Ratio Analysis - Use the 2019 numbers

This assignment includes calculating the 10 ratios for two different companies (Lockheed and Boeing) in the industry which can be found attached to this assignment. Then, tell me which company you would invest in and why.  Ratios (10 x 10 x 2 = 200) + 40 (explanation) = 240 points

The 10 ratios to be calculated are the

Current Ratio, Quick Ratio, Debt Ratio, Debt to Net Worth Ratio, Net Sales to Total Assets Ratio, Net Profit on Sales Ratio, Net Profit on Assets, Net Profit on Equity, Average Inventory Turnover Ratio, Accounts Receivables Ratio.

Use the materials from the Instructional Materials Area for Tesla and Toyota.

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 61 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,700 per month plus $45 per course plus $7 per student. The company’s sales should average $890 per student.

The company planned to run four courses with a total of 61 students; however, it actually ran four courses with a total of only 59 students. The actual operating results for September appear below:

Required:

1. Prepare the company’s planning budget for September.

2. Prepare the company’s flexible budget for September.

3. Calculate the revenue and spending variances for September.

Riveria Co. makes and sells a single product. The current selling price is $39 per unit. Variable expenses are $17 per unit, and fixed expenses total $39,500 per month. Sales volume for May totaled 4,550 units. Required: a. Calculate operating income for May. b. Calculate the break-even point in terms of units sold and total revenues. (Round your intermediate calculations to the nearest whole dollar.) c. Management is considering installing automated equipment to reduce direct labor cost. If this were done, variable expenses would drop to $11 per unit, but fixed expenses would increase to $64,100 per month. c-1. Calculate operating income at a volume of 4,550 units per month with the new cost structure. c-2. Calculate the break-even point in units with the new cost structure. c-3. Why would you suggest that management seriously consider investing in the automated equipment and accept the new cost structure? As sales volume moves above the break-even point, contribution margin and operating income will? By a relatively greater amount than under the old cost structure.

On December 31, 2017, Berclair Inc. had 260 million shares of common stock and 6 million shares of 9%, $100 par value cumulative preferred stock issued and outstanding. On March 1, 2018, Berclair purchased 24 million shares of its common stock as treasury stock. Berclair issued a 5% common stock dividend on July 1, 2018. Four million treasury shares were sold on October 1. Net income for the year ended December 31, 2018, was $200 million. The income tax rate is 40%. Also outstanding at December 31 were incentive stock options granted to key executives on September 13, 2013. The options are exercisable as of September 13, 2017, for 30 million common shares at an exercise price of $56 per share. During 2018, the market price of the common shares averaged $70 per share. In 2014, $62.5 million of 8% bonds, convertible into 6 million common shares, were issued at face value.

Required: Compute Berclair’s basic and diluted earnings per share for the year ended December 31, 2018.

Simple Plan Enterprises uses a periodic inventory system. Its records showed the following:

Inventory, December 31, using FIFO → 44 Units @ $17 = $748
Inventory, December 31, using LIFO → 44 Units @ $13 = $572

Required:

1. Compute the number and cost of goods available for sale, the cost of ending inventory, and the cost of goods sold under FIFO and LIFO.
2. Compute the inventory turnover ratio under the FIFO and LIFO inventory costing methods.
3. Does the inventory method used make a significant difference in the inventory turnover ratio?

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Alert Security Services Co. offers security services to business clients. The trial balance for Alert Security Services Co. has been prepared on the following end-of-period spreadsheet for the year ended October 31, 2016:

The data for year-end adjustments are as follows:

Prepare the adjusting entries for Alert Security Services Co. Refer to the Chart of Accounts for correct wording of account titles.

Chart of Accounts

Journal

Prepare the adjusting entries for Alert Security Services Co. Refer to the Chart of Accounts for correct wording of account titles.

PAGE 10

JOURNAL

The Koski Company has established standards as follows:

Direct material                                                     3 pounds @ P4/pound = P12 per unit

Direct labor                                                           2 hours @ P8/hour = P16 per unit

Variable overhead                                              2 hours @ P5/hour = $10 per unit

Actual production figures for the past year were as follows:

Units produced                                                                                    500

Direct material used                                                                           1,600 pounds

Direct material purchased (3,000 pounds)                                    $12,300

Direct labor cost (950 hours)                                                             $ 7,790

Variable overhead cost incurred                                                      $ 4,655
  

30. The materials price variance is:
    A. P160 U
    B. P6,300 U
    C. P300 U
    D. P150 U

31. The materials quantity variance is:
   A. P400 U
    B. P410 F
   C. P410 U
    D. P6,000 U

32. The labor efficiency variance is:
    A. P400 F
    B. P800 F
    C. P800 U
    D. P500 F

33. The variable overhead rate variance is:
    A. P345 F
   B. P95 F
    C. P655.50 F
    D. P345 U

Imagine that a coworker wants to circumvent an internal control to steal money from your company. Speculate on two (2) internal controls that your coworker might attempt to circumvent in order to steal the money. Recommend two (2) actions that the company could take in order to prevent the theft.

o   Outline an anti-fraud program that you would implement at your company (current or previous). Suggest the approach you would take to sell this program to your senior executives.

Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Inc. (BLI). As part of their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company's tax accounting balance sheet. The relevant information is summarized as follows:

* The mortgage is attached to the building and land.

Ernesto was asking for $518,350 for the company. His tax basis in the BLI stock was $122,000. Included in the sales price was an unrecognized customer list valued at $162,000. The unallocated portion of the purchase price ($83,250) will be recorded as goodwill. (Negative amounts should be indicated by a minus sign.)

a. What amount of gain or loss does BLI recognize if the transaction is structured as a direct asset sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction?

b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a direct asset sale to Amy and Brian, and BLI distributes the after-tax proceeds [computed in part (a)] to Ernesto in liquidation of his stock?

1. c1. What are the tax benefits, if any, to Amy and Brian as a result of structuring the acquisition as a direct asset purchase?
2. c2. What is the tax basis in the assets received by Amy and Brian?

Church Company completes these transactions and events during March of the current year (terms for all its credit sales are 2/10, n/30).

Assume the following ledger account amounts Inventory (March 1 beg. bal. is $63,000), Z. Church, Capital (March 1 beg. bal. is $63,000) and Church Company uses the perpetual inventory system.

Required:
2-a. Enter the transactions in a sales journal.
2-b. Enter the transactions in a purchases journal.
2-c. Enter the transactions in a cash receipts journal.
2-d. Enter the transactions in a cash disbursements journal.
2-e. Enter the transactions in a general journal.

Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the company’s products. The company now is planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements:

1. The finished goods inventory on hand at the end of each month must equal 2,000 units of Supermix plus 20% of the next month’s sales. The finished goods inventory on June 30 is budgeted to be 10,600 units.

2. The raw materials inventory on hand at the end of each month must equal one-half of the following month’s production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 66,000 cc of solvent H300.

3. The company maintains no work in process inventories.

A monthly sales budget for Supermix for the third and fourth quarters of the year follows.

Required:

1. Prepare a production budget for Supermix for the months July, August, September, and October.

3. Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, and for the quarter in total.

QUESTIONS

1. For each of the following accounts, signify which part of the accounting equation

    would include the account balance.

1.1 Merchandise inventory

a) Liabilities            b) Owner's equity            c) Assets      

1.2 Freight out expense

   a) Liabilities           b) Owner's equity            c) Assets      

1.3 Sales revenue

     a) Liabilities            b) Owner’s equity           c) Assets      

1.4 Cost of goods sold

     a) Liabilities            b) Owner's equity            c) Assets      

1.5 Sales returns and allowances

      a) Liabilities            b) Owner’s equity            c) Assets      

1.6 Sales discounts

      a) Liabilities            b) Owner's equity           c) Assets      

1.7 Accounts receivable

      a) Liabilities            b) Owner's equity            c) Assets      

1.8 Owner's capital

     a) Liabilities            b) Owner’s equity            c) Assets      

1.9 Owner's withdrawals

      a) Liabilities            b) Owner's equity            c) Assets      

1.10 Accounts payable

   a) Liabilities            b) Owner's equity            c) Assets      

2. For each of the following accounts, signify DEBIT or CREDIT to indicate the normal balance

    of the account.

2.1 Merchandise inventory

  a) Debit            b) Credit      

2.2 Freight out expense

  a) Debit            b) Credit      

2.3 Sales revenue

   a) Debit            b) Credit      

2.4 Cost of goods sold

   a) Debit            b) Credit      

2.5 Sales returns and allowances

   a) Debit            b) Credit      

2.6 Sales discounts

     a) Debit            b) Credit      

2.7 Accounts receivable

     a) Debit            b) Credit      

2.8 Owner's capital

     a) Debit            Credit      

2.9 Owner's withdrawals

      a) Debit            b) Credit      

2.10 Accounts payable

      a) Debit            b) Credit      

3. For each of the following items, signify the effect the item will ultimately have on the TOTAL

    COST of merchandise inventory on the books of the business recording the item.

3.1 Purchase returns

  a) No effect            b) Decrease           c) Increase      

3.2 Purchase allowances

   a) No effect            b) Decrease            c) Increase      

3.3 Purchase discounts

   a) No effect            b) Decrease            c) Increase      

3.4 Incoming freight costs

  a) No effect            b) Decrease            c) Increase      

3.5 Sales returns

a) No effect            b) Decrease            c) Increase      

3.6 Sales allowances

  a) No effect            b) Decrease            c) Increase      

3.7 Sales discounts

  a) No effect            b) Decrease            c) Increase      

3.8 Outgoing freight costs

  a) No effect            b) Decrease            c) Increase   

Marcelino Co.'s March 31 inventory of raw materials is $86,000. Raw materials purchases in April are $500,000, and factory payroll cost in April is $384,000. Overhead costs incurred in April are: indirect materials, $54,000; indirect labor, $23,000; factory rent, $38,000; factory utilities, $23,000; and factory equipment depreciation, $61,000. The predetermined overhead rate is 50% of direct labor cost. Job 306 is sold for $645,000 cash in April. Costs of the three jobs worked on in April follow.

1. Materials purchases (on credit).
2. Direct materials used in production.
3. Direct labor paid and assigned to Work in Process Inventory.
4. Indirect labor paid and assigned to Factory Overhead.
5. Overhead costs applied to Work in Process Inventory.
6. Actual overhead costs incurred, including indirect materials. (Factory rent and utilities are paid in cash.)
7. Transfer of Jobs 306 and 307 to Finished Goods Inventory.
8. Cost of goods sold for Job 306.
9. Revenue from the sale of Job 306.
10. Assignment of any underapplied or overapplied overhead to the Cost of Goods Sold account. (The amount is not material.)

2. Prepare journal entries for the month of April to record the above transactions.

Exercise 24-3 Hillsong Inc. manufactures snowsuits. Hillsong is considering purchasing a new sewing machine at a cost of $2.45 million. Its existing machine was purchased five years ago at a price of $1.8 million; six months ago, Hillsong spent $55,000 to keep it operational. The existing sewing machine can be sold today for $240,438. The new sewing machine would require a one-time, $85,000 training cost. Operating costs would decrease by the following amounts for years 1 to 7: Year 1 $390,900 2 399,800 3 410,100 4 425,400 5 434,000 6 434,900 7 436,400 The new sewing machine would be depreciated according to the declining-balance method at a rate of 20%. The salvage value is expected to be $379,100. This new equipment would require maintenance costs of $94,000 at the end of the fifth year. The cost of capital is 9%. Click here to view PV table. Use the net present value method to determine the following: (If net present value is negative then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round present value answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Calculate the net present value. Net present value $ Determine whether Hillsong should purchase the new machine to replace the existing machine? Click if you would like to Show Work for this question:

Milo Company manufactures beach umbrellas. The company is preparing detailed budgets for the third quarter and has assembled the following information to assist in the budget preparation:

1. The Marketing Department has estimated sales as follows for the remainder of the year (in units):

The selling price of the beach umbrellas is $13 per unit.

2. All sales are on account. Based on past experience, sales are collected in the following pattern:

Sales for June totaled $455,000.

3. The company maintains finished goods inventories equal to 15% of the following month’s sales. This requirement will be met at the end of June.

4. Each beach umbrella requires 4 feet of Gilden, a material that is sometimes hard to acquire. Therefore, the company requires that the ending inventory of Gilden be equal to 50% of the following month’s production needs. The inventory of Gilden on hand at the beginning and end of the quarter will be:

5. Gilden costs $0.60 per foot. One-half of a month’s purchases of Gilden is paid for in the month of purchase; the remainder is paid for in the following month. The accounts payable on July 1 for purchases of Gilden during June will be $48,390.

6. Required:

   1. Calculate the estimated sales, by month and in total, for the third quarter.

   2. Calculate the expected cash collections, by month and in total, for the third quarter.

   3. Calculate the estimated quantity of beach umbrellas that need to be produced in July, August, September, and October.

   4. Calculate the quantity of Gilden (in feet) that needs to be purchased by month and in total, for the third quarter.

   5. Calculate the cost of the raw material (Gilden) purchases by month and in total, for the third quarter.

   6. Calculate the expected cash disbursements for raw material (Gilden) purchases, by month and in total, for the third quarter.