3.12 ROI analysis using the DuPont model a. Firm D has net income of $ 66,640, sales of $
2,380,000, and average total assets of $ 680,000. Calculate the firm’s margin, turnover, and ROI.
b. Firm E has net income of $ 300,000, sales of $ 5,000,000, and ROI of 12%. Calculate the
firm’s turnover and average total assets. c. Firm F has ROI of 17.4%, average total assets of $
2,700,000, and turnover of 1.2. Calculate the firm’s sales, margin, and net income. Round your
answers to the nearest whole numbers.
3.16 Effect of transactions on working capital and current ratio Evans, Inc., had current liabilities
at April 30 of $ 120,500. The firm’s current ratio at that date was 1.8. Required: a. Calculate the
firm’s current assets and working capital at April 30. b. Assume that management paid $ 30,125
of accounts payable on April 29. Calculate the current ratio and working capital at April 30 as if
the April 29 payment had not been made. Round your current ratio answer to two decimal places.
c. Explain the changes, if any, to working capital and the current ratio that would be caused by
the April 29 payment.
3.20 Calculate and analyze liquidity measures Following are the current asset and current
liability sections of the balance sheets for Calketch, Inc
Required: a. Calculate the working capital and current ratio at each balance sheet date. Round
your current ratio answers to two decimal places. b. Describe the change in the firm’s liquidity
from 2013 to 2014.
4.6 Record transactions and calculate financial statement amounts The following are the
transactions relating to the formation of Cardinal Mowing Services, Inc., and its first month of
operations. Prepare an answer sheet with the columns shown. Record each transaction in the
appropriate columns of your answer sheet. Show the amounts involved and indicate how each
account is affected ( 1 or 2). After all transactions have been recorded, calculate the total assets,
liabilities, and stockholders’ equity at the end of the month and calculate the amount of net
income for the month. a. The firm was organized and the initial stockholders invested cash of $
3,000. b. The company borrowed $ 4,500 from a relative of one of the initial stockholders; a
short- term note was signed.
Two zero- turn lawn mowers costing $ 2,400 each and a professional trimmer costing $ 650 were
purchased for cash. The original list price of each mower was $ 3,050, but a discount was
received because the seller was having a sale. d. Gasoline, oil, and several packages of trash bags
were purchased for cash of $ 450. e. Advertising flyers announcing the formation of the business
and a newspaper ad were purchased. The cost of these items, $ 850, will be paid in 30 days. f.
During the first two weeks of operations, 47 lawns were mowed. The total rev-enue for this work
was $ 3,525; $ 2,325 was collected in cash, and the balance will be received within 30 days. g.
Employees were paid $ 2,100 for their work during the first two weeks. h. Additional gasoline,
oil, and trash bags costing $ 550 were purchased for cash. i. In the last two weeks of the first
month, revenues totaled $ 4,600, of which $ 1,875 was collected. j. Employee wages for the last
two weeks totaled $ 2,550; these will be paid during the first week of the next month. k. It was
determined that at the end of the month the cost of the gasoline, oil, and trash bags still on hand
was $ 150. l. Customers paid a total of $ 750 due from mowing services provided during the first
two weeks. The revenue for these services was recognized in transaction
f. Prepare an income statement and balance sheet After you have completed parts a through l in
Exercise 4.6, prepare an income statement for Cardinal Mowing Services, Inc., for the month
presented and a balance sheet at the end of the month using the captions shown on the answer
4.12 Enter the transaction/ adjustment letter in the first column and show the effect, if any, of the
transaction entry or adjustment on the appropriate balance sheet category or on the income
statement by entering the amount and indicating whether it is an addition ( 1) or a subtraction
( 2). Column headings reflect the expanded balance sheet equation; items that affect net income
should not be shown as affecting stockholders’ equity. In some cases, only one column may be
affected because all of the specific accounts affected by the transaction are included in that
category. Transaction a has been completed as an illustration. ( Note: As an alternative to using
the columns, you may write the journal entry for each transaction or adjustment.) a. During the
month, Supplies Expense was debited $ 5,200 for supplies purchased. The cost of supplies used
during the month was $ 3,800. Record the adjustment to properly reflect the amount of supplies
used and supplies still on hand at the end of the month. b. Independent of transaction a, assume
that during the month, Supplies ( asset) was debited $ 5,200 for supplies purchased. The total
cost of supplies used dur-ing the month was $ 3,800. Record the adjustment to properly reflect
the amount of supplies used and supplies still on hand at the end of the month. c. Received $
3,400 of cash from clients for services provided during the current month. d. Paid $ 1,900 of
accounts payable. e. Received $ 1,500 of cash from clients for revenues accrued at the end of the
prior month. f. Received $ 800 of interest income accrued at the end of the prior month. g.
Received $ 1,650 of interest income for the current month. h. Accrued $ 740 of interest income
earned in the current month. i. Paid $ 4,200 of interest expense for the current month. j. Accrued
$ 1,480 of interest expense at the end of the current month. k. Accrued $ 3,200 of commissions
payable to sales staff for the current month.
4.20 Effects of adjustments A bookkeeper prepared the year- end financial statements of
Giftwrap, Inc. The income statement showed net income of $ 237,000, and the balance sheet
showed ending retained earnings of $ 910,000. The firm’s accountant reviewed the bookkeeper’s
work and determined that adjustments should be made that would increase revenues by $ 50,000
and increase expenses by $ 84,000. Required: Calculate the amounts of net income and retained
earnings after the preceding adjustments are recorded.
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