Prepare the journal entry to record the sale of bonds on December 31, 20X1. The Corporation &
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Prepare the journal entry to record the sale of bonds on December 31, 20X1.
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The Corporation & Industry Financial Ratios Return on Equity Dividend Payout Return on Assets Return on Sales Asset Tumover Current Ratio Quick Ratio DebAssets Accounts Receivable Days Inventory Days Accounts Payable Days Summary: Cash Conversion Days 20X11 0.41 0.04 0.15 0.13 1.21 2.84 1.82 0.54 28.01 47.53 26.59 48.95 20X10 0.33 0.04 0.15 0.14 1.06 2.61 1.74 0.48 30.48 52.79 29.75 53.51 20X11/20X10 Industry 0.16 0.12 0.09 0.09 0.90 • Stock Valuation Data. The required rate of return demanded by investors approximates 17 percent. The 2.75 1.82 0.20 32.01 49.53 24.59 56.95 Other Information • Bonds Payable: On December 31, 20x1, the firm issued 1,000 bonds with a 20-year maturity. The bonds pay interest every six months (June 30 and December 31), and the yield to maturity/effective interest rate is 10 percent. • Stock Price-Firm: The market price of the stock (per the stock exchange) was $34 at year-end 20X11, $26 at year-end 20X10, $22 at year-end 20X9, and $17 at year-end 2006. • Market Information: The average return in the market over 20X9-20X11 is 12 percent, and its standard deviation 6.50 percent. • Treasury Bonds: The average rate on U.S. Treasury bonds was 5 percent. • Stock Shares: The firm has 600,000 authorized shares and 200.000 issued, and 126,000 outstanding at year-end 20x11. firm's beta is 1.75. The firm estimates that the growth rate in dividends is 20% for 20X12 and 20X13, and 14% for all years thereafter. Treasury Stock: The firm had zero treasury stock at year-end 20X8. The firm purchased 4,000 treasury shares at year-end 20x9, 44,000 at year-end 20X10, and 26,000 at year-end 20X11. There were no sales of treasury stock during this period-only purchases of treasury stock. Financial Ratio Formulas . Return on Equity: Net Income/Average Stockholders Equity Dividend Payout: Dividends Declared/Net Income . Return on Assets: Net Income/Average Total Assets Asset Turnover: Total Sales/Average Assets Current Ratio: Current Assets/Current Liabilities Quick Ratio: (Cash+Marketable Securities + AR)/Current Liabilities Debt-Asset Ratio: Total Liabilities/Total Assets • Accounts Receivable Days: 365/A/R Turnover • Inventory Days: 365/Inventory Turnover Accounts Payable: 365/A/P Turnover Cash Conversion Days: A/R Days Inventory Days-A/P Days A/R Turnover: Total Sales/Average Accounts Receivable Inventory Turnover. Total Cost of Goods Sold Expense/Average Inventory. • Accounts Payable Turnover: Purchases/Average Accounts Payable The Corporation & Industry Financial Ratios Return on Equity Dividend Payout Return on Assets Return on Sales Asset Tumover Current Ratio Quick Ratio DebAssets Accounts Receivable Days Inventory Days Accounts Payable Days Summary: Cash Conversion Days 20X11 0.41 0.04 0.15 0.13 1.21 2.84 1.82 0.54 28.01 47.53 26.59 48.95 20X10 0.33 0.04 0.15 0.14 1.06 2.61 1.74 0.48 30.48 52.79 29.75 53.51 20X11/20X10 Industry 0.16 0.12 0.09 0.09 0.90 • Stock Valuation Data. The required rate of return demanded by investors approximates 17 percent. The 2.75 1.82 0.20 32.01 49.53 24.59 56.95 Other Information • Bonds Payable: On December 31, 20x1, the firm issued 1,000 bonds with a 20-year maturity. The bonds pay interest every six months (June 30 and December 31), and the yield to maturity/effective interest rate is 10 percent. • Stock Price-Firm: The market price of the stock (per the stock exchange) was $34 at year-end 20X11, $26 at year-end 20X10, $22 at year-end 20X9, and $17 at year-end 2006. • Market Information: The average return in the market over 20X9-20X11 is 12 percent, and its standard deviation 6.50 percent. • Treasury Bonds: The average rate on U.S. Treasury bonds was 5 percent. • Stock Shares: The firm has 600,000 authorized shares and 200.000 issued, and 126,000 outstanding at year-end 20x11. firm's beta is 1.75. The firm estimates that the growth rate in dividends is 20% for 20X12 and 20X13, and 14% for all years thereafter. Treasury Stock: The firm had zero treasury stock at year-end 20X8. The firm purchased 4,000 treasury shares at year-end 20x9, 44,000 at year-end 20X10, and 26,000 at year-end 20X11. There were no sales of treasury stock during this period-only purchases of treasury stock. Financial Ratio Formulas . Return on Equity: Net Income/Average Stockholders Equity Dividend Payout: Dividends Declared/Net Income . Return on Assets: Net Income/Average Total Assets Asset Turnover: Total Sales/Average Assets Current Ratio: Current Assets/Current Liabilities Quick Ratio: (Cash+Marketable Securities + AR)/Current Liabilities Debt-Asset Ratio: Total Liabilities/Total Assets • Accounts Receivable Days: 365/A/R Turnover • Inventory Days: 365/Inventory Turnover Accounts Payable: 365/A/P Turnover Cash Conversion Days: A/R Days Inventory Days-A/P Days A/R Turnover: Total Sales/Average Accounts Receivable Inventory Turnover. Total Cost of Goods Sold Expense/Average Inventory. • Accounts Payable Turnover: Purchases/Average Accounts Payable
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Financial Accounting an introduction to concepts, methods and uses
ISBN: 978-0324789003
13th Edition
Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis
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