devry final exam acct 504

devry final exam acct 504

devry final exam acct 504

 

Question 1.1.(TCO A) A disadvantage of the corporate form of business is _____. (Points : 5)

Question 3.3.(TCO A, B)

Below are some of the account balances for PNK Company:

Cash	$7,000
Accounts Receivable	$12,000
Prepaid Insurance	$2,000
Accounts Payable	$4,000
Wages Payable	$1,500
Notes Payable	$500
Common Stock	$50,000
Dividends	$2,500
Revenues	$35,000
Expenses	$25,000

What will PNK Company show for total debits?

(Points : 5)

 

Question 4.4.(TCOs B and E) Which of the following statements is correct with regard to accrual accounting? (Points : 5)

 

Question 5.5.(TCO D) Three different companies each utilize a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)

 

Question 6.6.(TCO A) ABC Company purchased a piece of land with a preexisting building on it for a price of $250,000. In order to prepare the land for future construction, the old building was demolished at a cost of $15,000. The amount of scrap material that resulted from the demolition was sold for $2,000. As a result of the above purchase, the land and the building will be recorded in ABC’s books at (Points : 5)

 

Question 7.7.(TCOs D and G) When the market rate of interest is equal to the stated rate of interest on the bond, the bond will require _____. (Points : 5)

 

Question 8.8.(TCO C) Which inventory accounting system does not require a physical count of the inventory at the year end?(Points : 5)

 

Question 9.9.(TCO F) Which of the following tools should you use to perform a trend analysis of operating expenses? (Points : 5)

 

Question 10.10.(TCO F) Vertical analysis is also known as _____. (Points : 5)

 

Question 11.11.(TCO F) One advantage of the accrual method is(Points : 5)

 

Question 12.12.(TCO F) Creditors are usually most concerned with analyzing _____. (Points : 5)

 

Question 13.13.(TCO F) The rate of return on common stockholder’s equity ratio is NOT affected by _____. (Points : 5)

 

Question 14.14.(TCO G) To calculate the market value of a bond, we need to use the time-value-of-money concept called _____. (Points : 5)

 

 

Page 2

Question 1.1.(TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report. Income Taxes Payable $471 Short-term Investments and Marketable Securities 8,109 Cash 8,442 Other non-current Liabilities 10,449 Common Stock 1,760 Receivables 4,812 Other Current Assets 2,973 Long-term Investments 10,448 Other Non-current Assets 3,585 Property, Plant and Equipment 23,486 Trademarks 6,527 Other Intangible Assets 20,810 Allowance for Doubtful Accounts 53 Accumulated Depreciation 9,010 Accounts Payable 8,680 Short Term Notes Payable 17,874 Prepaid Expenses 2,781 Other Current Liabilities 796 Long-Term Liabilities 14,736 Paid-in-Capital in Excess of Par Value 11,379 Retained Earnings 55,038 Inventories 3,264 Treasury Stock 35,009 Other information taken from the Annual Report. Sales Revenue for 2012 $48,017 Cost of Goods Sold for 2012 19,053 Net Income for 2012 9,019 Inventory Balance on 12/31/11 3,092 Net Accounts Receivable Balance on 12/31/11 4,920 Total Assets on 12/31/11 79,974 Equity Balance on 12/31/11 31,921 Required: 1: Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also, separate the current liabilities from the non-current liabilities and provide a total for each. 2: Using the Balance Sheet from your answer above, calculate the Current Ratio and Return on common stockholders’ equity. (Points : 36)

 

2.(TCO B) The following selected data was retrieved from the Walmart, Inc. financial statements for the year ending January 31, 2013.

Accounts Payable	$38,080
Accounts Receivable	6,768
Cash	7,781
Common Stock	3,952
Cost of Goods Sold	352,488
Income Tax Expense	7,981
Interest Expense	2,064
Membership Revenues	3,048
Net Sales	466,114
Operating, Selling and Administrative Expenses	88,873
Retained Earnings	72,978

Required: 1: Using the information provided above, prepare a multiple-step income statement.
2: Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings and results.(Points : 36)

 

3.45. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the two questions below.

Cash flow from operating activities	In millions	In millions
	For the year ended 2012	For the year ended 2011
Net (loss) earnings	$(12,650)	$7,074
Depreciation and amortization	5,095	4,984
Impairment of goodwill and purchased intangible assets	18,035	885
Stock-based compensation expense	635	685
Provision for doubtful accounts	142	81
Provision for inventory	277	217
Restructuring charges	2,266	645
Deferred taxes on earnings	(711)	166
Excess tax benefit from stock-based competition	(12)	(163)
Other, net	265	(46)
Accounts and financing receivables	1,269	(227)
Inventory	890	(1,252)
Accounts payable	(1,414)	275
Taxes on earnings	(320)	610
Restructuring	(840)	(1,002)
Other assets and liabilities	(2,356)	(293)
Net cash provided by operating activities	10,571	12,639
Cash flows from investing activities:
Investment in property, plant, and equipment	(3,706)	(4,539)
Proceeds from sale of property, plant, and equipment	617	999
Purchases of available-for-sale securities and other investments	(972)	(96)
Maturities and sales of available-for-sale securities and other investment	662	68
Payments in connection with business acquisitions, net of cash acquired	(141)	(10,480)
Proceeds from business divestiture, net	87	89
Net cash used in investing activities	(3,453)	(13,959)
Cash flow from financing activities:
(Payments) issuance of commercial paper and notes payable, net	(2,775)	(1,270)
Issuance of debt	5,154	11,942
Payment of debt	(4,333)	(2,336)
Issuance of common stock under employee stock plans	716	896
Repurchase of common stock	(1,619)	(10,117)
Excess tax benefit from stock-based compensation	12	163
Cash dividends paid	(1,015)	(844)
Net cash used in financing activities	(3,860)	(1,566)
Increase (decrease) in cash and cash equivalents	3,258	(2,886)
Cash and cash equivalents at beginning of period	8,043	10,929
Cash and cash equivalents at end of period	$11,301	$8,043

Required: 1: Please calculate the percentage increase or decrease in cash for the total line of the operating, investing, and financing sections bolded above and explain the major reasons for the increase or decrease for each of these sections. 2: Please calculate the free cash flow for 2012 and explain the meaning of this ratio.(Points : 36)

 

4.(TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”

Assuming the goal is tomaximizenet income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported net income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet.

Required: 1: Goforit carries significant electronics inventory in a competitive environment in which prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.
2: Goforit has a large investment in warehouse equipment, including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: straight line (SL) or double declining balance (DDB)?(Points : 36)

 

5.(TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.

Ratio Name	Johnson & Johnson	Pfizer
Profit margin	16.1%	24.7%
Inventory turnover ratio	3.1	1.7
Average collection period	59.4 days	69.1 days
Cash debt coverage ratio	.27	.16
Debt to Total assets	46.6%	127.5%

Required: 1: Please explain the meaning of each of the Pfizer ratios above. 2: Please state which company performed better for each ratio. (Points : 36)

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