days
Cash debt coverage ratio
.27
.16
Debt to Total assets
46.6%
127.5%
Required:1) Please explain the meaning of each of the Pfizer ratios above.2) Please state which company performed better for each ratio.(Points : 36)
QCM
1. (TCO A) An advantage of the corporate form of business is that _____. (Points : 5)
it has limited lifeits owner’s personal resources are at stakeits ownership is easily transferable via the sale of shares of stockit is simple to establish
2. (TCO A) The Dividends account _____. (Points : 5)
is increased with a debitis decreased with a creditis not an expense accountAll of the above
3. (TCOs A, B) Below is a partial list of account balances for Denton Company:
Cash $7,000Prepaid insurance 700Accounts receivable 3,500Accounts payable 2,800Notes payable 4,200Common stock 1,400Dividends 700Revenues 21,000Expenses 17,500
What did Denton Company show as total credits? (Points : 5)
$30,100$29,400$28,700$30,800
4. (TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____. (Points : 5)
sales under $1,000,000no accountants on staffinsignificant receivables and payablesall sales and purchases on account
5. (TCO D) Two companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)
LIFO will have the highest ending inventoryFIFO will have the highest cost of goods soldFIFO will have the highest ending inventoryLIFO will have the lowest cost of goods sold
6. (TCO A, E) Equipment was purchased for $17,000 on January 1, 2006. Freight charges amounted to $700 and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2007, if the straight-line method of depreciation is used? (Points : 5)
$6,680$3,340$2,860$5,720
7. (TCOs D, G) Lopez Corporation issues 500 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 96. The journal entry to record the issuance will show a _____. (Points : 5)
debit to Cash of $500,000credit to Discount on Bonds Payable for $20,000credit to Bonds Payable for $480,000debit to Cash for $480,000
8. (TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $240,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)
$240,000$250,000$310,000$230,000
9. (TCO F) If you are comparing the 2010 income statement numbers with the income statement numbers from 2009 and 2008, you are conducting a _____. (Points : 5)
common-size analysishorizontal analysisvertical analysisratio analysis
10. (TCO F) Vertical analysis is also known as _____. (Points : 5)
perpendicular analysiscommon-size analysistrend analysisstraight-line analysis
11. (TCO F) Which one of the following is not a characteristic generally evaluated in ratio analysis? (Points : 5)
LiquidityProfitabilityMarketability of the productSolvency
12. (TCO F) A common measure of profitability is the _____. (Points : 5)
current ratiocurrent cash debt coverage ratioreturn on common stockholder’s equity ratiodebt to total assets
13. (TCO F) Long-term creditors are usually most interested in evaluating _____. (Points : 5)
liquiditymarketabilityprofitabilitysolvency
14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)
find out the present value of all of the future cash payments promised by the bondcalculate the present value of the principal onlycalculate the present value of the interest onlymultiply the bond price by the interest rate
Set 4:
Week 8 : Final Exam – Final Exam
Page 1
Question 1. 1. (TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5)Reduced legal liability for investorsHarder to transfer ownershipLower taxesMost common form of organization
Question 2. 2. (TCO A) When a corporation distributes a dividend, _____. (Points : 5)the most common form of distribution is a cash dividendthe Dividends account will be increased with a creditthe Retained Earnings account will be directly increased with a debitthe Dividends account will be decreased with a debit
Question 3. 3. (TCOs A, B) Below is a partial list of account balances for Cerner Company:
Cash $5,000Prepaid insurance 500Accounts receivable 2,500Accounts payable 2,000Notes payable 3,000Common stock 1,000Dividends 500Revenues 15,000Expenses 12,500
What did Cerner Company show as total credits? (Points : 5)$21,500$21,000$20,500$22,000
Question 4. 4. (TCOs B, E) Using accrual accounting, expenses are recorded and reported only _____. (Points : 5)when they are incurred, whether or not cash is paidwhen they are incurred and paid at the same timeif they are paid before they are incurredif they are paid after they are incurred
Question 5. 5. (TCO D) Three companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)LIFO will have the highest ending inventoryFIFO will have the highest cost of goods soldAll three companies will have the same value for ending inventory.average cost will have an ending inventory value that falls between FIFO and LIFO
Question 6. 6. (TCOs A, E) Equipment with a cost of $192,000 has an estimated salvage value of $18,000 and an estimated life of 4 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours? (Points : 5)$48,000$52,500$49,500$43,500
Question 7. 7. (TCOs D, G) Joyce Corporation issues 1,000 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 102. The journal entry to record the issuance will show a _____. (Points : 5)debit to Cash of $1,020,000debit to Discount on Bonds Payable for $20,000credit to Bonds Payable for $1,020,000credit to Cash for $1,000,000
Question 8. 8. (TCO C) Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)$120,000$125,000$155,000$115,000
Question 9. 9. (TCO F) If you are comparing the 2010 income statement numbers with the income statement numbers from 2009 and 2008, you are conducting a _____. (Points : 5)common-size analysishorizontal analysisvertical analysisratio analysis
Question 10. 10. (TCO F) Comparisons of data within a company are an example of the following comparative basis. (Points : 5)Industry averagesIntercompanyIntracompanyInterregional
Question 11. 11. (TCO F) In vertical analysis, the base amount for studying salary and wages expense is generally _____. (Points : 5)net salessalary and wages expense in a previous yeargross profitnet income
Question 12. 12. (TCO F) Short-term creditors are usually most interested in assessing _____. (Points : 5)solvencyliquiditymarketabilityprofitability
Question 13. 13. (TCO F) Return-on-assets ratio is most closely related to _____. (Points : 5)profit margin and debt-to-total-assets ratioprofit margin and asset-turnover ratiotimes interest earned and debt-to-stockholders equity ratioprofit margin and free cash flow
Question 14. 14. (TCO G) The present value of a bond is a function of which factors below? (Points : 5)The market interest rateThe length of time until the amounts are receivedThe dollar amounts to be receivedAll of the above
Page 2
Question 1. 1.(TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report:Income Taxes Payable $471Short-term Investments and Marketable Securities 8,109Cash 8,442Other non-current Liabilities 10,449Common Stock 1,760Receivables 4,812Other Current Assets 2,973Long-term Investments 10,448Other Non-current Assets 3,585Property, Plant and Equipment 23,486Trademarks 6,527Other Intangible Assets 20,810Allowance for Doubtful Accounts 53Accumulated Depreciation 9,010Accounts Payable 8,680Short Term Notes Payable 17,874Prepaid Expenses 2,781Other Current Liabilities 796Long-Term Liabilities 14,736Paid-in-Capital in Excess of Par Value 11,379Retained Earnings 55,038Inventories 3,264Treasury Stock 35,009
Other information taken from the Annual Report:
Sales Revenue for 2012 $48,017Cost of Goods Sold for 2012 19,053Net Income for 2012 9,019Inventory Balance on 12/31/11 3,092Net Accounts Receivable Balance on 12/31/11 4,920Total Assets on 12/31/11 79,974Equity Balance on 12/31/11 31,921
Required:1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.2. Using the Balance Sheet from your answer above, calculate the Current Ratio and Return on common stockholders’ equity ratio. (Make sure to show all your work).(Points : 36)
Question 2. 2.(TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013:
Accounts Payable $38,080Accounts Receivable 6,768Cash 7,781Common Stock 3,952Cost of Goods Sold 352,488Income Tax Expense 7,981Interest Expenses 2,064Membership Revenues 3,048Net Sales 466,114Operating, Selling and Administrative Expenses 88,873Retained Earnings 72,978Required:
Using the information provided above:1. Prepare a multiple-step income statement2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.(Points : 36)
Question 3. 3. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:Cash flow from operating activities In millions In millionsFor the year ended 2012 For the year ended 2011Net (loss) earnings $(12,650) $7,074Depreciation and amortization 5,095 4,984Impairment of goodwill and purchased intangible assets 18,035 885Stock-based compensation expense 635 685Provision for doubtful accounts 142 81Provision for inventory 277 217Restructuring charges 2,266 645Deferred taxes on earnings (711) 166Excess tax benefit from stock-based competition (12) (163)Other, net 265 (46)Accounts and financing receivables 1,269 (227)Inventory 890 (1,252)Accounts payable (1,414) 275Taxes on earnings (320) 610Restructuring (840) (1,002)Other assets and liabilities (2,356) (293)Net cash provided by operating activities 10,571 12,639Cash flows from investing activities:Investment in property, plant, and equipment (3,706) (4,539)Proceeds from sale of property, plant, and equipment 617 999Purchases of available-for-sale securities and other investments (972) (96)Maturities and sales of available-for-sale securities and other investment 662 68Payments in connection with business acquisitions, net of cash acquired (141) (10,480)Proceeds from business divestiture, net 87 89Net cash used in investing activities (3,453) (13,959)Cash flow from financing activities:(Payments) issuance of commercial paper and notes payable, net (2,775) (1,270)Issuance of debt 5,154 11,942Payment of debt (4,333) (2,336)Issuance of common stock under employee stock plans 716 896Repurchase of common stock (1,619) (10,117)Excess tax benefit from stock-based compensation 12 163Cash dividends paid (1,015) (844)Net cash used in financing activities (3,860) (1,566)Increase (decrease) in cash and cash equivalents 3,258 (2,886)Cash and cash equivalents at beginning of period 8,043 10,929Cash and cash equivalents at end of period $11,301 $8,043Required:1) Please calculate the percentage increase or decrease in cash for the total line of the operating, investing, and financing sections bolded above and explain the major reasons for the increase or decrease for each of these sections.2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio.(Points : 36)
Question 4. 4. (TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”
Assuming the goal is to maximize net income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported Net Income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet.
Required:a. Goforit carries significant electronics inventory in a competitive environment where prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.
b. Goforit has a large investment in warehouse equipment including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: Straight line (SL) or double declining balance (DDB)?(Points : 36)
Question 5. 5. (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.Ratio Name Johnson & Johnson Pfizer
Profit margin 16.1% 24.7%Inventory turnover ratio 3.1 1.7Average collection period 59.4 days 69.1 daysCash debt coverage ratio .27 .16Debt to Total assets 46.6% 127.5%Required:1) Please explain the meaning of each of the Pfizer ratios above.2) Please state which company performed better for each ratio.(Points : 36)
 

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