Reference no: EM1313799

Preparation of Balance sheet and Income Statement and computation of ratios.

1.  Unearned rent revenue would be listed under which of the following categories on a balance sheet?

a.         current assets

b.        long-term investments

c.         current liabilities

d.        stockholders' equity

e.         Unearned rent revenue would not appear on the balance sheet.

2.  Expense should be included in the income statement in the period in which (hint: the matching principle applies here)

a.         it is paid.

b.        the related revenue is collected.

c.         the related revenue is subject to tax.

d.        the related revenue is earned.

e.         it is deductible for tax purposes.

3.  A firm sells inventory for $100 that it acquired for $60. The customer pays $25 at the time of the sale and promises to pay the remaining $75 in the following month. The firm should recognize

a.         $100 of revenue and $60 of expense in the following month when the customer's payment is complete.

b.        $25 of revenue and $60 of expense at the time of the sale and another $75 of revenue when the rest of the sale price is collected.

c.         $25 of revenue and $15 of expense at the time of the sale and another $75 of revenue and $45 of expense when the rest of the sale price is collected.

d.        $100 of revenue and $60 of expense at the time of the sale.

e.         None of the above.

4.  A firm performed services for a client in September for $100. It collected $70 in September and $30 in October. Based on this information, for the month of October the firm should recognize

a.         no revenue.

b.        revenue of $30.

c.         revenue of $100.

d.        None of the above.

5.  Basic earnings per share is computed as

a.         net income from operations divided by the average number of shares outstanding during the period.

b.        net income before the expenses of interest and taxes divided by the average number of shares outstanding during the period.

c.         net income divided by the average number of shares outstanding during the period.

d.        net income divided by the number of shares outstanding on the last day of the period.

e.         dividends paid on each share of common stock during the period.

6. The following are the year-end balances of Salter Corporation for 2006 and 2007:

	31-Dec-07	31Dec06
Cash	$ 65,000	$ 45,000
Accounts   Receivable	80,000	50,000
Inventory	55,000	25,000
Property, Plant, and Equip	500,000	400,000
Total assets	$700,000	$520,000
	========	========
Accounts Payable	75,000	60,000
Bonds Payable (due in 2010)	100,000	100,000
Capital Stock	300,000	200,000
Retained Earnings	225,000	160,000
Total liabilities & Equity	$700,000	$520,000
	========	========

 

Required: If income for 2007 was $150,000, provide the following information as of December 31, 2007:  (Don't forget the articulation of statements discussed during Week 2 and 3- including retained earnings).

a.         Dividends declared (2007 only) = $__________

b.        Current ratio (2007 only) = ___________

c.         Debt-to-equity ratio (2007 only) = __________

d.        Debt ratio (2007 only) = __________

7. The accounts of the Capitan Company are shown below:

                                 Capitan Company

                                      List of Accounts

                                      December 31, 2007        

Accounts Payable	$20,000
Accounts Receivable	18,000
Accumulated Depreciation	11,000
Capital Stock	75,000
Cash	85,000
Cost of Goods Sold	12,000
Equipment and Buildings	81,000
Inventory	15,000
Long-Term Investment	30,000
Land	27,000
Marketable Securities	3,000
Mort-gage Payable	89,000
Patents	4,000
Prepaid Rent	6,000
Rent Expense	24,000
Retained Earnings	?
Sales	49,000
Salary Expense	19,000
Supplies	6,000
Taxes Payable	11,000
Unearned Revenue	19,0

 

Required:

Prepare in good form a classified balance sheet at December 31, 2007, for the Capitan Company. Assume that no dividends were declared during 2007.

8. The following information is available for the Koufax Company for the year ending Dec. 31, 2007:

Sales	400,000
Depreciation expense	50,000
Insurance expense	10,000
Salaries expense	60,000
Delivery expense	2,000
Cost of goods sold	180,000
Interest expense	12,000
Rental income	4,000
Income tax rate	30%
Beginning Retained Earnings	50,000
Dividends	25,000

 

Required:

Prepare two income statements and the Retained Earnings Statement. Use the single-step format and multiple-step income formats.