Formulas 

Current Ratio = Current Assets / Current Liabilities 

Debt-to-assets ratio = Total Liabilities / Total Assets  

Asset turnover ratio = Net Sales Revenue / Average Total Assets  

Net profit margin ratio = Net Income / Net Sales Revenue 

Gross profit percentage = (Net Sales Revenue - Cost of Goods Sold) / Net Sales Revenue Inventory turnover ratio = Cost of Goods Sold / Average Inventory 

Days to Sell = 365 / Inventory Turnover Ratio 

Earnings Per Share Ratio = Net Income / Avg Number of Shares Outstanding Return on Equity Ratio = Net Income / Average Shareholders' Equity Price Earnings Ratio = Current Share Price / Earnings per Share 

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Problem 1: [8 minutes, 3 marks] Mattel, Inc. is one of the world's most prominent toy manufacturers, owning such brands as Barbie and Hot Wheels. Assume the following information is taken from the company's financial statements: 2014 2013 2012 Current Assets $122,615 $100,227 $113,443 Total Assets 517,519 517,570 553,957 Current Liabilities 90,011 70,237 70,376 Total Liabilities 241,870 267,637 320,376 Total Stockholders' Equity 275,649 249,933 233,581 Sales Revenues 299,046 181,224 231,651 Net Income (Loss) 22,610 5,265 (89,858) Required: Below are three questions about the financial results in 2014 and 2013. For each question listed below, (1) name the appropriate ratio for answering the question, (2) use your calculations to prepare and support an answer. A. Did the company become more successful or less successful in controlling its expenses while generating sales? 7. Net profit margin ratio 2. 22. 610- 5, 265 = 0, 08 - 6 1 03 - company became more 299. 046 181, 224 successful B. Did the company become more efficient or less efficient in using its assets to generate sales? 7. Asset turnover ratio 2 . 299, 046: 058 181.224 6,34 -7 Company became more 517, 544.5 5 35, 763.5 efficient C. Did the company increase or decrease its relative reliance on creditors for financing the purchase of assets? 7. Debt to-assets 2 . 241, 870 .=0,47 267, 637 =0152 - Company decreased its 517. 519 517, 570 relative reliance on creditors 

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Problem 2: [10 minutes, 5 marks] Learn to Skate, Inc., is a company that provides skating lessons to all
ages. Its unadjusted trial balance at December 31, 2015, follows along with information about selected
accounts. Account Name Debit Credit Further Information Cash 5 23,800 As reported on ... 

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Problem 1: [15 minutes, 10 marks] Prior to the transactions listed below in the left column, Restaurant Inc. reported a debt-to-assets ratio of 0.60, asset turnover of 1.10, net pro?t margin of 0.25, and earnings per share of $1.00. Reguired: Complete the lettered cells in the following table by indicating whether each transaction causes the selected ratios for Restaurant Inc. to increase (+), decrease (?), or not change (NC). Notice you do Lot need to show the updated ratios. Consider each of the five transactions independently (i.e., on their own). Asset Net Pro?t Earnings Transaction Turnover Ma _in Per Share Mo Customers used previously issued gift certificates for food and drinks valued at $200. Received $50,000 cash from shareholders for additional common shares of Restaurant Inc. Purchased and received, but didn't yet pay for, equipment costng $320. Accrued $750 for this month's utility bill, which will be paid next month. Recorded $1,800 of depreciation this month. 

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Problem 3: [20 minutes, 15 marks] Campus Books (CB) is a retail store that purchases textbooks from publishers, and then sells these textbooks to students on campus for use in their registered classes. . On August 15th, CB placed an order with McGraw-Hill to purchase 100 accounting textbooks at a per unit cost of $50 each, under terms 3/10, n/30. On August 20th, CB placed an order with Wiley to purchase 70 finance textbooks at a per unit cost of $45 each, under terms 2/10, n/30. . CB received the accounting textbooks on September 1st while the finance textbooks arrived September 3rd. . On September 4th, CB returned 10 of the accounting textbooks to the publisher as they did not come with the Connect access code attached to the book. On September 5th, CB complained to Wiley about the condition of the finance textbooks, as some of them were damaged slightly during shipping. Wiley granted CB an allowance of $280. On September 6th, CB paid McGraw-Hill for the amount owing on the accounting textbooks. On September 7th, CB sold 76 of the accounting textbooks for $110 each and 50 of the finance textbooks for $100 each. All sales were made to students and were paid with either cash or credit card. On September 8th, 16 accounting textbooks were returned by students to CB, as 9 the students had decided after the first week of classes, accounting was not for them, and luckily they hadn't taken the textbook out of its packaging yet. . On September 15th, CB paid Wiley for the amount owing on the finance textbooks. Required: 1. Prepare journal entries for CB to record the business transactions described above. [12 marks] 2. Calculate the gross profit on the sales of the accounting textbooks and the gross profit on the finance textbooks. [2 marks] 3. What is the cost of the remaining accounting textbooks on hand for CB after all of the transactions are accounted for? [1 mark] 

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Problem 4: [15 minutes, 10 marks] The following are the ?nancial statements of Peterson Corporation for its year ended December 31, 2015 and 2014. All of Peterson's revenue is earned on account (ie. no cash sales). Peterson Corporation Balance Sheet At December 31 E?lé ASSETS Current Assets Cash $ 800 Accounts Receivable 330 Prepaid Rent 120 Total Current Assets 1,250 Equipment 2,600 Accumulated Depreciation (6001 Total Assets M 2014 $1,000 350 1 10 1 ,460 2,000 (500] M LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts Payable Wages Payable Total Current Liabilities Note Payable Total Liabilities Shareholders" Equity Contributed Capital Retained Earnings Total Shareholders' Equity Total Liabilities and SIH Requirements: $ 40 60 100 860 960 1,000 , 0 , 0 M Peterson Corporation Income Statement For the Year Ended December 31 Z?lé 2911 $3,000 $2,900 1,200 1,150 Service Revenue Wages Expense Rent Expense 800 780 Utilities Expense 150 140 100 $_ZS_Q Other Expenses Net Income 100 $_7_3_Q Peterson Corporation Statement of Cash Flows For the Year Ended December 31 Operating Cash F Jaws 2015 2 14 Net Income $ 750 $ 730 Depreciation 100 80 Change in non-cash working capital 85 1301 Net operating cash ?ow 935 780 Investing Cash Flows Purchased equipment 600 100 Financing Cash Flows Cash dividends paid {100) (10) Repaid promissory note {4351 (201 Net ?nancing cash ?ow 15351 1301 Net change in cash {200) 650 Cash position, beginning m 350 §=§QQ Cash position, ending 1. Calculate the total cash Peterson received from its customers during the year ended December 31, 2015. [2 marks] 

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2. Calculate the total cash Peterson paid to its employees during the year ended December 31, 2015. [2 marks] 3. Calculate the total cash Peterson paid to its landlord for rent during the year ended December 31, 2015. [2 marks] 4. Evaluate Peterson's Statement of Cash Flows for the year ended December 31, M similar to how we evaluated West] et's Statement of Cash Flows in class. Indicate what areas of the statement can be analyzed, and then write an analysis on each of these areas stating whether the reported amounts are a good or bad signal for the company and why. [4 marks] 

Problem 2: 

Ballad Company's annual accounting year ends on June 30. It is June 30, 2020, and all of the 2020  entries except the following adjusting journal entries have been made.  

Required:  

Prepare the adjusting journal entries that are required on June 30, 2020. [5 marks] 

a) On March 31, 2020, Ballad paid a six-month premium for property insurance in the  amount of $6,000 for insurance coverage starting on that date. Cash was credited and  Prepaid Insurance was debited for this amount. 

Account Names	Debit	Credit

 

b) On June 1, 2020, Ballad collected two months' maintenance revenue of $550. At that  date, Ballad debited Cash and credited Deferred Maintenance Revenue for $550. One  half of it has now been earned but not yet recorded. 

Account Names	Debit	Credit

 

c) Depreciation must be recognized on a service truck that was purchased on December 1,  2019. Annual depreciation is calculated to be $3,600. 

Account Names	Debit	Credit

 

d) Cash of $4,200 was collected on May 1, 2020, for services to be rendered evenly over the next year, beginning on May 1. Deferred Service Revenue was credited when the cash  was received. Some of it has now been earned but not yet recorded. 

Account Names	Debit	Credit

 

e) On June 30, 2020, the company completed the work on a contract for an out-of-province  company for $8,500 payable by the customer within 30 days. No cash has been collected and no journal entry has been made for this transaction. 

Account Names	Debit	Credit

 

 

Problem 3: [40 minutes, 23 marks]  

University Books (UB) is a retail store that purchases textbooks from publishers, and then sells these textbooks to students on campus for use in their registered classes. The April  2020 transactions are listed below. 

Required: 

1. Prepare journal entries for UB to record the business transactions described below.  Ignore income taxes. [12 marks] 

? On April 1^st, UB placed an order with McGraw-Hill to purchase 140 accounting  textbooks at a per unit cost of $100 each, under terms 2/10, n/30. The textbooks  were received the same day.  

Account Names	Debit	Credit

 

? On April 4^th, UB returned 40 of the accounting textbooks to the publisher as they  did not come with the Connect access code attached to the book.  

Account Names	Debit	Credit

 

? On April 5^th, UB complained to McGraw Hill about the condition of the  accounting textbooks, as some of them were damaged slightly during shipping.  McGraw Hill granted UB an allowance of $500.  

Account Names	Debit	Credit

 

? On April 6^th, UB paid McGraw-Hill for the amount owing on the accounting  textbooks.  

Account Names	Debit	Credit

 

? On April 7^th, UB sold 80 of the accounting textbooks for $140 each under terms 2/10,  n/30. 40% of the sales were paid with either cash or credit card while the other 60% was  put on account.  

Account Names	Debit	Credit

 

? On April 8^th, 10 accounting textbooks were returned by students to UB, as the students  had decided after the first week of classes, accounting was not for them, and luckily they  hadn't taken the textbook out of its packaging yet. UB reimbursed the students with cash as these students had paid cash when they originally bought the textbooks.  

Account Names	Debit	Credit

 

? On April 10^th, UB received cash from 35% of the sales on account from April 7^th. 

Account Names	Debit	Credit

 

? On April 15^th, UB paid employees $800, $300 of which related to work done in March  and $500 for wages up to April 15^th. 

Account Names	Debit	Credit

 

? On April 20^th, UB received cash from the remaining 65% of the sales on account  for April 7^th. 

Account Names	Debit	Credit

 

? On April 30^th, UB received their monthly utility bill for $400 and will pay this in  May. 

Account Names	Debit	Credit

 

2. Prepare a multistep income statement for the month of April 2020 that would be used for  internal reporting purposes given the transactions listed above. The company's tax rate is  25%. [10 marks] 

	$

 

3. Calculate UB's gross profit percentage and compare it to UB's online competitor who has a gross profit percentage of 20%. Who is better off? [1 mark] 

 

Problem 4: [23 minutes, 10 marks]  

Bondi Ltd. uses a perpetual inventory system and has the following data available for inventory,  purchases, and sales for a recent year: 

Activity	Units	Purchase Price (per unit)	Sales Price (per unit)
Beginning inventory	150	$5.50
Purchase 1, Jan. 20	675	6.00
Sale 1	395		$10.80
Sale 2	325		11.00
Purchase 2, Mar. 15	690	6.10
Sale 3	370		11.00
Sale 4	200		11.50
Purchase 3, Sept. 18	250	6.30
Sale 5	260		11.90

 

Required: 

1. Compute the cost of goods available for sale before taking into account any sales. [1  mark] 

 

2. Compute the cost of ending inventory and the cost of goods sold using the specific  identification method. Assume the ending inventory is made up of 40 units from  beginning inventory, 30 units from purchase 1, 80 units from purchase 2, and 40 units  from purchase 3. [2 marks] 

 

3. An inventory count took place at the end of the year and indicated that 190 units are left  on hand. Compute the cost of ending inventory and the cost of goods sold using the  FIFO inventory costing method. [2 marks] 

 

4. If the company uses FIFO and the Net Realizable Value of ending inventory is $6.00 per  unit, is a write-down of inventory necessary? Why or why not? [1 mark] 

 

5. If a write-down is necessary, calculate how much this write-down would be for and then  record the necessary journal entry. [3 marks] 

Account Names	Debit	Credit

6. What is the conceptual justification for valuing inventory at the lower of cost and net  realizable value? [1 mark] 

 

 

 

 

Please, please, provide all the answers accurately with step-by-step explanations. 

Thank you!

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