Reference no: EM131074321

Assignment

Listen to the video below for the exercise/problem. The video completes the problems using the book numbers. When working each problem, replace the book numbers with the numbers in column F (May-Jun)

Open the Guidance Report ("ACC205_Week_Five_Guidance_Report_JPearson) and rework the problem with the changed numbers (column F) and place your answers on the guidance report. Do not alter the guidance report. Show work on the "Work" tab

https://ashford.mediaspace.kaltura.com/media/ACC205A+Chapter+9+Exercise+3/0_hr4kw5my

https://ashford.mediaspace.kaltura.com/media/ACC205A+Chapter+9+Exercise+4/0_dhlinrga

https://ashford.mediaspace.kaltura.com/media/ACC205A+Chapter+9+Problem+1/0_z3fnurzo

https://ashford.mediaspace.kaltura.com/media/ACC205A+Chapter+9+Problem+2/0_6crdy65y

https://ashford.mediaspace.kaltura.com/media/ACC205A+Chapter+9+Problem+3/0_be8k7mev

Complete the following problems and exercises:

Exercises 3 and 4

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

a. 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?

b. Suppose Thornton is using FIFO for inventory valuation and Edison is using LIFO. Comment on the comparability of information between these two companies.

c. 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.

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.

a. Compute the accounts-receivable and inventory-turnover ratios for 20X5. Alaska rounds all calculations to two decimal places.

b. Study the ratios from part (a) and comment on the company's ability to repay a bank loan in 90 days.

c. Suppose that Alaska's major line of business involves the processing and distri- bution of fresh and frozen fish throughout the United States. Do you have any concerns about the company's inventory-turnover ratio? Briefly discuss.

Problems 1, 2 and 3

1 Horizontal and vertical analysis. The following financial statements pertain to Waterloo Corporation:

WATERLOO CORPORATION Comparative Balance Sheets December 31,20X5 and 20X4
	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 Comparative Income Statements For the Years Ending December 31, 20X5 and 20X4
	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

a. 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.

b. Prepare a vertical analysis of the income statement by relating each item to net sales.

c. Briefly comment on the results of your analysis.

2. Ratio computation. The financial statements of the Lone Pine Company follow.

LONE PINE COMPANY Comparative Balance Sheets December 31, 20X2 and 20X1 ($000 Omitted)
	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 Statement of Income and Retained Earnings For the Year Ending December 31,20X2 ($000 Omitted)
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:

a. Quick ratio
b. Current ratio
c. Inventory-turnover ratio
d. Accounts-receivable-turnover ratio
e. Return-on-assets ratio
f. Net-profit-margin ratio
g. Return-on-common-stockholders' equity
h. Debt-to-total assets
i. Number of times that interest is earned
j. Dividend payout rate

3. Financial statement construction via ratios. Incomplete financial statements of Lock Box Inc. are presented as follows:

LOCK BOX INC. Income Statement For the Year Ending December 31, 20X3
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. Balance Sheet December 31, 20X3
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.

Attachment:- acc205_week_five_guidance_report_jpearson.xlsx