Part 2)Application /36

1)The following cases are independent and relate to short-term notes payable. Principal and interest are to be paid at maturity in all cases.Fill in the missing items in the table below. If no number is required, enter zero. Items marked XXXX need not be calculated. Interest is to be calculated using months.

Note to be Interest Payable 2002 Interest

Case Principal Interest Rate Note Given Repaid 12/31/01 Expense [8]

1. $60,000 8% 9/30/01 9/30/02

2. $30,000 10% 9/1/00 3/1/01 XXXX

3. $45,000 8% $1,800 $ 900

4. $20,000 4/1/01 4/1/02 1,350 XXXX

5. 12% 12/1/01 3/1/02 XXXX 1,000

6. 8% 10/1/01 6/1/02 1,600 XXXX

2)Financial statements for Gantner Corporation are presented below. [18]

GANTNER CORPORATION

Comparative Balance Sheet

December 31

2002 2001

Assets

Cash $4,000 $6,000

Accounts receivable (net) 12,000 10,000

Inventory 14,000 20,000

Land 28,000 8,000

Machinery 62,000 60,000

Accumulated amortization (20,000) (14,000)

Total assets $100,000 $90,000

Liabilities and Shareholders' Equity

Accounts payable $10,000 $26,000

Long-term notes payable 35,000 19,000

Common shares 40,000 40,000

Retained earnings 15,000 5,000

Total liabilities and shareholders' equity $100,000 $90,000

GANTNER CORPORATION

Income Statement

For the year ended December 31, 2002

Sales $390,000

Less: Sales returns and allowances 10,000

Net sales $380,000

Cost of goods sold 300,000

Gross profit 80,000

Selling expenses 26,000

Administrative expenses 20,000

Income before income taxes 34,000

Income tax expense 15,000

Net income $19,000

Additional Information:All sales were on account. Common shares were issued at $10 per share. The market price of Gantner's common shares was $32 on December 31, 2001, and $38 on December 31, 2002.

Calculate the indicated ratios at December 31, 2002, or for the year ended December 31, 2002, as appropriate. Report answers to two decimal places.

1. Return on assets is .

2. Acid test ratio is .

3. Profit margin is .

4. Payout ratio is .

5. Debt to total assets is .

6. Asset turnover is .

7. Receivables turnover is .

8. Price-earnings ratio is .

9. Current ratio is .

3)Each of the events below may have an effect on the cash flow statement. Designate how the event should be reported within the cash flow statement using the codes provided below. Codes may be used more than once, or not at all.

Codes

A. Investing activity; cash inflow [10]

B. Investing activity; cash outflow

C. Financing activity; cash inflow

D. Financing activity; cash outflow

E. Operating activity; cash inflow

F. Operating activity; cash outflow

G. Noncash investing and financing activity

Events

_____ 1. Paid the weekly payroll

_____ 2. Paid an account payable

_____ 3. Issued bonds payable for cash

_____ 4. Declared and paid a cash dividend

_____ 5. Paid cash for a new car for a travelling salesperson

_____ 6. Repurchased shares for cash

_____ 7. Paid cash for 40% interest in another company

_____ 8. Received interest on a long-term bond investment

_____ 9. Converted bonds payable into common shares

_____ 10. Sold a long-term equity investment for cash at book value