• Lulu, Inc.

  Balance Sheets

  Ending Balances per years

  	2019		2020
  Cash	100,000		120,000
  Supplies	40,000		35,000
  AR	40,000		35,000
  Inventory	50,000		60,000
  Equipment	150,000		140,000
  Total	380,000		390,000
  Liabilities
  AP	30,000		33,000
  Salaries Payable	20,000		22,000
  NP	180,000		180,000
  Total	230,000		235,000
  Equity
  Common stock	75,000		75,000
  PIC Common	40,000		40,000
  Retained Earnings	35,000		40,000
  Total	150,000		155,000
  Total Liabilities & Equity	380,000		390,000

  
  

  
  LuLu. Inc.

  Income Statement

  For the Year Ended 2020

  Sales			1,000,000
  COGS			450,000
  Gross Margin			550,000
  Operating Expense
  	Administrative	100,000
  	Selling	60,000
  	Total		160,000
  EBIT			390,000
  Interest			10,000
  EBT			380,000
  Taxes	50% rate		190,000
  Operating Income			190,000

  
  

  Notes:

  • There are 120,000 shares of Common Stock. 400,000 shares are authorized and 120,000 are issued and outstanding. There is no Treasury Stock or Preferred Stock.
  • Market price per share is $35.
  • Dividends of $10,000 were issued.
  • Assume that Cash Flows from Operating Activities is $210,000.
  • Capital Expenditures for the year are $65,000.

• 
  

  Required: Compute the ratios for 2020. Compute all ratios as are listed in the front cover page of your textbook.

  
  

  Required: Highlight, underline, circle, or show you answers that I can easily identify them. Also, show all work to arrive at your answers. Failure to provide work = zero.

  
  

  
  
  Problem #2 Current Liabilities

  Professor Ding-Bat subscribed to Guns & Weapons Magazine. He paid $240 for a yearly subscription in December 2019 for the upcoming year (2020). The Guns & Weapons magazine comes out monthly and describes how to buy or make guns and ammunition of all types. Professor Ding-Bat was interested in how to make a bazooka. The issues were considered collector items for those interest in guns and valued at $50 per issue.

  
  

  Required: Make entries for the company when Professor Ding-Bag subscribed to the magazine in December 2019 and for the first two months of his subscription (January and February 2020).

  
  

  
  

  Problem #3 Corporations

  Big & Little Ltd, was a public company that specialized in clothing. It had 450,000 shares of $1 par common stock outstanding. Due to economic circumstances, the Board of Directors decided to buy back some of the outstanding stock and then resell it later in the year. The transactions that occurred were:

  • January 1: Purchased 100,000 shares of common stock at $15 per share.
  • February 1: Sold 10,000 shares of this stock at $16 per share.
  • March 1: Sold 10,000 shares of this stock at $10 per share.
  • April 1: Retire the remaining shares of this stock. Original purchase price was $5 per share in 2018.

• Required: Record the entries for the above transactions.

  
  

  
  

Answer rating: 100% (QA)

Problem 2 Current Liabilities To record the subscription payment by Professor DingBat in December 2019 and the first two months of his subscription January and February 2020 the following entries are ... View the full answer