MHM 507

MIDTERM EXAM

OCTOBER 16, 2021

Answer the following;

A. Case Study - Reyes Company (40pts.)

Jane Reyes made the following request of a friend:

My bookkeeper has quit, and I need to see the balance sheet of my Company.

He has left behind a book with the numbers already entered in it. Would you be willing to prepare balance
sheets for me? Also, any comments you care to make about the numbers would be appreciated. The
Cash account is healthy, which is a good sign, and he has told me that the net income in June was
P6,539.

Exhibit 1

Account Balances

June 1 June 30

Accounts payable P 2,839 P 7,105

Accounts receivable 7,266 8,835
Accrued wages payable 658 734
Accumulated depreciation on building 52,000 52,650
Accumulated depreciation on equipment 1,768 1,976
Bank notes payable 2,795 9,750
Building 195,000 195,000
Capital stock 130,000 130,000
Cash 11,661 22,199
Equipment (at cost) 4,420 12,220
Land 29,900 29,900
Merchandise inventory 9,945 8,840
Note receivable 3,900 0
Other assets 1,619 1,755
Other liabilities 817 817
Prepaid insurance 1,033 942
Retained earnings 73,822 76,461
Supplies on hand 1,853 2,210
Taxes payable 1,898 2,408
The book contained a detailed record of transactions, and from it the friend was able to copy off
the balances at the beginning of the month and at the end of the month as shown in Exhibit 1.
Jane owned all the stock of Reyes Company

Questions:

a) Prepare the balance Sheets as of June 1 and June 30, in proper format. (15 pts. )

b) Why do retained earnings not increase by the amount of June net income? (5 pts.)

c) Make an Analyses of the Balance Sheet you have made in no. 1 applying applicable ratios. (20
pts.

B. The records of JAS Corp. and Dove revealed the following data in relation
to its operating activities in 2019 in thousands: ( 30 PTS.)

JAS Corp. Dove Corp.

Net cash sales P10,000 P45,000

Net credit sales 190,000 240,000

Cost of goods sold 110,000 180,000

Net cash purchases 5,000 20,000

Net credit purchases 96,000 112,000

Average Trade Receivables 9,500 16,000

Average Inventories 2,750 7,200

Average Trade Payables 2,400 3,500

Cash Operating Expenses 18,000 17,600

Average Cash 600 800

Average Total Assets 80,000 95,000

Supplier’s credit terms 2/10, n/30 2/10, n/30

Required:

1. Calculate the following ratios for JAS Corp. And Dove Corp. ( Use a 360 -day year):

a. Inventory turnover and inventory days

b. Receivable turnover and collection period
c. Payables turnover and payment period
d. Operating cycle
e. Net cash cycle
f. Net Working capital

2. Comment on the Corporations ability to meet their supplier’s credit terms..

C. Describe the Phases of Accounting. and relate its applicability to your line
of business you are currently associated with or engaged in. ( 10pts.)

D. Research and Submit a Case study of Cost behavior in Hotels and Tourism
organizations. Make some observations based on your actual exposure
and or experiences. ( 20 pts.)

END