Project #4506 - Accounting

14.1

Selected information taken from the financial statements of Maxum Company for two successive years follows.  You are to compute the percentage change from 2008 to 2009 whenever possible.  Round all calculations to the nearest whole percentage.

 2009 2008 a.       Accounts receivable 126,000 160,000 b.      Marketable securities -0- 250,000 c.       Retained earnings 80,000 (80,000) d.      Notes receivable 120,000 -0- e.      Notes payable 870,000 800,000 f.        Cash 84,000 80,000 g.       sales 970,000 910,000

14.2

Compute trend percentages for the following items taken from the financial statements of Lopez Plumbing. Over a five year period.  Treat 2005 as the base year.  State whether the trends are favorable or unfavorable.  (Dollar amounts are stated in thousands.

 2009 2008 2007 2006 2005 Sales 81,400 74,000 61,500 59,000 50,000 Cost of goods sold 58,500 48,000 40,500 37,000 30,000

14.6A

 From the balance sheet: Cash 30,000 Accts recv 150,000 Inventory 200,000 Plant assets (net accumulated depreciation) 500,000 Current liabilities 150,000 Total stock holders equity 300,000 Total assets 1,000,000 From the income statement: Net sales 1,500,000 Cost of goods sold 1,080,000 Operating expense 315,000 Interest Expense 84,000 Income tax expense 6,000 Net income 15,000 From the statement of cash flows: Net cash provided by operating activities      (including interest paid of \$79,000) 40,000 Net cash used in investing activities (46,000_ Financing activities: Amounts Borrowed 50,000 Repayment of amounts borrowed (14,000) Dividends paid (20,000) Net cash provided by financing activities 16,000 Net increase in cash during the year \$10,000

Instructions

a.       explain how the interest expense shown in the income statement could be 84,000 when the interest payment appearing in the statement of cash is only \$79,000

b.      Compute the following (round to one decimal place):

1.       Current ratio

2.       Quick ration

3.       Working capital

4.       Debt ratio

c.       Comment on these measurements and evaluate Rentsch, Inc.’s short-term debt-paying ability.

d.      Compute the following ratios (assume that the year-end amounts of total assets and total stockholders’ equity also represent the average amounts throughout the year):

1.       Return on assets

2.       Return on equity

e.      Comment on the company’s performance under these measurements.  Explain why the returns on assets and return on equity are so different.

f.        Discuss (1) the apparent safety of long term creditors claims and (2) the prospects fro Rentsch, Inc., continuing its dividend payments at the present level.

 Subject Business Due By (Pacific Time) 04/16/2013 12:00 am
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