Financial Accounting - Exam 2

EXAM 2 FOR College of Southern Nevada ACCOUNTING 201 HELP!!!!!

Questions 1 to 3 cover the inventory methods:

1.January 1, 2018:Purchased 10 units at $6

January 15, 2018:Purchased 10 units at $9

Sold 14 units:What is the cost of goods sold under LIFO?

A.$114

B.$120

C.$126

D.$132

2.January 1, 2018:Purchased 10 units at $6

January 15, 2018:Purchased 10 units at $9

Sold 13 units: What is the cost of goods sold under FIFO?

A.$81

B.$87

C.$93

D.$99

3.January 1, 2018:Purchased 10 units at $6

January15, 2018:Purchased 10 units at $9

Sold 8 units:What is the cost of goods sold under average-cost?

A.$50

B.$55

C.$60

D.$65

Use the following information for questions 4 to 8:

Cost:$10,000

Salvage $1,000

Useful life:5 years

Units over life:36,000

4.What is the depreciation expense under straight-line?

A.$1,700

B.$1,800

C.$1,900

D.$2,000

5.What is the second year depreciation expense under declining-balance = 200%?

A.$4,000

B.$1,440

C.$864

D.$2,400

6.What is the fourth year depreciation expense under sum-of-years digits?

A.$2,400

B.$1,000

C.$1,100

D.$1,200

7.Assume the asset produced 13,000 units.What is the depreciation expense under the units of production method?

A.$1,300

B.$2,500

C.$3,250

D.$4,250

8.Assume the declining-balance = 200% method is used.What is the book value at the end of year 2?

A.$6,000

B.$3,600

C.$2,160

D.$1,296

The following information is used to answer question 9 to 12:

Bonds:$3,000,000 Par Value

Semiannual Interest Payments

Three-Year Life

Annual Contract Rate: 12%

Annual Market Rate: 10%

9.What is the price of the bond?

A. $3,152,270.76

B. $3,187,305.54

C. $3,215,852.37

D. $3,330,744.36

10.What is the amount of the bond premium?

A. $330,744.36

B. $187,305.54

C. $152,270.76

D. $215,852.37

11.What is the semi-annual cash payment to the bondholder?

A. $150,000

B. $160,000

C. $170,000

D. $180,000

12.What is the total amount of interest expense over the life of the bond?

A. $927,729.24

B. $945,756.32

C. $955,798.51

D. $963,877.98

The following information is used to answer questions 13 to 16:

Bonds:$1,000,000 Par Value

Semiannual Interest Payments,

Three-Year Life

Annual Contract Rate: 6%

Annual Market Rate: 8%

13.What is the price of the bond?

A. 963,544.12

B. 952,877.65

C. 947,578.63

D. 925,587.96

14.What is the amount of the bond discount?

A. 52,421.37

B. 50,865.35

C. 47,822.45

D. 45,647.24

15.What is the semi-annual cash payment to the bondholder?

A. 25,000

B. 30,000

C. 35,000

D. 40,000

16.What is the interest expense for the second semi-annual payment under the effective interest method?

A. 37,903.15

B. 38,219.27

C. 38,548.04

D. 38,889.96

Softbyte Corporation

Comparative Balance Sheets

December 31, 2018 and 2017

20182017

Assets

Cash$174,000$117,000

Accounts Receivable93,00081,000

Merchandise Inventory609,000534,000

Equipment333,000297,000

Accumulated Depreciation- Equipment(156,000(102,000)

Total Assets$1,053,000$927,000

Liabilities & Equity

Accounts Payable$69,000$96,000

Income taxes payable27,00024,000

Common Stock, $2 par value582,000558,000

Paid-in capital in excess

of par value, common stock198,000162,000

Retained Earnings177,00087,000

Total Liabilities & Equity$1,053,000$927,000

Softbyte Corporation

Income Statement

For Year Ended December 31, 2018

Sales$1,992,000

Cost of goods sold1,194,000

Gross profit798,000

Operating expenses

Depreciation expense$54,000

Other expenses501,000555,000

Income before taxes243,000

Income taxes expense42,000

Net income$201,000

Additional Information on Year 2018 Transactions

a.Purchased equipment for $36,000 cash.

b.Issued 12,000 shares of common stock for $5 cash per share.

c.Declared and paid $111,000 in cash dividends.

Required:Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to the indirect method.

Softbyte Corporation

Statement of Cash Flows - Indirect Method

For Year Ended December 31, 2018

Operating Activities

Net income

Adjustments to reconcile net income

to net cash provided by operating activities

Depreciation

Increase in accounts receivable

Increase in inventory

Decrease in accounts payable

Increase in income tax payable

Net cash provided by operating activities

Investing Activities

Purchase of Equipment

Financing Activities

Issuance of common stock

Payment of dividends

Net cash used by financing activities

Net increase in cash

Cash at beginning of period

Cash at end of period

(Note:Questions 17-19 pertain to the information on Pages 5 - 6)

17.What is the net cash provided by operating activities?

A.$119,000

B.$122,000

C.$135,000

D.$144,000

18.What is the net cash used by investing activities?

A.$(25,000)

B.$(28,000)

C.$(36,000)

D.$(39,000)

19.What is the net cash used by financing activities?

A.$(45,000)

B.$(51,000)

C.$(53,000)

D.$(68,000

Wal-Mart Stores Inc. (WMT)

Income Statement

View: Annual Data

All numbers in thousands

Period Ending

Jan 31, 2013

Jan 31, 2012

Jan 31, 2011

Total Revenue

469,162,000

446,950,000

421,849,000

Cost of Revenue

352,488,000

335,127,000

314,946,000

Gross Profit

116,674,000

111,823,000

106,903,000

Operating Expenses

Research Development

-

-

-

Selling General and Administrative

88,873,000

85,265,000

81,361,000

Non Recurring

-

-

-

Others

-

-

-

Total Operating Expenses

-

-

-

Operating Income or Loss

27,801,000

26,558,000

25,542,000

Income from Continuing Operations

Total Other Income/Expenses Net

187,000

162,000

201,000

Earnings Before Interest And Taxes

27,988,000

26,720,000

25,743,000

Interest Expense

2,251,000

2,322,000

2,205,000

Income Before Tax

25,737,000

24,398,000

23,538,000

Income Tax Expense

7,981,000

7,944,000

7,579,000

Minority Interest

(757,000)

(688,000)

(604,000)

Net Income From Continuing Ops

17,756,000

16,454,000

15,959,000

Non-recurring Events

Discontinued Operations

-

(67,000)

1,034,000

Extraordinary Items

-

-

-

Effect Of Accounting Changes

-

-

-

Other Items

-

-

-

Net Income

16,999,000

15,699,000

16,389,000

Preferred Stock And Other Adjustments

-

-

-

Net Income Applicable To Common Shares

16,999,000

15,699,000

16,389,000

Wal-Mart Stores Inc. (WMT)

Balance Sheet

View: Annual Data

All numbers in thousands

Period Ending

Jan 31, 2013

Jan 31, 2012

Jan 31, 2011

Assets

Current Assets

Cash And Cash Equivalents

7,781,000

6,550,000

7,395,000

Short Term Investments

-

-

-

Net Receivables

6,768,000

5,937,000

5,089,000

Inventory

43,803,000

40,714,000

36,437,000

Other Current Assets

1,588,000

1,774,000

3,091,000

Total Current Assets

59,940,000

54,975,000

52,012,000

Long Term Investments

-

-

-

Property Plant and Equipment

116,681,000

112,324,000

107,878,000

Goodwill

20,497,000

20,651,000

16,763,000

Intangible Assets

-

-

-

Accumulated Amortization

-

-

-

Other Assets

5,987,000

5,456,000

4,129,000

Deferred Long Term Asset Charges

-

-

-

Total Assets

203,105,000

193,406,000

180,782,000

Wal-Mart Stores Inc. (WMT)

Balance Sheet (continued)

Liabilities

Current Liabilities

Accounts Payable

59,099,000

55,952,000

52,534,000

Short/Current Long Term Debt

12,719,000

6,348,000

6,022,000

Other Current Liabilities

-

-

47,000

Total Current Liabilities

71,818,000

62,300,000

58,603,000

Long Term Debt

41,417,000

47,079,000

43,842,000

Other Liabilities

-

-

-

Deferred Long Term Liability Charges

7,613,000

7,862,000

6,682,000

Minority Interest

5,395,000

4,446,000

2,705,000

Negative Goodwill

-

-

-

Total Liabilities

126,243,000

121,687,000

111,832,000

Stockholders' Equity

Misc Stocks Options Warrants

519,000

404,000

408,000

Redeemable Preferred Stock

-

-

-

Preferred Stock

-

-

-

Common Stock

332,000

342,000

352,000

Retained Earnings

72,978,000

68,691,000

63,967,000

Treasury Stock

-

-

-

Capital Surplus

3,620,000

3,692,000

3,577,000

Other Stockholder Equity

(587,000)

(1,410,000)

646,000

Total Stockholder Equity

76,343,000

71,315,000

68,542,000

Wal-Mart Stores Inc. (WMT)

Statement of Cash Flows

View: Annual Data

All numbers in thousands

Period Ending

Jan 31, 2013

Jan 31, 2012

Jan 31, 2011

Net Income

16,999,000

15,699,000

16,389,000

Operating Activities, Cash Flows Provided By or Used In

Depreciation

8,501,000

8,130,000

7,641,000

Adjustments To Net Income

394,000

1,515,000

704,000

Changes In Accounts Receivables

(614,000)

(796,000)

(733,000)

Changes In Liabilities

2,313,000

2,746,000

2,243,000

Changes In Inventories

(2,759,000)

(3,727,000)

(3,205,000)

Changes In Other Operating Activities

-

-

-

Total Cash Flow From Operating Activities

25,591,000

24,255,000

23,643,000

Investing Activities, Cash Flows Provided By or Used In

Capital Expenditures

(12,898,000)

(13,510,000)

(12,699,000)

Investments

(316,000)

(3,548,000)

(202,000)

Other Cash flows from Investing Activities

603,000

449,000

708,000

Total Cash Flows From Investing Activities

(12,611,000)

(16,609,000)

(12,193,000)

Financing Activities, Cash Flows Provided By or Used In

Dividends Paid

(5,361,000)

(5,048,000)

(4,437,000)

Sale Purchase of Stock

(7,600,000)

(6,298,000)

(14,776,000)

Net Borrowings

1,487,000

3,485,000

7,819,000

Other Cash Flows from Financing Activities

(498,000)

(597,000)

(634,000)

Total Cash Flows From Financing Activities

(11,972,000)

(8,458,000)

(12,028,000)

Effect Of Exchange Rate Changes

223,000

(33,000)

66,000

Change In Cash and Cash Equivalents

1,231,000

(845,000)

(512,000)

Use Wal-Mart's financial statements to compute the following ratios (20 - 31) for the year ended January 31, 2013.

20. Current ratio

A..83

B..97

C.65

D..50

21.Acid-test (quick) ratio

A..10

B..15

C..20

D..25

22.Accounts receivable turnover

A.65.10 times

B.69.90 times

C.73.85 times

D.78.93 times

23.Inventory turnover

A.5.45 times

B.6.87 times

C.7.16 times

D.8.34 times

24.Profit margin

A.2.75%

B.3.62%

C.4.18%

D.5.34%

25.Asset turnover

A.2.37 times

B.1.23 times

C.3.89 times

D.4.52 times

26.Return on assets

A.8.57%

B.6.19%

C.9.75%

D.7.32%

27.Return on common stockholders' equity

A.15.79%

B.23.02%

C.18.94%

D.28.54%

28.Earnings per share (EPS) (Assume the Weighted-Average Common Shares

Outstanding is 3.14 billion.

A.$5.41

B.$4.35

C.$4.78

D.$6.23

29.Price-earnings (P-E) ratio (Assume the Market Price per Share is $74.75 and the

Earnings Per Share is $4.25)

A.10.44 times

B.12.83 times

C.14.35 times

D.17.59 times

30.Payout ratio

A.31.54%

B.25.64%

C.15.73%

D.20.85%

31.Debt to total assets ratio

A.58.45%

B.72.85%

C.62.16%

D.54.35%

32.Times interest earned

A.6.48 times

B.10.82 times

C.8.54 times

D.12.43 times

TIME VALUE OF MONEY

33.Future Value of $1

John and Mary Rich invested $15,000 in a savings account paying 5.25% interest at the time their son, Mike, was born.The money is to be used by Mike for his college education.On his 18^th birthday, Mike withdraws the money from his savings account.How much did Mike withdraw from his account?

A.$42,755.32

B.$30,345.27

C.$35,233.89

D$37,678.11

34.Future Value of Annuity of $1

John and Char Lewis' daughter, Debra, has just started high school.They decide to start a college fund for her and will invest $3,000 in a saving account at the end of each year she is in high school (4 payments total).The account will earn 6.5% interest compounded annually.How much will be in the college fund at the time Debra graduates from high school?

A.$12,345.74

B.$13,221.52

C.$14,864.39

D.$15,211.28

35. Computing a Car Payment

Assume you are financing the purchase of a used car with a four-year loan.The loan has a 6% stated annual interest rate, compounded monthly.The price of the car is $8,000.What is the monthly car payment assuming that the payments start one month after the purchase?

A.$187.88

B.$195.49

C.$203.40

D.$209.57

36.Present Value of Annuity of $1

You are evaluating financing options for a loan on a house.You decide that the maximum mortgage payment you can afford is $650 per month.The annual interest rate is 8.4%.If you get a mortgage that requires you to make monthly payments over a 30-year period, what is the maximum home loan you can afford?

A.$80,455.37

B.$82,349.58

C.$85,320.01

D.$90,346.55