Question 1
The Wiley Department Store is located near the Village shopping mall. At the close of the year ended December 31, 2007, the following accounts appeared in two of its trial balances. Trial Balances Unadjusted Adjusted Accounts Payable $ 89,300 $ 89,300 Accounts Receivable 50,300 50,300 Accumulated Depreciation-Building 42,100 52,500 Accumulated Depreciation-Equipment 29,600 42,900 Building 190,000 190,000 Cash 23,000 23,000 Depreciation Expense-Building 10,400 Depreciation Expense-Equipment 13,300 Equipment 110,000 110,000 Freight-in 3,600 3,600 Insurance Expense 7,200 Interest Expense 3,000 11,000 Interest Payable 8,000 Interest Revenue 4,000 4,000 Merchandise Inventory (Beginning Inventory) 40,500 40,500 Mortgage Payable 80,000 80,000 Office Salaries Expense 32,000 32,000 Prepaid Insurance - 9,600 2,400 Property Taxes Payable 4,800 Purchases 462,000 462,000 Purchase Discounts 12,000 12,000 Purchase Returns and Allowances 6,400 6,400 Sales Salaries Expense? 76,000 76,000 Sales 618,000 618,000 Sales Commissions Expense 11,000 14,500 Sales Commissions Payable 3,500 Sales Returns and Allowances 8,000 8,000 Common Stock 150,000 150,000 Retained Earnings 26,600 26,600 Dividends 28,000 28,000 Property Taxes Expense 4,800 Utilities Expense 11,000 11,000 Analysis reveals the following additional data: 1. A physical inventory was conducted for year ended December 31, 2007 and the inventory was valued at $70,000. 2. Insurance expense and utilities expense are, 60% selling and 40% administrative. 3. $20,000 of the mortgage payable is due for payment next year. 4. Depreciation on the building and property tax expense are administrative expenses; depreciation on the equipment is a selling expense. 5. The beginning balance of accounts receivable is $64,750. 6. The amount of total assets at the beginning of the year is $321,725. Instructions 1) Journalize the adjusting entries. 2) Prepare a multiple-step income statement and a retained earnings statement for the year and a classified balance sheet as of December 31, 2007. 3) Journalize the closing entries. 4) Prepare a post-closing trial balance. 5) Prepare the following ratios and show all support for your computations: a) Current Ratio b) Quick Ratio c) Working Capital d) Accounts Receivable Turnover e) Average Collection Period f) Inventory Turnover g) Days in Inventory h) Debt to Total Assets Ratio i) Gross Profit Ratio j) Profit Margin Ratio k) Return on Assets Ratio l) Asset Turnover Ratio 6) Based on the ratios computed in 5) above, answer the following questions and use the financial statement ratios to support your answers where appropriate: ? Do you feel that the company is able to meet its current and long term obligations as they become due? ? Comment on the profitability of the company with respect to the various profitability ratios that you computed. ? Would you lend money to this company for the long term? ? Comment on the ability of the company to collect its receivables and mange inventory. 2004 2005 2006 Industry Average Liquidity Current 1.05 1.23 1.56 1.35 Quick 0.56 0.85 0.99 1.02 Working Capital $ 19,500.00 $ 20,900.00 $ 22,000.00 $ 22,000.00 Leverage Debt to Total Assets (%) 46.32% 49.56% 52.12% 44.00% Times Interest Earned 1.96 2.85 3.99 5.2 Activity Inventory Turnover (sales) 6.51 7.05 8.01 12.50 Fixed Asset Turnover 2.86 3.68 4.02 6.23 Total Asset Turnover 1.56 2.64 2.99 3.59 Average Collection Period (days) 30.05 27.99 25.73 22.61 Accounts Receivable Turnover 11.98 12.86 13.99 15.92 Days in Inventory 56.07 51.77 45.57 52.13 Profitability Gross Profit Margin (%) 29.58% 31.42% 32.89% 42.26% Net Profit (%) 2.34% 3.87% 4.08% 5.89% Return on Total Assets (%) 4.34% 4.76% 5.36% 6.01% Return on Equity (%) 9.27% 10.68% 10.99% 11.05% Payout Ratio 62.00% 81.00% 95.00% 50.00%,The Wiley Department Store is located near the Village shopping mall. At the close of the year ended December 31, 2007, the following accounts appeared in two of its trial balances. Trial Balances Unadjusted Adjusted Accounts Payable $ 89,300 $ 89,300 Accounts Receivable 50,300 50,300 Accumulated Depreciation-Building 42,100 52,500 Accumulated Depreciation-Equipment 29,600 42,900 Building 190,000 190,000 Cash 23,000 23,000 Depreciation Expense-Building 10,400 Depreciation Expense-Equipment 13,300 Equipment 110,000 110,000 Freight-in 3,600 3,600 Insurance Expense 7,200 Interest Expense 3,000 11,000 Interest Payable 8,000 Interest Revenue 4,000 4,000 Merchandise Inventory (Beginning Inventory) 40,500 40,500 Mortgage Payable 80,000 80,000 Office Salaries Expense 32,000 32,000 Prepaid Insurance - 9,600 2,400 Property Taxes Payable 4,800 Purchases 462,000 462,000 Purchase Discounts 12,000 12,000 Purchase Returns and Allowances 6,400 6,400 Sales Salaries Expense? 76,000 76,000 Sales 618,000 618,000 Sales Commissions Expense 11,000 14,500 Sales Commissions Payable 3,500 Sales Returns and Allowances 8,000 8,000 Common Stock 150,000 150,000 Retained Earnings 26,600 26,600 Dividends 28,000 28,000 Property Taxes Expense 4,800 Utilities Expense 11,000 11,000 Analysis reveals the following additional data: 1. A physical inventory was conducted for year ended December 31, 2007 and the inventory was valued at $70,000. 2. Insurance expense and utilities expense are, 60% selling and 40% administrative. 3. $20,000 of the mortgage payable is due for payment next year. 4. Depreciation on the building and property tax expense are administrative expenses; depreciation on the equipment is a selling expense. 5. The beginning balance of accounts receivable is $64,750. 6. The amount of total assets at the beginning of the year is $321,725. Instructions 1) Journalize the adjusting entries. 2) Prepare a multiple-step income statement and a retained earnings statement for the year and a classified balance sheet as of December 31, 2007. 3) Journalize the closing entries. 4) Prepare a post-closing trial balance. 5) Prepare the following ratios and show all support for your computations: a) Current Ratio b) Quick Ratio c) Working Capital d) Accounts Receivable Turnover e) Average Collection Period f) Inventory Turnover g) Days in Inventory h) Debt to Total Assets Ratio i) Gross Profit Ratio j) Profit Margin Ratio k) Return on Assets Ratio l) Asset Turnover Ratio 6) Based on the ratios computed in 5) above, answer the following questions and use the financial statement ratios to support your answers where appropriate: ? Do you feel that the company is able to meet its current and long term obligations as they become due? ? Comment on the profitability of the company with respect to the various profitability ratios that you computed. ? Would you lend money to this company for the long term? ? Comment on the ability of the company to collect its receivables and mange inventory. 2004 2005 2006 Industry Average Liquidity Current 1.05 1.23 1.56 1.35 Quick 0.56 0.85 0.99 1.02 Working Capital $ 19,500.00 $ 20,900.00 $ 22,000.00 $ 22,000.00 Leverage Debt to Total Assets (%) 46.32% 49.56% 52.12% 44.00% Times Interest Earned 1.96 2.85 3.99 5.2 Activity Inventory Turnover (sales) 6.51 7.05 8.01 12.50 Fixed Asset Turnover 2.86 3.68 4.02 6.23 Total Asset Turnover 1.56 2.64 2.99 3.59 Average Collection Period (days) 30.05 27.99 25.73 22.61 Accounts Receivable Turnover 11.98 12.86 13.99 15.92 Days in Inventory 56.07 51.77 45.57 52.13 Profitability Gross Profit Margin (%) 29.58% 31.42% 32.89% 42.26% Net Profit (%) 2.34% 3.87% 4.08% 5.89% Return on Total Assets (%) 4.34% 4.76% 5.36% 6.01% Return on Equity (%) 9.27% 10.68% 10.99% 11.05% Payout Ratio 62.00% 81.00% 95.00% 50.00%,thx,i got it , thx
Question 4
13. Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is called: (Points : 2) Noncumulative preferred stock Participating preferred stock Callable preferred stock Cumulative preferred stock Convertible preferred stock 14. Bonds owned by investors whose names and addresses are recorded by the issuing company and for which interest payments are made with checks to the bondholders, are called: (Points : 2) Callable bonds Serial bonds Registered bonds Coupon bonds 15. A bond traded at 102 ? means that: (Points : 2) The bond pays 2.5% interest The bond traded at $1,025 per $1,000 bond The market rate of interest is 2.5% The bonds were retired at $1,025 each The market rate of interest is 2 ?% above the contract rate 16. A corporation's distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a: (Points : 2) Stock dividend Stock subscription Premium on stock Discount on stock Treasury stock 17. Installment notes payable that require periodic payments of accrued interest plus equal amounts of principal result in: (Points : 2) Periodic total payments that gradually decrease in amount Periodic total payments that are equal Periodic total payments that gradually increase in amount Increasing amounts of interest each period Increasing amounts of principal each period 18. A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is. (Points : 2) $0 $33,750 $67,500 $750,000 $1,550,000 19. Bonds that give the issuer an option of retiring them prior to the date of maturity are: (Points : 2) Debentures Serial bonds Sinking fund bonds Registered bonds Callable bonds 20. A company issues at par 7% bonds with a par value of $500,000 on June 1, which is 5 months after the most recent interest date. How much total cash interest is received on May 1 by the bond issuer? (Points : 2) $0 $2,916.66 $100,000.00 $14,583.33 $35,000.00 21. Amortizing a bond discount: (Points : 2) Allocates a part of the total discount to each interest period Increases the market value of the Bonds Payable Decreases the Bonds Payable account Decreases interest expense each period Increases cash flows from the bond 22. Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as: (Points : 2) Convertible bonds Sinking fund bonds Callable bonds Serial bonds Junk bonds 23. Operating leases differ from capital leases in that (Points : 2) For a capital lease the lessee records the lease payments as rent expense, but for an operating lease the lessee reports the lease payments as depreciation expense For an operating lease the lessee depreciates the asset acquired under lease, but for the capital lease the lessee does not Operating leases create a long-term liability on the balance sheet, but capital leases do not Operating leases do not transfer ownership of the asset under the lease, but capital leases often do Operating lease payments are generally greater than capital lease payments 24. What is the debt to equity ratio for a company who has $700,000 in total liabilities and $3,500,000 in total equity? (Points : 2) 20% 5 $2,100,000 2% .5 25. A company had net income of $250,000. On January 1, there were 12,000 shares of common stock outstanding. On May 1, the company issued an additional 9,000 shares of common stock. The company declared a $7,900 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions. The company had an earnings per share of: (Points : 2) $13.45 $13.89 $11.53 $26.90 Amount cannot be determined as problem does not state if there are any dividends in arrears
