Create a T-account allowance for doubtful accounts and explain
Question # 00016972
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Updated on: 06/05/2014 11:27 PM Due on: 06/30/2014
(1) Create a T-account allowance for doubtful accounts and explain by debits and credits in this T-account how the allowance account changed from its beginning balance to its ending balance for 2011, 2012, and 2013. Compute the ratios (i) allowance for doubtful accounts/gross accounts receivable and (ii) bad debts expense/sales for each of those years. Assume that the allowance for sales returns is zero. Do they indicate a concern with management’s possible manipulation of these numbers?
(2) Compute the cash collected from customers in 2012 and 2013. Contrast the growth in revenues and the growth in cash from customers. Assume the allowance for sales returns is zero. Also evaluate the quality of revenues.
(3) Complete five T-accounts to determine the following amounts in 2013: the cost of finished goods sold in 2013; the cost of completed goods transferred from work in process in 2013; the cost of raw materials transferred to work in process in 2013; the cost of raw materials purchased in 2013; and the amount of cash disbursed for raw-material purchases during 2013. Assume the cost of direct and indirect materials put into production equals half of all production costs.
(4) Using a T-account for short-term investments, determine how much of the short-term investments were sold during the year. Based on your result, what can you say about the loss on investments of $3.7 (from the cash flow statement)?
(5) Combine land, buildings, and machinery and equipment into one property, plant, and equipment (PPE) account. Recreate the T-account for gross PPE, recognizing 2013 transactions that increased or decreased the account from its 2013 beginning balance to its ending balance in 2013. Also re-create the T-account and its transactions for accumulated depreciation for 2013. What is the summary journal entry for the sale or disposal of PPE in 2013? Where is this gain or loss found in the annual report?
(6) (i) What is in-process research and development (IRP&D)?
(ii) Allergan reports IPR&D as unamortizable. Why is IPR&D unamortizable?
(iii) With its acquisition of MAP Pharmaceuticals, Allergan gains use of Levadex®. What makes this cost IPR&D?
(iv) Create a T-account for IPR&D and explain the changes in 2013. What meaning do you attach to the plug figure that makes the account balance?
(7) Allergan has operating leases in which it has made commitments to disburse cash over the lease terms. What is the present value of these lease commitments?
(8) (i) Give the journal entry for the 2013 dividends.
(ii) Give the journal entry for the 2013 stock-based compensation expense.
(iii) Give the journal entry for the 2013 purchase of treasury shares.
(9) Evaluate the solvency of Allergan and rate the firm on a scale from 1 (weak) to 10 (strong).
(10) Evaluate the quality of earnings of Allergan and rate the firm on a scale from 1 (weak) to 10 (strong).
You may also need a few 2011 data; if so, you may use google finance or yahoo finance to obtain these data.
(2) Compute the cash collected from customers in 2012 and 2013. Contrast the growth in revenues and the growth in cash from customers. Assume the allowance for sales returns is zero. Also evaluate the quality of revenues.
(3) Complete five T-accounts to determine the following amounts in 2013: the cost of finished goods sold in 2013; the cost of completed goods transferred from work in process in 2013; the cost of raw materials transferred to work in process in 2013; the cost of raw materials purchased in 2013; and the amount of cash disbursed for raw-material purchases during 2013. Assume the cost of direct and indirect materials put into production equals half of all production costs.
(4) Using a T-account for short-term investments, determine how much of the short-term investments were sold during the year. Based on your result, what can you say about the loss on investments of $3.7 (from the cash flow statement)?
(5) Combine land, buildings, and machinery and equipment into one property, plant, and equipment (PPE) account. Recreate the T-account for gross PPE, recognizing 2013 transactions that increased or decreased the account from its 2013 beginning balance to its ending balance in 2013. Also re-create the T-account and its transactions for accumulated depreciation for 2013. What is the summary journal entry for the sale or disposal of PPE in 2013? Where is this gain or loss found in the annual report?
(6) (i) What is in-process research and development (IRP&D)?
(ii) Allergan reports IPR&D as unamortizable. Why is IPR&D unamortizable?
(iii) With its acquisition of MAP Pharmaceuticals, Allergan gains use of Levadex®. What makes this cost IPR&D?
(iv) Create a T-account for IPR&D and explain the changes in 2013. What meaning do you attach to the plug figure that makes the account balance?
(7) Allergan has operating leases in which it has made commitments to disburse cash over the lease terms. What is the present value of these lease commitments?
(8) (i) Give the journal entry for the 2013 dividends.
(ii) Give the journal entry for the 2013 stock-based compensation expense.
(iii) Give the journal entry for the 2013 purchase of treasury shares.
(9) Evaluate the solvency of Allergan and rate the firm on a scale from 1 (weak) to 10 (strong).
(10) Evaluate the quality of earnings of Allergan and rate the firm on a scale from 1 (weak) to 10 (strong).
You may also need a few 2011 data; if so, you may use google finance or yahoo finance to obtain these data.
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Solution: MBA515 assignment