1. Lone Psychic Experience is a sole proprietorship established this year. Alice Lone established the firm with capital of $62,600. During the year she withdrew $22,000 as personal salary. Net income before tax for the year is $62,100. Alice’s average tax rate for income tax purposes is 25%.

Required 1: What is the balance of the equity account in the year end financial statements? $

Required 2: What is the balance of the equity account at the beginning of the first year? $

Required 3: What is the maximum amount Alice can withdraw during the first year of operations? $

2. Excelsior Corporation has the following headings on its December 31, 2019 Balance Sheet:
Total Current Assets $200,000
Total Assets $500,000
Total Current Liabilities $97,500
Total Non-Current Liabilities $300,000

On January 2020 Excelsior pays off $40,500 in long term debt by transferring title to one of its idle factories to the creditor

Required 1: Assume no other transaction in 2020. How much will working capital increase/decrease by when comparing December 2019 with January 2020? $

Required 2: The current ratio of 2019 is:

Required 3: Excelsior's financial leverage in 2019 is (calculate it as a debt to equity ratio):

Required 4: Excelsior's financial leverage in 2019 is (calculate the Equity Ratio and not the Equity Ratio percentage):

Required 5: If sales for 2019 amount to $570,000, the working capital turnover for 2019 is:

3. Stardust Furniture Store sells “low end” furniture and uses the installment method for revenue recognition. Its year-end is December 31. It shows the following data for January:
Sales of $6,840 with a 50% markup.
Sales terms: No down payment in January, no interest and 6 easy monthly payments starting in February.

Required 1: Assuming no other transaction happened, what revenue is recognized in January? $

Required 2: Assuming no other transaction happened, what revenue is recognized in February? $

Required 3: Assuming no other transaction happened, what cost of goods sold is recognized in March? $

Required 4: Assuming no other transaction happened, what is the Gross Margin of April? $

4.

Great Lakes Manufacturing Inc. comparative Statement of Financial Position at December 31 in (000)'s
	20X4			20X3
Cash	$	5,100		$	4,800
Accounts Receivable	$	9,010		$	6,100
Inventory	$	10,400		$	14,000
Prepaid Expenses	$	1,950		$	1,020
Equipment	$	58,500		$	59,900
Accumulated Depreciation - equipment	$	(33,100	)	$	(32,000	)
Total Assets	$	51,860		$	53,820
Account Payable	$	7,000		$	11,400
Interest Payable	$	350		$	110
Income taxes payable	$	650		$	500
Dividends Payable	$	2,400		$	3,200
Long-term Notes Payable	$	17,500		$	17,000
Common shares	$	22,000		$	20,000
Retained Earnings	$	1,960		$	1,610
Total Liabilities & Shareholders' Equity	$	51,860		$	53,820

Great Lakes Manufacturing Inc.
Income Statement
Year Ended December 31, 20X4 in (000)'s
Sale				$	130,000
Cost of goods sold				$	97,000
Gross Profit				$	33,000
Operating Expenses	$	30,000
Gain on Sale of equipment	$	(1,000	)	$	29,000
Profit from Operations				$	4,000
Other expenses
Interest Expense				$	200
Profit before Income Tax				$	3,800
Income Tax Expense				$	1,550
Profit				$	2,250

Additional Information:

Operating expenses include depreciation expense of $3,500,000

Accounts Payable related to the purchase of inventory

Equipment that cost $3,900,000 was sold at a gain of $1,000,000

New equipment was purchased during the year for $2,500,000

Dividends declared and paid in 20X4 totalled $1,900,000

Common shares were sold for $2,000,000 cash

Interest payable in 20X4 was $240,000 greater than interest payable in 20X3

The current ratio at December 20X4 was:

a) Equal or below 1.90

b) Equal or above 7.64

c) Between 3.82 and 7.63

d) Not enough data provided to calculate it

e) Between 1.91 and 3.81

5. If you had limited time and resources that prevented you from designing a complete system of internal control for your organization, you would focus your scarce resources on setting up controls over:

a) Revenue transactions

b) Inventory

c) Cash

d) Capital assets

e) Expense transactions