Selected data for two similar companies in the toy industry are as follows. Cash Debtors Stocks Equipment (net) M-One 85,000 137,000 450,000 485,000 H-Q 250,000 212,000 460,000 627,000 Current liabilities Long-term liabilities Capital and retained earnings 250,000 400,000 507,000 320,000 500,000 CityU Web Login Service Annual sales Cost of goods sold Salary Other expenses 1,000,000 300,000 150,000 250000 1,500,000 600,000 200,000 175,000 REQUIRED: a) Calculate each company's net profit ratio, current ratio, quick ratio, return on assets, debtors ratio, stock turnover ratio, and gearing ratio. (14 marks) b) Which of the two companies, as judged by the preceding information, would you consider as being in a better financial position and why? (6 marks) vas v I abe X x Aa A WEN AT A aby - A A ** 18 From the following list of account balances, calculate the correct amount of current liabilities: Accounts receivable $5,000. Accounts payable 6,300. Unearned revenues 900. Rent expense 1,200- Sales revenue 46,300. Sales tax payable 3,700 Estimated warranty payable 800. Note payable, due in 90 days 1,300. Accumulated depreciation 700- (A) $12,100 (B) $13,000 (C) $15,000 (D) $61,200 (E) $59,300- 2. The CPA firm auditing IBN Company found that profit had been overstated. Which of the following errors could be the cause? (A) Failure to record depreciation expense for the period. (B) No entry made to record purchase of land for cash on the last day of the year. (C) Failure to record payment of an account payable on the last day of the year. (D) Failure to make an adjusting entry to record revenue which had been earned but not yet billed to customers.. (E) No entry made to record owner draw cash for his personal use.. of the following adjusting entries, which one results in an increase in Liabilities and the recognition of an expense at the end of an accounting period? (A) The entry to accrue salaries owed to employees at the end of the period. (B) The entry to record revenue earned but not yet collected or recorded. (C) The entry to record camed portion of rent previously received in advance from a tenant (D) The entry to write off a portion of unexpired insurance.. (E) None of the above- 4. Before any month-end adjustments are made, the profit of LP Company is $550,000. However, the following adjustments are necessary: office supplies used, $35,000, services performed for clients but not yel recorded or collected, S12,300; interest accrued on note payable to bank, $14.100. After adjusting entries are made for the items listed above, LP Company's profit would be: (A) $488,600 (B) $513,200 (C) S536,200 (D) 583,200 (E) 5541,400. HEAD) dit # 314 1314 # 203 WIRD "Fikille vas v Aa A wen A :- J. abe X2 X? A aby - A. A S. ZAK 5. BOA Ltd. extracted the trial balance for the year ended 31 December 20X9. The total of the debits exceeded the credits by $300. Which of the following could explain the imbalance? (A) Sales of $300 were omitted from the sales day book (B) Returns inward of $150 were extracted to the debit column of the trial balance (C) Discounts received of $150 were extracted to the debit column of the trial balance (D) The bank ledger account did not agree with the bank statement by a debit of $300. (E) None of the above. Prior to taking a physical inventory at year-end, the trial balance records of GD Company showed an inventory of $26,000, sales of $358,000, and a purchase of goods of $215,000. The year-end physical inventory indicated goods on hand costing $24,000. The company's gross profit for the year was: (A) S334,000 (B) $145,000 (C) S143,000 (D) $141,000 (E) Some other amount Watson Company sold a delivery truck for cash of 586,800. The original cost of the truck was $336,000, and a loss of $53,200 was recognized on the sale. The accumulated depreciation at the date of sale must have been (A) $249,200 (B) S145,600 (C) $33,600 (D) S193,000 (E) Some other amount PT Company reported the following information for 20X8 and 20X9: 20X8 20X9. Sales $100,000 $120,000. Cost of goods sold 50,000 66.000. Inventory turnover Given these facts, which of the following statements could be true?. (A) Accounts receivable increased.. (B) Average inventory increased.. (C) Cost of goods sold decreased.. (D) Average inventory decreased.. (E) None of the above. I THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 9 THROUGH 10.. The following transactions occurred during June, the first month of operations for AC Manufacturing . . Issued 60.000 shares to the owners of the corporation in exchange for $600.000 cash. . . Purchased a piece of land for $250,000, making an $80,000 cash down payment and signing a note payable for the balance. . .Made a S100,000 cash payment on the note payable from the purchase of land. . . Purchased equipment on credit from National Supply for $40,000.- 9. Refer to the above data. What are total assets of AC Manufacturing at the end of June? . (A) 5810.000 (3) $710.000 (C) $630,000 (D) $460,000 (E) $420,000. - 10. Refer to the above data. What is the total of AC's liabilities at the end of June? (A) 570,000 (B) 5100,000 (C) $110.000 (D) $180,000 (E) $240,000 il) abe X2 X Aaby AA *** -S- 17. A potential investor interested in predicting the earnings of a company in the future should examine the:. A Balance Sheet only. B. Income Statement only. C. Statement of Retained Earnings. D. Statement of Retained Earnings and Balance Sheet 18. Which statement below is FALSE? A Income taxes payable are tax debts owed to the government. B. Accrued liabilities can include liabilities for salaries and utilities... C. Short-term investments include stocks and bonds of other companies D. Prepaid expenses include accrued interest payable. 19. PT Company reported the following information for 20X6 and 20X7: 20X6 20X7. Sales $100,000 $120,000. Cost of goods sold 50,000 66,000 Inventory turnover Given these facts, which of the following statements could be true? A. Accounts receivable increased.. B. Average inventory increased.. C. Cost of goods sold decreased. D. Average inventory decreased. 20. Xena has the following working capital ratios: 20X9 20X8. Current ratio 1.2:1 1.5:1. Receivables days 75 days 50 days. Payables days 30 days 45 days. Inventory turnover 42 days 35 days. Which of the following statements is correct? A Xena's liquidity and working capital has improved in 20X9. B. Xena is receiving cash from customers more quickly in 20X9 than in 20X8. C. Xena is suffering from a worsening liquidity position in 20X9 D. Xena is taking longer to pay suppliers in 20x9 than in 20x8. (2 )