Assignment 2- Cost of Good Sold

Assignment 3-Financial Ratios

I need help pls, this is to be passed tomorrow

Assignment No. 3 1. Safeway Inc., is one of the world's largest supermarket chains. These selected items were adapted from a recent Safeway balance sheet (dollar amounts are in millions). Cash $74.8 Receivables 152.7 Merchandise Inventories 1,191.8 Prepaid Expenses 95.5 Fixtures and Equipment 2592.9 Retained Earnings 284.4 Total Current Liabilities 1,939.0 Instructions: a) Using the information above compute the amounts of Safeway's total current assets and total quick assets. b) Compute the company's a) current ratio b) quick ratio c) working capital (round to one decimal place). c) From these computations are you able to conclude whether Safeway is a good credit risk for short term creditors or on the brink of bankruptcy? Explain. d) Is there anything unusual about the operating cycle of supermarkets that would make you think that they would normally have lower current ratios than say any large department stores? e) What other types of information could you utilize in performing a more complete analysis of Safeway's liquidity? 2. The following data are adapted from a recent annual report of Walgreen Drug Stores (dollar amounts are stated in millions). 2002 2001 Quick Assets $1,304.7 $815.2 Current Assets 5,166.5 4,393.9 Current Liabilities 2,955.2 3,011.6 Stockholder's Equity 6,230.2 5,207.2 Total Assets 9,878.8 8,833.8 Balance Sheet Data Income Statement Data Net Sales $28,681.1 $24,623.0 Gross Profit 7,605.0 6,574.1 Operating Income 1,624.2 1,398.3 Net Income 1,019.2 885.6 Instructions: a) Compute the following for 2002 and 2001. (Round to one decimal place) 1. Working Capital 2. Current Ratio 3. Quick Ratio b) Comment on the trends in the liquidity measures and state whether Walgreen appears to be able to satisfy its liabilities at the end of2002. c) Compute the percentage changes for 2002 in the amounts of net sales and net income (Round to one-tenth of 1 percent). d) Compute the following for 2002 and 2001. (Round to one tenth of 1 percent . For items 3 and 4 , use the year end amounts stated above as substitutes for average assets and average stockholder's equity.) 1. Gross profit rate 2. Net Income as a percentage of sales 3. Return on assets 4. Return on stockholder's equity e) Comment on the trends in the profitability measures computed in parts c and d. 3. This selected information is from recent annual reports of the three largest retail pharmaceutical companies in the United States. (Dollar amounts are stated in billions). CVS Corp WalGreen Rite Aid Corp. Net Sales $? $28.6 $15.2 Cost of Goods Sold 17.9 ? 11.7 Gross Profit 6.2 ? ? Gross Profit Margin ?% 26.2% ?% Total Square Feet of Selling Space 44.2 Million 42.7 Million 38.8 Million Sales per square foot of selling space ? ? ? Fill in the missing amounts and percentages (Round dollar amounts to nearest billion and % to the nearest whole percent). 4. Assume that you will soon graduate from College and that you have job offers with two pharmaceutical firms. The first offer is with Alpha Research, a relatively and aggressive company. The second is with Omega Scientific, a very well established and conservative company. Financial information pertaining to each firm and to the pharmaceutical industry as a whole is as follows: Financial Measure Alpha Omega Industry Average Current Ratio 2.2 to 1 4.5 to 1 2.5 to 1 Quick Ratio 1.2 to 1 2.8 to 1 1.5 to 1 Return on Assets Return on Equity P/E ratio 17% 28% 20 to 1 8% 14% 10 to 1 10% 16% 12 to 1 The Omega offer is for $36,000 per year. The alpha offer is for $32,000. However, unlike Omega, Alpha awards its employees a stock option bonus based on profitability for the year. Each option enables the employee to purchase shares of Alpha's common stock at a significantly reduced price. The more profitable this company is, the more stock each employee can buy at a discount. Show how the above information may help justify accepting the Alpha Research offer , even though the starting salary $4,000 lower than the Omega Scientific offer. 5. A condensed balance sheet for Bradford Corporation prepared at the end of the year appears as follows: Assets Liabilities and Stockholder's Equity Cash $95,000 Notes payable (due 6 $40,000 months) Accounts receivable 155,000 Accounts payable 110,000 Inventory 270,000 Long-term Liabilities 360,000 Prepaid Expenses 60,000 Capital Stock $5 par 300,000 Plant and 570,000 Retained Earnings 430,000 Equipment (Net) Other Assets 90,000 Total $1,240,000 Total $1,240,000 During the year, the company earned a gross profit of $1,116,000 on sales of $2,950,000. Accounts receivable, inventory and plant assets remained almost constant in amount throughout the year. Compute the following: a) Current ratio b) Quick Ratio c) Working Capital d) Debt Ratio e) Accounts receivable turnover all sales were on credit f) Inventory turnover g) Book Value per share of capital stock Assignment No. 2 Accounting and Valuation of Inventory and COGS 1. Star Track sells satellite tracking systems for receiving television broadcasts from communication satellites in space. On December 31, 2004, the company's inventory amounted to $44,000. During the first week in January 2005, Star Track made only one purchase and one sale. These transactions were as follows: Jan 3 . Sold a tracking system to Mystery Mountain Resort for $20,00 cash. The system consisted of seven different devices, which had a total cost to Star Track of $11.200 . Jan 7 Purchased two Model 400 and four Model 800 satellite dishes from Yamaha Corp. The total cost of this purchase amounted to $10,000; terms 2/10 at n/30. Star Track records purchases of merchandise at net cost. The company has full time accounting personnel and uses manual accounting system. Instructions: a) Briefly describe the operating cycle of a merchandise company. b) Prepare journal entries to record these transactions, assuming that Star Track uses a perpetual inventory system. c) Explain what information in b should be posted to subsidiary ledger accounts. d) Compute the balance in the inventory control account of January 7. e) Prepare journal entries to record the two transactions, assuming that Star Track uses a periodic inventory system. f) Compute the Cost of Goods Sold for the first week of January, assuming use of the periodic system. As the amount of ending inventory, use your answer to Part D. g) Which type of inventory system do you think Star Trak should use? Explain your reasoning. h) Determine the gross profit margin on the January 3 sales transaction . 2. Pemberton Products uses a periodic inventory system. The company records show the beginning inventory of PH4 oil filter on January1, and the purchases of this item during the current year to be as follows: Jan 1 Beginning Inventory ........ 9 units @$3.00 Feb. 23 Purchase .....................12 units@$3.50 $27.00 42.00 April 20 Purchase ......................30 units@$3.80 114.00 May 4 Purchase ......................40 units@$4.00 160.00 Nov. 30 Purchase ......................19 units@$5.00 95.00 Totals .......................... 110 units $438.00 A physical inventory count indicates 20 units in inventory, based on each of the following methods of inventory valuation. (Remember to use periodic inventory costing procedures). a) Average cost b) FIFO c) LIFO Adopted from: Williams J.R. Financial and Managerial Accounting, 13 ed. McGraw Hill/Irwin, 2005