1.(TCO D) Please describe the purpose of the Income Statement
and the interrelationship between the income statement and the other major
financial statements that we covered in this class. In your answer, please also
address which financial statements should be created before the Income
Statement, if any, and which financial statements need to be completed after
the Income Statement, if any. (Points : 25)
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Question 2. 2.(TCO E) Your
friend, Lisa, plans to open a nail salon. Lisa states that she does not have
time to develop and implement a system of internal controls.
(a) Explain to Lisa the components of internal control. (10 points)
(b) Explain to Lisa at least 5 internal control procedures she must establish
to protect herself against fraud. You should state specific internal control
procedures from the textbook, and relate your answer to her nail salon
business. (15 points) (Points : 25)
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Question 3. 3.(TCO A) The
following items are taken from the financial statements of PQR Company for
2013:
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Cash
|
$100,000
|
|
Inventory
|
150,000
|
|
Accounts
Payable
|
123,000
|
|
Accounts
Receivable
|
40,000
|
|
Supplies
|
10,000
|
|
Salaries
Payable
|
30,000
|
|
Unearned
Revenue
|
75,000
|
|
Intangible
assets
|
78,000
|
|
Property,
plant, and equipment, net
|
156,000
|
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Long
term debt
|
50,000
|
|
Common
Stock
|
25,000
|
|
Additional
Paid in Capital
|
175,000
|
|
Retained
Earnings, 12/31/2012
|
13,000
|
|
Service
revenue
|
402,000
|
|
Cost
of Goods Sold
|
250,000
|
|
Rent
expense
|
48,000
|
|
Supplies
expense
|
25,000
|
|
Insurance
expense
|
36,000
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Instructions:
(1) Create a classified balance
sheet in good form for the year ended 2013. (30 points)
(2) Calculate the current ratio
and debt ratio and explain your findings. (6 points) (Points : 20)
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Question 4. 4.(TCO B) The
Delta Company gathered the following condensed data for the year ended
December 31, 2014:
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Cost
of goods sold
|
$300,000
|
|
Net
sales
|
525,000
|
|
Administrative
expenses
|
110,000
|
|
Interest
expense
|
18,000
|
|
Common
stock dividends paid
|
25,000
|
|
Selling
expenses
|
52,000
|
|
Income
tax percentage
|
33%
|
Instructions:
(1) Prepare a multiple-step income statement for the year ended December
31, 2014. (30 points)
(2) Compute the gross margin percentage and net profit margin ratio. Delta
Company’s assets at the beginning of the year were $800,000, and the total
assets were $1,000,000 at the end of the year. To qualify for full credit,
you must state the formula you are using, show your computations, and explain
your findings. (6 points) (Points : 20)
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Question 5. 5.(TCO C) This
is a 2-part question.
Part 1) 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. (30 points)
(a) Amortization of a patent
(b) Increase in accounts payable
(c) Paid cash dividends to common stockholders
(d) Purchased equipment with cash
(e) Increase in inventory
Part 2) Please explain how to
calculate free cash flow and the importance of free cash flow to investors.
(6 points) (Points : 20)
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Question 6. 6.(TCO F) This
is a 2-part question.
Part 1) Journalize the adjusting
entries below at year-end December 31, XXXX. Please share your supporting
calculations for the adjusting entries requiring computations.
(a) Beginning prepaid insurance,
$500. Payments for insurance during the period are $900. Ending prepaid
insurance is $600.
(b) Interest revenue of $1,500 has been earned but not yet received.
(c) Accrued Service Revenue of $12,000
(d) The weekly payroll is $20,000. Employees are owed for 4 days of a 5-day
work week.
The unadjusted balance of the Supplies account is $1,200. The total cost of
supplies remaining is $300.
(f) Equipment was purchased at the beginning of the year for $25,000. The
equipment’s useful life is 5 years, and the residual value is $5,000. Record
the depreciation for this year.
(30 points)
Part 2) Calculate the overall overstatement or understatement of net income
if the above adjusting entries were not made. Please share your work. (6
points) (Points : 20)
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Question 7. 7.(TCO G)
Please review the following 6 ratios for Johnson Company and Lee Enterprises
for the year ended 2014, and address the 2 questions below.
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Ratio Name
|
Johnson
Company
|
Lee
Enterprises
|
|
(a) Accounts receivable turnover
|
6.5
|
5.3
|
|
(b) Days’ inventory outstanding
|
40
|
35
|
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(c) Debt ratio
|
29.3%
|
25.7%
|
|
(d) Return on common
stockholders’ equity
|
14.7%
|
10.5%
|
|
(e) Current ratio
|
2.50
|
3.60
|
|
(f) Price/Earnings ratio
|
10
|
12
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Instructions: This is a 2-part question.
(1) Explain the meaning of each of
the Johnson Company ratios above. (18 points)
(2) State which company performed better for each ratio. (18 points) (Points
: 20)
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Solution: Devry ACCT504 final exam december 2016