1.)Use the following partial financial statement information below to calculate the liquidity and profitability ratios. This information can be used to correctly solve each of the ratios below.



Average common shares $10,000 Current liabilities $100,000 Capital expenditures 20,000 Net income 21,000



Cash provided by operations 28,000 Net sales 150,000



Common stock dividends paid 5,000 Total liabilities 105,000 Current assets 150,000 Total assets 175,000 Instructions: Compute the following.



a) Current ratio



b) Working capital



c) Earnings per share



d) Debt-to-total-assets ratio



e) Free cash flow



Must show the formula you are using, show your computations, and explain the meaning of each of your ratio results.



2.)The following items are taken from the financial statements of Grove Company for 2010.



Accounts payable $ 18,500 Accounts receivable 4,000



Accumulated depreciation 4,800 Bonds payable 18,000



Cash 24,000 Common stock 25,000



Cost of coods sold 13,000 Depreciation expense 4,800



Dividends 5,300 Equipment 48,000



Interest expense 2,500 Patents 7,500



Retained earnings, January 1 16,000 Salaries expense 5,200 Sales revenue 36,500 Supplies 4,500



Instructions: Prepare an income statement and a retained earnings statement for Grove Company. 



3.)The Oxford Company has budgeted sales revenues as follows. April May June



Credit sales $60,000 $48,000 $36,000



Cash sales 36,000 102,000 78,000



Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month.



Purchases of inventory are all on credit, with 60% paid in the month of purchase and 40% in the month following purchase. Budgeted inventory purchases are $130,000 in April, $90,000 in May, and $42,000 in June.



Other budgeted cash receipts include



(a) the sale of plant assets for $24,700 in May and



(b) the sale of new common stock for $33,700 in June.



Other budgeted cash disbursements include



(a) operating expenses of $13,500 each month,



(b) selling and administrative expenses of $25,000 each month,



(c) dividends of $38,000 to be paid in May, and



(d) purchase of equipment for $12,000 cash in June.



The company has a cash balance of $20,000 at the beginning of June and wishes to maintain a minimum cash balance of $20,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 12%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that $7,000 of financing was obtained on May 1. Requirements: Use this information to prepare a schedule of expected cash collections from customers for the months of May and June only. This question does not require creation of an entire cash budget so please only create the schedule that is asked for in the question because otherwise you will be wasting valuable time.



4.) (TCO D) Your friend Dean has hired you to evaluate the following internal control procedures.



a) Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which principle relates to each of the internal controls.



b) For the weaknesses, you also need to state a recommendation for improvement.



1. Bonding of the cashiers is not required because all of the cashiers have significant experience.



2. The treasurer is the only one allowed to sign checks.



3. All employees may operate cash registers.



4. Blank checks are stored in the safe.



5. Supervisors count cash receipts daily.



5.)Please prepare the following journal entries. Indicate which account should be debited with the abbreviation DR in front of the account name and which account should be credited with the abbreviation CR in front of the account name along with the dollar amount of the debit and credit.



a) Investors invested $600,000 in exchange for 30,000 shares of common stock.



b) Company paid rent of $3,000



c) Company billed $5,000 for services performed



d) Company purchased supplies of $3,000



e) Company received $20,000 for services not yet performed



 

6.)  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) Payment of dividends
b) Bought assets needed to operate the business
c) Depreciation of equipment
d) Increase in inventory
e) Sale of building

    • 7 years ago
    ACCT 504 week 8
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