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Name _________________________________________

Problem 1
A partial list of accounts for Company, in alphabetical order, is presented below:
Accounts Payable
Accounts Receivable
Accrued Salaries Payable
Accumulated DepreciationBuildings
Accumulated DepreciationEquipment
Additional Paid-In CapitalCommon Stock
Allowance for Doubtful Accounts
Bonds Payable
Buildings
Cash
Commission Expense
Common Stock
Current Portion of Long-Term Debt
Equipment
FICA Taxes Payable
Goodwill
Interest Income
Interest Receivable
Inventory
Land
Loss on Sale of Equipment
Notes Payable (long-term)
Patent
Preferred Stock
Prepaid Expenses
Retained Earnings
Sales
Sales Salaries Expense
Treasury Stock
Unearned Rent Revenue
Required:
Prepare a classified balance sheet, without monetary amounts, as of December 31, 2014. Include
the appropriate classification headings.

Solution:

Assets
Current Assets:
Cash
Accounts Receivable
Less: Allowance for Doubtful Accounts
Interest Receivable
Inventory (ending balance)
Prepaid Expenses
Total Current Assets
Property, Plant, and Equipment:
Land
Buildings
Less: Accumulated Depreciation
Buildings
Equipment
Less: Accumulated Depreciation
Equipment

Intangibles:
Patent
Goodwill
Total Assets

Liabilities and Stockholders' Equity

Current Liabilities:
Accounts Payable
Accrued Salaries Payable
FICA Taxes Payable

Unearned Rent Revenue


Current Portion of Long-Term Debt
Total Current Liabilities

Long-Term Liabilities:
Bonds Payable
Notes PayableLong-Term

Stockholders' Equity:
Preferred Stock
Common Stock
Additional Paid-In CapitalCommon
Stock
Retained Earnings
Less: Treasury Stock
Total Liabilities and Stockholders'
Equity

Problem 2
The income statement for Lifeline Products Company in single-step format follows.
Lifeline Products Company
Income Statement
For the Year Ended December 31, 2014
Revenues:
Sales
Rent Income

$3,000,000
14,000
$3,014,000

Costs and Expenses:


Cost of Sales
Selling and Administrative Expenses
Interest Expense
Loss on the Sale of Plant Assets
Income Taxes
Net Income

2,370,000
322,000
48,000
16,000
112,000
$ 146,000

Required:
Convert the statement to multiple-step format.
Solution:

For the Year Ended December 31, 2014


$3,000,0
00

Sales

2,370,00
0
$
630,000

Cost of Sales
Gross Profit
Selling and Administrative
Expenses
Operating Income
Other Income:
Rent Income
Other Expenses:
Interest Expense
Loss on Sale of Plant Assets

322,000
$
308,000
14,000
$48,000
$

16,000.0
0
Income Before Taxes

(64,000
)
$
258,000
112,000

Income Taxes
Net Income

$
146,00
0

Problem 3
Financial Data for Springfield Power Company as of December 31, 2014:
Inventory
Long-term debt
Interest expense
Accumulated depreciation
Cash
Net sales (all credit)
Common stock
Accounts receivable
Operating expense (incl. depr. exp. and taxes)
Notes payable-current
Cost of goods sold
Plant and equipment
Accounts payable
Marketable securities
Accrued wages
Retained earnings

$300,000
500,000
25,000
450,000
280,000
1,800,000
900,000
325,000
625,000
200,000
1,100,000
1,400,000
180,000
80,000
45,000
190,000

From the information presented, calculate the following ratios for the Springfield Power
Company.
I need u to add one line as comment for each ratio
a. current ratio
b. acid test ratio
c. average collection period
d. inventory turnover
e. gross profit margin
f.
operating profit margin
g. net profit margin
h. total asset turnover

Solution:
a. current ratio
= (300000 + 280000 + 325000 + 80000) / (200000 + 180000 + 45000)
= 2.32
b. acid test ratio
= (280000 + 325000 + 80000) / (200000 + 180000 +45000)
= 1.61
c. average collection period
= 325,000/(1,800,000/365 days)
= 65.9 days
d. inventory turnover
= 1,100,000/300,000
=3.67 days
e. gross profit margin
= (1,800,000 - 1,100,000) / 1,800,000
= 0.389
f. operating profit margin
= (1,800,000 - 1,100,000 - 625,000) / 1,800,000 = $75,000/$1,800,000
= 0.042
g. net profit margin
= (1,800,000 - 1,100,000 - 625,000 - 25,000) / 1,800,000
= $50,000/$1,800,000
= 0.0278
h. total asset turnover
= $1,800,000/( $98500 + $1400,000)
= 0.755