BUSINESS

Description / Instructions: Complete the following Week 5 Assignment in WileyPLUS: * Exercise 7-3 * Exercise 12-1 * Exercise 12-8 * Problem 12-9A * Problem 12-10A * Exercise 13-3 * Exercise 13-4 * IFRS 13-1 * Problem 13-2A

Exercise 12-1

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Question 1
Putnam Corporation had these transactions during 2014.

Analyze the transactions and indicate whether each transaction resulted in a cash flow from operating activities, investing activities, financing activities, or noncash investing and financing activities.

(a) Purchased a machine for $30,000, giving a long-term note in exchange. [removed]
(b) Issued $50,000 par value common stock for cash. [removed]
(c) Issued $200,000 par value common stock upon conversion of bonds having a face value of $200,000. [removed]
(d) Declared and paid a cash dividend of $13,000. [removed]
(e) Sold a long-term investment with a cost of $15,000 for $15,000 cash. [removed]
(f) Collected $16,000 of accounts receivable. [removed]
(g) Paid $18,000 on accounts payable. [removed]

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Exercise 12-8

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Question 2
Shown below are comparative balance sheets for Schmitt Company.

SCHMITT COMPANY
Comparative Balance Sheets
December 31
Assets
2014
2013
Cash
$ 68,000
$ 22,000
Accounts receivable
88,000
76,000
Inventory
167,000
189,000
Land
80,000
100,000
Equipment
260,000
200,000
Accumulated depreciation—equipment
(66,000
)
(32,000
)
Total
$597,000
$555,000
Liabilities and Stockholders’ Equity
Accounts payable
$ 39,000
$ 43,000
Bonds payable
150,000
200,000
Common stock ($1 par)
216,000
174,000
Retained earnings
192,000
138,000
Total
$597,000
$555,000

Additional information:

1. Net income for 2014 was $93,000.
2. Depreciation expense was $34,000.
3. Cash dividends of $39,000 were declared and paid.
4. Bonds payable amounting to $50,000 were redeemed for cash $50,000.
5. Common stock was issued for $42,000 cash.
6. No equipment was sold during 2014.
7. Land was sold for its book value.

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Prepare a statement of cash flows for 2014 using the indirect method. (Show amounts that decrease cash flow with either a – sign e.g. -15,000, or in parenthesis e.g. (15,000)).

SCHMITT COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2014
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$[removed]
Adjustments to reconcile net income to
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Compute these cash-based ratios: (Round ratios to 2 decimal places, e.g. 2.56.)

(1) Current cash debt coverage.

Current cash debt coverage
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(2) Cash debt coverage.

Cash debt coverage
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Exercise 13-3

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Question 3
Here is financial information for Spangles Inc.

December 31, 2014
December 31, 2013
Current assets $106,000 $ 90,000
Plant assets (net) 400,000 350,000
Current liabilities 99,000 65,000
Long-term liabilities 122,000 90,000
Common stock, $1 par 130,000 115,000
Retained earnings 155,000 170,000

Prepare a schedule showing a horizontal analysis for 2014, using 2013 as the base year. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000), (20%). Round percentages to 1 decimal place, e.g. 12.1%.)

SPANGLES INC.
Condensed Balance Sheet
December 31
Increase or (Decrease)
2014
2013
Amount
Percentage
Assets
Current Assets
$106,000
$90,000
$[removed]
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%
Plant assets (net)
400,000
350,000
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%
   Total assets
$506,000
$440,000
$[removed]
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%
Liabilities
Current Liabilities
$99,000
$65,000
$[removed]
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%
Long-term liabilities
122,000
90,000
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%
   Total liabilities
$221,000
$155,000
$[removed]
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%
Stockholders’ Equity
Common stock, $1 par
130,000
115,000
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%
Retained earnings
155,000
170,000
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%
   Total stockholders’ equity
285,000
285,000
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%
   Total liabilities and stockholders’ equity
$506,000
$440,000
$[removed]
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%

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Exercise 13-4

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Question 4
Operating data for Jacobs Corporation are presented below.

2014
2013
Sales revenue $800,000 $600,000
Cost of goods sold 520,000 408,000
Selling expenses 120,000 72,000
Administrative expenses 60,000 48,000
Income tax expense 30,000 24,000
Net income 70,000 48,000

Prepare a schedule showing a vertical analysis for 2014 and 2013. (Round percentages to 1 decimal place, e.g. 12.1%.)

JACOBS CORPORATION
Condensed Income Statement
For the Years Ended December 31
2014
2013
Amount
Percent
Amount
Percent
Sales
$800,000
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%
$600,000
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%
Cost of goods sold
520,000
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%
408,000
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%
Gross profit
280,000
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%
192,000
[removed]
%
Selling expenses
120,000
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%
72,000
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%
Administrative expenses
60,000
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%
48,000
[removed]
%
Total operating expenses
180,000
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%
120,000
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%
Income before income taxes
100,000
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%
72,000
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%
Income tax expense
30,000
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%
24,000
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%
Net income
$ 70,000
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%
$ 48,000
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%

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IFRS 13-1

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Question 5
Ling Company reports the following information for the year ended December 31, 2014: sales revenue $1,000,000, cost of goods sold $700,000, operating expenses $200,000, and an unrealized gain on non-trading securities of $75,000. Prepare a statement of comprehensive income using the one-statement approach.

LING COMPANY
Statement of Comprehensive Income
For the Year Ended December 31, 2014
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Problem 12-9A

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Question 6
Condensed financial data of Odgers Inc. follow.

ODGERS INC.
Comparative Balance Sheets
December 31
Assets
2014
2013
Cash
$ 80,800
$ 48,400
Accounts receivable
87,800
38,000
Inventory
112,500
102,850
Prepaid expenses
28,400
26,000
Long-term investments
138,000
109,000
Plant assets
285,000
242,500
Accumulated depreciation
(50,000
)
(52,000
)
Total
$682,500
$514,750
Liabilities and Stockholders’ Equity
Accounts payable
$ 102,000
$ 67,300
Accrued expenses payable
16,500
21,000
Bonds payable
110,000
146,000
Common stock
220,000
175,000
Retained earnings
234,000
105,450
Total
$682,500
$514,750
ODGERS INC.
Income Statement Data
For the Year Ended December 31, 2014
Sales revenue
$388,460
Less:
     Cost of goods sold
$135,460
     Operating expenses, excluding depreciation
12,410
     Depreciation expense
46,500
     Income tax expense
27,280
     Interest expense
4,730
     Loss on disposal of plant assets
7,500
233,880
Net income
$ 154,580

Additional information:

1. New plant assets costing $100,000 were purchased for cash during the year.
2. Old plant assets having an original cost of $57,500 and accumulated depreciation of $48,500 were sold for $1,500 cash.
3. Bonds payable matured and were paid off at face value for cash.
4. A cash dividend of $26,030 was declared and paid during the year.

Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)

ODGERS INC.
Statement of Cash Flows
For the Year Ended December 31, 2014
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$[removed]
Adjustments to reconcile net income to
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$[removed]
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Problem 12-10A

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Question 7
Condensed financial data of Odgers Inc. follow.

ODGERS INC.
Comparative Balance Sheets
December 31
Assets
2014
2013
Cash
$ 80,800
$ 48,400
Accounts receivable
87,800
38,000
Inventory
112,500
102,850
Prepaid expenses
28,400
26,000
Long-term investments
138,000
109,000
Plant assets
285,000
242,500
Accumulated depreciation
(50,000
)
(52,000
)
Total
$682,500
$514,750
Liabilities and Stockholders’ Equity
Accounts payable
$ 102,000
$ 67,300
Accrued expenses payable
16,500
21,000
Bonds payable
110,000
146,000
Common stock
220,000
175,000
Retained earnings
234,000
105,450
Total
$682,500
$514,750
ODGERS INC.
Income Statement Data
For the Year Ended December 31, 2014
Sales revenue
$388,460
Less:
     Cost of goods sold
$135,460
     Operating expenses, excluding depreciation
12,410
     Depreciation expense
46,500
     Income taxes
27,280
     Interest expense
4,730
     Loss on disposal of plant assets
7,500
233,880
Net income
$ 154,580

Additional information:

1. New plant assets costing $100,000 were purchased for cash during the year.
2. Old plant assets having an original cost of $57,500 and accumulated depreciation of $48,500 were sold for $1,500 cash.
3. Bonds payable matured and were paid off at face value for cash.
4. A cash dividend of $26,030 was declared and paid during the year.

Further analysis reveals that accounts payable pertain to merchandise creditors.

Prepare a statement of cash flows for Odgers Inc. using the direct method. (Show amounts that decrease cash flow with either a – sign e.g. -15,000 or in parenthesis e.g. (15,000).)

ODGERS INC.
Statement of Cash Flows
For the Year Ended December 31, 2014
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Problem 13-2A

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Question 8
The comparative statements of Osborne Company are presented here.

OSBORNE COMPANY
Income Statements
For the Years Ended December 31
2014
2013
Net sales
$1,890,540
$1,750,500
Cost of goods sold
1,058,540
1,006,000
Gross profit
832,000
744,500
Selling and administrative expenses
500,000
479,000
Income from operations
332,000
265,500
Other expenses and losses
   Interest expense
22,000
20,000
Income before income taxes
310,000
245,500
Income tax expense
92,000
73,000
Net income
$ 218,000
$ 172,500
OSBORNE COMPANY
Balance Sheets
December 31
Assets
2014
2013
Current assets
   Cash
$ 60,100
$ 64,200
   Debt investments (short-term)
74,000
50,000
   Accounts receivable
117,800
102,800
   Inventory
126,000
115,500
     Total current assets
377,900
332,500
Plant assets (net)
649,000
520,300
Total assets
$1,026,900
$852,800
Liabilities and Stockholders’ Equity
Current liabilities
   Accounts payable
$ 160,000
$145,400
   Income taxes payable
43,500
42,000
     Total current liabilities
203,500
187,400
Bonds payable
220,000
200,000
     Total liabilities
423,500
387,400
Stockholders’ equity
   Common stock ($5 par)
290,000
300,000
   Retained earnings
313,400
165,400
     Total stockholders’ equity
603,400
465,400
Total liabilities and stockholders’ equity
$1,026,900
$852,800

All sales were on account. Net cash provided by operating activities for 2014 was $220,000. Capital expenditures were $136,000, and cash dividends were $70,000.

Compute the following ratios for 2014. (Round all answers to 2 decimal places, e.g. 1.83 or 12.61%.)

(a) Earnings per share
$[removed]
(b) Return on common stockholders’ equity
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 %
(c) Return on assets
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 %
(d) Current ratio
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 :1
(e) Accounts receivable turnover
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 times
(f) Average collection period
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 days
(g) Inventory turnover
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times
(h) Days in inventory
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 days
(i) Times interest earned
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 times
(j) Asset turnover
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(k) Debt to assets
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 %
(l) Current cash debt coverage
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 times
(m) Cash debt coverage
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(n) Free cash flow
$[removed]

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Exercise 7-3

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Question 9

The following control procedures are used in Kelton Company for over-the-counter cash receipts.

(a) For each procedure, explain the weakness in internal control and identify the control principle that is violated.

Procedure
Weakness
Principle Violated
1. Each store manager is responsible for interviewing applicants for cashier jobs. They are hired if they seem honest and trustworthy. [removed] [removed]
2. All over-the-counter receipts are registered by three clerks who share a cash register with a single cash drawer. [removed] [removed]
3. To minimize the risk of robbery, cash in excess of $100 is stored in an unlocked attaché case in the stock room until it is deposited in the bank. [removed] [removed]
4. At the end of each day the total receipts are counted by the cashier on duty and reconciled to the cash register total. [removed] [removed]
5. The company accountant makes the bank deposit and then records the day’s receipts. [removed] [removed]

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