Question: Based upon your financial ratio analysis, what questions would you like to propose to management to gain clarity on the business operations?
Industry Financial Ratio Standards:
|
Ratio |
Industry Norm |
Milan Fashions Ratios 2015 |
Evaluation* |
|
Current ratio |
4.5 times |
13.25 |
Good |
|
Long-term debt-to-Equity ratio |
12% |
5.36% |
Good |
|
Debt-to-Equity ratio |
30% |
10.08% |
Good |
|
Total Debt ratio |
20% |
9.16% |
Good |
|
Financial leverage ratio |
1.10 |
1.1 |
Fair |
|
Inventory turnover |
7 times |
6 times |
Poor |
|
Fixed asset turnover |
1.8 times |
2.99 times |
Good |
|
Debt-to-Capital ratio |
43.4% |
10.32% |
Good |
|
Interest coverage ratio |
5.0 times |
18 times |
Good |
|
Return on Assets |
8.4% |
2.15% |
Poor |
|
Ratio |
Industry Norm |
Milan Fashions Ratios 2016 |
Evaluation* |
|
Current ratio |
4.5 times |
21.54 |
Good |
|
Long-term debt-to-Equity ratio |
12% |
6.92% |
Good |
|
Debt-to-Equity ratio |
30% |
9.86% |
Good |
|
Total Debt ratio |
20% |
8.97% |
Good |
|
Financial leverage ratio |
1.10 |
1.1 |
Fair |
|
Inventory turnover |
7 times |
6 times |
Poor |
|
Fixed asset turnover |
1.8 times |
2.6 times |
Good |
|
Debt-to-Capital ratio |
43.4% |
10.17% |
Good |
|
Interest coverage ratio |
5.0 times |
20 times |
Good |
|
Return on Assets |
8.4% |
2.22% |
Poor |
*Possible ratings: Good (Highest); Fair (Middle); Poor (Lowest)
In: Accounting
Question: Of the financial ratios that are used for the industry standard, which do you feel are most important when determining whether First United should approve the loan to Milan Fashions? What do you feel are the strong and weak points of the company in your financial analysis?
Industry Financial Ratio Standards
|
Ratio |
Industry Norm |
Milan Fashions Ratios 2015 |
Evaluation* |
|
Current ratio |
4.5 times |
13.25 |
Good |
|
Long-term debt-to-Equity ratio |
12% |
5.36% |
Good |
|
Debt-to-Equity ratio |
30% |
10.08% |
Good |
|
Total Debt ratio |
20% |
9.16% |
Good |
|
Financial leverage ratio |
1.10 |
1.1 |
Fair |
|
Inventory turnover |
7 times |
6 times |
Poor |
|
Fixed asset turnover |
1.8 times |
2.99 times |
Good |
|
Debt-to-Capital ratio |
43.4% |
10.32% |
Good |
|
Interest coverage ratio |
5.0 times |
18 times |
Good |
|
Return on Assets |
8.4% |
2.15% |
Poor |
|
Ratio |
Industry Norm |
Milan Fashions Ratios 2016 |
Evaluation* |
|
Current ratio |
4.5 times |
21.54 |
Good |
|
Long-term debt-to-Equity ratio |
12% |
6.92% |
Good |
|
Debt-to-Equity ratio |
30% |
9.86% |
Good |
|
Total Debt ratio |
20% |
8.97% |
Good |
|
Financial leverage ratio |
1.10 |
1.1 |
Fair |
|
Inventory turnover |
7 times |
6 times |
Poor |
|
Fixed asset turnover |
1.8 times |
2.6 times |
Good |
|
Debt-to-Capital ratio |
43.4% |
10.17% |
Good |
|
Interest coverage ratio |
5.0 times |
20 times |
Good |
|
Return on Assets |
8.4% |
2.22% |
Poor |
*Possible ratings: Good (Highest); Fair (Middle); Poor (Lowest)
In: Accounting
Port Ormond Carpet Company manufactures carpets. Fiber is placed in process in the Spinning Department, where it is spun into yarn. The output of the Spinning Department is transferred to the Tufting Department, where carpet backing is added at the beginning of the process and the process is completed. On January 1, Port Ormond Carpet Company had the following inventories:
| Finished Goods | $62,000 |
| Work in Process-Spinning Department | 35,000 |
| Work in Process-Tufting Department | 28,500 |
| Materials | 17,000 |
Departmental accounts are maintained for factory overhead, and both have zero balances on January 1. Manufacturing operations for January are summarized as follows:
| Jan. | 1 | Materials purchased on account, $500,000 |
| 2 | Materials requisitioned for use: | |
| Fiber—Spinning Department, $275,000 | ||
| Carpet backing—Tufting Department, $110,000 | ||
| Indirect materials—Spinning Department, $46,000 | ||
| Indirect materials—Tufting Department, $39,500 | ||
| 31 | Labor used: | |
| Direct labor—Spinning Department, $185,000 | ||
| Direct labor—Tufting Department, $98,000 | ||
| Indirect labor—Spinning Department, $18,500 | ||
| Indirect labor—Tufting Department, $9,000 | ||
| 31 | Depreciation charged on fixed assets: | |
| Spinning Department, $12,500 | ||
| Tufting Department, $8,500 | ||
| 31 | Expired prepaid factory insurance: | |
| Spinning Department, $2,000 | ||
| Tufting Department, $1,000 | ||
| 31 | Applied factory overhead: | |
| Spinning Department, $80,000 | ||
| Tufting Department, $55,000 | ||
| 31 | Production costs transferred from Spinning Department to Tufting Department, $547,000 | |
| 31 | Production costs transferred from Tufting Department to Finished Goods, $807,200 | |
| 31 | Cost of goods sold during the period, $795,200 |
| Required: | |
| 1. | Journalize the entries to record the operations, using the dates provided with the summary of manufacturing operations. Refer to the Chart of Accounts for exact wording of account titles. |
| 2. | Compute the January 31 balances of the inventory accounts. |
| 3. | Compute the January 31 balances of the factory overhead accounts. |
In: Accounting
Suppose BO company uses the indirect method to prepare the cash flow statement. Indicate which of the following items will appear in the cash flow from operating activities section of the cash flow statement. [Tick all that apply].
|
Amortization of the cost of an intangible asset |
||
|
Cash paid to acquire other companies |
||
|
Cash paid to buy bonds issued by another company |
||
|
Cash received from sale of company’s own stock |
||
|
Dividends received from companies accounted by available-for-sale method |
||
|
Income from companies accounted by equity method |
||
|
Licensing revenue |
In: Accounting
Costs per Equivalent Unit
The following information concerns production in the Baking Department for March. All direct materials are placed in process at the beginning of production.
| ACCOUNT Work in Process—Baking Department | ACCOUNT NO. | ||||||||
| Date | Item | Debit | Credit | Balance | |||||
| Debit | Credit | ||||||||
| Mar. | 1 | Bal., 6,000 units, 2/5 completed | 12,600 | ||||||
| 31 | Direct materials, 108,000 units | 194,400 | 207,000 | ||||||
| 31 | Direct labor | 55,760 | 262,760 | ||||||
| 31 | Factory overhead | 31,360 | 294,120 | ||||||
| 31 | Goods finished, 109,500 units | 284,580 | 9,540 | ||||||
| 31 | Bal. ? units, 2/5 completed | 9,540 | |||||||
a. Based on the above data, determine each cost listed below. Round "cost per equivalent unit" answers to the nearest cent.
| 1. Direct materials cost per equivalent unit | $ |
| 2. Conversion cost per equivalent unit | $ |
| 3. Cost of the beginning work in process completed during March | $ |
| 4. Cost of units started and completed during March | $ |
| 5. Cost of the ending work in process | $ |
b. Assuming that the direct materials cost is
the same for February and March, did the conversion cost per
equivalent unit increase, decrease, or remain the same in
March?
In: Accounting
Macondo, Inc. is a wholesaler located in Aguadilla. During its current fiscal year, ended December 31, 2019, Macondo Inc. completed the following selected transactions:
Feb. 3 Purchased 2,500 shares of its own common stock at $26, recording the stock at cost. (Prior to the purchase, there were 40,000 shares of $20 par common stock outstanding.
May 1 Declared a semiannual dividend of $1 on the 10,000 shares of preferred stock a $.30 dividend on the common stock to stockholders of record on May 31, payable on June 15.
June 15 Paid the cash dividends.
Sept. 23 Sold 1,000 shares of treasury stock at $28, receiving cash.
Nov. 1 Declared semiannual dividends of $1 on the preferred and $.30 declared on the common stock, In addition, a 5% common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimate at $30.
Dec. 1 Paid the cash dividends and issued the certificates for the common stock dividend.
Instructions: Journalize the transactions.
In: Accounting
WoolCo buys sheep’s wool from farmers. The company began operations in January of this year, and is making decisions on product offerings, pricing, and vendors. The company is also examining its method of assigning overhead to products. You’ve just been hired as a production manager at WoolCo.
Currently WoolCo makes three products: (1) raw, clean wool to be used as stuffing or insulation; (2) wool yarn for use in the textile industry, and (3) extra-thick yarn for use in rugs.
The company would like you to evaluate its costing methods for its raw wool and wool yarn. Upper management would also like your recommendations regarding a production decision regarding their current and proposed product lines.
Traditional costing allocates overhead costs to products based upon a predetermined factory overhead rate, which is computed using an estimated activity base such as direct labor hours or machine hours. The rate is computed as follows:
Predetermined Factory Overhead Rate = (Estimated Total Factory Overhead Costs) ÷ (Estimated Activity Base)
WoolCo has been using traditional costing with combing machine hours as the activity base. The company would like to consider activity-based costing. In order to understand their current system better, you evaluate WoolCo’s current method of costing for raw wool and wool yarn. The production staff has compiled the following information for you on the production of 500 pounds of either raw wool or wool yarn:
|
Total Factory |
Total Costs |
|
Overhead Costs |
|
| Sorting | $25,600 |
| Cleaning | 38,400 |
| Combing | 1,300 |
|
Raw Wool |
Wool Yarn |
|
| Hours of combing machine use required | 80 | 20 |
In the following table, use combing machine hours as the activity base for assigning overhead costs to each product. When required, round your answers to the nearest dollar.
Predetermined factory overhead rate: per direct labor hour
Points:
0 / 1
| Raw Wool | Wool Yarn | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allocated factory overhead cost |
In order to compare WoolCo’s current traditional method with activity-based costing, you interview the production staff and compile the following information, which relates only to the costs for raw wool and wool yarn. WoolCo wishes to consider costing only for these two products at this time, since they are more established and have more data to evaluate.
In the following table, compute and enter the activity rate for each of the three activities. If required, round your answers to the nearest cent.
Points: 3 / 3 In the following table, allocate the costs of sorting, cleaning, and combing based on the rates of activity consumed by each product’s process. When required, round your answers to the nearest dollar.
|
In: Accounting
Daley Company prepared the following aging of receivables analysis at December 31.
| Days Past Due | |||||||||||||||||||||||
| Total | 0 | 1 to 30 | 31 to 60 | 61 to 90 | Over 90 | ||||||||||||||||||
| Accounts receivable | $ | 580,000 | $ | 398,000 | $ | 92,000 | $ | 38,000 | $ | 20,000 | $ | 32,000 | |||||||||||
| Percent uncollectible | 3 | % | 4 | % | 7 | % | 9 | % | 12 | % | |||||||||||||
a. Complete a table to calculate the estimated
balance of Allowance for Doubtful Accounts using aging of accounts
receivable.
b. Prepare the adjusting entry to record Bad Debts
Expense using the estimate from part a. Assume the
unadjusted balance in the Allowance for Doubtful Accounts is a
$3,800 credit.
c. Prepare the adjusting entry to record bad debts
expense using the estimate from part a. Assume the
unadjusted balance in the Allowance for Doubtful Accounts is a $300
debit.
Part 2
Daley Company prepared the following aging of receivables analysis at December 31.
| Days Past Due | |||||||||||||||||||||||
| Total | 0 | 1 to 30 | 31 to 60 | 61 to 90 | Over 90 | ||||||||||||||||||
| Accounts receivable | $ | 580,000 | $ | 398,000 | $ | 92,000 | $ | 38,000 | $ | 20,000 | $ | 32,000 | |||||||||||
| Percent uncollectible | 3 | % | 4 | % | 7 | % | 9 | % | 12 | % | |||||||||||||
a. Estimate the balance of the Allowance for
Doubtful Accounts assuming the company uses 5% of total accounts
receivable to estimate uncollectibles, instead of the aging of
receivables method.
b. Prepare the adjusting entry to record Bad Debts
Expense using the estimate from part a. Assume the
unadjusted balance in the Allowance for Doubtful Accounts is a
$12,200 credit.
c. Prepare the adjusting entry to record bad debts
expense using the estimate from part a. Assume the
unadjusted balance in the Allowance for Doubtful Accounts is a
$1,200 debit.
In: Accounting
At year-end (December 31), Chan Company estimates its bad debts
as 0.60% of its annual credit sales of $665,000. Chan records its
Bad Debts Expense for that estimate. On the following February 1,
Chan decides that the $333 account of P. Park is uncollectible and
writes it off as a bad debt. On June 5, Park unexpectedly pays the
amount previously written off.
Prepare Chan's journal entries for the transactions.
In: Accounting
Problem 6-1A Perpetual: Alternative cost flows LO P1
[The following information applies to the questions
displayed below.]
Warnerwoods Company uses a perpetual inventory system. It entered
into the following purchases and sales transactions for
March.
| Date | Activities | Units Acquired at Cost | Units Sold at Retail | |||||||||
| Mar. | 1 | Beginning inventory | 110 | units | @ $51.20 per unit | |||||||
| Mar. | 5 | Purchase | 230 | units | @ $56.20 per unit | |||||||
| Mar. | 9 | Sales | 270 | units | @ $86.20 per unit | |||||||
| Mar. | 18 | Purchase | 90 | units | @ $61.20 per unit | |||||||
| Mar. | 25 | Purchase | 160 | units | @ $63.20 per unit | |||||||
| Mar. | 29 | Sales | 140 | units | @ $96.20 per unit | |||||||
| Totals | 590 | units | 410 | units | ||||||||
Required:
1. Compute cost of goods available for sale and
the number of units available for sale.
2. Compute the number of units in ending
inventory.
3. Compute the cost assigned to ending inventory
using (a) FIFO, (b) LIFO, (c) weighted
average, and (d) specific identification. For specific
identification, the March 9 sale consisted of 70 units from
beginning inventory and 200 units from the March 5 purchase; the
March 29 sale consisted of 50 units from the March 18 purchase and
90 units from the March 25 purchase.
4. Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 70 units from beginning inventory and 200 units from the March 5 purchase; the March 29 sale consisted of 50 units from the March 18 purchase and 90 units from the March 25 purchase. (Round weighted average cost per unit to two decimals and final answers to nearest whole dollar.)
In: Accounting
Give examples of the strengths and weaknesses inherent in the use of standards for planning, control and decision making. How do standards relate to general cost management?
Note:Could you please don't use your handwriting to answer this question to be easy for me to solve...Thanks
In: Accounting
Lets say I owned a business worth $100 million dollars and I have 25% stake in the company. Lets say 100% of the what I own in the company will be taxable and I am married and it will be filed jointly. Company's net income is $17.5 million.
What would be the estate tax attributable, 100% interest will be taxable and filling jointly?
Also can you please mention some tax laws that would be beneficial in this situation?
In: Accounting
In: Accounting
In: Accounting
Lets say I owned a business worth $100 million dollars and I have 25% stake in the company. Lets say 100% of the what I own in the company will be taxable and I am married and it will be filed jointly. Company's net income is $17.5 million.
If I was selling the company how much estate tax attributable would I be facing filing jointly?
In: Accounting