MT-Exam-MSci261-W09-Solutions - UW email userid_SOLUTION_...

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UW email userid__________SOLUTION _________ Problem 1. The ȱ balance ȱ sheet ȱ of ȱ the ȱ First ȱ Chemical ȱ Plant ȱ contains ȱ the ȱ following ȱ information: ȱ ASSETS ȱ LIABILITIES ȱ Current ȱ assets ȱ ȱȱ x ȱ Cash ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $5,000 ȱ ȱȱ x ȱ Accounts ȱ receivable ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $5,000 ȱ ȱȱ x ȱ Inventories ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $25,000 Total ȱ current ȱ assets ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $35,000 ȱ ȱ Fixed ȱ assets ȱ ȱȱ x ȱ Land ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ **** ȱȱȱ d ȱȱ $100,000 ȱ ȱȱ x ȱ Plant ȱ and ȱ equipment ȱȱȱȱȱȱȱȱȱȱȱ $100,000 Total ȱ fixed ȱ assets ȱȱȱȱȱȱȱȱ **** ȱȱȱ c ȱȱ $200,000 ȱ ȱ Other ȱ assets ȱ ȱȱ x ȱ Deferred ȱ charges ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $10,000 ȱ ȱȱ x ȱ Intangibles ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $10,000 Total ȱ other ȱ assets ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $20,000 ȱ ȱ Total ȱ assets ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $255,000 ȱ Current ȱ liabilities ȱ ȱȱ x ȱ Accounts ȱ payable ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $1,500 ȱȱ x ȱ Notes ȱ payable ȱȱȱȱȱȱȱȱ **** ȱȱȱ h ȱȱȱȱȱȱ $1,500 ȱȱ x ȱ Accrued ȱ expenses ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $5,000 Total ȱ current ȱ liabilities ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $8,000 ȱ Long - term ȱ liabilities ȱ ȱȱ x ȱ Mortgage ȱ bonds ȱȱȱȱȱ **** ȱȱ g ȱȱȱȱ $50,000 ȱȱ x ȱ Debentures ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ $50,000 Total ȱ long - term ȱ liabilities ȱȱȱȱȱȱȱȱ ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ **** ȱȱȱ f ȱȱ $100,000 ȱ ȱ ȱ ȱ ȱ Total ȱ Liabilities ȱȱȱȱȱȱȱȱȱ **** ȱȱȱ e ȱȱ $108,000 (a) (3 marks) Total Owners’ Equity is $147,000. Fill in the blanks above (beside the **** symbols) for "Land," "Total fixed assets," "Mortgage bonds," "Notes payable," "Total Liabilities," and "Total long-term liabilities." (1/2 mark for each answer) c Total Fixed Assets = Total Assets – Total Other Assets – Total Current Assets = $255,000 - $20,000 - $35,000 = $200,000 d Land = Total Fixed Assets – Plant&Equipment = $200,000 - $100,000 = $100,000 e Total Liabilities = Total Assets – Total Owner’s Equity = $255,000 - $147,000 = $108,000 f Total Long-term Liabilities = Total Liabilities – Total Current Liabilities = $108,000 - $8,000 = $100,000 g Mortgage bonds = Total Long-term Liabilities – Debentures = $100,000 - $50,000 = $50,000 h Notes Payable = Total Current Liabilities – Accounts Payable – Accrued Expenses = $8,000 - $1,500 - $5,000 = $1,500 (b) (2 marks) If the annual sales value was $400,000, profit after income tax was $32,000, and interest paid on all liabilities was $6000, then calculate: (i) the inventory turnover ratio; and (ii) the acid test ratio. Comment on how well
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This note was uploaded on 04/01/2012 for the course MSCI 261 taught by Professor Bonkoo during the Winter '09 term at Waterloo.

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MT-Exam-MSci261-W09-Solutions - UW email userid_SOLUTION_...

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