Ashford acc205 week 5 assignment
Chapter 9 Exercise 3
? Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:
|
Edison |
Stagg |
Thornton |
|
|
Cash |
$4,000 |
$2,500 |
$1,000 |
|
Short-Term Investments |
3,000 |
2,500 |
2,000 |
|
Accounts Receivable |
2,000 |
2,500 |
3,000 |
|
Inventory |
1,000 |
2,500 |
4,000 |
|
Prepaid Expenses |
800 |
800 |
800 |
|
Accounts Payable |
200 |
200 |
200 |
|
Notes Payable: Short-Term |
3,100 |
3,100 |
3,100 |
|
Accrued Payables |
300 |
300 |
300 |
|
Long-Term Liabilities |
3,800 |
3,800 |
3,800 |
- Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why?
- Suppose Thornton is using FIFO for inventory valuation and Edison is using LIFO. Comment on the comparability of information between these two companies.
- If all short-term notes payable are due on July 11 at 8 a.m., comment on each company's ability to settle its obligation in a timely manner.
Chapter 9 Exercise 4
? Computation and evaluation of activity ratios. The following data relate to Alaska Products Inc.:
|
20X5 |
20X4 |
|
|
Net Credit Sales |
$832,000 |
$760,000 |
|
Cost of Goods Sold |
440,000 |
350,000 |
|
Cash, Dec. 31 |
125,000 |
110,000 |
|
Accounts Receivable, Dec. 31 |
180,000 |
140,000 |
|
Inventory, Dec. 31 |
70,000 |
50,000 |
|
Accounts Payable, Dec. 31 |
115,000 |
108,000 |
The company is planning to borrow $300,000 via a 90-day bank loan to cover short-term operating needs.
- Compute the accounts-receivable and inventory-turnover ratios for 20X5. Alaska rounds all calculations to two decimal places.
- Study the ratios from part (a) and comment on the company's ability to repay a bank loan in 90 days.
- Suppose that Alaska's major line of business involves the processing and distribution of fresh and frozen fish throughout the United States. Do you have any concerns about the company's inventory-turnover ratio? Briefly discuss.
Chapter 9 Problem 1
- Horizontal and vertical analysis. The following financial statements pertain to Waterloo Corporation:
|
WATERLOO CORPORATION |
||
|
20X5 |
20X4 |
|
|
Assets |
||
|
Current Assets |
||
|
Cash |
$ 11,250 |
$ 12,500 |
|
Accounts Receivable (net) |
18,500 |
25,000 |
|
Inventories |
38,500 |
35,000 |
|
Prepaid Expense |
__3,750 |
__3,750 |
|
Total Current Assets |
$ 72,000 |
$ 76,250 |
|
Property, Plant, and Equipment |
||
|
Buildings (net) |
$ 102,750 |
$ 101,250 |
|
Equipment (net) |
28,500 |
30,000 |
|
Vehicles (net) |
32,000 |
40,000 |
|
Total Property, Plant, and Equipment |
$ 163,250 |
$ 171,250 |
|
Trademarks (net) |
__$ 14,750 |
__$ 2,500 |
|
Total assets |
$ 250,000 |
$ 250,000 |
|
Liabilities and Stockholders' Equity |
||
|
Current Liabilities |
||
|
Accounts Payable |
$ 49,000 |
$ 70,000 |
|
Notes Payable |
13,500 |
40,000 |
|
Federal Taxes Payable |
__2,500 |
__25,000 |
|
Total Current Liabilities |
$ 65,000 |
$ 135,000 |
|
Long-Term Debt |
__$ 50,000 |
__$ 25,000 |
|
Total Liabilities |
$ 115,000 |
$ 160,000 |
|
Stockholders' Equity |
||
|
Common Stock, $10 par |
$ 25,000 |
$ 25,000 |
|
Retained Earnings |
__110,000 |
__65,000 |
|
Total Stockholders' Equity |
$ 135,000 |
$ 90,000 |
|
Total Liabilities and Stockholders' Equity |
$ 250,000 |
$ 250,000 |
|
WATERLOO CORPORATION |
||
|
20X5 |
20X4 |
|
|
Net Sales |
$ 550,000 |
$500,000 |
|
Cost of Goods Sold |
__330,000 |
__250,000 |
|
Gross Profit |
$ 220,000 |
$250,000 |
|
Operating Expense |
__132,500 |
__100,000 |
|
Income Before Interest and Taxes |
$ 87,500 |
$150,000 |
|
Interest Expense |
__12,500 |
__3,000 |
|
Income Before Taxes |
$ 75,000 |
$147,000 |
|
Income Tax Expense |
__30,000 |
__58,800 |
|
Net Income |
$ 45,000 |
$ 88,200 |
Instructions
- Prepare a horizontal analysis of the balance sheet, showing dollar and percentage changes. Round all calculations in parts (a) and (b) to two decimal places.
- Prepare a vertical analysis of the income statement by relating each item to net sales.
- Briefly comment on the results of your analysis.
Chapter 9 Problem 2
- Ratio computation. The financial statements of the Lone Pine Company follow.
|
LONE PINE COMPANY |
||
|
20X2 |
20X1 |
|
|
Assets |
||
|
Current Assets |
||
|
Cash and Short-Term Investments |
$ 400 |
$ 600 |
|
Accounts Receivable (net) |
3,000 |
2,400 |
|
Inventories |
__2,000 |
__2,200 |
|
Total Current Assets |
$5,400 |
$5,200 |
|
Property, Plant, and Equipment |
||
|
Land |
$1,700 |
$ 600 |
|
Buildings and Equipment (net) |
__1,500 |
__1,000 |
|
Total Property, Plant, and Equipment |
$3,200 |
$1,600 |
|
Total Assets |
$8,600 |
$6,800 |
|
Liabilities and Stockholders' Equity |
||
|
Current Liabilities |
||
|
Accounts Payable |
$1,800 |
$1,700 |
|
Notes Payable |
__1,100 |
__1,900 |
|
Total Current Liabilities |
$2,900 |
$3,600 |
|
Long-Term Liabilities |
||
|
Bonds Payable |
4,100 |
2,100 |
|
Total Liabilities |
$7,000 |
$5,700 |
|
Stockholders' Equity |
||
|
Common Stock |
$ 200 |
$ 200 |
|
Retained Earnings |
__1,400 |
__900 |
|
Total Stockholders' Equity |
$1,600 |
$1,100 |
|
Total Liabilities and Stockholders' Equity |
$8,600 |
$6,800 |
|
LONE PINE COMPANY |
||
|
Net Sales* |
$36,000 |
|
|
Less: Cost of Goods Sold |
$20,000 |
|
|
Selling Expense |
6,000 |
|
|
Administrative Expense |
4,000 |
|
|
Interest Expense |
400 |
|
|
Income Tax Expense |
__2,000 |
_32,400 |
|
Net Income |
$ 3,600 |
|
|
Retained Earnings, Jan. 1 |
___900 |
|
|
$ 4,500 |
||
|
Cash Dividends Declared and Paid |
__3,100 |
|
|
Retained Earnings, Dec. 31 |
$ 1,400 |
|
|
*All sales are on account. |
Instructions
Compute the following items for Lone Pine Company for 20X2, rounding all
calculations to two decimal places when necessary:
- Quick ratio
- Current ratio
- Inventory-turnover ratio
- Accounts-receivable-turnover ratio
- Return-on-assets ratio
- Net-profit-margin ratio
- Return-on-common-stockholders' equity
- Debt-to-total assets
- Number of times that interest is earned
- Dividend payout rate
Chapter 9 Problem 3
- Financial statement construction via ratios. Incomplete financial statements of Lock Box Inc. are presented as follows:
|
LOCK BOX INC. |
||
|
Sales |
$ ? |
|
|
Cost of Goods Sold |
? |
|
|
Gross Profit |
$ 15,000,000 |
|
|
Operating Expenses and Interest |
? |
|
|
Income Before Taxes |
$ ? |
|
|
Income taxes, 40% |
? |
|
|
Net income |
$ ? |
|
LOCK BOX INC. |
||
|
Assets |
||
|
Cash |
$ ? |
|
|
Accounts Receivable |
? |
|
|
Inventory |
? |
|
|
Property, Plant, and Equipment |
___8,000,000 |
|
|
Total assets |
$ 24,000,000 |
|
|
Liabilities and Stockholders' Equity |
||
|
Accounts Payable |
$ ? |
|
|
Notes Payable: Short-Term |
600,000 |
|
|
Bonds Payable |
4,600,000 |
|
|
Common Stock |
2,000,000 |
|
|
Retained Earnings |
? |
|
|
Total Liabilities and Stockholders' Equity |
$ 24,000,000 |
Further information is the following:
- Cost of goods sold is 60% of sales. All sales are on account.
- The company's beginning inventory is $5 million; inventory-turnover ratio is 4.
- The debt-to-total-assets ratio is 70%.
- The profit margin on sales is 6%.
- The firm's accounts-receivable-turnover ratio is 5. Receivables increased by $400,000 during the year.
Instructions
Using the preceding data, complete the income statement and the balance sheet.
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Rating:
/5
Solution: acc205 assignment