Question

Question 2

Baden Company is a diversified company which has developed the following information about its five segments:

                                      SEGMENTS

                                              A                         B                   C                     D                     E        

Total sales                      $   800,000      $1,700,000      $   300,000      $   320,000      $   580,000

Operating profit (loss)        (270,000)          480,000             40,000          (300,000)           (10,000)

Identifiable assets            2,600,000        5,800,000        1,200,000        3,900,000        5,600,000

Instructions

Identify which segments are significant enough to warrant disclosure in accordance with FASB No. 131, "Reporting Disaggregated Information about a Business Enterprise," by applying the following quantitative tests:

            a.     Revenue test

            b.     Operating profit or loss test

            c.     Identifiable assets test

Question 3

1.       Sharp Company

Comparative Balance Sheet

                                                                                                                       December 31           

                                                                                                                 2018                         2017    

         Cash                                                                                        $     59,000               $     36,000

         Accounts receivable, net                                                          53,000                      57,000

         Inventory                                                                                    156,000                    123,000

         Land                                                                                             180,000                    285,000

         Buildings                                                                                     300,000                    300,000

         Accumulated depreciation—building                                (75,000)                    (60,000)

         Equipment                                                                               1,565,000                    900,000

         Accumulated depreciation—equipment                          (177,000)                  (141,000)

                                                                                                              $2,061,000               $1,500,000

         Accounts payable                                                                   $   202,000               $   150,000

         Bonds payable                                                                              450,000                          -0-

         Capital stock, $10 par                                                              1,250,000                 1,250,000

         Retained earnings                                                                        159,000                  100,000

                                                                                                               $2,061,000               $1,500,000

Additional Data:

1.      Net income for the year amounted to $134,000.

2.      Cash dividends were paid amounting to 6% of par value.

3.      Land was sold for $130,000.

4.      Sharp sold equipment, which cost $225,000 and had accumulated depreciation of $90,000, for $115,000.

Instructions

Prepare a statement of cash flows using the indirect method.

Question 4

1.                   Information from Collins Company’s balance sheet is as follows:

            Current assets:

                  Cash                                                                                           $ 12,000,000

                  Short-term investments                                                          20,000,000

                  Accounts receivable                                                                  50,000,000

                  Inventories                                                                                   66,000,000

                  Prepaid expenses                                                                         2,000,000

                  Total current assets                                                              $150,000,000

            Current liabilities:

                  Notes payable                                                                    $   11,000,000

                  Accounts payable                                                                   18,000,000

                  Accrued expenses                                                                  13,000,000

                  Income taxes payable                                                              3,000,000

                  Current portion of long-term debt                                      5,000,000

                        Total current liabilities                                               $ 50,000,000

            What is the acid-test (quick) ratio?

		1.24 to 1
		1.64 to 1
		1.68 to 1
		3.00 to 1

Answer 1

• All working forms part of the answer
• Question 2

---Test 1

Test #1: If Revenues are 10% or more than Total Revenues
	A	B	C	D	E	TOTAL
Sales Revenues	$       800,000.00	$   1,700,000.00	$        300,000.00	$           320,000.00	$        580,000.00	$        3,700,000.00
% of total revenues	21.6%	45.9%	8.1%	8.6%	15.7%
Reportable as per Test 1	YES	YES	NO	NO	YES

----TEST #2 Operating profits or Loss test:

Total of operating profits = 480000 + 40000 = $ 520,000

Total of Operating loss = 270000 + 300000 + 10000 = $ 580,000

Higher value of the two values = $ 580,000 and hence test of 10% should be on the basis of this value

Test #2: If Profits are 10% or more than Total Profits
	A	B	C	D	E	TOTAL value to be considered.
Operating Profits	$    (270,000.00)	$       480,000.00	$           40,000.00	$         (300,000.00)	$        (10,000.00)	$           580,000.00
% of total profits	46.6%	82.8%	6.9%	51.7%	1.7%
Reportable as per Test 2	YES	YES	NO	YES	NO

---TEST #3

Test #3: If identifiable Assets are 10% or more than total Assets
	A	B	C	D	E	TOTAL
Total Assets	$   2,600,000.00	$   5,800,000.00	$     1,200,000.00	$       3,900,000.00	$    5,600,000.00	$     19,100,000.00
% of total Assets	13.6%	30.4%	6.3%	20.4%	29.3%
Reportable as per Test 3	YES	YES	NO	YES	YES

SUMMARY of Results of all the Tests
	A	B	C	D	E
Reportable as per Test 1 of Revenues 10% or more	YES	YES	NO	NO	YES
Reportable as per Test 2 of Profits 10% or more	YES	YES	NO	YES	NO
Reportable as per Test 3 of Assets 10% or more	YES	YES	NO	YES	YES

Reportable Segments	Revenues
A	$       800,000.00
B	$   1,700,000.00
D	$       320,000.00
E	$       580,000.00
Total revenues to be reported	$   3,400,000.00
Actual total revenues of all 5 segments	$   3,700,000.00
% of total revenues reported	91.9%
Additional Segments to be reported?	NO

• Question 3

Working Notes:

Equipment
Beginning Balance	$           900,000.00
Purchased (Sold)	$         (225,000.00)
Ending balance	$        1,565,000.00
Sold (Purchased)	$        (890,000.00)

Accum Dep - Equipment
Beginning Balance	$           141,000.00
Depreciation Expense for the year (Accumulated depreciation on Asset sold)	$           (90,000.00)
Ending Balance	$           177,000.00
Accumulated Depreciation on Asset Sold (Depreciation Expense)	$         (126,000.00)

Land
Beginning Balance	$           285,000.00
Ending balance	$           (180,000.00 )
Sold (Purchased)	$           105,000.00
Sold for	$           130,000.00
Gain (loss) on sale	$              25,000.00

Cash Flows from Operating Activities
Net Income		$          134,000.00
Adjustment to reconcile Net Income to
Depreciation expense	$    141,000.00
Loss on Sale of Equipment	$      20,000.00
Gain on Sale of Land	$    (25,000.00)
Decrease in Accounts receivables net	$        4,000.00
Increase in Inventory	$    (33,000.00)
Increase in Accounts payable	$      52,000.00
		$         159,000.00
Net Cash Flows from Operating Activities		$          293,000.00
Cash Flows from Investing Activities
Sale of Land	$    130,000.00
Purchase of Equipment	$ (890,000.00)
Sale of Equipment	$    115,000.00
Net Cash flows from Investing Activities		$       (645,000.00)
Cash Flows from Financing Activities
Cash received from Bonds Payable	$    450,000.00
Dividends paid	$    (75,000.00)
Net Cash Flows from Financing Activities		$          375,000.00
Increase in Cash		$            23,000.00
Cash at the beginning		$            36,000.00
Cash at the end		$           59,000.00

• Question 4

	Amount – Quick Assets
Cash	$     12,000,000.00
Short Term Investments	$     20,000,000.00
Accounts receivables	$     50,000,000.00
Prepaid expenses	Not Included
Inventories	Not Included
Total Quick Assets	$     82,000,000.00

Working
A	Total Quick Assets	$     82,000,000.00
B	Total Current Liabilities	$     50,000,000.00
C = A/B	Quick Ratio	1.64

Hence, The correct answer = Option #2: 1.64 to 1 = Quick ratio (or Acid Test Ratio)