X #Inter 1 Terry Solution #1.pdf Inter 1 Terry S page Homework and Cases - ROSTER X ion%20%231.pdf Terry Co. Multi-Step Income Statement For Year Ended December 31, Year 2 SS Revenue Sales Revenue $29,700,000 Less: Sales Discounts $356,400 Sales Returns $1,410,750 $1.767 150 Net Sales Revenue $27,932,850 Cost of Goods Sold Cost of Goods Sold Gross Profit $16,208,255 $11,724,595 $556,875 $144,788 $408,375 $1,485,000 $243 169 $2.838,207 Operating Activities Selling Expenses Advertising Expense Miscellaneous Selling Expenses Sales Force Salaries Expense Selling Commissions Expense Shipping Expense Total Selling Expenses Administrative Expenses Executive Salaries Expense Depreciation Expense Insurance Expense Miscellaneous Admin Expenses Office Supplies Expense Consulting and Legal Fees Utilities Expense Total Administrative Expenses Income from Operations $1,299,375 $1,782,000 $256,163 $14,664 $115,088 $18,563 $222.750 $3.708,603 $6,546,810 $5,171 13 $92,813 ($189,338) Rent Revenue Interest Expense Income from Continuing Operations before Taxes Income Tax Expense Net Income (596,525) $5,081,260 151,524 378) $3,656,882 EPS $ 1.05 Homepage Homework and Cases - ROSTER X * Inter 1 Terry Solution *1.pdf X > Inter 1 Terry Solution #1 pd Solution%20%231.pdf Terry Co. Balance Sheet As of 12/31/Year 2 Year 2 Year $1,682,000 $1,485,000 $2,673,000 $2,524,500 ($148,500) (5742,500) $3,589,600 $4,158,000 $492.750 $445,500 $371.250 $297 000 $6,680,100 $8,167,500 Current Assets Cash AR Allowance for Bad Debts Inventory Prepaid Insurance Prepaid Utilities Total Current Assets Long-term Investments Loans to other businesses Expansion Fund Total Long-term Investments PPE Land Building Equipment Accumulated Depreciation Total PPE Intangible Assets Patents Total Assets $1,188,000 $1,188,000 $891,000 $891,000 $2.079,000 $2,079,000 $3.267.000 $2,079.000 $2,376,000 $2,376,000 $8,316,000 $3,861,000 (54.752,000)($2.970.000) 59.207.000 $5,346.000 $445.500 $445,500 $20.000 $1,782,000 $297.000 $445,500 $371.250 $ 148,500 Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $498828 Income Tax Payable $561 240 Unearned Revenue $742.500 Wages Payabile $366,400 Current Portion of Loan Payable $148,500 Long-term Debt Loan Payable $742,500 Notes Payable $4158,000 Total Long-term Debt Total Liabilities 5720738 Stockholders' Equity Common Stock $3,400.000 ($1 par, 56,800,000.00 authorized, $3,400,000 outstanding Additional Paid-In Capital $891,000 Retained Earnings S. 192.032 Total Stockholders' Equity $13,183 632 Total Liabilities and Stockholder's Equity $203010 $891.000 $2,376,000 $6,311250 $3,400,000 $891.000 $5.415.20 $9.726, 750 DOLL Bob 76730 20%231.pdf Terry Co. Statement of Cash Flows For Year Ended December 31, Year 2 Cash Flow from Operations Net Income $3,556,882 Adjustments: Change in AR ($742,500) Change in Inventory $568.400 Change in Prepaid Insurance ($47,250) Change in Prepaid Utilities ($74,250) Depreciation $1,782,000 Change in AP ($1,283,172) Change in Income Tax Payable $264,240 Change in Unearned Revenue $297.000 Change in Wages Payable ($14,850) $749,618 Net Cash Flow from Operations $4,306,500 Cash Flow from Investments Purchase of Land Purchase of Equipment Net Cash Flow from Investments ($1,188,000) 184,455,000) (55,643,000) Cash Flow from Financing Repayment of Loans Issuance of Notes Payable Payments of Dividends Net Cash Flow from Financing ($148,500) $1,782,000 ($100.000) $1,533,500 Net Increase (Decrease) in Cash Cash, January 1, Year 2 Cash, December 31, Year 2 $197,000 $1,485.000 $1,6829700 P LLB. 76730 C X Help ACS ACS St. ACS.pt Cage ACSpit 02240 ACSspit ACS ACSspit ACSupt 9/11 150% Intermediate 1 Terry Part #2: Chapter 10 Goal: To practice recording an exchange of PPE and to determine the effects of the exchange on the financial statements. (See Topic Guides A 21, 24, 37, 38). Information: On December 15th, Terry's management decided to trade in one of their machines for a newer model. After long discussions with their auditors, Terry's management has decided that the change in capacity between the old and new machines makes this an exchange without substance. The old machine originally cost $670,000 and had been fully depreciated to its $50,300 salvage value. The new machine typically sells for $841,000, but the vendor offered Terry a $73,000 trade-in discount on the old machine if the balance is paid in cash. Terry's management was excited about the deal, since they would have been able to sell the old machine for only $50,300 if they had tried to dispose of it on the open market Although the deal was completed on December 29", no journal entries have yet been recorded. Terry's management would like to know the effect of the sale on the following ratios: Asset Turnover (Net Sales / average total assets) . Current Ratio ROA Assiroma me 28 MWE: 1 DELLI Bob 76730 Tech QUE ACS.Sp. ACS.si 150% - Asset Turnover (Net Sales / average total assets) . Current Ratio ROA Assignment: Calculations 1. Calculate each of the three (3) ratios before you make any adjustments. 2. Make the appropriate journal entries, if any, to account for the trade-in (including any necessary changes to income tax expense). 3. Make any necessary changes to the financial statements. 4. Calculate the three (3) ratios after you make any adjustments. Critical Thinking 5 What do you think Terry's creditors' (1.e. bank and bond holder) reaction will be to the exchange? In other words, based on your changes to the financial statements and the change in the ratios, do you think the creditors will be happy with the exchange? Why or why not? 6. Terry's CFO argued that the company should wait to exchange the machine until they had used it for two more years, "Even though we would have to fight with the old machine," he argued, "we could depreciate it to So, and we know we can sell it for more than that. That would give us a boost to EPS." What would be the consequences of following the CFO's suggestion? What would be the consequences for making the exchange now? e VIP: MUZE: 1 DOLLI Bob 76730 Technologies ilani om 2.2003 Enc SEOS X #Inter 1 Terry Solution #1.pdf Inter 1 Terry S page Homework and Cases - ROSTER X ion%20%231.pdf Terry Co. Multi-Step Income Statement For Year Ended December 31, Year 2 SS Revenue Sales Revenue $29,700,000 Less: Sales Discounts $356,400 Sales Returns $1,410,750 $1.767 150 Net Sales Revenue $27,932,850 Cost of Goods Sold Cost of Goods Sold Gross Profit $16,208,255 $11,724,595 $556,875 $144,788 $408,375 $1,485,000 $243 169 $2.838,207 Operating Activities Selling Expenses Advertising Expense Miscellaneous Selling Expenses Sales Force Salaries Expense Selling Commissions Expense Shipping Expense Total Selling Expenses Administrative Expenses Executive Salaries Expense Depreciation Expense Insurance Expense Miscellaneous Admin Expenses Office Supplies Expense Consulting and Legal Fees Utilities Expense Total Administrative Expenses Income from Operations $1,299,375 $1,782,000 $256,163 $14,664 $115,088 $18,563 $222.750 $3.708,603 $6,546,810 $5,171 13 $92,813 ($189,338) Rent Revenue Interest Expense Income from Continuing Operations before Taxes Income Tax Expense Net Income (596,525) $5,081,260 151,524 378) $3,656,882 EPS $ 1.05 Homepage Homework and Cases - ROSTER X * Inter 1 Terry Solution *1.pdf X > Inter 1 Terry Solution #1 pd Solution%20%231.pdf Terry Co. Balance Sheet As of 12/31/Year 2 Year 2 Year $1,682,000 $1,485,000 $2,673,000 $2,524,500 ($148,500) (5742,500) $3,589,600 $4,158,000 $492.750 $445,500 $371.250 $297 000 $6,680,100 $8,167,500 Current Assets Cash AR Allowance for Bad Debts Inventory Prepaid Insurance Prepaid Utilities Total Current Assets Long-term Investments Loans to other businesses Expansion Fund Total Long-term Investments PPE Land Building Equipment Accumulated Depreciation Total PPE Intangible Assets Patents Total Assets $1,188,000 $1,188,000 $891,000 $891,000 $2.079,000 $2,079,000 $3.267.000 $2,079.000 $2,376,000 $2,376,000 $8,316,000 $3,861,000 (54.752,000)($2.970.000) 59.207.000 $5,346.000 $445.500 $445,500 $20.000 $1,782,000 $297.000 $445,500 $371.250 $ 148,500 Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $498828 Income Tax Payable $561 240 Unearned Revenue $742.500 Wages Payabile $366,400 Current Portion of Loan Payable $148,500 Long-term Debt Loan Payable $742,500 Notes Payable $4158,000 Total Long-term Debt Total Liabilities 5720738 Stockholders' Equity Common Stock $3,400.000 ($1 par, 56,800,000.00 authorized, $3,400,000 outstanding Additional Paid-In Capital $891,000 Retained Earnings S. 192.032 Total Stockholders' Equity $13,183 632 Total Liabilities and Stockholder's Equity $203010 $891.000 $2,376,000 $6,311250 $3,400,000 $891.000 $5.415.20 $9.726, 750 DOLL Bob 76730 20%231.pdf Terry Co. Statement of Cash Flows For Year Ended December 31, Year 2 Cash Flow from Operations Net Income $3,556,882 Adjustments: Change in AR ($742,500) Change in Inventory $568.400 Change in Prepaid Insurance ($47,250) Change in Prepaid Utilities ($74,250) Depreciation $1,782,000 Change in AP ($1,283,172) Change in Income Tax Payable $264,240 Change in Unearned Revenue $297.000 Change in Wages Payable ($14,850) $749,618 Net Cash Flow from Operations $4,306,500 Cash Flow from Investments Purchase of Land Purchase of Equipment Net Cash Flow from Investments ($1,188,000) 184,455,000) (55,643,000) Cash Flow from Financing Repayment of Loans Issuance of Notes Payable Payments of Dividends Net Cash Flow from Financing ($148,500) $1,782,000 ($100.000) $1,533,500 Net Increase (Decrease) in Cash Cash, January 1, Year 2 Cash, December 31, Year 2 $197,000 $1,485.000 $1,6829700 P LLB. 76730 C X Help ACS ACS St. ACS.pt Cage ACSpit 02240 ACSspit ACS ACSspit ACSupt 9/11 150% Intermediate 1 Terry Part #2: Chapter 10 Goal: To practice recording an exchange of PPE and to determine the effects of the exchange on the financial statements. (See Topic Guides A 21, 24, 37, 38). Information: On December 15th, Terry's management decided to trade in one of their machines for a newer model. After long discussions with their auditors, Terry's management has decided that the change in capacity between the old and new machines makes this an exchange without substance. The old machine originally cost $670,000 and had been fully depreciated to its $50,300 salvage value. The new machine typically sells for $841,000, but the vendor offered Terry a $73,000 trade-in discount on the old machine if the balance is paid in cash. Terry's management was excited about the deal, since they would have been able to sell the old machine for only $50,300 if they had tried to dispose of it on the open market Although the deal was completed on December 29", no journal entries have yet been recorded. Terry's management would like to know the effect of the sale on the following ratios: Asset Turnover (Net Sales / average total assets) . Current Ratio ROA Assiroma me 28 MWE: 1 DELLI Bob 76730 Tech QUE ACS.Sp. ACS.si 150% - Asset Turnover (Net Sales / average total assets) . Current Ratio ROA Assignment: Calculations 1. Calculate each of the three (3) ratios before you make any adjustments. 2. Make the appropriate journal entries, if any, to account for the trade-in (including any necessary changes to income tax expense). 3. Make any necessary changes to the financial statements. 4. Calculate the three (3) ratios after you make any adjustments. Critical Thinking 5 What do you think Terry's creditors' (1.e. bank and bond holder) reaction will be to the exchange? In other words, based on your changes to the financial statements and the change in the ratios, do you think the creditors will be happy with the exchange? Why or why not? 6. Terry's CFO argued that the company should wait to exchange the machine until they had used it for two more years, "Even though we would have to fight with the old machine," he argued, "we could depreciate it to So, and we know we can sell it for more than that. That would give us a boost to EPS." What would be the consequences of following the CFO's suggestion? What would be the consequences for making the exchange now? e VIP: MUZE: 1 DOLLI Bob 76730 Technologies ilani om 2.2003 Enc SEOS