ACC3000 Topic 6 Mastery Assessments PDF

Preview

Summary

Topic 6 MyEducator Mastery Assessments for Fall 2019 ACC-3000 with Max Cannon....

Description

1

ACC-3000 Topic 6 Mastery Assessments Table of Contents Topic 6 -- Mastery Assessment A

2

Topic 6 -- Mastery Assessment B

10

Topic 6 -- Mastery Assessment C

17

2 Topic 6 -- Mastery Assessment A 1. What is the danger in focusing a financial analysis solely on the data found in the historical financial statements? a. The analysis might reflect both fixed and variable costs. b. The analysis might ignore current-year data. c. The analysis might reflect fair values rather than leveraged values. d. The analysis might be based on divisional data rather than segment data. 2. Using the data below, compute CURRENT RATIO. Accounts Payable

210

Accounts Receivable

1,600

Capital Stock

120

Cash

50

Cost of Goods Sold

300

Inventory

190

Long-term Debt

1,820

Net Income

140

Property, Plant, and Equipment (net)

700

Retained Earnings

390

Sales

1,500

Market value of shares

3,000

a. 12.10 b. 0.11 c. 0.91 d. 3.61 e. 8.76 Current Ratio = Current Assets / Current Liabilities

Current Assets: Accounts Receivable

$1,600

Cash

$50

Inventory

$190

(+)------------------------------------

3 Current Assets

$1,840

Current Liabilities: Accounts Payable

$210

Current Ratio = $1,840 / $210 = 8.76 3. Using the data below, compute DEBT RATIO. Accounts Payable

210

Accounts Receivable

1,600

Capital Stock

120

Cash

50

Cost of Goods Sold

300

Inventory

190

Long-term Debt

1,820

Net Income

140

Property, Plant, and Equipment (net)

700

Retained Earnings

390

Sales

1,500

Market value of shares

3,000

a. 125.1% b. 67.7% c. 25.1% d. 71.7% e. 79.9% Debt Ratio = Total Liabilities / Total Assets

Liabilities: Accounts Payable

$210

Long-term Debt

$1,820

(+)----------------------------------Total Liabilities

$2,030

Assets: Accounts Receivable

$1,600

Cash

$50

4 Inventory

$190

Property, Plant, and Equipment (net)

$700

(+)-------------------------------------------------------Total Assets

$2,540

Debt Ratio = ($2,030 / $2,540) * 100% = 79.9% 4. Using the data below, compute Return on Sales. Accounts Payable

210

Accounts Receivable

1,600

Capital Stock

120

Cash

50

Cost of Goods Sold

300

Inventory

190

Long-term Debt

1,820

Net Income

140

Property, Plant, and Equipment (net)

700

Retained Earnings

390

Sales

1,500

Market value of shares

3,000

a. 80.0% b. 20.0% c. 9.3% Return on Sales = Net Income / Sales Return on Sales = ($140 / $1,500) * 100% = 9.3% d. 27.5% e. 16.7% 5. Using the data below, compute Asset Turnover. Accounts Payable

210

Accounts Receivable

1,600

Capital Stock

120

Cash

50

Cost of Goods Sold

300

Inventory

190

5 Long-term Debt

1,820

Net Income

140

Property, Plant, and Equipment (net)

700

Retained Earnings

390

Sales

1,500

Market value of shares

3,000

a. 0.59 Asset Turnover = Sales / Total Assets

Assets: Accounts Receivable

$1,600

Cash

$50

Inventory

$190

Property, Plant, and Equipment (net)

$700

(+)-------------------------------------------------------Total Assets

$2,540

Asset Turnover = $1,500 / $2,540 = 0.59 b. 0.50 c. 1.69 d. 18.14 e. 2.00 6. Using the data below, compute Return on Equity. Accounts Payable

210

Accounts Receivable

1,600

Capital Stock

120

Cash

50

Cost of Goods Sold

300

Inventory

190

Long-term Debt

1,820

Net Income

140

Property, Plant, and Equipment (net)

700

Retained Earnings

390

6 Sales

1,500

Market value of shares

3,000

a. 27.5% Return on Equity = Net Income / Stockholders' Equity

Stockholders' Equity: Capital Stock

$120

Retained Earnings

$390

(+)----------------------------------Stockholders' Equity

$510

Return on Equity = ($140 / $510) * 100% = 27.5% b. 49.0% c. 5.5% d. 9.8% e. 6.9% 7. Using the data below, compute Price-Earnings Ratio. Accounts Payable

210

Accounts Receivable

1,600

Capital Stock

120

Cash

50

Cost of Goods Sold

300

Inventory

190

Long-term Debt

1,820

Net Income

140

Property, Plant, and Equipment (net)

700

Retained Earnings

390

Sales

1,500

Market value of shares

3,000

a. 27.3 b. 7.7 c. 21.4 Price-Earnings Ratio = Market Values of Shares / Net Income

7 Price-Earnings Ratio = 3,000 / $140 = 21.4 d. 12.0 e. 10.0 8. Comparative income statements for South Drive Company for Year 2 and Year 1 are given below. Year 2

Year 1

Sales

900,000

500,000

Cost of goods sold

(432,000)

(240,000)

Gross profit on sales

468,000

260,000

Wage expense

(54,000)

(30,000)

Rent expense

(90,000)

(50,000)

Operating income

324,000

180,000

Interest expense

(80,000)

(30,000)

Net income

244,000

150,000

Return on sales for South Drive is lower in Year 2 than in Year 1. What expense is causing this lower profitability? a. Cost of goods sold b. Rent expense c. Interest expense Year 2 Expenses percent of Sales: COGS = (-$432,000 / $900,000) * 100% = 48% Wage Expense = (-$54,000 / $900,000) * 100% = 6% Rent Expense = (-$90,000 / $900,000) * 100% = 10% Interest Expense = (-$80,000 / $900,000) * 100% = 8% Year 1 Expenses percent of Sales: COGS = (-$240,000 / $500,000) * 100% = 48% Wage Expense = (-$30,000 / $500,000) * 100% = 6% Rent Expense = (-$50,000 / $500,000) * 100% = 10% Interest Expense = (-$30,000 / $500,000) * 100% = 6%

COGs Wage Expense

Year 2

% of Sales

Year 1

% of Sales

-$432,000

-48%

-$240,000

-48%

-$54,000

-6%

-$30,000

-6%

8

Rent Expense

-$90,000

-10%

-$50,000

-10%

Interest Expense

-$80,000

-8%

-$30,000

-6%

Because the Interest Expense percent of Sales is greater for Year 2 than Year 1, Interest Expense is responsible. d. Wage expense 9. The following data are taken from the comparative balance sheet prepared for Route 13 Company. Year 2

Year 1

Cash

39,063

25,000

Accounts receivable

62,500

40,000

Inventories

67,000

30,000

Property, plant, and equipment

156,250

100,000

Total assets

$324,813

$195,000

Sales for Year 2 were $1,250,000. Sales for Year 1 were $800,000. Overall, Route 13 Company is less efficient at using its assets to generate sales in Year 2 than in Year 1. What asset is responsible for this decreased efficiency? a. Inventory Year 2 Assets percent of Sales: Cash = ($39,063 / $1,250,000) * 100% = 3.1% AR = ($62,500 / $1,250,000) * 100% = 5% Inventory = ($67,000 / $1,250,000) * 100% = 5.36% PPE = ($156,250 / $1,250,000) * 100% = 12.5% Year 1 Assets percent of Sales: Cash = ($25,000 / $800,000) * 100% = 3.1% AR = ($40,000 / $800,000) * 100% = 5% Inventory = ($30,000 / $800,000) * 100% = 3.75% PPE = ($100,000 / $800,000) * 100% = 12.5% Year 2

% of Sales

Year 1

% of Sales

Cash

$39,063

3.1%

$25,000

3.1%

AR

$62,500

5%

$40,000

5%

9

Inventory

$67,000

5.36%

$30,000

3.75%

PPE

$156,250

12.5%

$100,000

12.5%

Because the Inventory % of Sales is greater for Year 2 than Year 1, Inventory is responsible.

b. Cash c. Property, plant, and equipment d. Accounts receivable 10. The data below are for Julian Company and Standard Company. Standard Company is the best company in Julian’s industry; all companies in the industry strive to do things the way that Standard does them. Julian

Standard

Cash

500

3,250

Accounts Receivable

5,000

15,000

Inventory

3,000

19,500

Property, Plant, and Equipment

12,000

40,000

Total Assets

20,500

Total Liabilities

13,000

37,000

Total Equity

7,500

40,750

Sales

20,000

130,000

Cost of Goods Sold

(6,000)

(39,000)

Wage Expense

(10,000)

(65,000)

Research Expense

(2,000)

(13,000)

Advertising Expense

(1,600)

(6,000)

Net Income

400

7,000

77,750

Which ONE of the following statements is TRUE regarding Julian’s income statement? Remember, Standard Company represents the standard of performance in Julian’s industry. a. Julian Company has a problem with its advertising expense.

10

Julian

% of Sales

Standard

% of Sales

Sales

$20,000

100%

$130,000

100%

COGs

(6,000)

-30%

(39,000)

-30%

(10,000)

-50%

(65,000)

-50%

Research Expense

(2,000)

-10%

(13,000)

-10%

Advertising Expense

(1,600)

-8%

(6,000)

-4.62%

400

2%

7,000

5.4%

Wage Expense

Net Income

b. Julian Company has a problem with its costs of goods sold. c. Julian Company has a problem with its research expense. d. Julian Company's profitability is better than Standard Company's profitability. e. Julian Company has a problem with its wage expense. Topic 6 -- Mastery Assessment B 1. Which ONE of the following is NOT one of the factors that can reduce comparability among financial statements? a. Companies use different accounting methods b. A company is composed of a variety of different lines of business c. Companies classify items differently d. A company reports both net income AND retained earnings 2. Using the data below, compute CURRENT RATIO. Accounts Payable

800

Accounts Receivable

1,100

Capital Stock

2,000

Cash

50

Cost of Goods Sold

6,000

Inventory

1,500

Long-term Debt

1,820

Net Income

950

Property, Plant, and Equipment (net)

3,000

Retained Earnings

1,030

11 Sales

10,000

Market value of shares

12,000

a. 7.06 b. 3.31 Current Ratio = Current Assets / Current Liabilities

Current Assets: Accounts Receivable

$1,100

Cash

$50

Inventory

$1,500

(+)-----------------------------------Current Assets

$2,650

Current Liabilities: Accounts Payable

$800

Current Ratio = $2,650 / $800 = 3.31 c. 1.01 d. 0.30 e. 0.87 3. Using the data below, compute DEBT RATIO. Accounts Payable

800

Accounts Receivable

1,100

Capital Stock

2,000

Cash

50

Cost of Goods Sold

6,000

Inventory

1,500

Long-term Debt

1,820

Net Income

950

Property, Plant, and Equipment (net)

3,000

Retained Earnings

1,030

Sales

10,000

Market value of shares

12,000

a. 115.6%

12 b. 21.8% c. 215.6% d. 32.2% e. 46.4% Debt Ratio = Total Liabilities / Total Assets

Liabilities: Accounts Payable

$800

Long-term Debt

$1,820

(+)----------------------------------Total Liabilities

$2,620

Assets: Accounts Receivable

$1,100

Cash

$50

Inventory

$1,500

Property, Plant, and Equipment (net)

$3,000

(+)-------------------------------------------------------Total Assets

$5,650

Debt Ratio = ($2,620 / $5,650) * 100% = 46.4% 4. Using the data below, compute Return on Sales. Accounts Payable

800

Accounts Receivable

1,100

Capital Stock

2,000

Cash

50

Cost of Goods Sold

6,000

Inventory

1,500

Long-term Debt

1,820

Net Income

950

Property, Plant, and Equipment (net)

3,000

Retained Earnings

1,030

Sales

10,000

Market value of shares

12,000

13 a. 31.4% b. 40.0% c. 17.5% d. 19.0% e. 9.5% Return on Sales = Net Income / Sales Return on Sales = ($950 / $10,000) * 100% = 9.5% 5. Using the data below, compute Asset Turnover. Accounts Payable

800

Accounts Receivable

1,100

Capital Stock

2,000

Cash

50

Cost of Goods Sold

6,000

Inventory

1,500

Long-term Debt

1,820

Net Income

950

Property, Plant, and Equipment (net)

3,000

Retained Earnings

1,030

Sales

10,000

Market value of shares

12,000

a. 1.77 Asset Turnover = Sales / Total Assets

Assets: Accounts Receivable

$1,100

Cash

$50

Inventory

$1,500

Property, Plant, and Equipment (net)

$3,000

(+)-------------------------------------------------------Total Assets

Asset Turnover = $10,000 / $5,650 = 1.77 b. 0.57

$5,650

14 c. 1.20 d. 5.95 e. 0.83 6. Using the data below, compute Return on Equity. Accounts Payable

800

Accounts Receivable

1,100

Capital Stock

2,000

Cash

50

Cost of Goods Sold

6,000

Inventory

1,500

Long-term Debt

1,820

Net Income

950

Property, Plant, and Equipment (net)

3,000

Retained Earnings

1,030

Sales

10,000

Market value of shares

12,000

a. 31.0% b. 36.3% c. 31.4% Return on Equity = Net Income / Stockholders' Equity

Stockholders' Equity: Capital Stock

$2,000

Retained Earnings

$1,030

(+)----------------------------------Stockholders' Equity

$3,030

Return on Equity = ($950 / $3,030) * 100% = 31.4% d. 57.8% e. 16.8% 7. Using the data below, compute Price-Earnings Ratio. Accounts Payable

800

Accounts Receivable

1,100

15 Capital Stock

2,000

Cash

50

Cost of Goods Sold

6,000

Inventory

1,500

Long-term Debt

1,820

Net Income

950

Property, Plant, and Equipment (net)

3,000

Retained Earnings

1,030

Sales

10,000

Market value of shares

12,000

a. 6.3 b. 11.7 c. 15.0 d. 12.6 Price-Earnings Ratio = Market Values of Shares / Net Income Price-Earnings Ratio = 12,000 / $950 = 12.6 e. 6.9 8. Comparative income statements for South Drive Company for Year 2 and Year 1 are given below. Year 2

Year 1

Sales

1,000,000

600,000

Cost of goods sold

(400,000)

(240,000)

Gross profit on sales

600,000

360,000

Wage expense

(70,000)

(30,000)

Rent expense

(83,333)

(50,000)

Operating income

446,667

280,000

Interest expense

(50,000)

(30,000)

Net income

396,667

250,000

Return on sales for South Drive is lower in Year 2 than in Year 1. What expense is causing this lower profitability? a. Wage expense b. Cost of goods sold c. Rent expense

16 d. Interest expense 9. The following data are taken from the comparative balance sheet prepared for Route 13 Company. Year 2

Year 1

Cash

75,000

45,000

Accounts receivable

225,000

135,000

Inventories

375,000

225,000

Property, plant, and equipment

900,000

450,000

Total assets

$1,575,000

$855,000

Sales...