Question: 1. The following items are taken from the financial statements of BCT Company for 2017:
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Cash
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$138,800
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|
Accounts Payable
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75,000
|
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Supplies
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15,000
|
|
Accounts Receivable
|
35,000
|
|
Inventory
|
45,000
|
|
Salaries Payable
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30,000
|
|
Unearned Revenue
|
45,000
|
|
Property, plant, and equipment, net
|
318,000
|
|
Intangible assets
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260,000
|
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Common Stock
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100,000
|
|
Additional Paid-in Capital
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400,000
|
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Retained Earnings, 01/01/2017
|
21,000
|
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Long-term debt
|
90,000
|
|
Service revenue
|
746,000
|
|
Cost of Goods Sold
|
639,200
|
|
Rent expense
|
30,000
|
|
Supplies expense
|
5,000
|
|
Insurance expense
|
21,000
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Instructions: (1) Create a classified balance sheet in good form for the year ended 2017. Note that the retained earnings given is for the beginning of the year and so the ending retained earnings must be calculated.
(2) Calculate the current ratio and debt ratio and explain your findings.
2) The Delta Company gathered the following condensed data for the year ended December 31, 2017:
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Cost of goods sold
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$300,000
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|
Net sales
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525,000
|
|
Administrative expenses
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110,000
|
|
Interest expense
|
18,000
|
|
Common stock dividends paid
|
25,000
|
|
Selling expenses
|
52,000
|
|
Income tax percentage
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33%
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Instructions: (1) Prepare a multiple-step income statement for the year ended December 31, 2017.
(2) Compute the gross margin percentage and net profit margin ratio. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings.
3) This is a 2-part question.
Part 1: 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) Increase in accounts receivable
(b) Purchased a factory with cash
(c) Depreciation of a building
(d) Retired bonds with cash
(e) Received cash dividends
Part 2: Please explain how to calculate free cash flow and the importance of free cash flow to investors.
4) 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 and after the Income Statement.
5) 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.
REQUIRED: (a) Explain to Lisa the objectives of internal control.
(b) Explain to Lisa at least FIVE internal control procedures that she should establish to protect herself against fraud. For full credit, you should state specific internal control procedures from the textbook reading and relate your answer to her type of business.
6) Journal entries
Journalize the adjusting entries below at year-end December 31, 2017. Please provide 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.
(e) 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.
(g) Beginning unearned service revenue is $3,000, and ending unearned service revenue is $1,500.
7. Please review the following 6 ratios for ABC Company and XYZ Inc. for the year ended 2017, and address the 2 questions below.
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Ratio Name
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ABC Company
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XYZ Inc.
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(a) Rate of return on total assets
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21.5%
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17.9%
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(b) Debt ratio
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25.0%
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10.1%
|
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(c) Accounts receivable turnover
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8.3
|
7.5
|
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(d) Price-Earnings ratio
|
25
|
19
|
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(e) Inventory turnover
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6.1
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5.2
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(f) Current ratio
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1.96
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3.12
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Instructions: This is a 2-part question.
(1) Explain the meaning of each of the ratios above.
(2) State which company performed better for each ratio.
8. ABC Corporation purchased 10, $1,000, 8% bonds of Anderson Corporation when the market rate of interest was 10%. Interest is paid semiannually on the bonds, and the bonds mature in 6 years.
Required: Compute the total price paid for the bonds by ABC Corporation showing your calculation for the present value of the principal and the present value of the interest payments.
Note: You may use either Excel or the present value tables that are available in your textbook. If you use Excel, you must the function you used and indicate which numbers were used for each part of the function. If you use the present value tables, you must indicate the table(s) you used and which row and column you used for each table as well as the present value factor extracted from the respective table.