Q.1 Answer the following: I. Unity designs and manufactures uniforms for corporations throughout the United States and Canada. The company's stock is traded on NASDAQ. Selected information from the company's balance sheet follows. For Year 2, the company reported sales revenue of $7,413,800, cost of goods sold of $3,031,630, interest expense of $100,000, income tax expense of $750,000, net income of $988,000, cash paid for interest of $80,000, and cash flows from operating activities of $1,200,000. Cash and cash equivalents Marketable securities Accounts receivable Inventories UNITY Balance Sheet (in thousands) Prepaid expenses and other current assets Accounts payable Year 2 $ 70,720 240,106 717,740 463,482 31,562 Current accrued expenses Current portion of long-term debt Long-term debt Year 1 $ 77,823 405,078 779,810 396,000 22,326 129,244 141,526 527,024 8,282 Required: Compute the the following ratios: receivable turnover ratio (assume that 60% of sales were credit sales), inventory turnover ratio, current ratio, cash ratio, times interest earned ratio, [6] and cash coverage ratio. IL ABC Ltd. has developed a new product, which is about to be launched into the market. The variable cost of selling the product is Rs. 17 per unit. The marketing department has estimated that at a sale price of Rs. 25, annual demand would be 10,000 units. However, if the sale price is set above Rs. 25, sales demand would fall by 500 units for each Re. 0.50 increase above Rs. 25. Similarly, if the price is below Rs. 25, demand would increase by 500 units for each Re: 0.50 stepped reduction in price below Rs. 25. Determine the price, which would maximize ABC Ltd.'s profit in the next year. [4] 143,270 190,726 478,122 53,305 III. X Ltd., manufacturers only pens where the marginal cost of each pen is $ 3. It has fixed costs of $ 25,000 per annum, Present production and sales of pens is 50,000 units and selling price per pen is $ 5. Any sale beyond 50,000 pens is possible only if the company reduces 20% of its current selling price. However, the reduced price applies only to the additional units. The company wants a target profit of $ 1,00,000, How many pens to company must produce and sell if the target profit is to be achieved? [4] Q.2 Answer the following: 1. You are an independent CPA hired by the company to audit the company's accounting systems and review the financial statements. In your audit, you developed additional data as follows: a. Wages for the last three days of December amounting to $670 were not recorder or paid. b. Cutler estimated telephone usage at $350 for December, but nothing has been recorded or paid. Depreciation on rental autos, amounting to $23,300 for the current year, was not recorded. c. d. Interest on a $19,000, one-year, 10 percent note payable dated October 1 of the current year was not recorded. The 10 percent interest is payable on the maturity date of the note. e. Maintenance expense excludes $2,000 representing the cost of maintenance supplies used during the current year. f. The Unearned Rental Revenue account includes $4,600 of revenue to be amned in January of next year. g. The income tax expense is $5,300. Payment of income tax will be made in next year. Required: 1. For items (2) through (g), what adjusting entry should Cutler record on December 31? if none is required, explain why. 2. Prepare a corrected income statement for current year in good form, including earnings per share, assuming that 7,000 shares of stock are outstanding all year. 3. Assume beginning of the year balance for Cutler's total assets was $58,020 and its ending balance for total assets was $65,180: Compute total asset turnover ratio based on corrected information. What does this ratio suggest? If the average total assei turnover ratio for the industry is 2.31, what might you infer about Cutler, Inc.? [12] [2] untion

Q.1 Answer the following: I. Unity designs and manafictures uniforms for corporations throughout the United Suates and Canada. The company's stock is traded en NASDAQ, Selected information from the company's balasce sheet follows. For Year 2, the company reportid sales revenue of 57,413,800, coct of goods sold of $3,031,630, interes? expense of $100,000, income tax expense of $750,000, net incoene of $9$8,000, cash paid for interest of $0,000, and cath flows from operating sctivities of $1,200,000. were credit sales), inveatory narnover ratio, carrent ratio, cash ratio, times interest eamed ratio. and cabi eovenige ratio. [6] IL. ABC Lid, has developed a new product, which is about to be lunched into the makket. Tive variable cost of selling the product. is Fs. I 7 per Lnic The marketing deparmet has estimated that at a sale price of Rs. 25, anmul dectand would be 10,000 units. However, if the sale price is set above Rs. 25, sales demand woald fall by 500 usits for efch Re. 0.50 increase above Rs. 23. Simalarly, if the price is below Rs. 2S, densand would increase by 500 units for each Re. 0.50 stepped reduetion in price below Rs. 25. Determice the price, whikh woald maximize ABC Lud.'s profit in the nest year. [4] Iff. X Lu, manufactarens valy pers where the marginal cost of cach peo is 53 . If has fixed costs of $25,000 per annum, Fresent production and sales of pens ia $0,000 units and selling price per pen is $5. Any sale beyond 30,000 pens is posible only if the company redeces 20% of its carrent selling price. However, the reduced price applies enly to the additional units. The company wants a target protit of 1,00,0,0. How enany pens to compary must produse and sell if the target protit is to be axhieved? Q.2 Answet the following: a. Wages for the last three days of Decembet amsanting to $670 were not recorder or paid. b. Cutler estimated teleplione usage at \$350 for Decomber, bat nothing has boen f:coeded or pait. c. Depreciation on rental autos, ampunding to $23,300 for the current ycar. was not recorded. d. Inierest on a $19,000, onte-ysar, 10 petcent eote payable dated Oetober 1 of tive current year was not reconded. The 10 percent inlerest is payable on the maturity date of the note. e. Maimenance expense exelodes $2,000 representing the cost of inaintenance sup aties usod dariag the current year. f. The Uneamed Rental Revenae seceunt inclades $4,600 of revenue to be amod in Jamuary of nexi year. e. The income tax expense is $5,300. Prymeat of income tax will be made in next, ear. Required: 1. For items (a) through ( g ), what adjusting entry should Cutler rocotd on Decemier 31 ? If bone is required, explain why. 2. Prepare a corrected ineome statemerit for curcm year in good form, ineludiny eamings per share, assuming that 7,000 shares of spock afe outstanding all year. 3. Assume beginning of the year balance for Cutler's total assets was $8,020 and is ending balance for total assets was $65,180. Cempule total asset fernover fatio based on cottosted information. What does inis ratio sugsesn II tho average ratio for the indastry is 2.31 , what might you infer about Cutler, Ine