Management Accounting

Due Tues., May 2 - 7 questions Big Time Picture Frames has asked you to determine whether the company's ability to pay current liabilities and total liabilities improved or deteriorated during 2009. To answer this question, you gather the following data: _____________ _________________________________2009__________2008 Cash $52, 000 51, 000 Short -term investments 30,000 -- Net receivables 110,000 120, 000 Inventory 217,000 262,000 Total assets 540,000 490,000 Total current lia bilities 265 ,000 202,000 Long -term note payable 44,000 54,000 Income from operations 165,000 153,000 Interest expense 44,000 37,000 Requirement 1. Compute the following ratios for 2009 and 2008: a. Current ratio b. Acid -test ratio c. Debt ratio d. Times -interest -earned ratio a. Calculate the current ratio for both years. (Round your answers to two decimal places.) 2009: nothing 200 8: nothing The Variline Inc., comparative income statement follows. 2010 data are given as needed. Variline, Inc. Comparative Income Statement Years Ended December 31, 2012 and 2011 (Doll ars in thousands) 2012 2011 2010 Net sales $176,000 $160,000 Cost of goods sold 93,600 86,000 Selling and general expenses 46,800 41,400 Interest expense 9,600 10,900 Income tax expense 10,200 9,200 Net income $15,80 0 $12,500 Additional data: Total assets $201,000 $192,000 $174,000 Common stockholders' equity $96,900 $89,800 $79,500 Preferred dividends $3,400 $3,400 $0 Common shares outstanding during the year 20,000 20,000 18,000 Re quirements 1. Calculate the rate of return on net sales. 2. Calculate the rate of return on total assets. 3. Calculate the rate of return on common stockholders' equity. 4. Calculate the EPS. 5. Did the company's operating performance improve or deteriorate during 2012? Requirement 1. Calculate the rates of return on net sales for 2012 and 2011. (Round your answers to three decimal places .) 2012: nothing 2011: nothing The Specialty Department Stores, Inc., chief executive officer (CEO) has asked you to compare the company's profit performance and financial position with the average for the industry. The CEO has given you the company's income statement and balance sheet, as well as the industry average data for retailers. Specialty Department Stores, Inc. Income Statement Compared with Industry Average Year Ended December 31, 2010 Industry Specialty Average Net sales $782,000 100.0 % Cost of goods sold 526,286 65.8 Gross profit 255,714 34.2 Operating expenses 164,220 19.7 Operating income 91,494 14.5 Other expenses 6,256 0.4 Net income $85,238 14.1 % Specialty Department Stores, Inc. Balance Sheet Compared with Industry Average December 31, 2010 Industry Specialty Average Current assets $324,960 70.9 % Fixed asset s, net 123,840 23.6 Intangible assets, net 8,160 0.8 Other assets 23,040 4.7 Total assets $480,000 100.0 % Current liabilities $221,760 48.1 % Long -term liabilities 106,560 16.6 Stockholders' equity 151,680 35.3 To tal liabilities and stockholders' equity $480,000 100.0 % Requirements 1. Prepare a common -size income statement and balance sheet for Specialty . The first column of each statement should present Specialty common -size statement, and the second column, the industry averages. 2. For the profitability analysis, compute Special ty's (a) ratio of gross profit to net sales, (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is Specialty 's profit performance better or worse than the industry average? 3. For the analysis of financial position, compute Specialty 's (a) ratio of current assets to total assets and (b) ratio of stockholders' equity to total assets. Compare these ratios with the industry averages. Is Specialty 's financial posit ion better or worse than the industry averages? Requirement 1. Prepare a common -size income statement for Specialty Department Stores. (Round your answers to one decimal place.) Specialty Department Stores, Inc. Common -Size Income Statement Compare d to Industry Average Year Ended December 31, 2010 Specialty Industry (%) Average (%) Net sales 100.0 Cost of goods sold 65.8 Gross profit 34.2 Operating expenses 19.7 Operating income 14.5 Othe r expenses 0.4 Net income 14.1 Financial statement data of Modern Traveler Magazine include the following items (dollars in thousands): Cash. . . . . . . . . . . . . . . . . . . . . . . . $24,000 Accounts receivable, net. . . . .

. . . $78,000 Inventories. . . . . . . . . . . . . . . .

. $187,000 Total assets. . . . . . . . . . . . . . . . . . $639,000 Short -term notes payable. . . . . . . $48,000 Accounts payable. . . . . . . . . .

. . . . $102,000 Accrued liabilities. . . . . . . . . .

. . . . $37,000 Long -term liabilities. . . . . . . . . . . . $225,000 Net income. . . . . . . . . . . . . . . . . . . $73,000 Common shares outstanding. .

. . . 20,000 Requirements 1. Compute Modern Traveler 's current ratio, debt ratio, and earnings per share. Round all ratios to two decimal places. 2. Compute the three ratios after evaluating the effect of each transaction that follows. Consider each transaction separately . a. Purchased inventory of $4 8,000 on account b. Borrowed $125,000 on a long -term note payable c. Issued 2,000 shares of common stock, receiving cash of $105,000 d. Received cash on account, $8,000 Requirement 1. Compute Modern Traveler Modern Traveler 's current ratio, debt ratio, and earnings per share. Round all ratios to two decimal places. Current Ratio Debt Ratio Earnings Per Share The Arborists provide tree -spraying services in the company's home county John Renkas , the owner, incurred the follow ing operating costs for the month of August 2012: Salaries and wages. . . . . . . . . . . . . . . . .

. . . . $6,000 Chemicals. . . . . . . . . . . . . . . . . . . . . . . .

. . . . . 4,900 Depreciation on truck. . . . . . . . . . . . . . .

. . . . . 45 0 Depreciation on building and equipment. . . . . 700 Supplies expense. . . . . . . . . . . . . . . . . . .

. . . . 400 Gasoline and utilities. . . . . . . . . . . . . . . .

. . . . 5,590 The Arborists earned $22,000 in revenues for the month of Augu st by spraying trees totaling 25,000 feet in height. Requirements 1. Prepare an in come statement for the month of August. Compute the ratio of total operating expense to total revenue and operating income to total revenue. 2. Compute the unit operating c ost of spraying one foot of tree height . 3. The manager of The Arborists must keep unit operating cost below $0.50 per foot in order to get his bonus. Did he meet the goal? 4. What kind of system could The Arborists use to integrate all its data? Requirement 1. Prepare an income statement for the month of August. Compute the ratio of total operating expense to t otal revenue and operating income to total revenue. (Round the ratios to the nearest whole number.) The Arborists Income Statement Month Ended August 31, 2012 Chemicals, Depreciation on bldg. & equip, Depreciation on truck, Gasoli ne & utilities, Net operating income, Net operating loss, Salaries 7 wages, Sales revenue, Supplies expense, Total operating expenses % % % Choose from any list or enter any number in the input fields and then click Check Answer. In 2011 Chris Gonzales opened Chris' Pets , a small retai l shop selling pet supplies. On December, 31, 2011, Chris's accounting records showed t he following: Inventory on December 31, 2011 $10,250 Inventory on January 1, 2011 15,400 Sales revenue 52,000 Utilities for shop 3,300 Rent for shop 4,100 Sales commissions 2,550 Purchases of merchandise 24,000 Requirement 1. Prepare an income st atement for Chris' Pets , a merchandiser, for the year ended December 31, 2011. Chris' Pets Income Statement Year Ended December 31, 2011 Advert. Expense, Beginning inventory, Cost of goods avail. for sale, Cost of goods sold, Ending i nventory, Gross profit, Operating profit, Operating loss, Purchases of merch ., Rent exp., Sales commissions exp., Sales Rev., Utilities exp. Cost of goods sold: Cost of goods sold Gross profit Operating expenses: Craig’s Pet s succeeded so well that Craig decided to manufacture his own brand of chewing bone — Fido Treats Fido Treats . At the end of Decembe r 2011, his accounting records showed the following: Inventories: Beginning Ending Materials $13,500 $9,000 Work in process 0 1,250 Finished goods 0 5,200 Other information: Direct material purchases $31,000 Utilities for pla nt $1,100 Plant janitorial services 500 Rent on plant 13,000 Sales salaries expense 5,800 Customer service hotline expense 1,700 Delivery expense 1,400 Direct labor 17,000 Sales revenue 111,000 Requirements 1. Prepare a schedule of cost of goods manufactured for Fido Treats for the year ended December 31, 2011. 2. Prepare an income statement for Fido Treatsfor the year ended December 31, 2011. 3. How does the format of the income statement for Fido Treats differ from the income statement of a merchandiser? 4. Fido Treats manufactured 17,800 units of its product in 2011. Compute the company's unit product cost for the year. Requirement 1. Prepare the schedule of cost of goods manufactured for Fido Treats . (For accounts with a $0 ba lance, make sure to enter "0" in the appropriate column.) Fido Treats Schedule of Cost of Goods Manufactured Year Ended December 31, 2011 Avail. For use, Begin materials invent., Begin work in progress invent., Cost of goods manfac., Deprec., exp. on plant equip., Direct labor, Direct materials used., Ending materials invent., Ending work in process invent., Plant janitorial serv., Purch., of direct materials, Rent on plant., Total m anfac. cost incurred during year., Total m anfac. cost to account for, Utilities for plant Add: Direct materials used Direct materials used Manufacturing overhead: Total manufacturing costs incurred during the year Total manufacturing costs to account for Less: Cost of goods manufactured