S

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 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. Compute depreciation expense using the double declining balance and the straight – line methods for the years 2021 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? 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 ...

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• 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
• 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
• 18. 971 Increase in accounts payable 1.944
• 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
• 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
• 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
• 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
• 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
• 49. 1.943 Decrease in accrued expenses payable 2.914 Gain on sales of marketable securities
• 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
• 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
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