#### Description of this paper

##### Ch.5 finance Quiz

Description

solution

Question

Question;Exercise 5-1;On June;1, 2011, the Luttman and Dowd Company sold inventory to the Ushman Corporation;for \$400,000. Terms of the sale called;for a down payment of \$100,000 and four annual installments of \$75,000 due on;each June 1, beginning June 1, 2012.;Each installment also will include interest on the unpaid balance;applying an appropriate interest rate.;The inventory cost Foster \$150,000.;The company uses the perpetual inventory system.;Required;1. Compute the amount of gross profit to be;recognized from the installment sale in 2011, 2012, 2013, 2014, and 2015 using;point of delivery revenue recognition. Ignore interest charges.;2. Repeat requirement 1 applying the;installment sales method.;3. Repeat requirement 1 applying the cost;recovery method.;Exercise 5-2;The Ugenti Construction Company;contracted to construct a warehouse building for \$2,600,000. Construction began in 2011 and was completed;in 2012. Data relating to the contract;are summarized below;2011 2012;Costs incurred during the year................................. \$;360,000 \$1,650,000;Estimated;costs to complete as of 12/31............... 1,560,000;-;Billings;during the year............................................. 430,000 2,170,000;Cash;collections during the year.............................. 320,000 2,280,000;Required;1. Compute the amount of gross profit or loss;to be recognized in 2011 and 2012 using the percentage-of-completion method.;2. Compute the amount of gross profit or loss;to be recognized in 2011 and 2012 using the completed contract method.;3. Prepare a partial balance sheet to show how;the information related to this contract would be presented at the end of 2011;using the percentage-of completion method.;4. Prepare a partial balance sheet to show how;the information related to this contract would be presented at the end of 2011;using the completed contract method.;Exercise 5-3;On April 13, 2011, the Pagano;Construction Company entered into a three-year construction contract to build a;mall for a price of \$12,000,000. During;2011, costs of \$3,000,000 were incurred with estimated costs of \$6,000,000 yet;to be incurred. Billings of \$3,800,000;were sent and cash collected was \$3,250,000.;In 2012, costs incurred were;\$4,000,000 with remaining costs estimated to be \$5,600,000. 2012 billings were \$3,500,000 and \$3,600,000;cash was collected. The project was;completed in 2013 after additional costs of \$5,800,000 were incurred. The company?s fiscal year-end is December;31. Arrow uses the percentage-of-completion;method.;Required;1. Calculate the amount of gross profit or;loss to be recognized in each of the three years.;2. Prepare journal entries for 2011 and 2012;to record the transactions described (credit ?Various accounts? for;construction costs incurred).;3. Prepare a partial balance sheet to show the;presentation of the project as of December 31, 2011 and 2012.;Exercise 5-4;On November 15, 2011, the;Coldstone Ice Cream Company entered into a franchise agreement with an;individual. In exchange for an initial;franchise fee of \$25,000, Coldstone will provide initial services to the;franchisee to include assistance in design and construction of the building;help in training employees, help in obtaining financing, and management advice;over the first five years of the ten-year franchise agreement.;50% of the initial franchise fee;is payable on November 15, 2011, with the remaining \$12,500 payable in five;equal annual installments beginning on November 15, 2012. These installments will include interest at;an appropriate rate. The franchise;opened for business on February 15, 2012.;Required;Assume that the initial services to be performed by Coldstone;subsequent to November 15, 2011, are substantial and that collectibility of the;installment receivable is reasonably certain.;Substantial performance of the initial services is deemed to have;occurred when the franchise opened.;Prepare the necessary journal entries for the following dates (ignoring;interest charges);1. November 15, 2011, and;2. February 15, 2012.;Exercise 5-5;The year 2011 income statement of;Garret & Sons Music Company reported net sales of \$10 million, cost of;goods sold of \$6 million, and net income of \$1 million. The following table shows the company's;comparative balance sheets for 2011 and 2010;(\$ in 000s);Assets: 2011 2010;Cash..................................................................................... \$;240 \$ 280 Accounts receivable.......................................................... 800 600 Inventory............................................................................ 850 700 Property, plant, and equipment (net).............................;2,600 2,520 Total assets.................................................................... \$4,490 \$4,100;Liabilities;and Shareholders? Equity;Current liabilities................................................................ \$;720 \$ 650 Notes payable....................................................................;600 1,000;Paid-in capital....................................................................;2,000 2,000;Retained earnings..............................................................;1,170 450;Total liabilities and shareholders;equity.................... \$4,490 \$4,100;Some industry averages for the;company?s line of business are;inventory;turnover 6 times;average;collection period 28 days;asset turnover 2 times;Required;Assess Garret & Son's asset management relative to its industry.;Exercise 5-6;The following condensed;information was reported by Sanders Manufacturing, Inc. for 2011 and 2010;(\$ in 000s);2011 2010Income;statement information;Net sales \$7,200 \$6,800Net income 360;408;Balance Sheet information;Current assets.............................................................. \$ 800 \$ 750 Property, plant, and;equipment (net)...................... 2,100 1,950 Total assets............................................................... \$2,900 \$2,700;Current liabilities......................................................... \$ 250 \$ 400 Long-term liabilities...................................................;950;750;Paid-in capital.............................................................;1,000 1,000;Retained earnings....................................................... 700 550;Liabilities and shareholders? equity..................... \$2,900 \$2,700;Required;1. Determine the following ratios for 2011;a. profit;margin on sales;b. return on;assets;c. return on;shareholders? equity;2. Calculate the DuPont framework for Sanders;for 2011.;3. Determine the amount of dividends paid to;shareholders during 2011.

Paper#51357 | Written in 18-Jul-2015

Price : \$22