Project #11756 - accounting for decision making

 

1.     Your company is getting ready to lease some equipment.  The attorney’s sign off on the lease contracts and you send it to you; the company’s CFO and you review the lease so you can decide what kind of lease it is.  It has numerous provisions and you find that the lease transfers ownership of the property from the lessor to the lessee by the end of the lease term; the lease contains an option permitting the lessee to purchase the property at a bargain price; the lease term is equal to or greater than 75 percent of the estimated economic life of the leased property; and the present value of rental and other minimum lease payment equals or exceeds 75 percent of the fair value of the leased property.

 

Based on the information provided above, would you classify this lease as an operating lease or a capital lease and why.

 

2.     Please review the following accounts.  Each account will fall into one of the following categories on the Balance Sheet.  Match the general ledger account as to which category the account would be located in the Balance Sheet.  For instance, Preferred Stock would be located in which category?  Categories can be used more than once and put the appropriate letter next to the General Ledger Account.

 

Categories:

CA      Current Assets

PPE     Property, Plant and Equipment

OA      Other Assets

CL       Current Liabilities

LL       Long Term Liabilities

OL       Other Liabilities

EQ       Equity

NB      Not a Balance Sheet Account

 

General Ledger Accounts:

 

Preferred Stock                                   ______           

 

Cash                                                    ______           

 

Accounts Receivables                         ______

           

Notes Payable                                     ______           

 

Depreciation Expense                         ______

 

Prepaid Expenses                                ______           

 

Accrued Expenses                               ______           

 

Treasury Stock                                   ______           

 

Debt Maturing within One Year         ______           

 

Cost of Goods Sold                            ______           

 

3.     Using the following information, calculate the ratios noted below.  Show your calculations

 

Cash                                              $   500,000

Net Accounts Receivables            $1,250,000

Other Assets                                 $   100,000

Current Liabilities                         $   750,000

Gross Sales                                   $2,500,000

Common Stock                             $1,100,000

Average Current Liabilities           $   800,000

Average Total Liabilities               $1,250,000

Treasury Stock                             $   500,000

Cost of Goods Sold                      $1,000,000

Current Assets                              $3,500,000

Average Inventory                        $   650,000

Average Net Receivables              $1,075,000

Net Credit Sales                            $2,225,000

Cash Provided by Operations      $   375,000

Accumulated Depreciation           $   922,000

 

 

a.     Current Ratio       

b.     Receivables Turnover

c.     Current Cash Debt Coverage Ratio

d.     Inventory Turnover Ratio

e.     Cash Debt Coverage Ratio

 

4.     Company A has a $1 million loan due in 10 years.  The first year they pay $15,000 on the principal, year two they pay $20,000 on the principal and in year three they pay $30,000 on the principal.  How much of the loan is current maturity of long term debt and how much in long-term debt in year three?

 

 

 

5.     What are the four advantages of leasing:

 

6.     Describe two major obligations incurred by a company when bonds are issued.

 

7.     If an 8%, 10-year, $900,000 bond is issued at face value and interest is paid annually, what is the amount of the interest payment at the end of the first year?

 

8.     What are the three essential features of the allowance method of accounting for Bad Debts?

 

9.     Which of the following are not considered as cash on a company's balance sheet?

 

a.     Cash in bank – Savings Account

b.     Cash on Hand

c.     Petty Cash

d.     Cash refund due from Vendor

e.     Cash in checking Account

f.      Postdated Receivables Checks

 

10.  Indicate where each of these accounts should be classified in the stockholders’equity section of the balance sheet below.

 

a.     Common Stock

b.     Paid-in-Capital in Excess of Par Value

c.     Retained Earnings

d.     Treasury Stock

e.     Preferred Stock

 

 

Stockholders’ Equity:

 

_________________________________                              $XXX,XXX

_________________________________                              $XXX,XXX

_________________________________                              $XXX,XXX

_________________________________                              $XXX,XXX

_________________________________                             ($XXX,XXX)

 

Total Stockholders’ Equity                                                             $XXX,XXX

 

 

 

 

 

 

 

 

11.  What are the effects of stock splits and stock dividends?

 

Stock Dividend           Stock Split

            Total Paid-in Capital                                      _____________          ____________

            Total Retained Earnings                                  _____________          ____________            Total par value (Common Stock)                   _____________          ____________

            Par Value per share                                         _____________          ____________

 

            The choices are: Increase, Decrease or No Change and each can be used more

            than once.

 

12.  What are the Five Basic Principals of Cash Management

 

a.      

b.      

c.      

d.      

e.      

 

13.  The purpose of vertical analysis, also known as common-size analysis, is to determine the increase or decrease that has taken place, expressed as either an amount or a percentage.  True or False

 

14.  What are the two characteristics of “Cash Equivalents?

 

a.      

b.      

 

15.  What are the six principals of Internal Controls?

 

a.      

b.      

c.      

d.      

Subject Mathematics
Due By (Pacific Time) 09/02/2013 01:15 am
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