Question 6 (10 marks)
The comparative balance sheets for 2000 and 2001 and the 2001 income statement for Morris's Costume Shop are as follows:
MORRIS'S COSTUME SHOP
Balance Sheet December 31
Liabilities and Shareholders' Equity
Current Liabilities ................................................ $ 495,000 Mortgage Payable ................................................... 940,000 Common Stock (150,000 shares outstanding) ........ 600,000 Retained Earnings ................................................... 495,000 Total Liabilities and Shareholders’ Equity ......... $2,530,000
MORRIS'S COSTUME SHOP
Income Statement
For Year Ended December 31, 2001
Assets Cash .
Accounts Receivable Merchandise Inventory
Property, Plant, and Equipment Total Assets
2001 2000 $ 36,000 360,000 480,000 1,644,000 $2,520,000 $ 110,000 220,000 660,000 1,540,000 $2,530,000 $ 600,000 996,000 600,000 324,000 $2,520,000 Sales $1,703,000 Less: Cost of Goods Sold 950,000 Gross Profit on Sales $ 753,000 Operating Expenses:
Administrative Expenses ..................................... $215,000 Selling Expenses .................................................. 231,000 Total Operating Expenses ................................................... ................... 446,000 Operating Income ............................................................... ................... $ 307,000 Other Expenses:
Interest Expense .................................................................. ................... 44,000 Income before Taxes ........................................................... ................... $ 263,000 Income Tax Expense ........................................................... ................... 92,000 6
Net Income .......................................................................... ................... $ 171,000 Additional Information:
1. Morris's common stock is currently selling for $20.50 per share. 2. Morris's paid a dividend of $1.00 per share during 2001. Required
Calculate the following ratios: a) Quick ratio
b) Inventory turnover
c) Stockholders' equity to total assets ratio
d) Rate of return on common stockholders' equity e) Earnings per share
Question 7 (13 marks)
Arrowhead Optics has hired you as a consultant. Your assistance is needed in preparing income statement to submit to the Kansas National Bank for a $1,000,000 loan.
Arrowhead sells fiber optic telephone systems to large businesses. Arrowhead buys systems from Santa Fe Communications Electronics. Purchases during the first year of operations were as follows:
Month of Purchase Feb. May Nov. Dec.
Units Purchased
1,000 5,000 4,000 2,000
Cost per
Unit $1,500 1,400 1,200 1,100
Total Cost $1,500,000 7,000,000 4,800,000 2,200,000
Arrowhead has 3,500 units on hand on Dec. 31, the company's fiscal year-end. Since this is its first year of operations, Arrowhead has not formally chosen an inventory cost method. Sales for the year totaled $14,800,000; operating expenses amounted to $1,700,000.
Required
a) Which inventory cost method would you recommend that Arrowhead use for the income statement submitted to the bank for the loan? Why?
b) Assuming that Arrowhead's income tax rate is 40%, which inventory cost method would you recommend that Arrowhead use for income tax purposes? Why?
Support your answer with the Income Statement and show your calculations
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Question 8 (16 marks)
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暨南大学考试试卷参考答案
课程 2005 –2006 学年第 二 学期 基础会计学FA（1） 试题 授课教师 考试时间 2006 年 7 月7日 姓 名 沈 红 涛 课程类别 必修[ √]选修[ ] 考试方式 开卷[ ]闭卷[ √] 试卷类别(A、B、…) [ A ] 共 8 页 国 际 学院 C G A 专业 2005 级 Question 1
1 B
2 D 3 A 4 B 5 C 6 C 7 C 8 C 9 A 10 D Question 2 (12 marks)
2 marks a) Dec.31 Insurance Expense ..................................................... 100
Prepaid Insurance 100
3 marks
b) 31 Amortization Expense, lawn tractor 50
Accumulated Amortization, lawn tractor 50
2 marks c) 31 Unearned Service Fees ........................................... 500 Earned Service Fees 500
3 marks d) 31 Salaries Expense .................................................. 560 Salaries Payable 560
2 marks e) 31 Accounts Receivable (Rent Receivable).. ......... 1,800 Earned Revenues 1,800
Question 3 (8 marks)
2 marks a) Apr. 15 Allowance for Doubtful Accounts 5,700
Accounts Receivable 5,700
3 marks b) July 1 Accounts Receivable 2,300
Allowance for Doubtful Accounts 2,300
Cash 2,300
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Accounts Receivable 2,300
3 marks c) Dec. 31 Bad debts Expense 7,500 (=75,000x0.02)
Allowance for Doubtful Accounts 7,500
Question 4 (15 marks)
Feb. 1 Cash 427,663 (416,000x0.888+10400x5.6014) 3 for cal Premium on Bonds Payable 11,663 2 for entry Bonds Payable 416,000 Aug 1 Bond Interest Expense 8,456 Premium on Bonds Payable 1,944 3 for cal Cash 10,400 2 for entry Sept 30 Bond Interest Expense 2,819 (8456x2/6) 3 for cal Premium on Bonds Payable 648 (1944x2/6) 2 for entry Interest Payable 3,467 (10400x2/6)
Question 5 (6 marks)
a. (14500-1000)/5/2=1350 2 marks b. (14500-1000)*2625/7500=4725 2 marks c. 14500*0.4/2=2900 2 marks
Question 6 (10 marks)
Calculate the following ratios:
2 marks a) Quick ratio (110+220)/495=0.667
2 marks b) Inventory turnover 950/[(660+480)/2]=1.67
2 marks c) Stockholders' equity to total assets ratio 1095/2530=0.433
2 marks d) Rate of return on common stockholders' equity 171/[(1095+924)/2]=0.169 2 marks e) Earnings per share 171/150=1.14
Question 7 (13 marks)
FIFO: COGS 11,500,000, Net Income 1,600
2 for cal 2 for statement 3 for explanation
LIFO: 10,500,000 2,600
2 for cal 2 for statement 2 for explanation
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Question 8 (16 marks)
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