1. Formality: prepare the tasks in excel, answering each question
in an excel spreadsheet of the same file.
Question 1
On January 1st, 2018, the company DECORA, SA acquires a
machine, useful life 5 years for a purchase price 25.000 eur.
In payment, the company issues an installment note payable for
this amount, plus interests at 12 percent per annum (or 1 percent
per month).
This note will be paid in 5 monthly installments of 5.151 eur,
beginning on January 1st.
You can see the amortization table allocating payments between
interest and principal below:
Period
Payment Date
Monthly Payment
Interest expense
Reduction in Unpaid Balance
Total amortized amount
1
January
5.151
250
4.901
4.901
2
February
5.151
201
4.950
9.851
3

2. March
5.151
151
5.000
14.851
4
April
5.151
101
5.050
19.900
5
May
5.151
51
5.100
25.000
1. From the table indicate the total amount of interests paid over
the 5 installments
2. Prepare the journal entry to record the first monthly payment
January 1st
3. Indicate the liability amount on March 31 that will appear in
the Balance Sheet
Weight: 20% weight
Question 2
Resisa Company purchased a delivery van for 25.000 eur on
January 1, 2021. The van was assigned an estimated useful life
of 5 years and has a residual value of 2.400 eur. Comput e
depreciation expense using the double declining balance and the
straight – line methods for the years 2021

3. Weight: 30% weight
Question 3
For the following statements provide an appropriate
explanation.
a) Nice things company records depreciation on a furniture.
Explain how it affects its Balance Sheet and the Income
Statement
b) If a company records depreciation in every closing, which is
the accounting principle that is it applying? What does it mean?
Weight: 10% weight
Question 4
a) Which is the only plant asset does not decline in service
potential over the course of its useful life and it is never
depreciate it?
b) Given the following account balances at year end, compute
the total intangible assets on the Balance Sheet of Anisha
Enterprises:
Cash1.500.000
Accounts receivable 4.000.000
Trademarks1.000.000
Goodwill4.500.000
Weight: 20% weight
Question 5
On January 1, 2021, Laurion Corporation sells 1 million (1.000
bonds each with a 1.000-dollar face value) of 5%, 20-year bonds
payable to an underwriter at a price of 95% of their face value.
Interest is payable semiannually on June 1 and December 1. On
January 1, 2021, Laurion receives 950.000-dollar cash from the
underwriter and records a net liability of this amount
(1.000.000$*0,95 = 950.000 dollar)
1. Which is the amount and the meaning of the discount? When
is it paid?

4. 2. Prepare the entry on January 1 of the issuance of the bonds
Weight: 20% weight
EmployeesQuestions1Imagine you are an employer (an awesome
one). When should you recognize short- term employee
benefits?aEvery 1st day of the monthbEvery 15 th and 30 th of
the monthcWhen the employees have rendered service in
exchange for the employee benefitsdNever2You are the business
owner of Entity A. You have 10 employees, each earning 20.000
per monthYou pay salaries on a bi- monthly basis. During the
month of April 2021, none of your employeeswere absent, late
or have rendered overtime service. When will you recognize the
salaries expense (ant at what amount) for the first payday in the
month of April 2021?Timing of recognitionAmount
recognizeda. April120,000b. April 1520,000c. April 1100,000d.
April 15100,0003Entity A has 20 employees who are each
entitled to one day paid vacation leave for each month of
service rendered.Unused vacation leaves cannot be carried
forward and are forfeited when employees leave the entity. All
the employees have rendered service throught the current year
and have taken a total of 150 days of vacationleaves. The
average daily rate of the employees in the current period is
1.000.However a 5% increase in the rate is expected to take into
effect in the following year. Based on Entity A´s past
experience,the average annual employee turnover rate is 20%.
How much will entity A accrue at the end of the current year for
unused entitlements?a0b150,000c90,000d94,5004Under a profit
sharing plan, Entity A agrees to pay its employees 5% of its
annual profit. The bonus shall be dividedamong the employees
currently employed as at year end . Relevant information
follows:Profit for the year8,000,000Employees at the beginning
of the year8Average employees during the year7Employees at

5. the end of the year6If the employee benefits remain unpaid, how
much liability shall Entity A accrue at the end of the
year?a.400,000b.300,000c.200,000d0
Accruals12345678
INDEXCONTENT0 - [email protected]0 - Starbucks1 -
Financial ratios [email protected]2 - Performance measures
Starbucks3 - Test4. More financial ratios tasks
O. [email protected]Table: Financial Statements
[email protected]BALANCE
SHEETP&L2018201920202018Var2019Var2020VarCurrent
assets:2,6204,7338,084Cash and marketable
securities2865050ROASales10,000100%20,000100%30,000100
%a. Return on assetsAccounts receivable1,6673,3336,667Cost
of goods sold8,00080%16,20081%24,60082%b. Operating profit
marginInventories6671,3501,367Gross
margin2,00020%3,80019%5,40018%c. Sales to assets ratioFixed
assets:5,0005,5006,000Wages2002%1,0005%1,8006%d.
Inventory turnoverNet fixed assets5,0005,5006,000Overhead
costs1001%3852%4702%e. Debt equity ratioTOTAL
ASSETS7,62010,23314,084EBITDA1,70017%2,41512%3,13010
%f. Working capitalLiabilities and Shareholders
equityDepreciation5005%5503%6002%g. Quick ratioCurrent
liabilities9903,0576,011EBIT1,20012%1,8659%2,5308%Accoun
ts payable7201,4072,051Financial
expenses3003%3702%5362%Other current liabilities
taxes270448598EBT9009%1,4957%1,9947%Bank credit
line01,2023,362Taxes (30%)2703%4492%5982%Long term
liabilities3,0002,5002,000Profit6306%1,0475%1,3965%Long
term bank debt3,0002,5002,000Other long term
liabilities3,6304,6766,072Shareholders
equity3,0003,6304,676Profit of the year6301,0461,396TOTAL
LIABILITIES7,62010,23314,083Interest or Financial
expenses300Tax on interest90After tax
interest210EBIT1,200After tax interest + net income1,410Total
Assets7,620ROA19%Net income or

6. EBIT1,200Sales10,000Profit margin12%Sales10,000Total
Assets7,620Asset Turn ratio131%Cost of goods
sold8,000Inventory667Inventory turnover11.9940029985(quite
high )Inventory667Daily cost of goods
sold21.9178082192Inventory period =30.431875Long term
debt3,000Equity 3,630Long term debt equity83%Current
assets2,620Current liabilities990Net working capital1,630Cash
and Mark. Securi286Receivables1,667Current
liabilities990Quick ratio288What is the shareholder´s equity in
2019?4,676
ROA= (after tax interest + net income)/ total assets
ROA= EBIT/ Total assets
Profit margin= net income/sales
It measures the proportion of sales that finds its way into profits
Income available to debt and equity investors per dollar of the
firm´s total assets
Asset Turnover ratio= Sales/Total assets at start of year
How much sales volumen is generated by each dollar of total
assets.
It measures how hard the firm´s assets are working.
How efficiently the business is using its entire asset base
Inventory turnover= cost of goods sold/ inventory at start of
year
Efficient company´s hold only a relatively small level of
inventories
Inventory period= inventory at start of year/daily cost of goods
sold
How many days of output are represented by inventories
Long term debt equity ratio

7. Net working capital = current assets – current liabilities
Quick (Acid Test) Ratio
Cash + marketable securities + receivables
Current liabilities
A low cash ratio may not matter if the firm can borrow on short
notice
O. StarbucksTable: Financial Statements StarbucksBALANCE
SHEETP&L201420152014VarCurrent assets:4,1685,472Cash
and marketable securities1,8443,234Sales16,448100%Accounts
receivable948839Cost of goods
sold6,85942%Inventories1,0911,111Gross
margin9,58958%Other current assets285288Selling, general
administration expenses5,655Fixed
assets:6,5836,046Depreciation7104%Net fixed
assets3,5193,201EBITDA3,22420%Other long term
assets3,0642,845Interest expense640%TOTAL
ASSETS10,75111,518Taxable income3,16019%Liabilities and
Shareholders equityTax1,0927%Current
liabilities3,0395,378Net income2,06813%Accounts
payable2,2441,940Dividends7835%Other current liabilities
7953,438Addition to retained earnings1,2858%Long term
liabilities2,0481,299Long term bank debt2,0481,299Other long
term liabilities5,6644,841Other long term
liabilities392360Shareholders equity5,2724,481Profit of the
yearTOTAL LIABILITIES10,75111,518At the end of fiscal
2014, Starbucks had 748 million shares outstanding with a share
price of 81.25$. Calculate: a. Market value added. b. Market-to-
book ratio. c. Economic value added. d. Return on start-of-the-
year capitalaMarket value addedNumber of shares outstanding *
market shareMarket value added60,775,000,000bMarket to book
ratioMarket to book ratioMarket value of equity / Book value of
equityMarket to book ratio60,775,000,000125,272,000,000The
company has multiplied the value of its shareholder´s

8. investments 12 timecEconomic value addedc.1Economic
ValueTotal capitalization = Long term debt + shareholder´s
equityLong term debt2,440Shareholder´s
equity5,272EV7,712Cumulative amount that has been invested
in the past by debt and shareholdersc.2Economic value
addedNet income + after tax interest - cost of capital *
capitalNet income2,068Interest64Tax interest22.4After tax
interest42Total capitalization or capital7,712We assume cost of
capital 3%Capital * cost of capital231.36How many dollars a
business is earning after deducting the cost of capitalEconomic
value added1,878A firm creates value for its investors only if it
can earn more than its cost of capital, more tan its investors can
earn by investing on their owndReturn on capital start-of-the-
year 20152,068total profits that the company has earned for its
debt and shareholders
1.Financial ratios EPerformance measuresTASKS 1:1.1Table 1
from 0. Financial Statements spreadsheet gives abbreviated
balance sheets and income statements for
[email protected]Calculate the following using balance-sheet
figures from year 2018/2019 and 2020: a. Return on assetsb.
Operating profit marginc. Sales to assets ratiod. Inventory
turnovere. Debt equity ratiof. Current ratiog. Quick
ratio1.2What is the shareholder´s equity in 2019?See solutions
in E- [email protected] excel spreadsheet
2. Performance Measures SPerformance measuresTASKS
2:2.1Look at 0.Starbuck´s spreadsheet. At the end of fiscal
2014, Starbucks had 748 million shares outstanding with a share
price of 81.25$. The company’s weighted�average cost of
capital was about 9%. Calculate: a. Market value added. b.
Market-to-book ratio. c. Economic value added. d. Return on
start-of-the-year capitalSee solutions in 0. Starbucks excel
spreadsheet
3. TestTest Financial ratiosTASK 3:3.1.There are no universally
accepted definitions of financial ratios, but five of the following
ratios are clearly incorrect. Substitute the correct definitionsa.
Debt–equity ratio = (long-term debt + value of leases)/(long-

9. term debt + value of leases + equity)Debt ratio = total
liabilities / total assetsb. Return on
equity = (EBIT − tax)/average equity Net income /equityc.
Profit margin = net income/salesCORRECTd. Days in
inventory = sales/(inventory/365)inventory at start of year/daily
cost of goods solde. Current ratio = current liabilities/current
assets Current assets /current liabilitiesf. Sales-to-net-working-
capital = average sales/average net working capitalIncorrect //
Net working capital / total assets = Net working capital to total
assetsg. Quick ratio = (current assets − inventories)/current
liabilities(cash + marketable securities + receivables)/ current
liabilitiesh. Times-interest-earned = interest earned × long-term
debtEBIT/interest payments3.2.Financial ratios True or false? a.
A company’s debt–equity ratio is always less than 1.Falseb. The
quick ratio is always less than the current ratioTrueQuick ratio
(cash + marketable securities + receivables)/ current
liabilititesCurrent ratio (current assets /current liabilities)c. The
return on equity is always less than the return on
assetsFalseReturn on equity = net income /net equityReturn on
assets = after tax interests + net income / total capitald. Book
rates of return Keller Cosmetics maintains an operating profit
margin of 8% and a sales-to-assets ratio of 3. It has assets of
$500,000 and equity of $300,000. Interest payments are $30,000
and the tax rate is 35%a. What is the return on assets? b. What
is the return on equity?
Solution
to 3.2. d) Keller CosmeticsOperating profit margin8%Sales to
assets ratio3Assets500,000Equity300,000Interest
payments30,000Tax rate35%Return on assets = after tax
interests + net income / total capitalTax interest

10. payments10500After tax interests payments19,500Sales to
assets or asset turnover Sales / Total
assets3x/500.000Sales3*500.0001,500,000Net
income120,000Return on assetsCapital = assets500,000Return
on assets28%Income available to debt and equity investors per
dollar of the firm´s total assets
4. More Financial ratiosMore financial ratios tasksTASKS
4:4.1.Magic Flutes has total receivables of $3,000, which
represent 20 days’ sales. Total assets are $75,000. The firm’s
operating profit margin is 5%.Find the firm’s sales-to-assets
ratio and return on assets4.2Consider this simplified balance
sheet for Geomorph Trading: Other liabilities 70Current
assets 100Current liabilities 60Long term debt 280Long term
assets 500Equity 190a. Calculate the ratio of debt to equity. b.
What are Geomorph’s net working capital and total long-term
capital? 4.3ReceivablesOn average, it takes Microlimp’s
customers 60 days to pay their bills. If Micro limp has annual
sales of $500 million, what is the average value of unpaid
bills4.4Current ratioHow would the following actions affect a
firm’s current ratio?a. Inventory is soldb. The firm takes out a
bank loan to pay its suppliers.c. The firm arranges a line of
credit with a bank that allows it to borrow at any time to pay its
suppliers.d. A customer pays its overdue bills.e. The firm uses
cash to purchase additional inventories4.5Inflation. How would
rapid inflation affect the accuracy and relevance of a

11. manufacturing company’s balance sheet and income
statement?4.6Look up the latest financial statements for a
company that you are creating and calculate the following ratios
for the latest year: a. Return on capital. b. Return on equity. c.
Operating profit margin. d. Days in inventory. e. Debt ratio. f.
Times-interest-earned. g. Current ratio. h. Quick
ratio.SOLUTIONS4.1.Sales to assets and Return on assetsMagic
Flutes has total receivables of $3,000, which represent 20 days’
sales. Total assets are $75,000. The firm’s operating profit
margin is 5%.Sales to assetsSales/ Total Assets at start of the
yearReceivables3,00020 days salesTotal assets75,000Operating
profit margin5%Net income /SalesNet income sales * operating
profit margin 3000Asset turnoverSales/AssetsProfit marginNet
income/SalesReceivables
turnoverSales/receivables20x/300060000SalesSales60,000Net
income3,000Return on assetsAfter tax interest + Net income /
Total assetsROA4%Assets turnoverSales / Total assetsAsset
turnover or sales to assets80%4.2Balance sheet for Geomorph
Trading: Current assets100Current liabilities60Other
liabilities70Long term assets500Long term
debt280Equity190TOTAL ASSETS600TOTAL
LIABILITIES600a. Calculate the ratio of debt to equity. b.
What are Geomorph’s net working capital and total long-term
capital? Debt to equityTotal liabilities / Total assetsDebt to
equity68%Net working capitalNet working capital / Total

12. assetsWorking capital-30Total Assets600Net working capital-
5%Total long term capital4704.3ReceivablesMicrolimp’s
customers 60 days to pay their billsf Micro limp has annual
sales of $500 million, what is the average value of unpaid
billsCustomers credit term60Sales500,000,000Receivables
turnoverSales/Receivables60500.000.000/xx
8,333,3334.4Current ratioHow would the following actions
affect a firm’s current ratio?a. Inventory is soldNeutralb. The
firm takes out a bank loan to pay its suppliers.Neutralc. The
firm arranges a line of credit with a bank that allows it to
borrow at any time to pay its suppliers.Decreasesd. A customer
pays its overdue bills.Neutrale. The firm uses cash to purchase
additional inventoriesNeutralCurrent ratioCurrent assets /
current liabilities4.5InflationInflation. How would rapid
inflation affect the accuracy and relevance of a manufacturing
company’s balance sheet and income statement?By the inflation
rate4.6Look up the latest financial statements for a company
that you are creating and calculate the following ratios for the
latest year: a. Return on capital. b. Return on equity. c.
Operating profit margin. d. Days in inventory. e. Debt ratio. f.
Times-interest-earned. g. Current ratio. h. Quick ratio.
QUESTIONS:
Question 1
On December 31st, Pyramid company had the following

13. preferred and common stock:
PYRAMID COMPANY
COMMON SHARES
PREFERRED SHARES
Authorized
625.000
125.000
Issued and Outstanding
100.000
50.000
Dividend per share per year
Not fixed
$4, cumulative
(Convertible 1 preferred to 5 common shares)

14. Net Income of the year accounts for $3.906.000
1. Calculate Basic Earnings per Share (EPS)
2. Calculate Diluted Earnings per Share (DEPS)
Question 2
AXY company´s 2021 Statement of Cash Flows is as follows:
Cash flows from OPERATING ACTIVITIES

15. Net income
48.571

16. Add:

17. Depreciation expense
11.656
Decrease in inventory

18. 971
Increase in accounts payable
1.944

19. Subtotal
14.571

20. Less:

21. Increase in accounts receivable
1.943

22. Decrease in accrued expenses payable
2.914
Gain on sales of marketable securities
3.885

23. Subtotal
8.742

24. Net cash provided by operating activities
54.400

25. Cash flows from INVESTING ACTIVITIES

26. Proceeds from sales of marketable securities
850

27. Cash paid to acquire plant assets (see more explanation below
**)
-536
**

28. Net cash provided by investing activities
314

29. Cash flows from FINANCING ACTIVITIES

30. Dividends paid
-2.500

31. Payments to retire bonds payable
-2.679

32. Net cash used for financing activities
-5.179

33. NET INCREASE IN CASH
49.535

34. Cash and equivalents January 1, 2021
72.800
Cash and equivalents December 31, 2021

35. 122.335

36. 1. What was the company´s free cash flow in 2021?
2. What were the major sources of cash from financing
activities during 2021? Did the net effect of financing activities
result in an increase or a decrease in cash during the year?
3. What happened to the total amount of cash and cash
equivalents during the year? Assuming 2021 was a typical year,
is the firm in a position to continue its dividend payments in the
future? Explain

37. It increases by 49.535
4. Look at the reconciliation of net income to net cash provided
by operating and financing activities, and explain the following:
a. Net loss (gain) from the sale of marketable securities
b. Increase in accounts receivable
Question 3
Among the transactions of SUNNI Inc, were the following:
3.1 Purchase of goods
3.2 Paid the principal amount of a loan to Santander Bank
3.3. Paid interest charges relating to the previous note payabl e
to EBN Bank
Question 4
NBC adjusts its accounts at the end of the month. On November
30, adjusting entries are prepared:
a. Depreciation expense for November
b. Salaries that need to be paid and that have been accrued since
the last payday in the previous month
Indicate the effect of each of these adjusting entries on the
major elements of the company´s income statement and balance
sheet, assets, liabilities and owner´s equity. Organize your
answer in tabular form, using the column headings and the
effect. The answer for adjusting entry a is provided as an

38. example.
Adjusting entry
Revenue
Expenses
Net Income
Asset´s
Liabilities
Owner´s equity
a
b
c

39. d
e
f

40. QUESTIONS:
Question 1
On December 31st, Pyramid company had the following
preferred and common stock:
PYRAMID COMPANY
COMMON SHARES
PREFERRED SHARES
Authorized
625.000
125.000
Issued and Outstanding
100.000
50.000
Dividend per share per year

41. Not fixed
$4, cumulative
(Convertible 1 preferred to 5 common shares)
Net Income of the year accounts for $3.906.000
1. Calculate Basic Earnings per Share (EPS)
2. Calculate Diluted Earnings per Share (DEPS)
Question 2
AXY company´s 2021 Statement of Cash Flows is as follows:
Cash flows from OPERATING ACTIVITIES

42. Net income

43. 48.571

44. Add:
Depreciation expense

45. 11.656
Decrease in inventory
971
Increase in accounts payable

46. 1.944
Subtotal
14.571

48. Less:
Increase in accounts receivable

49. 1.943
Decrease in accrued expenses payable
2.914
Gain on sales of marketable securities

50. 3.885
Subtotal
8.742

51. Net cash provided by operating activities
54.400

52. Cash flows from INVESTING ACTIVITIES

53. Proceeds from sales of marketable securities

54. 850
Cash paid to acquire plant assets (see more explanation below
**)
-536
**

55. Net cash provided by investing activities
314

56. Cash flows from FINANCING ACTIVITIES

57. Dividends paid

58. -2.500
Payments to retire bonds payable
-2.679

59. Net cash used for financing activities
-5.179

60. NET INCREASE IN CASH
49.535

61. Cash and equivalents January 1, 2021

62. 72.800
Cash and equivalents December 31, 2021
122.335

64. 1. What was the company´s free cash flow in 2021?
2. What were the major sources of cash from financing
activities during 2021? Did the net effect of financing activities
result in an increase or a decrease in cash during the year?
3. What happened to the total amount of cash and cash
equivalents during the year? Assuming 2021 was a typical year,
is the firm in a position to continue its dividend payments in the
future? Explain
It increases by 49.535
4. Look at the reconciliation of net income to net cash provided
by operating and financing activities, and explain the following:
a. Net loss (gain) from the sale of marketable securities
b. Increase in accounts receivable
Question 3
Among the transactions of SUNNI Inc, were the following:
3.1 Purchase of goods
3.2 Paid the principal amount of a loan to Santander Bank
3.3. Paid interest charges relating to the previous note payable
to EBN Bank
Question 4
NBC adjusts its accounts at the end of the month. On November
30, adjusting entries are prepared:

65. a. Depreciation expense for November
b. Salaries that need to be paid and that have been accrued since
the last payday in the previous month
Indicate the effect of each of these adjusting entries on the
major elements of the company´s income statement and balance
sheet, assets, liabilities and owner´s equity. Organize your
answer in tabular form, using the column headings and the
effect. The answer for adjusting entry a is provided as an
example.
Adjusting entry
Revenue
Expenses
Net Income
Asset´s
Liabilities
Owner´s equity
a
b

66. c
d
e

67. f