Financial Accounting Homework Help

Listed as follows are nine technical terms used in this chapter. Liquidity Adequate disclosure Income Summary Nominal accounts After-closing trial balance Interim financial statements Real accounts Closing entries Dividends Each of the following statements may (or may not) describe one of these technical terms. For each statement, indicate the accounting term described, or answer "None" if the statement does not describe any of the items. a. The accounting principle intended to assist users in interpreting financial statements. b. A term used to describe a company's ability to pay its obligations as they come due. C. A term used in reference to accounts that are closed at year-end. d. e. A term used in reference to accounts that are not closed at year-end. A document prepared to assist management in detecting whether any errors occurred in post- ing the closing entries. f. A policy decision by a corporation to distribute a portion of its income to stockholders. g. The process by which the Retained Earnings account is updated at year-end. h. Entries made during the accounting period to correct errors in the original recording of com- plex transactions.

5 . 10 Compute and discuss briefly the significance of the following measures as they relate to Save-A- Lot Supplies. a. Net income percentage in current year. b. Return on equity in current year. c. Working capital on December 31, current year. d. Current ratio on December 31, current year.

Required: 1. Compute the gross margin ratio (both with and without services revenue) and net profit margin ratio. 2. Compute the current ratio and acid-test ratio. 3. Compute the debt ratio and equity ratio. 4. What percent of its assets are current? What percent are long term?

Question 1 A local municipality is considering investing $250,000 to upgrade a park. Based on similar investments made by similar cities, it is anticipated the investment will result in annual costs and annual benefits over a 15-year period as shown in the cash flow profile given below in thousands of dollars. Notice, an intermediate investment of $150,000 is anticipated in the 6th year of the investment. Based on a MARR of 5%, use benefit-cost ratio analysis to determine whether the investment should be made.

Question 2 $400,000 is invested in processing equipment having a negligible salvage value regardless of the number of years used. Annual cost savings of $50,000 occur the first year; thereafter, annual savings increase 12% per year. Based on a MARR of 12%, solve mathematically for the DPBP. Assume a fractional number of years is feasible.

Question 3 A new solid waste treatment plant is to be constructed in Washington County. The initial installation will cost $30 million (M). After 10 years, minor repair and renovation (R&R) will occur at a cost of $10M will be required; after 20 years, a major R&R costing $20M will be required. The investment pattern will repeat every 20 years. Each year during the 20-year period, operating and maintenance (O&M) costs will occur. The first year, O&M costs will total $2M. Thereafter, O&M costs will increase at a compound rate of 4% per year. Based on a 4% MARR, what is the capitalized cost for the solid waste treatment plant?

Exercise 4.3 "The Rockford Rollers, a professional roller derby team, prepares financial statements on a monthly basis. The roller derby season begins in February, but in January, the team engaged in the follow-ing transactions: 1. Paid $33,000 to the Sunbury Skating Rink as advance rent for use of the facilities for the 6-month period from February 1 through July 31. This payment was initially recorded as Prepaid Rent. 2. Collected $45,000 cash from the sale of season tickets for the team's home games. The entire amount was initially recorded as Unearned Ticket Revenue. During the month of February, the team skated several home events at which $7,000 of the season tickets sold in January were used by fans

(B) Indicate why you have excluded any of the above amounts from your answer. Be sure to comment on all items not used in the computation of employment income.

Exercise 4.9 "Among the ledger accounts used by Rapid Speedway are the following: Prepaid Rent, Rent Expense, Unearned Admissions Revenue, Admissions Revenue, Prepaid Printing, Printing Expense, Con- cessions Receivable, and Concessions Revenue. For each of the following items, provide the jour-nal entry (if one is needed) to record the initial transaction and provide the adjusting entry, if any, required on May 31, assuming the company makes adjusting entries monthly. Question a. - On May 1, borrowed $600,000 cash from National Bank by issuing a 9 percent note payable due in three months. Question b. - On May 1, paid rent for six months beginning May 1 at $14,400 per month. Question c. - On May 2, sold season tickets for a total of $720,000 cash. The season includes 60 racing days: 15 in May, 20 in June, and 25 in July. Question d. - On May an agreement was reached with Snack-Bars, Inc., allowing that company to sell refreshments at the track in return for 10 percent of the gross receipts from refreshment sales."

Exercise 4.7 "Sweeney & Allen, a large marketing firm, adjusts its accounts at the end of each month. The following information is available for the year ending December 31. 1. A bank loan had been obtained on December 1. Accrued interest on the loan at December 31 amounts to $1,500. No interest expense has yet been recorded. 2. Depreciation of the firm's office building is based on an estimated life of 30 years. The build-ing was purchased four years ago for $450,000. 3. Accrued, but unbilled, revenue during December amounts to $75,000. 4. On March 1, the firm paid $2,400 to renew a 12-month insurance policy. The entire amount was recorded as Prepaid Insurance. 5. The firm received $15,000 from King Biscuit Company in advance of developing a six-month marketing campaign. The entire amount was initially recorded as Unearned Revenue. At December 31, $9,000 had actually been earned by the firm. 6. The company's policy is to pay its employees every Friday. Since December 31 fell on a Wednesday, there was an accrued liability for salaries amounting to $1,900. Question - Record the necessary adjusting journal entries on December 31 Question - By how much did Sweeney & Allen's net income increase or decrease as a result of the adjusting entries performed in the previous question