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Devry ACCT504 final exam essay questions




Question;15. (TCO A) Use the following partial financial statement;information below to calculate the liquidity and profitability ratios. This;information can be used to correctly solve each of the ratios below.;Average common shares outstanding 35,000;Current liabilities $25,000;Capital expenditures $20,000;Net income $50,000;Cash provided by operations $77,000;Net sales $100,000;Preferred stock dividends paid $30,000;Total liabilities $50,000;Current assets $20,000;Total assets $80,000;Instructions: Compute the following;a) Current ratio;b) Working capital;c) Earnings per share;d) Debt-to-total-assets ratio;e) Free cash flow;To earn full credit, you must show the;formula you are using, show your computations, and explain the meaning of each;of your ratio results. (Points: 30);2. (TCO D) The Oxford Company;has budgeted sales revenues as follows. October;Credit Sales of $120,000. November Credit Sales of $96,000. December Credit sales of $72,000. Cash sales;$ 72,000, $204,000, $156,000. Total sales: $192,000, $300,000, $228,000. Past;experience indicates that 60% of the credit sales will be collected in the month;of sale and the remaining 40% will be collected in the following month. Purchases;of inventory are all on credit, with 60% paid in the month of purchase and 40%;in the month following purchase. Budgeted inventory purchases are$260,000 in;October, $180,000 in November, and $84,000 in December. Other budgeted cash;receipts include (a) the sale of plant assets for $49,400 in November and (b);the sale of new common stock for $67,400 in December. Other budgeted cash;disbursements include (a) operating expenses of $27,000 each month, (b) selling;and administrative expenses of $50,000 each month, (c) dividends of $76,000 to;be paid in November, and (d) purchase of equipment for$24,000 cash in December.;The company has a cash balance of $40,000 at the beginning of December and wishes;to maintain a minimum cash balance of $40,000 at the end of each month. An open;line of credit is available at the bank and carries an annual interest rate of;12%. Assume that all borrowing is done on the first day of the month in which financing;is needed and that all repayments are made on the last day of the month in;which excess cash is available. Also assume that $14,000 of financing was;obtained on November 1.;Requirements: Use this information to prepare a schedule of expected cash payments;for purchases of inventory for the months of November and December only. This;question does not require creation of an entire cash budget so please only create;the schedule that is asked for in the question because otherwise you will be;wasting valuable time.(Points: 30);(TCOs B, E) The;following items are taken from the financial statements of Lansing Company for;2010. Accounts payable: $16,500. Accounts;receivable: $ 25,500. Accumulated depreciation: 12,600. Bonds payable: 35,000. Cash;55,000. Common stock: 75,000. Cost of goods sold: 53,000. Depreciation expense;6,300. Dividends: 5,300. Equipment: 35,000. Interest expense: 4,300. Patents: 6,500. Retained earnings: January 1 $80,000. Salaries expense: $ 42,000.;Sales revenue: $ 115,000. Supplies: $ 3,500.;Instructions: Prepare an income statement;and a retained earnings statement for Lansing Company. (Point: 30);(TCO D) Your;friend James has hired you to evaluate the following internalcontrol;procedures.;a) Explain to your friend whether each of;the numbered items below is an internal control strength or weakness. You must;also state which principle relates to each of the internal controls.;b) For the weaknesses, you also need to;state a recommendation for improvement.Everyone has access to the petty cash;fund.;Cash register codes are assigned to each;cashier. The treasurer is the only one allowed to sign checks. Supervisors;count cash receipts daily. The treasurer approves of the purchases and makes;the payment because he is familiar with the purchases. (Points: 30);5. (TCOs D, E) Please prepare the following;journal entries. Indicate which account should be debited with the abbreviation;DR in front of the account name and which account should be credited with the;abbreviation CR in front of the account name along with the dollar amount of;the debit and credit.;a) Investors invested $150,000 in exchange;for 10,000 shares of common stock.;b) Company made payment on account for;$10,000;c) Company received $15,000 for services;not yet performed;d) Company purchased $7,500 worth of;equipment;e) Company billed $5,000 for services;performed (Points: 30);(TCO C) Please indicate which section of the statement of;cash flows should contain each of the following items and whether each item;would result in an inflow or outflow of cash. The sections are Operating;Investing, and Financing.;a) Depreciation of equipment;b) Increase in accounts payable;c) Sold a building at book value;d) Payment of dividends;e) Increase in inventory (Points: 30)


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