I have some cost accounting questions and need how to arrive at the solution. I have the solutions posted. I think all the solutions I'm providing are correct. These problems are not that difficult. Somehow, I need to see how to set the problems up. Thanks!
41. Boggs Company has 40,000 shares of common stock outstanding. The book value per share of this stock was $60.00 and the market value per share was $75.00 at the end of the year. Net income for the year was $400,000. Interest on long term debt was $40,000. Dividends paid to common stockholders were $3.00 per share. The tax rate was 30%. The company's priceearnings ratio at the end of the year was: A. 25 B. 20 C. 7.50 D. 6.00 C 42. Last year the return on total assets in Jeffrey Company was 8.5%. The total assets were 2.9 million at the beginning of the year and 3.1 million at the end of the year. The tax rate was 30%, interest expense totaled $110 thousand, and sales were $5.2 million. Net income for the year was: A. $145,000 B. $222,000 C. $332,000 D. $178,000 D 43. Brandon Company's net income last year was $65,000 and its interest expense was $20,000. Total assets at the beginning of the year were $640,000 and total assets at the end of the year were $690,000. The company's income tax rate was 30%. The company's return on total assets for the year was closest to: A. 9.8% B. 10.7% C. 12.8% D. 11.9% D Selected year-end data for the Brayer Company are presented below: The company has no prepaid expenses and inventories remained unchanged during the year. Based on these data, the company's inventory turnover ratio for the year was closest to: A. 1.20 B. 2.40 C. 1.67 D. 2.33 C 54. Brewster Company has an acid-test ratio of 1.5 and a current ratio of 2.5. Current assets equal $200,000, of which $10,000 is prepaid expenses. The company's current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory. Brewster Company's inventory must be: A. $30,000 B. $110,000 C. $70,000 D. $80,000 C 55. Cotuit Company has a current ratio of 3.2 and an acid-test ratio of 2.4. The company's current assets consist of cash, marketable securities, accounts receivable, and inventory. The company's inventory is $40,000. Cotuit Company's current liabilities must be: A. $40,000 B. $120,000 C. $50,000 D. $32,000 C 58. Grasse Company had $160,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $12,000. The company's average collection period was closest to: A. 25.09 days B. 22.81 days C. 50.19 days D. 27.38 days B Financial statements for Harwich Company for the most recent year appear below: The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the year. A $0.75 per share dividend was declared and paid during the year. On December 31, Harwich Company's common stock was trading at $24.00 per share. 112.Harwich Company's price-earnings ratio at December 31 was closest to: A. 3.00 B. 8.25 C. 8.00 D. 7.25 C 113.Harwich Company's book value per share at December 31 was closest to: A. $7.00 B. $15.00 C. $24.00 D. $30.00 B 114.Harwich Company's dividend payout ratio for the year was closest to: A. 75% B. 25% C. 5% D. 3.125% B Financial statements for Larned Company appear below: Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $160. 123.Larned Company's book value per share at the end of Year 2 was closest to: A. $16.11 B. $63.89 C. $70.56 D. $10.00 B 41. Boggs Company has 40,000 shares of common stock outstanding. The book value per share of this stock was $60.00 and the market value per share was $75.00 at the end of the year. Net income for the year was $400,000. Interest on long term debt was $40,000. Dividends paid to common stockholders were $3.00 per share. The tax rate was 30%. The company's priceearnings ratio at the end of the year was: A. 25 B. 20 C. 7.50 D. 6.00 Solution: Price-earning ratio = Price per share / Earning per share Earning per share = Net income / Number of shares outstanding = $400,000 / 40,000 = $10 Price-earning ratio = $75 / $10 = 7.50 42. Last year the return on total assets in Jeffrey Company was 8.5%. The total assets were 2.9 million at the beginning of the year and 3.1 million at the end of the year. The tax rate was 30%, interest expense totaled $110 thousand, and sales were $5.2 million. Net income for the year was: A. $145,000 B. $222,000 C. $332,000 D. $178,000 Solution: Return on total assets = [Net income + Interest expense x (1 - Tax rate)] / Average assets Net income = [0.085 x {(2,900,000 + 3,100,000) / 2}] - [110,000 x (1 - 0.30)] = $178,000 43. Brandon Company's net income last year was $65,000 and its interest expense was $20,000. Total assets at the beginning of the year were $640,000 and total assets at the end of the year were $690,000. The company's income tax rate was 30%. The company's return on total assets for the year was closest to: A. 9.8% B. 10.7% C. 12.8% D. 11.9% Solution: Return on total assets = [Net income + Interest expense x (1 - Tax rate)] / Average assets = [65,000 + {20,000 x (1 - 0.30)}] / [(640,000 + 690,000) / 2] = 0.119 or 11.9% Selected year-end data for the Brayer Company are presented below: The company has no prepaid expenses and inventories remained unchanged during the year. Based on these data, the company's inventory turnover ratio for the year was closest to: A. 1.20 B. 2.40 C. 1.67 D. 2.33 Solution: Current assets = Current ratio x Current liabilities = 3.0 x $600,000 = $1,800,000 Current assets - Inventories = Acid-test ratio x Current liabilities = 2.5 x $600,000 = $1,500,000 Inventories = $1,800,000 - $1,500,000 = $300,000 Inventory turnover ratio = COGS / Inventories = $500,000 / $300,000 = 1.67 54. Brewster Company has an acid-test ratio of 1.5 and a current ratio of 2.5. Current assets equal $200,000, of which $10,000 is prepaid expenses. The company's current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory. Brewster Company's inventory must be: A. $30,000 B. $110,000 C. $70,000 D. $80,000 Solution: Current ratio = CA / CL CL = $200,000 / 2.5 = $80,000 Acid test ratio = CA - I - Prepaid expenses / CL CA - I - Prepaid expenses = Acid test ratio x CL CA - I - Prepaid expenses = 1.5 x $80,000 = $120,000 Inventory = $200,000 - $120,000 - $10,000 = $70,000 55. Cotuit Company has a current ratio of 3.2 and an acid-test ratio of 2.4. The company's current assets consist of cash, marketable securities, accounts receivable, and inventory. The company's inventory is $40,000. Cotuit Company's current liabilities must be: A. $40,000 B. $120,000 C. $50,000 D. $32,000 Solution: Current ratio = CA / CL 3.2 = CA / CL Acid test ratio = CA - I / CL 2.4 = CA - I / CL 2.4 = (CA - 40,000) / CL We can write it as, 2.4 = (CA / CL) - (40,000 / CL) We know CA / CL = 3.2 (calculated above) 2.4 = 3.2 - 40,000/CL 40,000/CL = 3.2 - 2.4 = 0.8 CL = 40,000 / 0.8 = $50,000 58. Grasse Company had $160,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $12,000. The company's average collection period was closest to: A. 25.09 days B. 22.81 days C. 50.19 days D. 27.38 days Solution: Accounts receivable turnover = Sales on account / Average accounts receivable balance = $160,000 / [($10,000 + 12,000) / 2] = 14.55 Average collection period = 365 days / Accounts receivable turnover = 365 / 14.55 = 25.09 days Financial statements for Harwich Company for the most recent year appear below: The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the year. A $0.75 per share dividend was declared and paid during the year. On December 31, Harwich Company's common stock was trading at $24.00 per share. 112.Harwich Company's price-earnings ratio at December 31 was closest to: A. 3.00 B. 8.25 C. 8.00 D. 7.25 Solution: Price-earning ratio = Price per share / Earning per share Earning per share = Net income / Number of shares outstanding = $60,000 / 20,000 = $3 Price-earning ratio = $24 / $3 = 8.00 113.Harwich Company's book value per share at December 31 was closest to: A. $7.00 B. $15.00 C. $24.00 D. $30.00 Solution: Book value per share = Common equity / No of shares outstanding = (20,000 + 120,000 + 160,000) / (20,000/1) = $15.00 114.Harwich Company's dividend payout ratio for the year was closest to: A. 75% B. 25% C. 5% D. 3.125% Solution: Dividend payout ratio = Dividend per share / Earning per share = $0.75 / $3.00 = 0.25 or 25% Financial statements for Larned Company appear below: Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $160. 123.Larned Company's book value per share at the end of Year 2 was closest to: A. $16.11 B. $63.89 C. $70.56 D. $10.00 Solution: Book value per share = Common equity / No of shares outstanding = (180,000 + 110,000 + 860,000) / (180,000/10) = $63.89 41. Boggs Company has 40,000 shares of common stock outstanding. The book value per share of this stock was $60.00 and the market value per share was $75.00 at the end of the year. Net income for the year was $400,000. Interest on long term debt was $40,000. Dividends paid to common stockholders were $3.00 per share. The tax rate was 30%. The company's priceearnings ratio at the end of the year was: A. 25 B. 20 C. 7.50 D. 6.00 Solution: Price-earning ratio = Price per share / Earning per share Earning per share = Net income / Number of shares outstanding = $400,000 / 40,000 = $10 Price-earning ratio = $75 / $10 = 7.50 42. Last year the return on total assets in Jeffrey Company was 8.5%. The total assets were 2.9 million at the beginning of the year and 3.1 million at the end of the year. The tax rate was 30%, interest expense totaled $110 thousand, and sales were $5.2 million. Net income for the year was: A. $145,000 B. $222,000 C. $332,000 D. $178,000 Solution: Return on total assets = [Net income + Interest expense x (1 - Tax rate)] / Average assets Net income = [0.085 x {(2,900,000 + 3,100,000) / 2}] - [110,000 x (1 - 0.30)] = $178,000 43. Brandon Company's net income last year was $65,000 and its interest expense was $20,000. Total assets at the beginning of the year were $640,000 and total assets at the end of the year were $690,000. The company's income tax rate was 30%. The company's return on total assets for the year was closest to: A. 9.8% B. 10.7% C. 12.8% D. 11.9% Solution: Return on total assets = [Net income + Interest expense x (1 - Tax rate)] / Average assets = [65,000 + {20,000 x (1 - 0.30)}] / [(640,000 + 690,000) / 2] = 0.119 or 11.9% Selected year-end data for the Brayer Company are presented below: The company has no prepaid expenses and inventories remained unchanged during the year. Based on these data, the company's inventory turnover ratio for the year was closest to: A. 1.20 B. 2.40 C. 1.67 D. 2.33 Solution: Current assets = Current ratio x Current liabilities = 3.0 x $600,000 = $1,800,000 Current assets - Inventories = Acid-test ratio x Current liabilities = 2.5 x $600,000 = $1,500,000 Inventories = $1,800,000 - $1,500,000 = $300,000 Inventory turnover ratio = COGS / Inventories = $500,000 / $300,000 = 1.67 54. Brewster Company has an acid-test ratio of 1.5 and a current ratio of 2.5. Current assets equal $200,000, of which $10,000 is prepaid expenses. The company's current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory. Brewster Company's inventory must be: A. $30,000 B. $110,000 C. $70,000 D. $80,000 Solution: Current ratio = CA / CL CL = $200,000 / 2.5 = $80,000 Acid test ratio = CA - I - Prepaid expenses / CL CA - I - Prepaid expenses = Acid test ratio x CL CA - I - Prepaid expenses = 1.5 x $80,000 = $120,000 Inventory = $200,000 - $120,000 - $10,000 = $70,000 55. Cotuit Company has a current ratio of 3.2 and an acid-test ratio of 2.4. The company's current assets consist of cash, marketable securities, accounts receivable, and inventory. The company's inventory is $40,000. Cotuit Company's current liabilities must be: A. $40,000 B. $120,000 C. $50,000 D. $32,000 Solution: Current ratio = CA / CL 3.2 = CA / CL Acid test ratio = CA - I / CL 2.4 = CA - I / CL 2.4 = (CA - 40,000) / CL We can write it as, 2.4 = (CA / CL) - (40,000 / CL) We know CA / CL = 3.2 (calculated above) 2.4 = 3.2 - 40,000/CL 40,000/CL = 3.2 - 2.4 = 0.8 CL = 40,000 / 0.8 = $50,000 58. Grasse Company had $160,000 in sales on account last year. The beginning accounts receivable balance was $10,000 and the ending accounts receivable balance was $12,000. The company's average collection period was closest to: A. 25.09 days B. 22.81 days C. 50.19 days D. 27.38 days Solution: Accounts receivable turnover = Sales on account / Average accounts receivable balance = $160,000 / [($10,000 + 12,000) / 2] = 14.55 Average collection period = 365 days / Accounts receivable turnover = 365 / 14.55 = 25.09 days Financial statements for Harwich Company for the most recent year appear below: The balances in the Cash, Accounts Receivable, Inventory, Bonds Payable, Common Stock, and Additional Paid-In Capital accounts are unchanged from the beginning of the year. A $0.75 per share dividend was declared and paid during the year. On December 31, Harwich Company's common stock was trading at $24.00 per share. 112.Harwich Company's price-earnings ratio at December 31 was closest to: A. 3.00 B. 8.25 C. 8.00 D. 7.25 Solution: Price-earning ratio = Price per share / Earning per share Earning per share = Net income / Number of shares outstanding = $60,000 / 20,000 = $3 Price-earning ratio = $24 / $3 = 8.00 113.Harwich Company's book value per share at December 31 was closest to: A. $7.00 B. $15.00 C. $24.00 D. $30.00 Solution: Book value per share = Common equity / No of shares outstanding = (20,000 + 120,000 + 160,000) / (20,000/1) = $15.00 114.Harwich Company's dividend payout ratio for the year was closest to: A. 75% B. 25% C. 5% D. 3.125% Solution: Dividend payout ratio = Dividend per share / Earning per share = $0.75 / $3.00 = 0.25 or 25% Financial statements for Larned Company appear below: Dividends during Year 2 totaled $263 thousand, of which $12 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $160. 123.Larned Company's book value per share at the end of Year 2 was closest to: A. $16.11 B. $63.89 C. $70.56 D. $10.00 Solution: Book value per share = Common equity / No of shares outstanding = (180,000 + 110,000 + 860,000) / (180,000/10) = $63.89
