GibsonTB_ch06
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GibsonTB_ch06

Course Number: FINANCE 101, Spring 2012

College/University: University of Sharjah

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CHAPTER 6LIQUIDITY OF SHORT-TERM ASSETS; RELATED DEBTPAYING ABILITY MULTIPLE CHOICE 1. Company A uses lifo and Company B uses fifo for inventory valuation. Otherwise, the firms are of similar size and have the same revenue and expense. Assume inflation. In analyzing liquidity and profitability of the two firms, which of the following will hold true? a. It is impossible to compare two firms with different inventory...

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6LIQUIDITY CHAPTER OF SHORT-TERM ASSETS; RELATED DEBTPAYING ABILITY MULTIPLE CHOICE 1. Company A uses lifo and Company B uses fifo for inventory valuation. Otherwise, the firms are of similar size and have the same revenue and expense. Assume inflation. In analyzing liquidity and profitability of the two firms, which of the following will hold true? a. It is impossible to compare two firms with different inventory methods. b. Company B will have relatively higher profit and higher inventory turnover. c. Company B will have relatively higher profit and lower inventory turnover. d. Company A will have a higher current ratio and acid test ratio, with the same profit. e. Company B will have relatively higher profit and a higher current ratio. Register to View Answer PTS: 1 2. Which of the following would best indicate that the firm is carrying excess inventory? a. a decline in sales b. a decline in the current ratio c. a decline in days' sales in inventory d. stable current ratio with declining quick ratios e. a rise in total asset turnover Register to View Answer PTS: 1 3. Which of the following types of businesses would normally have the shortest operating cycle? a. a retail clothing store b. a grocery store c. a wholesale furniture store d. a car manufacturer e. a car dealer Register to View Answer PTS: 1 4. Jones Company presents the following data for 2006. Receivables, less allowance for losses and discounts of $12,196 Net Sales Cost of Goods Sold The days' sales in receivables is a. 53.1 b. 48.2 c. 43.1 d. 38.1 e. none of the answers are correct Register to View Answer PTS: 1 6-1 $ 266,700 $2,360,108 $1,580,360 5. Abbott Company presents the following data for 2006. Receivables, end of year, less allowances for losses and discounts of $115,960 Receivables, beginning of year, less allowance for losses and discounts of $102,330 Net Sales $ 2,370,100 $ 2,443,140 $24,417,090 The accounts receivable turnover in times per year is: a. 6.9 b. 7.9 c. 10.7 d. 9.7 e. none of the answers are correct Register to View Answer PTS: 1 6. Smith Company presents the following data for 2006. Inventories, beginning of year Inventories, end of year Cost of Goods Sold Net Sales $ 310,150 $ 340,469 $2,103,696 $8,690,150 The number of days' sales in inventory is: a. 65.8 b. 60.8 c. 59.1 d. 58.1 e. none of the answers are correct Register to View Answer PTS: 1 7. Shaffer Company presents the following data for 2006. Net Sales, 2006 Net Sales, 2005 Cost of Goods Sold, 2006 Cost of Goods Sold, 2005 Inventory, beginning of 2006 Inventory, end of 2006 $3,007,124 $ 93,247 $2,000,326 $1,000,120 $ 341,169 $ 376,526 The merchandise inventory turnover for 2006 is: a. 5.6 b. 15.6 c. 7.5 d. 7.7 e. none of the answers are correct Register to View Answer PTS: 1 6-2 8. Szabo Company computed the following data for 2006. Days' sales in receivables Accounts receivable turnover Accounts receivable turnover in days Days' sales in inventory Merchandise inventory turnover Inventory turnover in days 38.7 days 9.6 times 35.1 days 68.5 days 5.9 times 58.7 days The estimated operating cycle for 2006 is: a. 97.4 days b. 107.2 days c. 93.8 days d. 108.0 days e. none of the answers are correct Register to View Answer PTS: 1 9. Typically, which of the following would be considered to be the most indicative of a firm's short-term debt paying ability? a. working capital b. current ratio c. acid test d. cash ratio e. days' sales in receivables Register to View Answer PTS: 1 10. If a firm has pledged its receivables and its inventory, then the best indicator of its short-term liquidity may be indicated by: a. working capital b. current ratio c. acid-test d. cash ratio e. days' sales in receivables Register to View Answer PTS: 1 11. Which of the following would not be classified as a current asset? a. cash b. marketable securities c. receivables d. inventories e. investments Register to View Answer PTS: 1 12. Which of the following types of business would normally have the longest operating cycle? a. a seller of resort property b. a car dealer c. a car manufacturer d. a grocery store e. a record store Register to View Answer PTS: 1 6-3 13. Which of the following accounts would not be classified as a current asset? a. cash restricted for retirement of bonds b. cash and equivalents c. cash and certificates of deposit d. time deposits e. cash Register to View Answer PTS: 1 14. Unrealized losses for long-term investments should usually be reported in the: a. stockholders' equity section of the balance sheet b. income statement c. current assets section of the balance sheet d. current liabilities section of the balance sheet e. long-term liabilities section of the balance sheet Register to View Answer PTS: 1 15. Which of the following does not bear on the quality of receivables? a. shortening the credit terms b. lengthening the credit terms c. right of return privilege d. lengthening the outstanding period e. all of the answers bear on the quality of receivables Register to View Answer PTS: 1 16. Which of the following reasons should not be considered in order to explain why the receivables appear to be abnormally high? a. Sales volume expanded materially late in the year. b. Receivables have collectibility problems and possibly some should have been written off. c. The company seasonally dates invoices. d. Material amount of receivables are on the installment basis. e. Sales volume decreases materially late in the year. Register to View Answer PTS: 1 17. Which of the following is not an acceptable inventory costing method? a. specific identification b. last-in, first-out (lifo) c. first-in, first-out (fifo) d. average cost e. next-in, first-out (nifo) Register to View Answer PTS: 1 6-4 18. Which of the following would not be a reasonable conclusion when comparing lifofifo under an inflationary condition? a. Lifo generally results in a lower profit than does fifo. b. Fifo reports a higher inventory ending balance. c. Lifo results in a lower profit figure than does fifo. d. Lifo would probably be used for inventory that has a high turnover rate because there would be an immaterial difference in the results between lifo and fifo. e. The cash flow under lifo is greater than the cash flow under fifo by the difference in the resulting tax between the two methods. Register to View Answer PTS: 1 19. Which of the following current assets will not generate cash in the future? a. prepayments b. accounts receivable c. inventory d. marketable securities e. notes receivable Register to View Answer PTS: 1 20. Which of the following ratios does not represent some form of comparison between accounts in current assets and accounts in current liabilities? a. working capital b. current ratio c. acid-test ratio d. cash ratio e. merchandise inventory turnover Register to View Answer PTS: 1 21. Which of the following ratios would generally be used to evaluate a firm's overall liquidity position? a. working capital b. current ratio c. acid-test ratio d. cash ratio e. inventory turnover in days Register to View Answer PTS: 1 TRUE/FALSE 1. Compensating balances reduce the amount of cash available to the borrower to meet obligations and they decrease the effective interest rate for the borrower. Register to View Answer PTS: 1 2. To qualify as a marketable security, the investment must be readily marketable and it must be the intent of management to convert the investment to cash within the current operating cycle or a year, whichever is longer. Register to View Answer PTS: 1 6-5 3. In terms of liquidity, it is to management's advantage to show investments under investments instead of marketable securities. Register to View Answer PTS: 1 4. By reporting marketable equity securities under current assets, management picks up a liquidity advantage. Register to View Answer PTS: 1 5. The valuation problem from waiting to collect a receivable is ignored in the valuation of receivables and notes that are classified as current assets. Register to View Answer PTS: 1 6. Under the allowance method, the charge off of a specific account receivable does not influence the income statement nor the net receivable on the balance sheet at the time of the charge off. Register to View Answer PTS: 1 7. Using the direct write-off method, the bad debt expense that is recorded as a specific customer's account is determined to be noncollectible. Register to View Answer PTS: 1 8. The direct write-off method frequently results in the bad debt expense being recognized in the year subsequent to the sale, and thus results in a proper matching of expense with revenue. Register to View Answer PTS: 1 9. When a company has receivables that are due beyond one year or accounting cycle from the balance sheet date, and when it is the industry practice to include these receivables in current assets, they will be included in current assets even though they do not technically meet the guidelines to qualify as current assets. Register to View Answer PTS: 1 10. The receivables of a company with installment receivables would normally be considered to be of higher quality than the receivables of a company that did not have installment receivables. Register to View Answer PTS: 1 11. If days' sales in receivables are materially longer than the credit terms, this indicates a collection problem. Register to View Answer PTS: 1 12. The days' sales in receivables ratio gives an indication of the length of time that the receivables have been outstanding at the end of the year. This indication can be misleading if sales are seasonal and/or the company uses a natural business year. Register to View Answer PTS: 1 6-6 13. Days' sales in receivables may be abnormally high at the end of the year if sales volume expanded materially late in the year. Register to View Answer PTS: 1 14. Days' sales in receivables may be abnormally high if a material amount of sales are on a cash basis. Register to View Answer PTS: 1 15. When doing external analysis, many of the reasons why the days' sales in receivables is abnormally high or low cannot be determined without access to internal information. Register to View Answer PTS: 1 16. Inventory is particularly sensitive to changes in business activity. Therefore, management should keep inventory at a minimum. Register to View Answer PTS: 1 17. Because the cost of specific inventory items is not usually practical to determine, it is necessary for management to select a cost flow assumption. Register to View Answer PTS: 1 18. A firm that has been on lifo for many years may have some inventory costs that go back ten years or more. Register to View Answer PTS: 1 19. Under inflationary conditions, fifo generally results in a lower profit than does lifo, and this difference can be substantial. Register to View Answer PTS: 1 20. A low sales to working capital ratio tentatively indicates an unprofitable use of working capital. Register to View Answer PTS: 1 21. Working capital of a business is the excess of current assets over current liabilities. Register to View Answer PTS: 1 22. The lifo inventory costing method usually results in working capital being overstated. Register to View Answer PTS: 1 23. The lifo inventory costing method results in the acid-test ratio being overstated. Register to View Answer PTS: 1 24. The cash ratio is usually a good indication of the liquidity of the firm. Register to View Answer PTS: 1 6-7 25. Management should usually strive to keep the cash ratio high. Register to View Answer PTS: 1 26. The ability of an entity to maintain its short-term, debt-paying ability is important to all users of financial statements. Register to View Answer PTS: 1 27. Even an entity on a very profitable course will find itself bankrupt if it fails to meets its obligations to short-term creditors. Register to View Answer PTS: 1 28. Current assets are assets that (1) are in the form of cash, (2) will be realized in cash, or (3) conserve the use of cash within the operating cycle of a business or for one year , whichever is shorter. Register to View Answer PTS: 1 29. The operating cycle is the time between the acquisition of inventory and the realization of cash from selling the inventory. Register to View Answer PTS: 1 30. In order to classify cash as a current asset, it must be free from any restrictions that would prevent its deposit or use to pay creditors classified as long-term. Register to View Answer PTS: 1 31. The use of the allowance for doubtful accounts results in the bad debt expense being charged to the period of sale. Register to View Answer PTS: 1 32. Customer concentration can be an important consideration in the quality of receivables. Register to View Answer PTS: 1 33. A shortening of the credit terms is an indication that there will be more risk in the collection of future receivables. Register to View Answer PTS: 1 34. The company with the natural business year tends to overstate its accounts receivable turnover, thus overstating its liquidity. Register to View Answer PTS: 1 35. The election to use lifo for taxes governs the firm's financial reporting. Register to View Answer PTS: 1 6-8 36. If the company closes the year when the activities are at a peak, the number of days' sales in inventory would tend to be overstated and the liquidity would be overstated. Register to View Answer PTS: 1 37. An approximation of the operating cycle can be determined from the receivable liquidity figures and the inventory liquidity figures. Register to View Answer PTS: 1 38. Working capital is considered to be more indicative of the short-term, debt-paying ability than is the current ratio. Register to View Answer PTS: 1 39. Liquidity problems with receivables and/or inventory means that the current ratio needs to be much higher than when there are no such liquidity problems. Register to View Answer PTS: 1 40. Significant weight is seldom given to the cash ratio unless the firm is in financial trouble. Register to View Answer PTS: 1 PROBLEMS 1. Required: Determine the cost of goods sold of a firm with the financial data given below: Current Ratio Acid-Test Ratio* Current Liabilities Inventory Turnover (using ending inventory) 2.4 to 1 2.1 to 1 $400,000 4 times *Assume that the acid test ratio is computed as follows: Current Assets - Inventory Current Liabilities 6-9 ANS: Current Ratio = Current Assets Current Liabilities = X $400,000 = 2.4 Current Assets = ($400,000)(2.4) = $960,000 Acid-Test Ratio = Current Assets - Inventory Current Liabilities $960,000 - X Inventory Turnover = = $960,000 - X $400,000 = 2.1 = $840,000 = $120,000 Cost of Goods Sold = X =4 Inventory $120,00 0 Cost Goods of Sold = $480,000 PTS: 1 2. Each of the following would generally be thought of as a favorable indicator of the firm's financial position: a. b. c. A current ratio well above 2.0, which is substantially higher than that for other firms in the industry. Collection period significantly lower than for several recent periods. Rapidly rising merchandise inventory turnover. Required: In each case, give an example of circumstances underlying the ratio that might represent an unfavorable development. Register to View AnswerA high current ratio can mean overstocked inventory or doubtful receivables. Either of these accounts being high could cause the current ratio to be misleading. b. The firm may have substantially tightened its credit policy. This might have resulted in a major loss of customers. c. Rapidly rising turnover might mean that production is unable to generate goods as quickly as possible and that the firm is running a risk of stockouts. PTS: 1 6-10 3. Required: How will switching from fifo to lifo for inventory valuation affect financial analysis of liquidity and profitability? Cite two ratios that will be affected and indicate how they will change. (Assume an inflationary condition.) ANS: Lifo inventory valuation results in higher cost of sales and lower inventory valuation. It will cause lower profitability and tax outflow. Merchandise inventory turnover will appear much higher, since the cost of sales will be higher and average inventory much lower. Days' sales in inventory will be lower, since the cost of sales will be higher, giving higher daily cost of sales to divide into lower inventory. The liquidity position will be reduced in terms of working capital and the current ratio. PTS: 1 4. Decort Company's working capital accounts at December 31, 2006, are given below: Current Assets: Cash Marketable Securities Accounts Receivable Less Allowance for Doubtful Accounts Inventory, Lifo Prepaid Total Current Assets $100,000 50,000 $250,000 (20,000) Current Liabilities: Accounts Payable Notes Payable Taxes Payable Accrued Liabilities Total Current Liabilities 230,000 300,000 8,000 $688,000 $200,000 50,000 10,000 30,000 $290,000 During 2007, DeCort Company completed the following transactions: a. Purchased fixed assets for cash, $20,000. b. Exchanged DeCort Company common stock for land. Estimated value of transaction, $80,000. c. Payment of $40,000 on short-term notes payable. d. Sold marketable securities costing $20,000 for $25,000 cash. e. Sold DeCort Company common stock for $70,000. f. Wrote off an account receivable in the amount of $20,000. g. Declared a cash dividend in the amount of $5,000. h. Paid the above cash dividend. i. Sold inventory costing $10,000 for $15,000 cash. j. Sold inventory costing $5,000 for $8,000 on account. k. Paid accounts payable in the amount of $20,000. l. Sold marketable securities costing $20,000 for $20,000 cash. m. Issued a credit memo on an account receivable, $1,000. 6-11 Required: a. Compute the following as of December 31, 2006: 1. working capital 2. current ratio 3. acid-test ratio (conservative) 4. cash ratio (These ratios are to be computed using only the December 31, 2006 data.) b. For 2007, indicate the effect of each of the transactions given on working capital, current ratio, acid-test ratio, and cash ratio. Give the effect in terms of +, - , or none. Consider each transaction to be the first transaction of the year. Assume at the start of the year that the current ratio is over 2 to 1, the acid-test ratio is over 1 to 1, and the cash ratio is less than 1 to 1. Format: Transaction The Effect On AcidCurrent Test Ratio Ratio Working Capital Cash Ratio Register to View Answer1. Working Capital = Current Assets - Current Liabilities = $688,000 - $290,000 = $398,000 Current Assets 2. Current Ratio = Current Liabilities = $688,000 $290,000 = 2.37 3. Acid-Test Ratio = Cash Equivalents + Marketable Securities + Net Receivables Current Liabilities = $100,000 + $50,000 + $230,000 = 1.31 $290,000 4. Cash Ratio = Cash Equivalents + Marketable Securities Current Liabilities = $100,000 + $50,000 $290,000 6-12 = 0.52 b. Transaction a. b. c. d. e. f. g. h. i. j. k. l. m. Working Capital The Effect On Acid Current Test Ratio Ratio none none + + none none + + none none - none + + + none + + + + none - Cash Ratio none + + + none + + + + none - none + + none + none none none PTS: 1 5. Bill's Produce does 60 percent of its business during June, July, and August. For Year Ended For Year Ended December 31, 2006 July 31, 2006 Net Sales Receivables, less allowance for doubtful accounts: $700,000 Beginning of period (allowance, January 1, $2,000; August 1, $3,000) $ 45,000 $ 80,000 $ 50,000 $ 85,000 End of period (allowance, December 31, $3,000; July 31, $3,500) $690,000 Required: a. Compute the days' sales in receivables for July 31, 2006, and December 31, 2006, based on the data above. b. Compute the accounts receivable turnover for the period ended July 31, 2006, and December 31, 2006. c. Comment on the results from (a) and (b). 6-13 Register to View AnswerDays' sales in receivables Gross Receivables Net Sales/365 December 31, 2006 July 31, 2006 $ 53,000 $ 88,500 $ 700,000 $ 690,000 365 365 = 27.6 b. Accounts Receivable = = 46.8 Net Sales Average Gross Receivables December 31, 2006: $700,000 = 14.0 ($47,000 + $53,000) / 2 July 31, 2006: $690,000 = 8.0 ($83,000 + $88,500) / 2 c. Bill's Produce is a seasonal business. Therefore, the computation of days' sales in receivables and accounts receivable turnover are not realistic. These figures would be helpful when comparing with prior years on the same date. PTS: 1 6. Required: a. Stark Company has computed its accounts receivable turnover in days to be 36. Compute the accounts receivable turnover per year. b. Stark Company has computed its accounts receivable turnover per year to be 10. Compute the accounts receivable turnover in days. c. Stark Company has gross receivables at the end of the year of $380,000 and net sales for the year of $1,850,000. Compute the days' sales in receivables at the end of the year. d. Stark Company has net sales of $2,500,000 and average gross receivables of $224,000. Compute the accounts receivable turnover. 6-14 Register to View AnswerAccounts Receivable Turnover = b. Accounts Receivable Turnover in Days = 365 Receivable Turnover in Days 365 Accounts Receivable Turnover per Year c. Days' Sales in Receivables = Gross Receivables Net Sales / 365 = 365 36 = = 365 = 10 = 36.5 days $380,000 $1,850,000 / 365 = 10.1 Times $2,500,000 $224,000 = 75.0 days d. Accounts Receivable = Sales Average Gross Receivables = 11.2 times PTS: 1 7. Alpha Company would like to estimate how long it will take to realize cash from its ending inventory. For this purpose the following data are submitted: Accounts Receivable, less allowance for doubtful accounts of $40,000 Ending Inventory Net Sales Cost of Goods Sold Days' Sales in Inventory = Ending Inventory Cost of Goods Sold / 365 Days' Sales in Receivables = Gross Receivables Net Sales / 365 Required: Estimate how long it will take to realize cash from the ending inventory. ANS: $750,000 $4,250,000 / 365 = 64.4 $700,000 $5,650,000 / 365 64.4 + 45.2 = 109.6 days PTS: 1 6-15 = 45.2 $660,000 $750,000 $5,650,000 $4,250,000 8. Hind Company presents the following data for 2006: Accounts Receivable, less allowance for doubtful accounts of $40,000 Ending Inventory, lifo (estimated replacement cost $800,000) Net Sales Cost of Goods Sold (estimated replacement cost, $4,150,000) $780,000 $500,000 $4,750,000 $3,550,000 Required: a. Compute the days' sales in receivables. b. Compute the days' sales in inventory, using the cost figure. c. Compute the days' sales in inventory, using the replacement cost for the inventory and the cost of goods sold. d. Explain which days' sales in inventory figure is probably more realistic, the one computed in (b) or (c). Register to View Answer Days' Sales in Receivables = = b. $820,000 $4,750,000 / 365 = 63.0 Days' Sales in Inventory = c. $500,000 $3,550,000 / 365 Gross Receivables Net Sales / 365 = Inventory Cost of Goods Sold / 365 = 51.4 Days' Sales in Inventory (using the replacement cost) = $800,000 $4,150,000 / 365 = Inventory Estimated Goods sold = 70.36 d. The days' sales in inventory figure computed in (c) is probably more realistic because it compares similar costs for both inventory and cost of goods sold. PTS: 1 6-16 9. Required: Comment on the usual influence from a switch to lifo from fifo on the following variables during an inflationary period: a. b. c. d. e. f. revenue gross profit cost of goods sold profit income taxes cash flow Register to View AnswerA switch to lifo will usually not influence revenue because revenue is usually more demand/supply-related than cost-related. b. Gross profit will usually decline because of higher cost of goods sold. c. Cost of goods sold will increase because of using the most recent cost. d. Profits will decrease because of the higher cost of goods sold. e. Income taxes will decrease because of the lower profit. f. Cash flow will increase because of the lower taxes. PTS: 1 10. Anne Elizabeth Company's Balance Sheet for December 31, 2006, and Income Statement For the Year Ended December 31, 2006, are given below. Balance Sheet Anne Elizabeth Company December 31, 2006 2006 Assets: Current Assets: Cash Marketable Securities Accounts Receivable, less allowance of $10,000 Inventory, Lifo Prepaid Total Current Assets 2005 Less Accumulated Depreciation Total Assets 6-17 $ 28,538 20,500 50,000 70,000 7,000 $176,038 9,000 220,000 $229,000 (68,000) $394,450 Property, Plant, and Equipment: Land Buildings and Equipment $ 50,450 25,000 60,000 90,000 8,000 $233,450 8,000 210,000 $218,000 (60,000) $334,038 Liabilities and Shareholders' Equity: Current Liabilities: Accounts Payable Accrued Compensation Income Taxes Total Current Liabilities $ 35,000 8,000 7,000 $ 50,000 40,000 Shareholders' Equity: Common Shares Retained Earnings Total Liabilities and Shareholders' Equity 11,038 60,000 244,450 $304,450 $394,450 Long-Term Debt $ 30,000 7,000 6,000 $ 43,000 60,000 220,000 $280,000 $334,038 Income Statement Anne Elizabeth Company For the Year Ended December 31, 2006 2006 Earnings before income taxes Income taxes Net earnings Required: a. Compute the following ratios for 2006: 1. Accounts receivable turnover 2. Merchandise inventory turnover 3. Working capital 4. Current ratio 5. Acid-test ratio (conservative) 6. Sales to working capital 6-18 $650,500 $640,000 520,000 515,000 $130,500 $125,000 $ 71,000 4,000 $ 75,000 $ 63,500 30,000 $ 33,500 Operating expenses: Selling, general, and administrative Interest 2005 $718,500 580,000 $138,500 Net sales Cost of goods sold Gross profit 2004 $ 67,000 3,000 $ 70,000 $ 60,500 29,000 $ 31,500 $ 65,000 2,500 $ 67,500 $ 57,500 28,000 $ 29,500 ANS: 1. Accounts receivable turnover = Net Sales Average Gross Receivables $718,500 [($60,000 + $10,000) + ($50,000 + $10,000)] / 2 2. Merchandise Inventory Turnover = $580,000 ($90,000 + $70,000) / 2 = = $718,500 $65,000 = 11.05 Cost of Goods Sold = 7.25 Average Inventory $580,000 $80,000 = 7.25 3. Working capital = Current Assets - Current Liabilities $233,450 - $50,000 = $183,450 4. Current ratio = Current assets/Current liabilities $233,450 $50,000 5. = 4.67 Acid-Test Ratio = Cash equivalents + Marketable Securities + Net Receivables Current Liabilities $50,450 + $25,000 + $60,000 $50,000 6. Sales to Working Capital = = $135,450 $50,000 = 2.71 Sales Average Working Capital $718,500 [($233,450 - $50,000) + ($176,038 - $43,000] / 2 = PTS: 1 6-19 $718,500 $158,244 = 4.54 11. Listed below are several ratios: a. b. c. d. e. f. g. h. i. j. k. l. days' sales in receivables accounts receivable turnover accounts receivable turnover in days days' sales in inventory inventory turnover inventory turnover in days operating cycle working capital current ratio acid-test ratio cash ratio sales to working capital Required: Match the letter that goes with each formula. _____ 1. Sales Average Working Capital _____ 2. Net Sales Average Gross Receivables _____ 3. _____ 4. _____ 5. _____ 6. _____ 7. Current Assets - Current Liabilities Cash Equivalents + Marketable Securities + Net Receivables Current Liabilities Gross Receivables Net Sales/365 Average Gross Receivables Net Sales/365 Average Inventory Cost of Goods Sold/365 _____ 8. Cash Equivalents + Marketable Securities Current Liabilities _____ 9. Current Assets Current Liabilities _____ 10. Accounts Receivable Turnover in Days _____ 11. Inventory Turnover in Days Cost of Goods Sold Average Inventory _____ 12. + Ending Inventory Cost of Goods Sold/365 6-20 ANS: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. l b h j a c f k i g e d PTS: 1 12. The following are the inventory records of the Garret Company: Units 40 January 1 Purchases: February 10 July 15 November 1 December 10 20 40 50 Cost $12 $480 13 14 15 16 30 Available Total 260 560 750 48 0 180 $2,530 Ending inventory consists of 30 units from the July purchase. Note: The company uses a periodic inventory system. Required: Calculate ending inventory and cost of sales, using: (a) FIFO, (b) LIFO, (c) average, and (d) specific identification. 6-21 Register to View AnswerFIFO Ending Inventory 30 $16 = $480 Cost of Sales $2,530 - $480 = $2,050 Ending Inventory 30 $12 = $360 Cost of Sales $2,530 - $360 = $2,170 b. LIFO c. Average Ending Inventory 180 $2,530 = $14.06 30 $14.06 = $421.80 d. Specific identification Ending Inventory 30 $14 = $420 Cost of Sales $2,530 - $421.80 = $2,108.20 Cost of Sales $2,530 - $420 = $2,110 PTS: 1 6-22

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Chapter 6Measuring and Evaluating the Performance of Banks and Their PrincipalCompetitorsFill in the Blank Questions1. The equity multiplier for a bank measures the amount of _ of the bankand is one part of the evaluation of the bank's ROE.Answer: l
University of Sharjah - FINANCE - 101
Chapter 11Liquidity and Reserves Management: Strategies and PoliciesFill in the Blank Questions1. A(n) _ is an asset which can be converted into cash easily, which has arelatively stable price and is reversible so that the seller can recover their ori
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Chapter 15The Management of CapitalFill in the Blank Questions1. The risk that has to do with banks trading in foreign currencies is called_.Answer: exchange risk2. The risk that has to do with fraud, embezzlement and bank robberies is called_.Ans
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GROUP PRESENTATION EVALUATION CRITERIAOrganization of Material and Subject Matter(are all important points covered and presented in a logical manner)Clarity(are all points made clear and well explained)Speaking Coherence and Clarity(are the speakers
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Business Communication: Group Membership and Chapter ResponsibilityName and/or IDGroup NoChapterPart1 Mohammed Emad Abed -U00023144Mohamed Salam-U00018930Samer al safarini-U00022406chapter 9first part2 1- Mohamed Nader Hassouna U000241412- Sy
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Group Presentation Schedule: Dates, Chapter Parts, and Corresponding Page NumbersPresentation Chapter PartsDateApril 1Chapter 15: Part IPage Numberspp.449-467 (Before Keys for Successfully Delivering anEffective Oral Presentation)pp.467-478April
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UniversityofSharjahCollegeofBusinessAdministrationInternationalFinanceAssignment1DUE ON 14 March 2012Problems:Q1. You are leaving Copenhagen, Denmark, for St. Petersburg, Russia. Denmarks currency isthe krone. You leave Copenhagen with 15,000 Danish
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UniversityofSharjahCollegeofBusinessAdministrationInternationalFinanceAssignment2Dueon22April2012Problems:1) The Chile peso was fixed through a currency board at Ps. 1.00/$ throughout the 1990s. InJanuary 2002 the Chile peso was floated. On January
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Problem 7.1 - 7.5 The Latin American Big Mac Index: Historical ComparisonThis textbook has used The Economist magazine's Big Mac Index for many years. Below are the Big Mac prices and actual exchange ratesfor select Latin American countries as printed i
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Problem 7.6 Argentine Peso and PPPThe Argentine peso was fixed through a currency board at Ps1.00/$ throughout the 1990s. InJanuary 2002 the Argentine peso was floated. On January 29, 2003 it was trading at Ps3.20/$.During that one year period Argentin
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TheUniversityofSharjahCollegeofBusinessAdministrationDepartmentofAccounting,FinanceandEconomicsCourseSyllabusCourseName: InternationalFinancialManagementCourseNumber:0301430InstructorsName:ProfessorMahendraRajTelephone:065050519OfficeLocation:M51
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Multinational Business Finance 10th EditionSolution ManualIM Science, KUST, Solution Manual of MBF 10tth Edition Prepared By Wasim Uddin Orakzai1Multinational Business Finance 10th EditionChapter-1Solution ManualFinancial Goals & Corporate Governan
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Multinational Business Finance 10th EditionSolution ManualChapter-4ForeignExchangeMarket (FEM)1IM Science, KUST, Solution Manual of MBF 10tth Edition Prepared By Wasim Uddin OrakzaiProblem# 4.6: Traveling: Copenhagen to St. Petersburg. On your pos
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ABUDHABICOMMERCIALBANKP.J.S.C.ReportandconsolidatedfinancialstatementsfortheyearendedDecember31,2011TheseauditedfinancialstatementsaresubjecttoCentralBankofU.A.E.approvalandadoptionbyShareholdersattheAnnualGeneralMeetingABUDHABICOMMERCIALBANKP.J.S.C
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ABU DHABI COMMERCIALBANK P.J.S.C.Report and consolidated financialstatements for the yearended December 31, 2010These Audited preliminary financial statements aresubject to central bank of UAE approval and adoption byShareholders at the Annual Gene
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Consolidated statement of financial position at 30 June 2011Sourse of FundsUses of FundsAssetsAssets2.Items in the course of collection from other banks9.Current tax assets10.Prepayments and accrued income12.Intangible assets13.Property, plant an
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HSBC BANK MIDDLE EAST LIMITEDCondensed Financial Statement (Unaudited) (continued)Consolidated statement of financial position at 30 June 2011Source of FundsAssetsUses of FundsAssets2.Items in the course of collection fromother banksAED9.Current
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HSBC Bank Middle East LimitedFOCUS ON BANK PERFORMANCEIN THE PERIOD OF 30 JUNE 2010 AND 30 JUNE 2011
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Statement of sources and Uses of funds of AbuDhabi commercial bank-31 Dec (2010 - 2011)Sources offundsUses of fundsAssets:Cash and balances with Central Banks742,315Deposits and balances due from banks2,442,398Trading securities15,755Loans and
Western Kentucky University - ACCT - 301
CHRISTY TRAUGHBER2.33, 34, 35, 42, 4333 a. 50,000 profit would be reported on 1040 Schedule C as income for Juanita50,000 profit would be reported on 1120 for the corporation, and since Juanita was paid nob. dividends she would not report anything34
Western Kentucky University - ACCT - 301
Christy Traughber47.a.b.c.d.e.f.g.WCEESBSCEIWSC50.a. are issued fr a fee by the National Office of the IRS upon a taxpayers request anddescribe how the IRS will treat a proposed transaction for tax purposes; apply only to thetaxpayer wh
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Date:March 19, 2012To:Client Tax FileFrom:Christy TraughberRE:Tax Consequences of Stock in Exchange for Control of Corporation orPartnershipI.Summary of Relevant Facts of this Research CaseOn March 19, 2012, my client, Lynn Jones contacted me r
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CHRISTY TRAUGHBER12/31/2010$450,000$220,00020%Cumulative FTACumulative FDAEnacted tax ratesPermanent differencesTax Income% of DTA that's current% of DTL that's CurrentBook Income 12/31/11FTAFDAPermanent differenceTaxable Income 12/31/11T
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PreferredCommonStockStock10,000250,0002,00025,000$50$26%YY5$766,000Shares IssuedShares in TreasuryParPS%Cumulative? (Y/N)Participating? (Y/N)Yrs in ArrearsTotal Dividends to distributeOUTPUTPreferred Stock Shares8,000Outstanding
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Christy Traughber1/1/20112/1/20113/1/20114/1/20115/1/20116/1/20117/1/20118/1/2011Treasury StockCash1,200,0001,200,000CashRetained EarningsTreasury Stock280,00020,000Treasury StockCash640,000CashTreasury StockAPIC-T850,000Treasury
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Bond Payable A$24,000,000$1,080,000$340,000$17,000faceannual interestDiscountannual amortizationConverts to 147,000 shares of common stockBond Payable B$28,000,000 face$770,000 annual interest$120,000 Premium$4,000 annual amortizationConver
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Christy Traughber2009AFS ScheduleSPCTSBM KT SHAREPRICETR ScheduleHRRBIBAVG2010AFS ScheduleSPCTSBTR ScheduleHRRBIBAVG2011AFS ScheduleSPCTSBTR ScheduleHRRBIBAVGFV10FV2021FV1121Unrealized holding loss-HRUnrealized holding
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Christy TraughberCost (p)Cost (t)20116,000,0006,000,00020123,000,0009,000,00020136,000,00015,000,00020146,000,00021,000,000Est cost tocomplete18,000,00021,000,00010,000,0007,000,000Est total tocomplete24,000,00030,000,00025,000,00
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Christy TraughberBook Income=20114,320,00070,000120,000210,000(180,000)(30,000)380,000(140,000)(550,000)60,000(90,000)260,0004,430,0000.301,329,0002012201320142015Taxable Income=Tax payable60,00040,000(10,000)80,000(140,000)80
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PensionExpenseBalance 1/1/11ReturnService CostBenefits paidContributionsInterest (.10)Amortization - PSCAmortization OCI-G/LLiability increase (chg in PBO)Journal Entry for 2011CashOCI-psc426,000 cr734,000 drPension A/L290,000 drPBO8,13
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CHRISTY TRAUGHBERPayment=-PV (.68301)750,00054,641695,3593.16986219,366PAYMENTPVAO (10%,4)1/1/201112/31/201112/31/201212/31/201312/31/201412/31/2014#012345InterestPayment(219,366)(219,366)(219,366)(219,366)(80,000)(957,464)7
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CHRISTY TRAUGHBERPROBLEM 22JOURNAL ENTRIESCost of Goods SoldInventory80,00080,000InventoryCumulative Effect Adjustment290,000290,000Depreciation ExpenseAccumulated depreciated-equipment70,000Amortization expenseCopyright16,00070,00016,00
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CHRISTY TRAUGHBERPROBLEM 22JOURNAL ENTRIESCost of Goods SoldInventory80,00080,000InventoryCumulative Effect Adjustment290,000290,000Depreciation ExpenseAccumulated depreciated-equipment70,000Amortization expenseCopyright16,00070,00016,00
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CHRISTY TRAUGHBERDodgers CompanyStatement of Cash FlowsFor year ended December 31, 2011Cash flows from operating activitiesCollect from customersPay for inventoryPay for operating expensesPay for interestPay for taxCollect rent revenueBuy inves
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CHRISTY TRAUGHBERDodgers CompanyStatement of Cash FlowsFor year ended December 31, 2011Cash flows from operating activitiesCollect from customersPay for inventoryPay for operating expensesPay for interestPay for taxCollect rent revenueBuy inves
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CHAPTER 17InvestmentsASSIGNMENT CLASSIFICATION TABLEBriefExercises ExercisesTopicsQuestionsProblems1.Debt securities.1, 2, 3, 15(a)Held-to-maturity.4, 5, 7, 8, 15,211, 3(b)Trading.4, 6, 7, 8, 12,214(c)Available-for-sale.4, 7, 8, 9,
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CHAPTER 18Revenue RecognitionASSIGNMENT CLASSIFICATION TABLE (BY TOPIC)BriefExercisesExercisesProblems*1. Realization and recognition; 1, 2, 3, 4,sales transactions; high5, 6, 22rates of return.11, 2, 31*2. Long-term contracts.7, 8, 9, 10,
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CHAPTER 22Accounting Changes and Error AnalysisASSIGNMENT CLASSIFICATION TABLE (BY TOPIC)TopicsQuestions1.Differences between change inprinciple, change in estimate,change in entity, errors.2, 4, 6, 7,8, 9, 12, 13,15, 21, 22,232.BriefExerci
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CHAPTER 23Statement of Cash FlowsASSIGNMENT CLASSIFICATION TABLE (BY TOPIC)TopicsQuestionsBriefExercisesExercisesConceptsProblems for Analysis1.Format, objectivespurpose, and sourceof statement.1, 2, 7,8, 122.Classifying investing,financ
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CoastJewelers,Inc.IncomeStatementFortheYearEnded12/31/11SalesRevenue$850,511.65Less:CostofGoodsSold442,619.87GrossMargin407,891.78Expenses:Advertising20,654.21Depreciation22,000.00Interest40,846.24Payroll115,365.11Utilities23,541.25Ne
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CoastJewelers,Inc.IncomeStatementFortheYearEnded12/31/11SalesRevenue$850,511.65Less:CostofGoodsSold442,619.87GrossMargin407,891.78Expenses:Advertising20,654.21Depreciation22,000.00Interest40,846.24Payroll115,365.11Utilities23,541.25Ne
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CoastJewelers,Inc.RatioAnalysisDec12ProfitabilityReturnonowner'sinvestmentReturnontotalinvestmentProfitmarginGrossmarginLiquidityCurrentratioQuickratioReceivableturnoverInventoryturnoverSolvencyDebttoequityLiability28%14%8%41%3.221.33
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SalesRevenueLess:CostofGoodsSoldGrossMarginExpenses:AdvertisingDepreciationInterestPayrollUtilitiesNetincomebeforetaxesIncometaxesNetincomeCoastJewelers,Inc.IncomeStatementFortheYearEnded12/31/11$850,511.65442,619.87407,891.78%100%52%
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Snick's Board ShopIncome Statementfor the period endedSalesLess: Cost of Goods SoldGross MarginExpenses:AdvertisingDepreciationWagesSuppliesUtilitiesNet income12/31/2011% Sales$28,000100%13,00046%15,00054%$2,2001,0005,0003008009,
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Snick's Board ShopIncome Statemntfor the period ended12/31/2011 % SalesSales# 100%Less: Cost of Goods Sold13,00046%Gross Margin15,00054%Expenses:Advertising #8%Depreciation#4%Wages#18%Supplies#1%Utilities# 9,3003%Net income$5,70
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CoastJewelers,Inc.EquipmentDepreciationSummaryAssetDisplayCasesChairsDateDeprec. 2011 2011Acc. 2012 2012Acc. 2013 2013Acc.AcquiredCostMethod Deprec. Deprec. Deprec. Deprec. Deprec. Deprec.1/1/2011 $15,000 DDB$6,000 $6,000 $3,600 $9,600 $2,160 $
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CoastJewelers,Inc.EquipmentDepreciationSummaryAssetDisplayCasesChairsDateDeprec. 2011 2011Acc. 2012 2012Acc. 2013 2013Acc.AcquiredCostMethod Deprec. Deprec. Deprec. Deprec. Deprec. Deprec.1/1/2011 $15,000 S/L$3,000 $3,000 $3,000 $6,000 $3,000 $
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CoastJewelers,Inc.EquipmentDepreciationSummaryAssetDisplayCasesChairsDateDeprec. 2011 2011Acc. 2012 2012Acc. 2013 2013Acc.AcquiredCostMethod Deprec. Deprec. Deprec. Deprec. Deprec. Deprec.1/1/2011 $15,000 SYD$5,000 $5,000 $4,000 $9,000 $3,000 $
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CoastJewelers,Inc.EquipmentDepreciationSummaryAssetShelvingErr:509DateAcquired1/1/20111/1/2011TotalStudentName04/29/2012Deprec. 2011 2011Acc. 2012 2012Acc. 2013 2013Acc.CostMethod Deprec. Deprec. Deprec. Deprec. Deprec. Deprec.$2,000 S/L$20
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CoastJewelers,Inc.EquipmentDepreciationSummaryAssetShelvingErr:509DateAcquired1/1/20111/1/2011TotalStudentName04/29/2012Deprec. 2011 2011Acc. 2012 2012Acc. 2013 2013Acc.CostMethod Deprec. Deprec. Deprec. Deprec. Deprec. Deprec.$2,000 S/L$20
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Snick's Board ShopCh 07-10Present Value AnalysisAnnuity payment required:($9,858.06)Future need:Term (in years):Interest rate:$80,000.00612%Investment value in future:$130,209.73Current investment:Interest rate:Term (in years):$(73,500.00)
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Expense/Hours Open$ 3,600$ 3,400$ 3,200Expenses$ 3,000$ 2,800$ 2,600$ 2,400145165185205Days Open225245Snick's Board ShopCh 07-11Predicting CostsMonthJanFebMarAprMayJunJulAugSepOctHigh ExpenseLow ExpenseDifferenceHi-