Monday 26 November 2012

BUS 209 RETAKE EXAM 7-9 Name __________________________ Date is Imperative________________ Part I II III IV V VI Total Points 10 10 30 15 12 23 100 Score PART I — MULTIPLE CHOICE (10 points) Instructions: Designate the best answer for each of the following questions. ____ 1. Seaside Market recorded the following events involving a recent purchase of merchandise: Received goods for $50,000 terms 2/10, n/30 Returned $2,000 of the shipment for credit Paid $250 freight on the shipment Paid the invoice within the discount period. As a result of these events, the company’s merchandise a. increased by $48,000 b. increased by $47,290 c. increased by $48,270 d. increased by $47,250 ____ 2. T. Powers Company's financial statements on December 31, 2010, showed the following: What is the fixed asset turnover for 2010 (rounded to two decimal places)? a. 3.93 b. 2.60 c. 4.10 d. 2.79 TEST 3 – Chapters 7-9 Page | 2 BUS 209 ____ 3. At the beginning of the year, Hillsboro Athletic had an inventory of $400,000. During the year, the company purchased goods costing $1,600,000. If Hillsboro Athletic reported ending inventory of $500,000 and sales of $2,000,000, the company’s cost of goods sold and gross profit rate must be: a. $1,400,000 and 70% b. $1,500,000 and 25% c. $1,400,000 and 30% d. $1,500,000 and 75% ____ 4. Which assets should be amortized using the straight-line method: a. Plant assets b. Intangible assets with limited lives. c. Intangible assets with unlimited lives. d. All of the above. ____ 5. On March 20, 2011, E Flynn Company acquired the following net assets from M. Curtiz Company for $360,000. How much Goodwill should E. Flynn Company record for this acquisition? a. $66,000 b. $63,000 c. $44,000 d. $ 0.00 Test 3 BUS 209 PART II: worth 10 points including double underlining the correct numbers. Put losses in parenthesis for full points. See page following for additional questions. No partial Credit. Instructions: Complete the Heading of the Income Statement for "Quality Fashion Center" and the missing amounts designated by letters A-H for the Month of December 2011. A A 1 Sales revenues 1 2 Sales 855,200 2 3 Less: Sales returns and allowances (9,900) 3 4 Net Sales 845,300 4 B Cost of Goods Sold B 6 Gross profit 248,700 6 7 7 8 Operating Expenses 8 9 Selling expenses 9 10 Salaries expense 160,100 10 11 Advertising expense 24,400 11 16 Store supplies expense 3,700 16 C Total Selling Expense C 18 Administrative expense 18 19 Salaries expense 57,100 19 21 Rent expense 4,800 21 22 Utilities expense 2,800 22 D Total admin expenses D E Total operating expense E F Income (Loss) from operations F 26 Other expenes and losses 26 27 Interest expense 5,000 27 G Income (loss) before income taxes G 29 Income Tax Expense 0.00 29 H Net Income/ (Loss) H 31 31 Quality Fashion Center Income Statement What is the Format of the above Income Statement?____________________________________ Explain how different inventory methods would change this statement: _______________________________________________________________________________________ TEST 3 – Chapters 7-9 Page | 4 BUS 209 PART III — BASIC INVENTORY COMPUTATIONS (30 points) Pilgrim Company, which uses a periodic inventory system, had a beginning inventory on Nov 1, of 250 units of Product A at a cost of $7.50 per unit. During November, the following purchases and sales were made. Purchases Sales Nov 6 225 units at $8.00 Nov 4 275 units 14 250 units at $9.00 8 425 units 21 350 units at $11.50 22 400 units 28 400 units at $12.00 24 225 units 1,225 1,325 Instructions: Compute the Nov 31 ending inventory and Nov’s cost of goods sold under (a) Average Cost, (b) FIFO, and (c) LIFO. Provide appropriate supporting calculations. (a) Average: Ending Inventory = $_________; Cost of Goods Sold = $_________. (b) FIFO: Ending Inventory = $_________; Cost of Goods Sold = $_________. (c) LIFO: Ending Inventory = $_________; Cost of Goods Sold = $_________. Test 3 BUS 209 PART IV — Receivables, bad debt, ratios (15 points) 144. At the end of 2011, Geisel, Inc has a $1,000 debit balance in the Allowance for Doubtful Accounts, before adjusting entries were prepared. Credit sales for 2011 totaled $510,000. Sales returns for 2011 were $10,000. Credit Sales for 2010 were $610,000. Sales returns for 2010 were $10,000. The following aging analysis of Accounts Receivable was prepared at 12/31/11: A. Compute the allowance for uncollectible accounts, and show your work below.(2pts) B. Prepare the 12/31/11 adjusting entry using the aging analysis approach to estimate bad debts.(5pts) C. Calculate the accounts receivable turnover ratio and the days to collect for 2010 and 2011 (round each calculation to one decimal place).The net receivables balance reported on the company's 12/31/09 financial statements was $120,000. The net receivables balance reported on the 12/31/10 financial statements was $130,000. (Show your work, make sure your work is correct – no partial points)(5 pts) 2010 AR Turnover ratio = 2010 Days to collect ratio = 2011 AR Turnover ratio = 2011 Days to collect ratio = c. Discuss the implications of the receivables turnover ratio and days to collect as calculated in part b. Discuss possible reasons for any changes in the calculations. (3 pts) TEST 3 – Chapters 7-9 Page | 6 BUS 209 PART V — Recording purchase of Capital Assets (12 points) Instructions: Complete the Journal Entries for the following separate transactions: A. A company purchases property that includes land, buildings and equipment for $5.5 million. The company pays $180,000 in legal fees, $220,000 in commissions, and $100,000 in appraisal fees. The land is estimated at 25%, the buildings are at 40%, and the equipment at 35% of the property value. Prepare the journal entry that is required to record the purchase assuming that the company paid 50% of the amounts using cash and signed a note for the remainder. B. On April 1, 2010, a company discarded a computer that cost $15,000 and that had a useful life of 4 years and a salvage value of $1,000. Using straight-line depreciation, the accumulated depreciation as of December 31, 2009 was $10,700. a. Prepare the journal entry to record depreciation up to the date of disposal of the computer b. Prepare the journal entry to record the disposal of the computer. C. Heidel Co. paid $750,000 cash to buy the plant assets of Rogers Co. that went out of business. An independent appraiser assigned the following values to the assets acquired: Land $522,000 Building 243,000 Equipment 135,000 Total $900,000 Prepare Heidel's journal entry to record the acquisition of these assets. Test 3 BUS 209 PART V — Computation of Depreciation (23 points) On September 30, 2012 ( the current year), a company acquired and placed in service a machine at a cost of $700,000. It has been estimated that the machine has a service life of five years or 330,000 units of output with a salvage value of $40,000. Using the double-declining-balance method of depreciation, prepare a schedule showing depreciation amounts for the current year and the next 4 years (round answers to the nearest dollar). The company closes its books on December 31 of each year. Instructions: Show all computations: A. Prepare the Double-Declining Depreciation Schedule below: (18 pts) B. What would have been the Depreciation expense been for 2012, had the Straight line method been used? (2 pts) C. What would have been the Depreciation expense in 2012 if the Units of Production method been used and the machine was used 30,000 units? (3 pts) TEST 3 – Chapters 7-9 Page | 8 BUS 209 Target Corp. (TGT) Income Statement View: Annual Data | Quarterly Data All numbers in thousands Period Ending Jan 27, 2012 Jan 28, 2011 Jan 29, 2010 Total Revenue 69,865,000 67,390,000 65,357,000 Cost of Revenue 47,860,000 45,725,000 44,062,000 Gross Profit 22,005,000 21,665,000 21,295,000 Operating Expenses Research Development - - - Selling General and Administrative 14,552,000 14,329,000 14,599,000 Non Recurring - - - Others 2,131,000 2,084,000 2,023,000 Total Operating Expenses - - - Operating Income or Loss 5,322,000 5,252,000 4,673,000 Income from Continuing Operations Total Other Income/Expenses Net 3,000 3,000 3,000 Earnings Before Interest And Taxes 5,325,000 5,255,000 4,676,000 Interest Expense 869,000 760,000 804,000 Income Before Tax 4,456,000 4,495,000 3,872,000 Income Tax Expense 1,527,000 1,575,000 1,384,000 Minority Interest - - - Net Income From Continuing Ops 2,929,000 2,920,000 2,488,000 Non-recurring Events Discontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - - Net Income 2,929,000 2,920,000 2,488,000 Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares 2,929,000 2,920,000 2,488,000 Test 3 BUS 209 Currency in USD. Target Corp. (TGT) All numbers in thousands Period Ending Jan 27, 2012 Jan 28, 2011 Jan 29, 2010 Assets Current Assets Cash And Cash Equivalents 794,000 1,712,000 2,200,000 Short Term Investments - - - Net Receivables 5,927,000 6,153,000 6,966,000 Inventory 7,918,000 7,596,000 7,179,000 Other Current Assets 1,810,000 1,752,000 2,079,000 Total Current Assets 16,449,000 17,213,000 18,424,000 Long Term Investments - - - Property Plant and Equipment 29,149,000 25,493,000 25,280,000 Goodwill - - - Intangible Assets - - - Accumulated Amortization - - - Other Assets 1,032,000 999,000 829,000 Deferred Long Term Asset Charges - - - Total Assets 46,630,000 43,705,000 44,533,000 Liabilities Current Liabilities Accounts Payable 10,501,000 9,951,000 9,631,000 Short/Current Long Term Debt 3,786,000 119,000 1,696,000 Other Current Liabilities - - - Total Current Liabilities 14,287,000 10,070,000 11,327,000 Long Term Debt 13,697,000 15,607,000 15,118,000 Other Liabilities 1,634,000 1,607,000 1,906,000 Deferred Long Term Liability Charges 1,191,000 934,000 835,000 Minority Interest - - - Negative Goodwill - - - Total Liabilities 30,809,000 28,218,000 29,186,000 TEST 3 – Chapters 7-9 Page | 10 BUS 209 Stockholders' Equity Misc Stocks Options Warrants - - - Redeemable Preferred Stock - - - Preferred Stock - - - Common Stock 56,000 59,000 62,000 Retained Earnings 12,959,000 12,698,000 12,947,000 Treasury Stock - - - Capital Surplus 3,487,000 3,311,000 2,919,000 Other Stockholder Equity (681,000) (581,000) (581,000) Total Stockholder Equity 15,821,000 15,487,000 15,347,000 Net Tangible Assets 15,821,000 15,487,000 15,347,000 Currency in USD. BONUS QUESTIONS: 6 Points 1. Prepare the Receivable Turnover Ratio for the January 27th 2012 Fiscal Year end for Target Corporation. (Show your work) 2. Prepare the Days to Collect for the January 27th 2012 Fiscal Year for Target Corporation. (Show your work) 3. Prepare the Fixed Asset Turnover Ratio for the January 27th 2012 Fiscal Year End for Target Corporation ( Show your work)

BUS 209 RETAKE EXAM 7-9 Name __________________________

Date is Imperative________________

Part I II III IV V VI Total

Points 10 10 30 15 12 23 100

Score

PART I — MULTIPLE CHOICE (10 points)

Instructions: Designate the best answer for each of the following questions.

____ 1. Seaside Market recorded the following events involving a recent purchase of merchandise:

Received goods for $50,000 terms 2/10, n/30

Returned $2,000 of the shipment for credit

Paid $250 freight on the shipment

Paid the invoice within the discount period.

As a result of these events, the company’s merchandise

a. increased by $48,000

b. increased by $47,290

c. increased by $48,270

d. increased by $47,250

____ 2. T. Powers Company's financial statements on December 31, 2010, showed the following:

What is the fixed asset turnover for 2010 (rounded to two decimal places)?

a. 3.93

b. 2.60

c. 4.10

d. 2.79

TEST 3 – Chapters 7-9

Page | 2

BUS 209

____ 3. At the beginning of the year, Hillsboro Athletic had an inventory of $400,000. During the year, the

company purchased goods costing $1,600,000. If Hillsboro Athletic reported ending inventory of

$500,000 and sales of $2,000,000, the company’s cost of goods sold and gross profit rate must be:

a. $1,400,000 and 70%

b. $1,500,000 and 25%

c. $1,400,000 and 30%

d. $1,500,000 and 75%

____ 4. Which assets should be amortized using the straight-line method:

a. Plant assets

b. Intangible assets with limited lives.

c. Intangible assets with unlimited lives.

d. All of the above.

____ 5. On March 20, 2011, E Flynn Company acquired the following net assets from M. Curtiz Company

for $360,000. How much Goodwill should E. Flynn Company record for this acquisition?

a. $66,000

b. $63,000

c. $44,000

d. $ 0.00

Test 3 BUS 209

PART II: worth 10 points including double underlining the correct numbers. Put losses in parenthesis for full

points. See page following for additional questions. No partial Credit.

Instructions: Complete the Heading of the Income Statement

for "Quality Fashion Center" and the missing amounts

designated by letters A-H for the Month of December 2011.

A A

1 Sales revenues 1

2 Sales 855,200 2

3 Less: Sales returns and allowances (9,900) 3

4 Net Sales 845,300 4

B Cost of Goods Sold B

6 Gross profit 248,700 6

7 7

8 Operating Expenses 8

9 Selling expenses 9

10 Salaries expense 160,100 10

11 Advertising expense 24,400 11

16 Store supplies expense 3,700 16

C Total Selling Expense C

18 Administrative expense 18

19 Salaries expense 57,100 19

21 Rent expense 4,800 21

22 Utilities expense 2,800 22

D Total admin expenses D

E Total operating expense E

F Income (Loss) from operations F

26 Other expenes and losses 26

27 Interest expense 5,000 27

G Income (loss) before income taxes G

29 Income Tax Expense 0.00 29

H Net Income/ (Loss) H

31 31

Quality Fashion Center

Income Statement

What is the Format of the above Income Statement?____________________________________

Explain how different inventory methods would change this statement:

_______________________________________________________________________________________

TEST 3 – Chapters 7-9

Page | 4

BUS 209

PART III — BASIC INVENTORY COMPUTATIONS (30 points)

Pilgrim Company, which uses a periodic inventory system, had a beginning inventory on Nov 1, of 250 units of

Product A at a cost of $7.50 per unit. During November, the following purchases and sales were made.

Purchases Sales

Nov 6 225 units at $8.00 Nov 4 275 units

14 250 units at $9.00 8 425 units

21 350 units at $11.50 22 400 units

28 400 units at $12.00 24 225 units

1,225 1,325

Instructions: Compute the Nov 31 ending inventory and Nov’s cost of goods sold under (a) Average Cost, (b)

FIFO, and (c) LIFO. Provide appropriate supporting calculations.

(a) Average: Ending Inventory = $_________; Cost of Goods Sold = $_________.

(b) FIFO: Ending Inventory = $_________; Cost of Goods Sold = $_________.

(c) LIFO: Ending Inventory = $_________; Cost of Goods Sold = $_________.

Test 3 BUS 209

PART IV — Receivables, bad debt, ratios (15 points)

144. At the end of 2011, Geisel, Inc has a $1,000 debit balance in the Allowance for Doubtful Accounts, before

adjusting entries were prepared. Credit sales for 2011 totaled $510,000. Sales returns for 2011 were $10,000.

Credit Sales for 2010 were $610,000. Sales returns for 2010 were $10,000. The following aging analysis of

Accounts Receivable was prepared at 12/31/11:

A. Compute the allowance for uncollectible accounts, and show your work below.(2pts)

B. Prepare the 12/31/11 adjusting entry using the aging analysis approach to estimate bad debts.(5pts)

C. Calculate the accounts receivable turnover ratio and the days to collect for 2010 and 2011 (round each

calculation to one decimal place).The net receivables balance reported on the company's 12/31/09 financial

statements was $120,000. The net receivables balance reported on the 12/31/10 financial statements was

$130,000. (Show your work, make sure your work is correct – no partial points)(5 pts)

2010 AR Turnover ratio = 2010 Days to collect ratio =

2011 AR Turnover ratio = 2011 Days to collect ratio =

c. Discuss the implications of the receivables turnover ratio and days to collect as calculated in part b. Discuss

possible reasons for any changes in the calculations. (3 pts)

TEST 3 – Chapters 7-9

Page | 6

BUS 209

PART V — Recording purchase of Capital Assets (12 points)

Instructions: Complete the Journal Entries for the following separate transactions:

A. A company purchases property that includes land, buildings and equipment for $5.5 million. The

company pays $180,000 in legal fees, $220,000 in commissions, and $100,000 in appraisal fees. The

land is estimated at 25%, the buildings are at 40%, and the equipment at 35% of the property value.

Prepare the journal entry that is required to record the purchase assuming that the company paid 50%

of the amounts using cash and signed a note for the remainder.

B. On April 1, 2010, a company discarded a computer that cost $15,000 and that had a useful life of 4

years and a salvage value of $1,000. Using straight-line depreciation, the accumulated depreciation as

of December 31, 2009 was $10,700.

a. Prepare the journal entry to record depreciation up to the date of disposal of the computer

b. Prepare the journal entry to record the disposal of the computer.

C. Heidel Co. paid $750,000 cash to buy the plant assets of Rogers Co. that went out of business. An

independent appraiser assigned the following values to the assets acquired:

Land $522,000

Building 243,000

Equipment 135,000

Total $900,000

Prepare Heidel's journal entry to record the acquisition of these assets.

Test 3 BUS 209

PART V — Computation of Depreciation (23 points)

On September 30, 2012 ( the current year), a company acquired and placed in service a machine at a cost of

$700,000. It has been estimated that the machine has a service life of five years or 330,000 units of output with

a salvage value of $40,000. Using the double-declining-balance method of depreciation, prepare a schedule

showing depreciation amounts for the current year and the next 4 years (round answers to the nearest dollar).

The company closes its books on December 31 of each year.

Instructions: Show all computations:

A. Prepare the Double-Declining Depreciation Schedule below: (18 pts)

B. What would have been the Depreciation expense been for 2012, had the Straight line method been

used? (2 pts)

C. What would have been the Depreciation expense in 2012 if the Units of Production method been used

and the machine was used 30,000 units? (3 pts)

TEST 3 – Chapters 7-9

Page | 8

BUS 209

Target Corp. (TGT)

Income Statement

View: Annual Data | Quarterly Data All numbers in thousands

Period Ending Jan 27, 2012 Jan 28, 2011 Jan 29, 2010

Total Revenue 69,865,000 67,390,000 65,357,000

Cost of Revenue 47,860,000 45,725,000 44,062,000

Gross Profit 22,005,000 21,665,000 21,295,000

Operating Expenses

Research Development - - -

Selling General and Administrative 14,552,000 14,329,000 14,599,000

Non Recurring - - -

Others 2,131,000 2,084,000 2,023,000

Total Operating Expenses - - -

Operating Income or Loss 5,322,000 5,252,000 4,673,000

Income from Continuing Operations

Total Other Income/Expenses Net 3,000 3,000 3,000

Earnings Before Interest And Taxes 5,325,000 5,255,000 4,676,000

Interest Expense 869,000 760,000 804,000

Income Before Tax 4,456,000 4,495,000 3,872,000

Income Tax Expense 1,527,000 1,575,000 1,384,000

Minority Interest - - -

Net Income From Continuing Ops 2,929,000 2,920,000 2,488,000

Non-recurring Events

Discontinued Operations - - -

Extraordinary Items - - -

Effect Of Accounting Changes - - -

Other Items - - -

Net Income 2,929,000 2,920,000 2,488,000

Preferred Stock And Other Adjustments - - -

Net Income Applicable To Common Shares 2,929,000 2,920,000 2,488,000

Test 3 BUS 209

Currency in USD.

Target Corp. (TGT)

All numbers in thousands

Period Ending Jan 27, 2012 Jan 28, 2011 Jan 29, 2010

Assets

Current Assets

Cash And Cash Equivalents 794,000 1,712,000 2,200,000

Short Term Investments - - -

Net Receivables 5,927,000 6,153,000 6,966,000

Inventory 7,918,000 7,596,000 7,179,000

Other Current Assets 1,810,000 1,752,000 2,079,000

Total Current Assets 16,449,000 17,213,000 18,424,000

Long Term Investments - - -

Property Plant and Equipment 29,149,000 25,493,000 25,280,000

Goodwill - - -

Intangible Assets - - -

Accumulated Amortization - - -

Other Assets 1,032,000 999,000 829,000

Deferred Long Term Asset Charges - - -

Total Assets 46,630,000 43,705,000 44,533,000

Liabilities

Current Liabilities

Accounts Payable 10,501,000 9,951,000 9,631,000

Short/Current Long Term Debt 3,786,000 119,000 1,696,000

Other Current Liabilities - - -

Total Current Liabilities 14,287,000 10,070,000 11,327,000

Long Term Debt 13,697,000 15,607,000 15,118,000

Other Liabilities 1,634,000 1,607,000 1,906,000

Deferred Long Term Liability Charges 1,191,000 934,000 835,000

Minority Interest - - -

Negative Goodwill - - -

Total Liabilities 30,809,000 28,218,000 29,186,000

TEST 3 – Chapters 7-9

Page | 10

BUS 209

Stockholders' Equity

Misc Stocks Options Warrants - - -

Redeemable Preferred Stock - - -

Preferred Stock - - -

Common Stock 56,000 59,000 62,000

Retained Earnings 12,959,000 12,698,000 12,947,000

Treasury Stock - - -

Capital Surplus 3,487,000 3,311,000 2,919,000

Other Stockholder Equity (681,000) (581,000) (581,000)

Total Stockholder Equity 15,821,000 15,487,000 15,347,000

Net Tangible Assets 15,821,000 15,487,000 15,347,000

Currency in USD.

BONUS QUESTIONS: 6 Points

1. Prepare the Receivable Turnover Ratio for the January 27th 2012 Fiscal Year end for Target

Corporation. (Show your work)

2. Prepare the Days to Collect for the January 27th 2012 Fiscal Year for Target Corporation. (Show your

work)

3. Prepare the Fixed Asset Turnover Ratio for the January 27th 2012 Fiscal Year End for Target

Corporation ( Show your work)



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