Rider UniversityFundamental of Accounting (PMBA 8020) Fall 2014 Dr. Larry M. Prober Problem 1 (14 Points) 1. In its 2013 annual report, Kohl’s Corporation reported the following (in millions): Total assets Total shareholders’ equity Total liabilities $13,905 $ 6,048 $ 7,857 What proportion of Kohl’s Corporation is financed by nonowners? A) B) C) D) E) 56.5% 54.2% 43.5% 77.0% None of the above 2. As inventory and property plant and equipment on the balance sheet are consumed, they are reflected: A) B) C) D) E) As a revenue on the income statement As an expense on the income statement As a use of cash on the statement of cash flows On the balance sheet because assets are never consumed Both B and C because the financial statements articulate 3. How would cash collected in advance for services affect the balance sheet? A) B) C) D) Increase liabilities and decrease equity Decrease liabilities and increase equity Increase assets and increase liabilities Increase assets and increase equity 4. A statement of cash flows usually does not include which of the following? A) B) C) D) E) Net income Increase in accounts receivable Contributed capital Depreciation expense None of the above 5. Sam’s Club (part of the WalMart consolidated operations) collects annual non-refundable membership fees from customers. When should Sam’s Club recognize revenue for these membership fees? A) Immediately when cash is received because the fees are nonrefundable B) Evenly over the membership year C) Evenly over the current fiscal year D) At the end of the membership year when Sam’s has discharged its obligation to the customer E) Pro rata over the customer’s actual purchasing pattern 510 $3.798. in its footnotes.924 $375.000 = – = Paid $1.934 Which of the following is true? A) Life Technologies Corporation is the more R&D intensive company of the two.892 $377. C) Affymetrix is more R&D intensive in 2012 than in 2011.588.623 $267. The balance sheet reports inventories at $198 million. B) Life Technologies Corporation has become more R&D intensive over the three years. D) Affymetrix is less R&D intensive in 2012 than in 2011. Capital + Earned Capital Revenues – Expenses = Issued stock for $40.672 $3.474 $310.6. (in thousands) Total revenue R&D expenses Life Technologies Corporation 2012 2011 2010 2012 Affymetrix Inc 2011 2010 $3.881 $63. The difference between these two numbers ($20 million) is referred to as: A) LIFO reserve B) LIFO conformity rule C) LIFO holding gain D) Inventory temporary difference E) None of the above Problem 2 (6 Points) Record the following transactions in the financial statement effects template below: Balance Sheet Transaction Cash Asset + Noncash Assets = Liabilities + Income Statement Contrib. uses the LIFO inventory costing method for both tax and financial reporting purposes.746 $341. Following is a table of Total revenue and R&D expenses for both companies. Assume that Barber Co.850 for rent = – = Performed services for $2. E) None of the above 7. are competitors in the life sciences and clinical healthcare industry. Then.094 $295. the company reports that inventories would have been $218 million had the company used the FIFO method. Life Technologies Corporation and Affymetrix Inc.591 $67.465 $57.500 cash = – = Net Income .775. 501 1.2 497.957 Marketable securities Net revenue 733.001.975 239.839 832.824. net Long-term debt Long-term receivables $285. net Receivables. (You do not need to use all of these accounts) Problem 4 (8 Points) Use the accounts below for Stanley Black and Decker to prepare an income statement for the year ended December 28.460. Inc.087 1.686 Other long-term assets 172.245. general and administrative expenses Income tax expense Interest and other nonoperating expenses.Problem 3 (20 Points) The following is an alphabetical list of accounts from 2013 financial statements of Collins.780 -629.291 Other non-operating expenses Other operating income.3 147.087 (3.180.709 761.700. 12/31/2012 Cash. ($ millions) Cost of goods sold Sales Other operating expenses Selling. 2013.800 287.724 47.629 841.0) .591.367 210.617) Required: Prepare a balance sheet at December 31.725 3.024.477 479.9 69.397 769.522 5.469 2.099 -34. Accounts payable Accrued liabilities Cash from operating activities Cash for financing activities Cash for investing activities Cash. (in thousands).6 (28. net Prepaid expenses Property and equipment.736 725. net Retained earnings SG&A expense Tax expense Treasury stock 5. net Net (loss) earnings from discontinued operations Net (loss) attributable to noncontrolling interests $7.8 2. 12/31/2013 Common stock Cost of goods sold Current portion of LT debt Goodwill Inventories Investment income.259 140.068.415 5.491 58.798 27.473.3 11.051 581. 2013.0) (1. Calculate the following ratios: 1. Receivable collection period (days) 3.133 Sales 9.600 1. Inventory turnover 4.006 82. Inventory Year 1 Year 2 $14. Accounts receivable turnover 2. Inventory-on-hand period (days) B. an upscale organic grocer.001 5. How will James Corporation report its accounts receivable on the balance sheet? Problem 6 (12 Points) Presented below are select financial data from the General Electric Company’s annual report: Amounts in millions Balance sheet Ave. ($ millions) a.189 Average assets 3.316 Average stockholders’ equity 2.400 860 430 $8. Net income $ 246 $ 1.589 66.778 $14.851 10.814 A. b.885 23. Calculate each company’s return on assets (ROA) and return on equity (ROE).290 Estimated % uncollectible 1% 3% 5% 10% a. and The Kroger Co. a mainstream grocer. Comment on any differences you observe. .112 Problem 5 (6 Points) James Corporation has aged its accounts receivable and estimated uncollectible accounts as follows (in millions): Age of Receivables Current 30-60 days past due 61-90 days past due Over 90 days past due Total Balance $5. Explain why Whole Foods has a higher ROA. Whole Foods Market. Disaggregate the ROA for each company into profit margin (PM) and asset turnover (AT). b.233 9. Accounts receivable (net) Ave.705 61.474 Income statement Net sales Cost of goods sold $84.759 $92. Determine the appropriate allowance for uncollectible accounts.Problem 5 (12 Points) Below are several financial statement items for two grocery chains. Evaluate General Electric’s accounts receivable and inventory management. is it because of PM or AT or both? Whole Foods The Kroger Market Co. The straight-line method (SL) b.000 as a collectors’ item. If Elk sells 10 units. which of the above three methods would produce the highest net income? Problem 8 (6 Points) The Lowes Theatre purchased a new projector costing $72. has 18 units in beginning inventory (costing $15 each) and purchases 6 more for $18 each. 2014. . Since prices are rising.Problem 7 (10 Points) Elk Co. Problem 9 (6 Points) How do companies use accounts receivables to shift income? Explain why managers engage in this sort of activity. Compute the depreciation expense for 2014 using: a. Because of changing technologies. Would this amount of depreciation expense in 2014 under (SL) be higher or lower than that calculated under the double-declining balance method. the projector is estimated to last four years after which it will be obsolete and have a salvage value of $4. calculate cost of goods sold and ending inventory if the company uses a) FIFO method. b) average cost method and c) LIFO method.000 on January 1.