Questions 3–9 of the Self-Study Questions are based on the following data:

HYDRO COMPANY

Balance Sheet

December 31, 2018

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,000 Current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . $ 80,000

Accounts receivable (net). . . . . . . . . . . . 80,000 10% bonds payable . . . . . . . . . . . . . . . . . . . . . . 120,000

Inventory. . . . . . . . . . . . . . . . . . . . . . . . . 130,000 Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000

Plant and equipment (net) . . . . . . . . . . . 250,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . 100,000

Total assets . . . . . . . . . . . . . . . . . . . . . . $500,000 Total liabilities and stockholders’ equity . . . . . . . $500,000

Sales revenues for 2018 were $800,000, gross profit was $320,000, and net income was $36,000. The income

tax rate was 40 percent. One year ago, accounts receivable (net) were $76,000, inventory was $110,000, total

assets were $460,000, and stockholders’ equity was $260,000. The bonds payable were outstanding all year and

the 2018 interest expense was $12,000.

3. The current ratio of Hydro Company at December 31, 2018, calculated using the above data, was

3.13 and the company’s working capital was $170,000. Which of the following would happen if the

firm paid off $20,000 of its current liabilities on January 1, 2019?

a. Both the current ratio and working capital would decrease.

b. Both the current ratio and working capital would increase.

c. The current ratio would increase, but working capital would remain the same.

d. The current ratio would increase, but working capital would decrease.

4. What was the firm’s inventory turnover for 2018?

a. 6.67 c. 6

b. 4 d. 3.69

5. What was the firm’s return on common stockholders’ equity for 2018?

a. 25.7 percent c. 17.1 percent

b. 12.9 percent d. 21.4 percent

6. What was the firm’s average collection period for 2018?

a. 36.5 days c. 35.6 days

b. 37.4 days d. 18.3 days

7. What was the firm’s times-interest-earned ratio for 2018?

a. 4 c. 5

b. 3 d. 6

8. What was the firm’s return on sales for 2018?

a. 4.0 percent c. 5.0 percent

b. 4.5 percent d. 5.5 percent

9. What was the firm’s return on assets for 2018?

a. 6.0 percent c. 7.5 percent

b. 7.0 percent d. 8.0 percent

Diaz Company issued $82,000 face value of bonds on January 1, 2018. The bonds had a 7 percent stated rate of interest and a ten-year term. Interest is paid in cash annually, beginning December 31, 2018. The bonds were issued at 96. The straight-line method is used for amortization.

Required

1. Use a financial statements model like the one shown below to demonstrate how (1) the January 1, 2018, bond issue and (2) the December 31, 2018, recognition of interest expense, including the amortization of the discount and the cash payment, affect the company’s financial statements.

2. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, 2018.

3. Determine the amount of interest expense reported on the 2018 income statement.

4. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, 2019.

5. Determine the amount of interest expense reported on the 2019 income statement.

Use a financial statements model like the one shown below to demonstrate how (1) the January 1, 2018, bond issue and (2) the December 31, 2018, recognition of interest expense, including the amortization of the discount and the cash payment, affect the company’s financial statements. (Use + for increase, − for decrease, and NA for not affected. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA) and if there is no effect, leave the cell blank.)

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Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, 2018.
Determine the amount of interest expense reported on the 2018 income statement.
Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, 2019.
Determine the amount of interest expense reported on the 2019 income statement.

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Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2018, 200 shares of preferred stock and 2,800 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2018:

March 1 Issue 1,000 shares of common stock for $30 per share.

May 15 Purchase 600 shares of treasury stock for $23 per share.

July 10 Reissue 100 shares of treasury stock purchased on May 15 for $28 per share.

October 15 Issue 100 shares of preferred stock for $33 per share.

December 1 Declare a cash dividend on both common and preferred stock of $0.85 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.)

December 31 Pay the cash dividends declared on December 1.

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2018: Preferred Stock, $200; Common Stock, $28; Additional Paid-in Capital, $64,000; and Retained Earnings, $24,500. Net income for the year ended December 31, 2018, is $9,600.

Taking into consideration the beginning balances on January 1, 2018 and all the transactions during 2018, respond to the following for Donnie Hilfiger:

Required:

1. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

2. Prepare the statement of stockholders’ equity for the year ended December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

Protrade Corporation acquired 70 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $420,000 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $715,000 and the fair value of the 30 percent noncontrolling interest was $180,000. No excess fair value over book value amortization accompanied the acquisition. The following selected account balances are from the individual financial records of these two companies as of December 31, 2018: Protrade Seacraft Sales $ 830,000 $ 550,000 Cost of goods sold 385,000 292,000 Operating expenses 169,000 124,000 Retained earnings, 1/1/18 930,000 370,000 Inventory 365,000 129,000 Buildings (net) 377,000 176,000 Investment income Not given 0 Each of the following problems is an independent situation: a.Assume that Protrade sells Seacraft inventory at a markup equal to 60 percent of cost. Intra-entity transfers were $109,000 in 2017 and $129,000 in 2018. Of this inventory, Seacraft retained and then sold $47,000 of the 2017 transfers in 2018 and held $61,000 of the 2018 transfers until 2019. Determine balances for the following items that would appear on consolidated financial statements for 2018: b.Assume that Seacraft sells inventory to Protrade at a markup equal to 60 percent of cost. Intra-entity transfers were $69,000 in 2017 and $99,000 in 2018. Of this inventory, $40,000 of the 2017 transfers were retained and then sold by Protrade in 2018, whereas $54,000 of the 2018 transfers were held until 2019. Determine balances for the following items that would appear on consolidated financial statements for 2018: c.Protrade sells Seacraft a building on January 1, 2017, for $118,000, although its book value was only $69,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value. Determine balances for the following items that would appear on consolidated financial statements for 2018:

Protrade Corporation acquired 70 percent of the outstanding voting stock of Seacraft Company on January 1, 2017, for $367,500 in cash and other consideration. At the acquisition date, Protrade assessed Seacraft's identifiable assets and liabilities at a collective net fair value of $565,000 and the fair value of the 30 percent noncontrolling interest was $157,500. No excess fair value over book value amortization accompanied the acquisition.

The following selected account balances are from the individual financial records of these two companies as of December 31, 2018:

Each of the following problems is an independent situation:

(A) Assume that Protrade sells Seacraft inventory at a markup equal to 60 percent of cost. Intra-entity transfers were $94,000 in 2017 and $114,000 in 2018. Of this inventory, Seacraft retained and then sold $32,000 of the 2017 transfers in 2018 and held $46,000 of the 2018 transfers until 2019. Determine balances for the following items that would appear on consolidated financial statements for 2018:

(B) Assume that Seacraft sells inventory to Protrade at a markup equal to 60 percent of cost. Intra-entity transfers were $54,000 in 2017 and $84,000 in 2018. Of this inventory, $25,000 of the 2017 transfers were retained and then sold by Protrade in 2018, whereas $39,000 of the 2018 transfers were held until 2019. Determine balances for the following items that would appear on consolidated financial statements for 2018:

(C) Protrade sells Seacraft a building on January 1, 2017, for $88,000, although its book value was only $54,000 on this date. The building had a five-year remaining life and was to be depreciated using the straight-line method with no salvage value. Determine balances for the following items that would appear on consolidated financial statements for 2018:

[The following information applies to the questions displayed below.]

Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2018, 300 shares of preferred stock and 4,000 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2018:

March 1 Issue 1,100 shares of common stock for $42 per share.
May 15 purchase 400 shares of treasury stock for $35 per share.
July 10 Reissue 200 shares of treasury stock purchased on May 15 for $40 per share.
October 15 Issue 200 shares of preferred stock for $45 per share.
December 1 Declare a cash dividend on both common and preferred stock of $0.50 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.)
December 31 Pay the cash dividends declared on December 1.

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2018: Preferred Stock, $300; Common Stock, $40; Additional Paid-in Capital, $76,000; and Retained Earnings, $30,500. Net income for the year ended December 31, 2018, is $10,800.

Taking into consideration the beginning balances on January 1, 2018 and all the transactions during 2018, respond to the following for Donnie Hilfiger:

1. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2018.

2. Prepare the statement of stockholders’ equity for the year ended December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

ACCOUNTING INFORMATION SYSTEMS; DATABASE DESIGN

Premium Garden Products (PGP) supplies gardening enthusiasts and commercial garden centers throughout the northeast with a wide range of gardening equipment and products. Their wide range of inventory includes such items as tank sprayers, wheelbarrows, fertilizers, plants, and insecticides. Sales to commercial customers (garden centers) are on credit, whereas consumer sales are cash transactions (bank credit/debit cards). Sales orders are received via e-mail or phone at the Scranton, Pennsylvania, home office. In the case of commercial customers’ sales, the PGP sales clerk verifies customer credit worthiness by checking their available credit in the Customer table. The clerk then checks the availability of the product from the Inventory table and creates a record in the Sales Invoice table to record the sale. The clerk then sends a stock release notice to the distribution center nearest to the customer’s location, from where the product is shipped. Shipments are made from two distribution centers: one in Scranton and one in Maryland. Commercial customers are given net 30 terms. They make payment by check, and the open Sales Invoice is then marked paid by placing the customers check number in the “payment” field of the invoice. Sales to consumer customers are processed similarly except no credit check is per- formed and the Sales Invoice record is marked paid at the time of sale by placing the last four digits of the customer’s credit card number in the payment field.

PGP obtains its inventories from over 100 nurseries and producers of garden products throughout the United States. When inventory levels fall to their pre-determined reorder points, the computer system automatically creates a record in the Purchase Order table and sends a hard copy PO to the supplier. When products arrive at the distribution centers, the receiving clerks log onto the main office computer and create a record in the Receiving Report table. Suppliers send their invoices to the AP clerk who adds a record to the Supplier Invoice table. On the due date, the cash disbursement clerk writes a check in payment of the AP and marks the supplier invoice paid by placing the check number in the “paid” field.

REQUIRED: Design a partial relational database needed to support those aspects of PGP’s process that are outlined in the problem. Label the database tables and assign meaningful attributes to each. Assign primary keys and foreign keys as needed. Assume that invoices, purchase orders, and receiving reports may contain many items.

5) CHART - Create a 3-D pie chart showing the breakdown of total Hours Worked into total Overtime Hours and the NonOvertime hours located at the bottom of the database listing, row 37 columns E, F, G. The pie chart should show the values, the legend should indicate Overtime Hours and NonOvertime, and the chart title should be Total Daily Hours. Place this chart so that it will fill cells K1:R16. (Hint: When selecting the data for this chart remember that pie charts show parts of a whole so there’s no reason to include a total if you are displaying the parts making up that total.) [In spreadsheets, does it make sense to put totals at the bottom of the database?] 6) DATA TABLE - Create a Data Table that shows the average Daily Pay by gender for each department number. Start the criteria in cell E40 and the data table in cell E44. 7) SUBTOTALS - Create a Subtotal showing the total hours worked by department and the total overtime hours worked by gender within each department. Change to Outline View 3. [Which department works the most hours and do you see something odd about the overtime hours?] Copy the subtotal information to Sheet 2 using Copy/Paste Special Values (previously undisplayed/hidden data will appear when copied to Sheet 2). Remove the Subtotaling on Sheet 1 using the Remove All button before continuing. 8) GOAL SEEK - In cell E7, place a formula that will multiply the Overtime Rate (B3) by the Total Number of Overtime Hours. Perform a Goal Seek to determine the overtime rate necessary to achieve $400 in total overtime pay. Leave the goal seek in place so that it can be graded. 9) EXTRACT (Advanced Filter) - Sort the database by the employees' names in ascending order. Extract just the name and the department number (Dept. No.) of those who worked more than 8 hours. Start the criteria in cell A40 and the extract output in cell A44. 10) DATA TABLE – on SHEET 3 create a One-Variable Data Table that will take the ODD numbers from 1 to 55 and will show each of the following independent calculations: multiply by $6.64; divide by 3.245; add $8.23 to each number; subtract 4 from each number.

1. Data Flow Diagram

The TOPCAR taxi company is developing a new computer system to be used to support taxi booking and corporate client credit accounts. This computer system aims to automate some manual processes and cut down on labour costs as TOPCAR has many customers from large corporate companies, e.g. CEO, and managers often need taxi trips to the airport. The following describes the activities that must be processed by the computer system:

A client company must first register and open a credit account with TOPCAR at TOPCAR’s website, in which case certain credit checks are made such as checking credit history of client company’s debt level. If the client company has no bad debt history, a credit account for the client company is set up.

At least 24 hours after successful account registration, authorized persons from such client company can request a taxi booking form TOPCAR’s website. When this happens, the availability of a taxi at the requested date and time is checked, as is the credit status of the client company checked. (Note that credit status in finance means a measure of a lender’s willingness to lend money to a particular person or organization, depending on their ability to repay).

If these two checks are successful, a booking is made, and a written confirmation is sent via SMS and emailed to client company. After the customer from the client company has used the taxi, the driver sends in a record of the work, including the cost, and this is added to client company’s account. (Note that driver is an outsourced worker from TOPCAR’s point of view.) At the end of each month, taxi bills are sent via SMS and emailed to client companies for settlement.

From the above description, draw a data flow diagram showing the flow of input information (and/or data) and output information (and/or data) to and from processes and database stores within this computer system and any external environmental elements that interact with this computer system. In this diagram, you must identify the following:

1. processes inside this computer system,                      
2. database stores, external environmental elements that interact with any of the processes identified

in (a)                                                 (5.5 marks)

3. input and output information (or data) to and from each of the processes, database stores, and external environmental elements identified in (a) and (b)        (7.5 marks)

(Hint: there are two environmental elements that interact with this computer system, and six main processes in this computer system)

A client is 36 weeks’ gestation. The doctor has ordered a non-stress test to be performed. Her obstetrician provided her with no information about the test. The client is anxious and concerned about the test. How will you explain the test to her? Draw and label a reactive and draw a non-reactive NST strip.