PSTAT 109: Quiz 3 Winter 2014
July 13, 2019
Data Gathering and Analysis
July 13, 2019



Brief Exercise 5-2 Koch Corporation’s

Exercise 5-1 Deep Blue Something, Inc

Exercise 5-4  Denis Savard Inc

Exercise 5-7 Yasunari Kawabata Company

Exercise 5-12 Scott Butler Corporation

Exercise 24-2 For each of the following subsequent

Exercise 24-3 Carlton Company

Exercise 24-4 As loan analyst for Utrillo Bank

Brief Exercise 5-2

Koch Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: Cash $7,000; Land $40,000; Patents $12,500; Accounts Receivable $90,000; Prepaid Insurance $5,200; Inventory $30,000; Allowance for Doubtful Accounts $4,000; Equity Investments (trading) $11,000.

Prepare the current assets section of the balance sheet. (List Current Assets in order of liquidity.)

Brief Exercise 5-6

Patrick Corporation’s adjusted trial balance contained the following asset accounts at December 31, 2014: Prepaid Rent $12,000; Goodwill $50,000; Franchise Fees Receivable $2,000; Franchises $47,000; Patents $33,000; Trademarks $10,000.

Prepare the intangible assets section of the balance sheet

Exercise 5-1

Presented below are a number of balance sheet accounts of Deep Blue Something, Inc. For each of the accounts below, indicate the proper balance sheet classification.         

  Balance Sheet Accounts Balance Sheet Classification
(a) Investment in Preferred Stock.  
(b) Treasury Stock.  
(c) Common Stock.  
(d) Dividends Payable.  
(e) Accumulated Depreciation-Equipment.  
(f)(1) Construction in Process (Constructed for another party).  
(f)(2) Construction in Process (Constructed for the use of Deep Blue Something, Inc.).  
(g) Petty Cash.  
(h) Interest Payable.  
(i) Deficit.  
(j) Equity Investments (trading).  
(k) Income Taxes Payable.  
(l) Unearned Subscription Revenue.  
(m) Work in Process.  
(n) Salaries and Wages Payable.  

Exercise 5-4

Assume that Denis Savard Inc. has the following accounts at the end of the current year.

1. Common Stock 14. Accumulated Depreciation-Buildings.
2. Discount on Bonds Payable. 15. Cash Restricted for Plant Expansion.
3. Treasury Stock (at cost). 16. Land Held for Future Plant Site.
4. Notes Payable (short-term). 17. Allowance for Doubtful Accounts.
5. Raw Materials 18. Retained Earnings.
6. Preferred Stock (Equity) Investments (long-term). 19. Paid-in Capital in Excess of Par-Common Stock.
7. Unearned Rent Revenue. 20. Unearned Subscriptions Revenue.
8. Work in Process. 21. Receivables-Officers (due in one year).
9. Copyrights. 22. Inventory (finished goods).
10. Buildings. 23. Accounts Receivable.
11. Notes Receivable (short-term). 24. Bonds Payable (due in 4 years).
12. Cash. 25. Noncontrolling Interest.
13. Salaries and Wages Payable.    

Prepare a classified balance sheet in good form. (List Current Assets in order of liquidity. For Land, Treasury Stock, Notes Payable, Preferred Stock Investments, Notes Receivable, Receivables-Officers, Inventory, Bonds Payable, and Restricted Cash, enter the account name only and do not provide the descriptive information provided in the question.)

Exercise 5-7

Presented below are selected accounts of Yasunari Kawabata Company at December 31, 2014.

Inventory (finished goods) $ 52,000 Cost of Goods Sold $2,100,000
Unearned Service Revenue 90,000 Notes Receivable 40,000
Equipment 253,000 Accounts Receivable 161,000
Inventory (work in process) 34,000 Inventory (raw materials) 207,000
Cash 37,000 Supplies Expense 60,000
Equity Investments (short-term) 31,000 Allowance for Doubtful Accounts 12,000
Customer Advances 36,000 Licenses 18,000
Restricted Cash for Plant Expansion 50,000 Additional Paid-in Capital 88,000
    Treasury Stock 22,000

The following additional information is available

1. Inventories are valued at lower-of-cost-or-market using LIFO.

2. Equipment is recorded at cost. Accumulated depreciation, computed on a straight-line basis, is $50,600.

3. The short-term investments have a fair value of $29,000. (Assume they are trading securities.)

4. The notes receivable are due April 30, 2016, with interest receivable every April 30. The notes bear interest at 6%. (Hint: Accrued interest due on December 31, 2014.)

5. The allowance for doubtful accounts applies to the accounts receivable. Accounts receivable of $50,000 are pledged as collateral on a bank loan.

6. Licenses are recorded net of accumulated amortization of $14,000.

7. Treasury stock is recorded at cost..

Prepare the current assets section of Yasunari Kawabata Company’s December 31, 2014, balance sheet, with appropriate disclosures. (List Current Assets in order of liquidity. Enter account name only and do not provide the descriptive information provided in the question.)

Exercise 5-12

Presented below is the trial balance of Scott Butler Corporation at December 31, 2014.

  Debit Credit
Cash $   197,000  
Sales   $ 8,100,000
Debt Investments (trading) (cost, $145,000) 153,000  
Cost of Goods Sold 4,800,000  
Debt Investments (long-term) 299,000  
Equity Investments (long-term) 277,000  
Notes Payable (short-term)   90,000
Accounts Payable   455,000
Selling Expenses 2,000,000  
Investment Revenue   63,000
Land 260,000  
Buildings 1,040,000  
Dividends Payable   136,000
Accrued Liabilities   96,000
Accounts Receivable 435,000  
Accumulated Depreciation-Buildings   152,000
Allowance for Doubtful Accounts   25,000
Administrative Expenses 900,000  
Interest Expense 211,000  
Inventory 597,000  
Gain (extraordinary)   80,000
Notes Payable (long-term)   900,000
Equipment 600,000  
Bonds Payable   1,000,000
Accumulated Depreciation-Equipment   60,000
Franchises 160,000  
Common Stock ($5 par)   1,000,000
Treasury Stock 191,000  
Patents 195,000  
Retained Earnings   78,000
Paid-in Capital in Excess of Par   80,000
        Totals $12,315,000 $12,315,000

Prepare a balance sheet at December 31, 2014, for Scott Butler Corporation. (Ignore income taxes). (List Current Assets in order of liquidity. List Property, Plant and Equipment in order of Land, Building and Equipment. Enter account name only and do not provide the descriptive information provided in the question.)

Exercise 24-2

For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

Sr. No. Subsequent (Post-Balance-Sheet) Events  
1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end.  
2. Introduction of a new product line.  
3. Loss of assembly plant due to fire.  
4. Sale of a significant portion of the company’s assets.  
5. Retirement of the company president.  
6. Prolonged employee strike.  
7. Loss of a significant customer.  
8. Issuance of a significant number of shares of common stock.  
9. Material loss on a year-end receivable because of a customer’s bankruptcy.  
10. Hiring of a new president.  
11. Settlement of prior year’s litigation against the company (no loss was accrued).  
12. Merger with another company of comparable size.  

Exercise 24-3

Carlton Company is involved in four separate industries. The following information is available for each of the four industries.

Operating Segment Total Revenue Operating Profit (Loss)  Identifiable Assets
W $60,000 $15,000  $167,000
X 10,000 3,000  83,000
Y 23,000 (2,000) 21,000
Z 9,000 1,000  19,000
  $102,000 $17,000  $290,000

Determine which of the operating segments are reportable based on the:

    Reportable Segments
(a) Revenue test.  
(b) Operating profit (loss) test.  
(c) Identifiable assets test.  

Exercise 24-4

As loan analyst for Utrillo Bank, you have been presented the following information.

  Toulouse Co. Lautrec Co.
Cash $120,000  $320,000 
Receivables 220,000  302,000 
Inventories 570,000  518,000 
   Total current assets 910,000  1,140,000 
Other assets 500,000  612,000 
   Total assets $1,410,000  $1,752,000 
Liabilities and Stockholders’ Equity      
Current liabilities $305,000  $350,000 
Long-term liabilities 400,000  500,000 
Capital stock and retained earnings 705,000  902,000 
   Total liabilities and stockholders’ equity $1,410,000  $1,752,000 
Annual sales $930,000  $1,500,000 
Rate of gross profit on sales 30% 40%

Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one of these requests is to be granted.

Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)

  Toulouse Co. Lautrec Co.
Current ratio   : 1   : 1
Acid-test ratio   : 1   : 1
Accounts receivable turnover   times   times
Inventory turnover   times   times
Cash to current liabilities   : 1   : 1

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