Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 4, Problem 4.29C
Case 4.29LO 6, 7Capstone analytical review of Chapter 2-4. Calculate liquidity and profitability measures and explain various financial statement relationships for a realty firm DeBauge Realtors, Inc., is a realty firm owned by Jeff and Kristi DeBauge. The DeBauge family owns 100% of the corporation’s |
stock. The following summarized data (in thousands) are taken from the December 31, 2016, financial statements:
At December 31, 2015, total assets were $615 and total stockholders’ equity was $150. There were no changes in notes payable or paid-in capital during 2016.
Required:
- What particular expense do you suppose accounts for the largest portion of the $ 177 cost of services provided?
- The cost of services provided amount includes all operating expenses (i.e., selling, general, and administrative expenses) except advertising expense. What do you suppose the primary reason was for DeBauge Realtors, Inc., to separate advertising from other operating expenses?
- Calculate the effective interest rate on the notes payable for DeBauge Realtors, Inc.
- Calculate the company’s average income tax rate. (Hint: You must first determine the earnings before taxes.)
- Calculate the amount of dividends declared and paid to Jeff and Kristi DeBauge during the year ended December 31, 2016. (Hint: Do a T-account analysis of retained earnings.) What is the company’s dividend policy? (What proportion of the company’s earnings are distributed as dividends?)
- DeBauge Realtors, Inc., was organized and operates as a corporation rather than a
partnership . What is the primary’ advantage of the corporate form of business to a realty’ firm? What is the primary’ disadvantage of the corporate form? - Explain why the amount of income tax expense is different from the amount of income taxes payable.
- Calculate the amount of
working capital and thecurrent ratio at December 31, 2016. Assess the company’s overall liquidity. - Calculate
ROI (including margin and turnover) and ROE for the year ended December 31, 2016. Explain why' these single measures may’ not be very’ meaningful for this firm.
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Prepare the required financial
statements for Metro Company
Assume you are an analyst evaluating Metro Company. The following data are available in your financial
analysis (unless otherwise indicated, all data are as of December 31, 2015): - 50 points
Retained earnings, 12/31/2014
Gross profit margin ratio
Day's sales in inventory
Acid-test ratio
Non current assets
Day's sales in receivables
Shareholder's equity to total debt
Sales (all on credit)
Common stock $15 par value; 10,000 shares issued and outstanding; issued at $21 per share.
$98,000
25%
45 days
2.5 times
$280,000
18 days
4 to 1
$920,000
Using these data, construct the December 31, 2015 balance sheet for your analysis. Operating expenses
(excluding taxes and cost of goods sold for 2015) are $180,000. The tax rate is 40%. Assume a 360-day
year in ratio computations. Current assets consist of cash, accounts receivable, and inventories.
Your answer
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Honor Code | bart..
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Financial Accounting
C.Mulford: Financial Statement Analysis: 17
Borrowing oneself Into Financial Health?
A condensed balance sheet for CSV Corp. is provided below.
Calculate the current and quick ratios.
Assume CSV borrowed $15,000 using long-term debt.
Recalculate the company's current and quick ratios.
CSV Corp. balance sheet (amounts in thousands):
Cash
Accounts receivable
Inventory
Total current assets
Property, plant and equipment
Total assets
2017
$1,400
3,600
5.800
10,800
10,200
$ 21.000
Accounts payable
Accrued expenses payable
Total current liabilities
Long-term debt
Shareholders' equity
Total liabilities and shareholders' equity
Calculated current ratio:
Calculated quick ratio:
Assume $15,000 borrowed using long-term debt:
Revised current ratio:
Revised quick ratio:
$ 4,200
6.400
10,600
4,400
6,000
$ 21.000
Question 2Alex is currently considering to invest his money in one of the companies between Company A and Company B. The summarized final accounts of the companies for their last completed financial year are as follows:
a. Calculate the following ratios for Company A and Company B. State clearly the formulae used for each ratio:
i. Gross Profit Marginii. Net Profit Marginiii. Inventory Turnover Period (days)iv. Receivables Collection Period (days)
Chapter 4 Solutions
Accounting: What the Numbers Mean
Ch. 4 - Prob. 4.1MECh. 4 - Mini-Exercise 4.2 LO 2, 6, 7 Record transactions...Ch. 4 - Prob. 4.3MECh. 4 - Prob. 4.4MECh. 4 - Exercise 4.5 LO 2. 6, 7 Record transactions and...Ch. 4 - Exercise 4.6 LO 2. 6, 7 Record transactions and...Ch. 4 - Exercise 4.7 LO 6 Write journal entries Write the...Ch. 4 - Exercise 4.8 LQ 6 Write journal entries Write the...Ch. 4 - Exercise 4.9 LO 2, 6, 7 Record transactions and...Ch. 4 - Exercise 4.10 LO 2. 6, 7 Record transactions and...
Ch. 4 - Exercise 4.11 LO 2. 6, 7 Record transactions and...Ch. 4 - Exercise 4.12 LO 2, 6, 7 Record transactions and...Ch. 4 - Exercise 4.13 LO 3 Calculate retained earnings On...Ch. 4 - Prob. 4.14ECh. 4 - Exercise 4.15 LO 6 . 7 Notes receivable-interest...Ch. 4 - Exercise 4.16 LO 6, 7 Notes payable-interest...Ch. 4 - Exercise 4.17 LO 6, 7 Effect of adjustments on net...Ch. 4 - Exercise 4.18 LO 6, 7 Effects of adjustments A...Ch. 4 - Exercise 4.19 LO 6 , 7 T-account analysis Answer...Ch. 4 - Exercise 4.20 LO 6, 7 Transaction analysis using...Ch. 4 - Problem 4.21 LO 2, 6, 7 Record transactions and...Ch. 4 - Prob. 4.22PCh. 4 - Prob. 4.23PCh. 4 - Problem 4.24 LO 6. 7 Calculate income from...Ch. 4 - Prob. 4.25PCh. 4 - Prob. 4.26PCh. 4 - Problem 4.27 LO 6. 7 Analyze several accounts...Ch. 4 - Prob. 4.28PCh. 4 - Case 4.29LO 6, 7Capstone analytical review of...Ch. 4 - Prob. 4.30C
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