SOLVENCY RATIOS Formula Solution

Debt to assets ratio Liabilities/Assets (18,100+54,950)/157,600

PROFTITABILITY RATIOS
Gross profit rate Gross profit/net sales 1,760,000/340,000
Profit Margin Gross profit/revenue 97,850/450,000
Return on Assets Net Income/Total Assets 26,250/157,600

26,250/((157,600+174,50
Asset turnover Net Income/Average total assets 0)/2)

LIQUIDITY RATIOS
Current Ratio Current Assets/Current Liabilities 20,450/18,100

Cash+Cash equivalents/Current Liabilities 6,000/18,100

ACTIVITY RATIOS

324,300/((12,100+6,500)
Stock Turnover Ratio COGS/Average Inventory /2)

Working Capital turnover ratio Sales/Working Capital 450,000/(20,450-18,100)

Net income - dividends / Total common

Basic Earnings per share shares outstanding 230,000/24,000
Net Income - preferred dividends / Total
common shares if converted + (230,000-
Diluted Earnings per share outstanding shares (600,000*.08))/74,000

Outstanding Shares
Ordinary Shares 40,000.00
Retired Shares (16,000.00)
Outstanding Shares 24,000.00

Convertible Ordinary Shares

Additional shares 50,000.00

Formula Solution
Net Income - preferred dividends / Total
common shares if converted + (279,000,000/455,334,24
Diluted Earnings per share outstanding shares 9
Cost of Clearing Checks

Solution Answer
Cost of Clearing Checks S0.10 x 35 x 12 $ 42.00
Cost Managing Each Account $ 140.00
Per check fee per account ( $ 154.00
Fee receieved per account $3 x 12 $ (36.00)
Total Cost per account $ 300.00

Total Cost per account / average account

Imputed interest = size

Total Cost per account = Implicit Interest x average account size

= 2% x 1,500
300.00

Per Check fee per account = 154 / 12 / 35

0.37
 5022

6,000.00

$ 3,795.00
2382

0.11
0.89
12.65

9600
7584
2,640.00 $ 1,047.50
$ 87.29

0.444011959240735 0.50
0.555988040759265 0.50
7.94268629656092 0.79

$ 2.01

$ 125.00
Answer

0.46

5.18
0.22
0.17

0.16

1.13

0.33

34.87

191.49

9.58

2.46

Answer

0.61
 72400

42,400.00
30,000.00
72,400.00
Current Ratio
Operating Revenues

2020
2021
2022

North Tahoe Public Ut

Operating Reve
10,000,000.00
9,000,000.00
8,000,000.00
Operating Revenues

7,000,000.00
6,000,000.00
5,000,000.00
4,000,000.00
3,000,000.00
2,000,000.00
1,000,000.00
-
Actual

Operating Expense

2020
2021
2022

Net Income

2020
2021
2022

North Tahoe Publi

Net Inc
16,000,000.00
 North Tahoe Publi
Net Inc
16,000,000.00
14,000,000.00
12,000,000.00
10,000,000.00
Net Income

8,000,000.00
6,000,000.00
4,000,000.00
2,000,000.00
-
2020

Year
2020
2021
2022

Budgeted Expenses
45000000
40000000
35000000
30000000
25000000
Expenses

20000000
15000000
10000000
5000000
0
Year Budgeted Operating Expenses

Loan Value at Year end

Increase
Divide the loan amount at year end with 1+ the increase (1.1)
Value at beginning
Divided by loan in $
Exchange rate beg

Annual rent
Amortization of Lease Bonus
Total Rent Income

Problem 1 - Evaluating a new project

Year 0
Year 1
Year 2
Year 3
Year 4
Year 5

Project - 5 year life

Mover's basic price
Modification cost
Total Cost
Increase in net working capital
Net Cost of earth mover

Net Present Value

st Saving Project

Acquisition - 5 Year Life

Earth Mover
Installation Costs
Total Initial Investment

Savings in Costs

Depreciation Rate (5 Year)

Total Depreciation Costs
Earnings Before Income Tax (EBIT)

Tax Rate
Total Taxes (Tax Savings)

Net Operating Profits (NOPAT)

Add Back Depreciation

Operating Cash Flow

Net Operating Working Capital

Increase in NOWC

Total Annual Project Cash Flow

Terminal Year Cash Flow

Machine Sale
Less: Book Value of Machine
Profit on Sale
Tax on Profit (40%)
Net Salvage Value on Equipment

Free Cash Flow

Required Rate of Return (WACC)

NPV

IRR

4,973,703.98

20x9
20x10
20x11

PV Notes Receivable
Total
Land
Gain on Sale

20x9
20x10
20x11

20x9

20x10

20x11
Basic Earnings per share

Diluted Earnings per share

Outstanding Shares
Converted bonds
Converted PS
Total Outstanding Shares for EPS

Outstanding Shares
Converted bonds
Converted PS
Share Option
Total

Bonds
Interest Rate
Interest Expense
Tax Rate
After Tax Interest Expense

Expenditure per year

Number of years after retirement
Total Amount (Amount needed for plan)

Total amount needed per year

Using the formula

A= P(1+r)^n

where
A= Future Value per year
P = unknown
R = rate
n = periods
Replacing:
Total amount=(115,000×35)=$4,025,000

You need a total amount of $4,025,00 for your plan

Step 2: Determine contribution per year

The contribution per year is the same as principal amount per year

Total amount needed per year=4,025,000/(65-22)=93,604.65 per

year

Using the formula

A=P(1+r)^n

where;

A=Future value per year=$93,604.65

P=unknown=p

r=6.6%=6.6/100=0.066

n=1

replacing;

93,604.65=p(1+0.066)^1

93,604.65=1.066 p

p=93,604.65/1.066

p=87,809.24

Your annual contribution=$87,809.24

Principal Amount Waived

Interest Rate
Annual Interest
PV of payments at 10%
PV of New Debt

PV of Modified Terms (New Debt)

CV of Liability

Threshold test:
(CV of Old Liab - PV of New Liab) / CV of Old Liab
Percentage

Particulars
Accrued Interest Payable
Gain on Extinguishment of debt
Premium on Notes Payable
To record the debt structuring of notes payable

E1 - 1
a.
b.
c.
d.
e.
f.
g.
h.

E1-12
E1 - 8
Cash, beginning

Operating Activities
Cash payment of salary
Cash payments to vendor
Cash collection from customers
Interest payment on debt
Net cash provided by oeprating activities

Investing Activities
Sale of a used bus
Purchase of land
Purchase of new drilling machine
Purchase of wood working machine
Net cash used by investing activities

Financing Activities
Cash Dividend
Repurchase of stock
Net cash used by financing activities

Net Cash Flows

Cash, end
Formula Solution

Explanation:

The contribution margin income statement is presented below

Particulars                   Total company              East              West

Sales                             $1,430,000                 $380,000      $1,050,000

Less: variable expense -$741,000                 -$205,000     -$536,000

Contribution margin      $689,000                 $175,000        $514,000

Less: fixed expense       -$246,000               -$45,000        -$201,000

Segment margin             $443,000                  $130,000     $313,000

Less: common fixed expense $310,000

Operating income             $133,000

Particualrs Company Total

Sales 1,230,000.00
Less:
Variable Expense (651,000.00)
Contribution Margin 579,000.00
Less:
Fixed Expense (216,000.00)
Segment Margin 795,000.00
Less: -
Common Fixed Expense (270,000.00)
Operating Income 1,065,000.00
Actual Budgeted
7,355,963.00 7,314,966.00
5,288,642.00 8,687,464.00
9,354,104.00

North Tahoe Public Utility District

Operating Revenues

Actual Budgeted

Actual Budgeted
12,486,880.00 13,234,047.00
7,397,258.00 13,635,062.00
14,326,835.00

Actual Budgeted
1,306,379.00 142,819.00
1,665,596.00 1,474,902.00
14,326,835.00

North Tahoe Public Utility District

Net Income
 North Tahoe Public Utility District
Net Income

2020 2021

Budgeted Operating Expenses Budgeted Non-Operating Expenses

13,234,047.00 240,000.00
13,635,062.00 212,900.00
14,326,835.00 95,000.00

Budgeted Expenses

Year Budgeted Operating Expenses Budgeted Non-Operating Expenses

2,000,000.00 55.00
50.00

2,200,000.00
10%

2,000,000.00
 40,000.00
50

25,000 x 12 300,000.00
180,000 / 3 60,000.00
360,000.00

220,000.00
30,000.00
250,000.00
10,000.00
260,000.00

Year 0 Year 1

220,000.00
30,000.00
250,000.00

52,000.00

20%
50,000.00
 2,000.00

25%
500.00

??

50,000.00
??

?? ??
?? ??

?? ??

?? ??

??

??

??

Face Value Interest

2,000,000.00 900,000.00
2,000,000.00 600,000.00
2,000,000.00 300,000.00

6,513,148.01
6,513,148.01
 3,000,000.00
3,513,148.01

Principal 15%

2,000,000.00 900,000.00
2,000,000.00 600,000.00
2,000,000.00 300,000.00

Particulars Debit
Notes Receivable 6,000,000.00
Unearned Interest Income 513,148.01
Land
Gain on Sale

Cash 2,000,000.00
Notes Receivable

Cash 900,000.00
Interest Income
Unearned Interest Income

Cash 2,000,000.00
Notes Receivable

Cash 600,000.00
Interest Income
Unearned Interest Income

Cash 2,000,000.00
Notes Receivable

Cash 300,000.00
Interest Income
Unearned Interest Income
 239158.1633
854136.2974

Formula Solution
[4,250,000 - (500,000 x 2 x 9%)] /
Net income - preferred dividends / Total common shares outstanding 6,675,000
Net Income - preferred dividends - interest expense of bonds after tax/
Weighted average of total common shares if converted + outstanding [4,250,000 - (500,000 x 2 x 9%)] -
shares 136,800 / 7,481,250

5,250,000.00
2,250,000/250 x 125 1,125,000.00
500,000 x 2 x 30% 300,000.00
6,675,000.00

Weight Shares
12/12 5,250,000
11/12 1,125,000
12/12 1,000,000
8/12 300,000

2,250,000.00
0.08
180,000.00
0.24
136,800.00

90,000.00
100-65 35.00
90,000 x 35 3,150,000.00

3,150,000/(65-22) 73,255.81

37,600.00
73,255.81

6.6%
1
73,225.81 = P(1+6.6%)^1
73,225.81 =1.066p
p = 73,225.81/1.066
68,692.13
 -

New Debt Principal Interest Payments

6,000,000.00 6,000,000.00
12%
720,000.00
0.83 1.74
4,980,000.00 1,252,800.00

6,232,800.00
6,600,000.00
367,200.00

367,200 / 6,600,000
6%

Debit Credit
600,000.00
367,200.00
232,800.00

8
1
6
7
3
2
5
4
A Cash
SE Retained Earning
E Cost of Goods Sold
E Salaries and Wages Expense
A Prepaid Insurance
A Inventory
 -90,900.00
-161,600.00
393,900.00
-26,260.00
115,140.00

45,450.00
-28,280.00
-76,760.00
-60,000.00
-119,590.00

-90,000.00
-75,000.00
-165,000.00
Answer

East West
280,000.00 950,000.00

(155,000.00) (496,000.00)
125,000.00 454,000.00

(35,000.00) (181,000.00)
160,000.00 635,000.00

(135,000.00) (135,000.00)
295,000.00 770,000.00
Budgeted

North Tahoe Public Utility Distr

Operating Expenses
16,000,000.00
14,000,000.00
12,000,000.00
Operating Expenses

10,000,000.00
8,000,000.00
6,000,000.00
4,000,000.00
2,000,000.00
-
Actual
2022
Year 2 Year 3 Year 4 Year 5

52,000.00 52,000.00 52,000.00 52,000.00

32% 19% 12% 11%

80,000.00 47,500.00 30,000.00 27,500.00
 (28,000.00) 4,500.00 22,000.00 24,500.00

25% 25% 25% 25%

(7,000.00) 1,125.00 5,500.00 6,125.00

?? ?? ?? ??

80,000.00 47,500.00 30,000.00 27,500.00

?? ?? ?? ??

?? ?? ?? ??
?? ?? ?? ??

?? ?? ?? ??

60,000.00
(15,000.00)
75,000.00
30,000.00
45,000.00

?? ?? ?? ??

Total Cash Inflows PV of single payment

2,900,000.00 0.91 2,636,363.64
2,600,000.00 0.83 2,148,760.33
2,300,000.00 0.75 1,728,024.04
6,513,148.01
 10% Amortization Carrying Amount
6,513,148.01
651,314.80 248,685.20 4,264,462.81
426,446.28 173,553.72 2,090,909.09
209,090.91 90,909.09 0.00

Credit

3,000,000.00
3,513,148.01

2,000,000.00

651,314.80
248,685.20

2,000,000.00

426,446.28
173,553.72

2,000,000.00

209,090.91
90,909.09
Answer

0.62

0.54

Weighted Average Number of Shares

5,250,000.00
1,031,250.00
1,000,000.00
200,000.00
7,481,250.00
Total

6,232,800.00

Dyckman Corporation
Statement of Cash Flows
For the year ending 2014

Sales Revenue 584,951.00

Service Revenue 4,806.00
Total Revenue 589,757.00
Less: Cost of Goods Sold (438,458.00)
Gross Profit 151,299.00
Less expenses
Interest Expense (1,882.00)
Salaries and wages Expense (115,131.00)
Net Income 34,286.00

Molina Co.
Statement of Retained Earnings
For the year ending 2014

Retained Earnings, beginning 67,000.00

Add: Net Income 13,400.00
Less: Dividends (6,000.00)
Retained Earnings, end 74,400.00

A Accounts Receivable
R Sales Revenue
L Notes Payable
L Accounts Payable
R Service Revenue
E Interest Expense

Dyckman Corporation
Statement of Cash Flows
For the year ending 2014

Cash, beginning 12,000.00

Cash flows from operating activites

Cash Received from Customer 50,000.00
Cash paid to supplier (16,000.00)
Net cash flows from operating activities 34,000.00

Cash flows from investing activities

Cash paid for new equipment (28,000.00)
Net cash flows from investing activities (28,000.00)

Cash Flows from financing activities

Cash Received from lenders 20,000.00
Cash dividends paid (8,000.00)
Net cash flows from financing activities 12,000.00
Cash, end 30,000.00

$ 400,000.00

-169,450.00

$ 569,450.00
 Public Utility District
ating Expenses

Budgeted
INDIGO Net Income

Net Income - preferred

dividends / Total common
shares if converted +
Diluted E outstanding shares

Potential outstanding
ordinary shares x diluted
Net Incomeps

Potential OS
Outstand 1,000,000
Potential 40,000
Total Pot 1,040,000

DEPS 15
x Potenti 1,040,000
Net Incom 15,600,000
Add back
Preferred 1,000,000
Interest 103,509
Net Incom 16,703,509

Express
Rating Formula Solution for 2020

1 Gross Profit Percentage Percentage Gross Profit Margin / Net Sales 6,129.9/17,626.6

2 Return on Sales Percentage Operating Profit / Net Sales 2,953.9/17,626.6

3 Asset Turnover
4 Return on Assets
Return on Common
5 Stockholder's Equity
6 Current Ratio
7 Quick Ratio
17,626.6/
Number Net sales/Average Total Assets (30,806.7+30,111.2)/2))
Net Income/Average Total
Percentage Assets 2181.2/((30806.7+30111.2)/2)
Net Income - Dividend on
Preferred/Average Common
Percentage Stockholder's Equity 2181.2/((8058.5+7054.5)/2)
Current Assets/Current
Number Liabilities 5121.3/7491.5
Current Assets - inventory -
prepayments/ Current
Number Liabilities (5121.3-1426.3-402.1)/7491.5

Operating Cash Flows to

Current Liabilities (Current Operating Cash Flows/Average
8 Cash Debt Coverage) Number Current Liabilities 3676.2/((7491.5+7087.1)/2)
 Accounts Receivable Net sales/average accounts
9 Turnover Number receivable 17626.6/((1615.1+1679.7)/2)
365 / Accounts Receivable
10 Average Collection Period Number Turnover 365/10.7
Cost of Goods Sold/Average
11 Inventory Turnover Number Inventories 11496.7/((1426.3+1559.3)/2)
12 Days' Sales in inventory Number 365/Inventory Turnover 365/7.7
Debt to equity ratio Number Total Liabilities/Total Equity 21912.6/8058.5
Debt to equity ratio (with
13 NCI) Number Total Liabilities/Total Equity 21912.6/8349.5
earnings before interest,
14 Times Interest Earned Number taxes/Interest Expense (2181.2+466.5+480.5)/(466.5)
(Net Income - Preferred
Dividends)/weighted average
15 Earnings per share Number common shares 2181.2/(754.6-144.8)
Market Price/Earnings per
17 Price earnings ratio Number share 52.69/3.58
Annual Dividend per share /
18 Dividend Yield Ratio Percentage share price 1.96/52.69

Annual dividends per

19 Dividend Payout Ratio Percentage share/earnings per share 1.96/3.58
610
 457.1

609.80

141.3
 2020 2019

34.78% 34.13%

16.76% 14.92%

0.58 0.56

7.16% 5.77%

28.87% 26.56%

0.68 0.59

0.44 0.30

0.50 0.39
 10.70 10.03

34.11 36.39

7.70 6.94
47.40 52.59
2.72 3.15

2.62 3.01

6.71 5.06

3.58 2.91 601.9

14.72 14.90

3.72% 4.52%

54.75% 67.35%
Date Cash
Dec 1 500,000.00
Dec 15 5,800.00
Dec 16 5,500.00
Dec 20 1,600.00
Dec 26 42,000.00
Dec 29 1,000.00
Dec 30 250.00
507,100.00 49,050.00
End 458,050.00

Land
Dec 6 120,000.00

120,000.00 -
End 120,000.00
Accounts payable
Dec 6 180,000.00
Dec 26 42,000.00

42,000.00 180,000.00
End 138,000.00

Unearned Income
Dec 16 5,500.00

5,500.00
5,500.00
End
Service Revenue
Dec 1 3,200.00

3,200.00
End 3,200.00
Interest Expense
Dec 30 250.00
 250.00
End 250.00

Estimated Overhead $ 112,600.00

Divide Estimated Direct Labor Hours 37,000.00
Overhead rate 3.04

Calculcate Profit using labor hours allocation

Commercial
Revenue 375,000.00
Direct Labor (210,000.00)
Overhead costs (45,600.00)
Profit 119,400.00

Revenue = Number of hours x Charge per hour 15,000 x 25 = 375,000

Direct Labor = Number of hours x wages per hours 15,000 x 14 = 210,000
Overhead = number of hours x overhead rate 15,000 x 3.04 = 45,600

b Calculate Activite Rate

(A)
Activity Cost pool Estimated Overhead
Travelling 14,820.00
Using Equipment 38,280.00
Using Supplies 59,500.00
112,600.00

Expected use of cost driv

Travelling 12 + 45
Using Equipment 3,800 + 2,000
Using supplies 110,000 + 60,000

(A)
Comme
 Activity Cost Pool Expected Cost Driver
Travelling 12.00
Using Equipment 3,800.00
Using Supplies 110,000.00
Total Cost Assigned

Calculation of prorif using ABC

Commercial
Revenue 375,000.00
Direct Labor (210,000.00)
Overhead Cost (66,700.00)
Profit 98,300.00

$150 per month

n = -(ln(1-PV x i)/PMT))/ln(1+i)
Replacing -(ln (1 - $5,000 x (0.129 / 12) / 150 ) / (ln (1 + (0.129 / 12)
41.49
Rounded up 42 Months

$200 per month

n = -(ln(1-PV x i)/PMT))/ln(1+i)
Replacing -ln(1-(5,000 x (0.129 / 200 ) / (ln ( 1 + (0.129 / 12)
29.27
Rounded up 30 months
Date Common Shares Date
Dec 1 500,000.00 Dec 1

Dec 6

- 500,000.00 Dec 15
500,000.00

Building Dec 16
Dec 6 60,000.00

Dec 18

60,000.00 - Dec 20
60,000.00
Equipment
Dec 15 5,800.00 Dec 26

Dec 29

5,800.00 - Dec 30
5,800.00

Accounts Receivable
Dec 18 3,200.00
Dec 20 1,600.00

3,200.00 1,600.00
1,600.00
Dividends
Dec 29 1,000.00

1,000.00
1,000.00
Per DLH

Residential
836,000.00
(308,000.00)
(66,880.00)
461,120.00

22,000 x 38 = 836,000
22,000 x 14 = 308,000
22,000 x 3.04 = 66,880

(B) (A)/(B)
Expected use of cost driver Activity based overhead rate
57 260.00 Per clients served
5,800 6.60 Per equipment hour
170,000 0.35 per sq yard

Total
57.00
5,800.00
170,000.00

(B) (A) X (B) (A) (B)

Commercial Residential
Activity based overhead rate Cost assigned Expected Cost Driver Activity based overhead rate
260.00 $ 3,120.00 45.00 260.00
6.60 $ 25,080.00 2,000.00 6.60
0.35 $ 38,500.00 60,000.00 0.35
$ 66,700.00

Revenue
836,000.00
(308,000.00)
(45,900.00)
482,100.00
 Account Titles Debit Credit Sarah Design LTD
Cash 500,000.00 Trial Balance
Common Shares 500,000.00 For the period ended Dec 2019
Account Debit
Land 120,000.00 Cash 458,050.00
Building 60,000.00 Accounts Receivable 1,600.00
Accounts Payable 180,000.00 Land 120,000.00
Equipment 5,800.00
Equipment 5,800.00 Building 60,000.00
Cash 5,800.00 Unearned Income
Accounts Payable
Cash 5,500.00 Service Revenue
Unearned Income 5,500.00 Dividends 1,000.00
Interest Expense 250.00
Accounts Receivab 3,200.00 Common Shares
Service Revenue 3,200.00 646,700.00

Cash 1,600.00
Accounts Receivable 1,600.00

Accounts Payable 42,000.00

Cash 42,000.00

Dividends 1,000.00
Cash 1,000.00

Interest Expense 250.00

Cash 250.00
(A) X (B)
Cost assigned
$ 11,700.00
$ 13,200.00
$ 21,000.00
$ 45,900.00
ign LTD
ance
ded Dec 2019
Credit

5,500.00
138,000.00
3,200.00

500,000.00
646,700.00
 Dana's Imports
Satement of Cash Flows

Operating Activities (OA)

Freight Payment (800.00)
Purchases (32,340.00)
Cash Received from Customers 16,000.00
Payment for Selling Expenses (3,300.00)

Invensting Activites (IA)

Financing Activities (FA)

Issue of Common Stock 50,000.00

Net Change in cash 29,560.00 Increase

September Effect in Cash Flows Effect in Net Income

1 FA - increase N/A
1 N/A N/A
5 OA - decrease decrease
8 N/A increase
8 N/A N/A
10 OA - decrease N/A
20 OA - increase N/A
30 OA - decrease decrease
 Dana's Imports
Income Statement

Sales $ 16,000.00
Less:
Cost of Goods Sold 11,500.00
Gross Profit 4,500.00
Less Expenses:
Selling Expenses 3,300.00
Freight Expense 800 4,100.00
Net Income $ 400.00
Rati
o Formula
ent
Rati
o Current Assets/Current Liabilities
Cash
Rati
o Cash+Cash equivalents/Current Liabilities
Inve
ntor
y
Turn
over Cost of Goods Sold / Average Inventory
Acco
unts
Rece
ivabl
e
Turn
over
s Net credit sales / average accounts receivable
Profi
t
Perc
enta
ge Gross profit/net sales
Debt
Rati
o
Debt Debts / Total Assets
to
Equi
ty
Rati
o Debts / Total Common Shareholder's Equity
Mar
gin
Rati
o
Asse Gross profit/revenue
t
Turn
over
Rati
o Net sales / Average total Assets
rn
on
Com
mon
Stoc
khol
der's
Equi
ty Net income after tax / Total common shareholder's equity
ings
per
shar
e Net income - dividends / Total common shares outstanding
Pric
e
earn
ings
ratio Share price / earnings per share
Divi
den
d
Yield
Divi Annual Dividends per share / curret share price
dent
Payo
ut
Rati
o Total Dividends / Net Income

Abili
ty
To
pay
curr
ent
liabil
ities Potential Investent Company with stronger ratio
ent
Rati
o PC
Cash
Rati
o PC

sell
mer
chan
dise
inve
ntor
y
and
colle
ct
recei
vabl
es Potential Investent Company with stronger ratio
Inve
ntor
y
turn
over KLV
acco
unts
recei
vabl
e
turn
over
s KLV
profi
t
perc
enta
ge PC
t
mar
gin
ratio KLV
Stoc
k as
an
inve
stm
ent
Debt Potential Investent Company with stronger ratio
to
Equi
ty
Rati
o PC
rn
on
Com
mon
Stoc
khol
der's
Equi
ty KLV
ings
per
shar
e KLV
Pric
e
earn
ings
ratio KLV
Profi
tabil
ity
s Potential Investent Company with stronger ratio
Profi
t
Perc
enta
ge PC
Mar
gin
Rati
o KLV
rn
on
Com
mon
Stoc
khol
der's
Equi
ty KLV
ings
per
shar
e KLV
Abili
ty to
pay
long
term
debt Potential Investent Company with stronger ratio
Debt
Rati
o
Debt PC
to
Equi
ty
Rati
o PC

Liqui
dity Solution
Formula
Rati BHB ZL
o
Curr
ent Current Assets/Current Liabilities 652,050,721/6 114,158/301,053
Asse
8,867,224
ts
Quic
k
(25,499,977+2
Asse Quick Assets/Current Liabilities 1,554,577+154 (5,383+94,283)/3
ts
,967)/68,867,2 01,053
Rati
o 24

k
Asse
ts Cash + Accounts Receivable + Marketable Securities

Date
Dec Particulars Debit Credit
15 Treasury Shares 252,000.00

Share Premium - Treasury Shares 18,000.00

Cash 270,000.00

Re-issurance of treasury shares

20 Public Auction Expense 5,000.00

Cash 5,000.00
To record auction expense

Subscribed Share Capital 40,000.00

Share Premium 56,000.00

Cash 48,000.00
 Subscription Receivable 48,000.00
To record deliquency of shares subscribed
Memorandum entry: Highest bidder found during auction
25 Willing to receive 900 shares

31 Store Salaries Expense 30,000.00

Store Salaries Payable 3,000.00
To record unrecorded salaries expense

31 Store Supplies Expense 24,000.00

Office Supplies Expense 29,400.00

Store Supplies 24,000.00
Office Supplies 29,400.00
To record used office supplies

31 Unearned Sales 32,000.00

Sales 32,000.00
To record earned sales

31 Depreciation Expense 133,000.00

Accumulated Depreciation - Store Furniture 88,000.00

Accumuldated Depreciation - Office Equipment 45,000.00

To record depreciaton for the year

Depreciation Expense
Office
Store Furniture Equipment
Cost 550,000.00 450,000.00
age
Valu
e (110,000.00) -
ecia
ble
Cost 440,000.00 450,000.00
Usef
ul
Life 5 10.00
ual
Depr
ecia
tion 88,000.00 45,000.00
 31 Doubtful Accounts Expense 38,400.00
Allowance for Bad Debts 38,400.00
To record provision of doubtful accounts
btful
Acco
unts
unts
Rece
ivabl
e 480,000.00
ecti
on
Polic
y 0.08
Acco
unts
Expe
nse 38,400.00

Sale
s 5,998,000.00
of
Goo
ds
Sold
begi
nnin
ghase 280,000.00
s 3,110,000.00
of
Goo
ds
Sold (3,390,000.00)
s
Sale
s 2,608,000.00
Salar
ies
Expe
nse (560,000.00)
Sup
plies
Expe
nse (24,000.00)
Expe
nse -
Stor
e
Furn
iture
and
Fixtu
res
eous (88,000.00)
Distr
ibuti
on
Cost
s (22,000.00)
Salar
ies
Expe
nse (660,000.00)
ties
Expe
nse (540,000.00)
Rent
Expe
nse (360,000.00)
Sup
plies
Expe
nse (29,400.00)
tion
Expe
nse -
Offic
e
Equi
pme
nt (45,000.00)
Acco
unts
Expe
nse
eous (38,400.00)
Adm
inist
rativ
e
Expe
nse (38,000.00)
Net
Inco
me 203,200.00

31 Sales 5,998,000.00
Cost of Goods Sold 3,390,000.00
Store Salaries Expense 560,000.00
Store Supplies Expense 24,000.00

Depreciation Expense - Store Furniture and Fixtures 88,000.00

Miscellaneous Distribution Costs 22,000.00

Office Salaries Expense 660,000.00
Utilities Expense 540,000.00
Rent Expense 360,000.00
Office Supplies Expense 29,400.00

Depreciation Expense - Office Equipment 45,000.00

Doubtful Accounts Expense 38,400.00

Miscellaneous Administrative Expense 38,000.00

Income Summary 203,200.00
To close the nominal accounts and record income for the year
 31 Retained Earnings 84,000.00

Retained Earnings, Appropriated 84,000.00

To re-appropriate retained earnings at the cost of treasury shares
sury
Shar
es
g
Bala
nce 336,000.00
Trea
sury
Shar
es (252,000.00)
sury
Shar
es,
edn 84,000.00

Feat Activity Environmental Environmental

ure Aspect Impact

A
vehi
cle
was
hing
facili
ty
usin ✔
g
jet
was
hers
,
dete
rgen
ts
and
a
mai
ns
wat
er
supp
ly
Low
wat
er ✔
level
s in
rese
rvoir
s
resul
ting
in a
hose
pipe
ban.

Abst
racti
ng
wat
er
from
an ✔
und
ergr
oun
d
sour
ce
for
use
in
a
man
ufac
turin
g
proc
ess.
Leak
age
of
ozon
e ✔
depl
etin
g
gase
s
from
air
con
ditio
ning
unit
s.

No. Particulars Debit Credit

1 Accounts Receivable 400.00
Allowance for Bad Debts 400.00
To revert receivables written off

Cash 400.00
Accounts Receivable 400.00
To record collection of accounts receivable previously written off

2 Cash 200.00
Accounts Receivable 200.00
To record collection from insolvent debtor

Allowance for Bad Debts 300.00

Accounts Receivable 300.00
To write off remaining balance of the receivable

3 Bad Debts Expense 500.00

Allowance for Bad Debts 500.00
To record increase in Bad Debts Allowance

4 Trading Inventory Expense 310.00

Consumable Stores 13,180.00
Trading Inventory 310.00
Consumable Stores Expense 13,180.00
To record the stock counted on hand and reverse the previous
expense recognized for Consumable Stores
 5 Rent Income 6,000.00
Unearned Rent Income 6,000.00
To record the earned rent income

6 Prepaid Insurance 600.00

Insurance 600.00
To record prepaid insurance for the period March to June

7 Interest Expense 24,000.00

Interest Payable 24,000.00
To record interest incurred for the period

8 Interest Receivable 2,250.00

Interest Income 2,250.00
To record interest income for the period

9 Service Fees 270.00

Cash Deposit Fee 120.00
Cash in Bank 390.00
To record service fees incurred

10 Depreciation Expense 81,000.00

Accumulated Depreciation - Equipment 45,000.00
Accumulated Depreciation - Vehicles 36,000.00
To record depreciation incurred for the period

Vehicles, at cost 420,000.00

Accumulated Depreciation (240,000.00)
Balance 180,000.00
Less: Acquired Vehicle (120,000.00)
Balance 60,000.00
Diminishing Rate 20%
Depreciation Expense 12,000.00

Recently purchased vehicle cost 120,000.00

Diminishing Rate 20%
Depreciation Expense 24,000.00

Total Depreciation for vehicles 36,000.00

 Answer
BHB ZL

9.47 0.38

0.69 0.33

Computation
6,000 TS x 42

6,000 TS x (45 - 42)

6,000 TS x 45

Cost incurred for public auction

2,000*20
(Subscribed shares x subscription price
2000 x (48 - 20)
Subscribed shares x (cost - par)
2000 x 48 x 50%
Subscribed Shares x cost x 50% payment
2000 x 48 x 50%
Subscribed Shares x cost x 50% on account

2/3 x 36,000
Used supplies x Store Supplies
70% x 42,000
Used supplies x office supplies

128,000 x 1/4
Unearned sales x earned sales
128,000 x 1/4
Unearned sales x earned sales

88,000 + 45,000
Store Furniture Depreciation + Office Equipment
Depreciation
42.00
200 / .4 = 500 x .6 = 300

77,310 - 77,000
13,680 - 500
78,000 - (6,000 * 12)

(800 / 12) * 9

150,000 x 16%

300,000 x 15%
 Cash
Direct materialas used 1,206,600.00 Accounts Receivable
Direct labor 1,500,000.00 Equipment
Manufacturing overhead 1,852,750.00 Accumulated Depreciation
Total Manufacturing cost 4,559,350.00 Accounts Payable
Unearned Revenue
Materials, beg 88,000.00
Raw Materials Purchases 1,200,000.00
Purchases Discount (14,400.00)
Freight in 28,000.00 Account
Materials, end (95,000.00) Service Revenue
Materials used 1,206,600.00 Income Summary
To close revenue account
Direct labor 1,500,000.00
S.Strong Capital
Work in Process, beg 65,000.00 Drawings
Direct labor 1,500,000.00 To close drawings account
Materials used 1,206,600.00
Manufacturing Overhead
Indirect Materials 15,500.00
The real
Factory heat, light & interest
power 1,750,000.00 rate is:
Real rate of
return = (1 +
Nominal
rate) / (1 +
Supervision 75,000.00 Inflation) - 1
Real rate of
return = (1 +
0.08) / (1 +
Machine repairs 12,250.00 1,852,750.00 0.03) - 1
Work in process, end (78,500.00) Real...
See full
answer
Cost of Goods Manufactured 4,545,850.00 below.

Finished Goods, beg 320,000.00

Cost of Goods Manufactured 4,545,850.00
Finished goods, end (250,000.00)
Cost of Goods Sold 4,615,850.00

Sales 6,000,000.00
Less
Sales Return & Allowances (18,500.00)
Sales Allowances (25,000.00) (43,500.00)
Gross Sales 5,956,500.00
Less
Cost of Goods Sold 4,615,850.00
Gross Profit 1,340,650.00
Less: Expenses
Sales Salaries 120,000.00
Office Supplies Expense 7,850.00
Advertising Expense 150,000.00
Delivery Expense 60,000.00
Net Income 1,340,650.00
No entry
No entry
No entry
No entry
No entry
No entry

Debit Credit
37,200.00
37,200.00

12,700.00
12,700.00

BLOSSOM COMPAN
Income Statemen
For the year ended July 3

Service Revenue
Rent Revenue
Total Revenue
Less expenses:
Salaries Expense
Utilities Expense
Depreciation Expense
Net Income/(loss)
 BLOSSOM COMPANY
Income Statement
or the year ended July 31, 2021
$3,689.96/year for 29 years until retirement.
62,900.00
7,200.00 Explanation
70,100.00 Needed retirement income: $80,275

(48,500.00) Onhand = 59,000 USD

(22,900.00) Period= 29 years
(3,890.00) Additional Years = 20 years
(5,190.00) Inflation rate = 2%
Rate of return = 11%

Real Rate of Return = ( 1 + ROR given)/(1+ inflation rate) - 1

Real Rate of Return = ( 1+ 0.11)/(1 + 0.02) -1
Real Rate of Return = 0.08824 x 100%
Real Rate of Return 8.82%

Required fund = 80,275 - 59,000

Required fund = 21,275 USD

Where:
Present Value = PV
PMT = 21,275
Interest Rate (I/Y) = 8.82%
Number of Periods 20 years
PV of 21,275 USD = $196,726.82

Where
Future Value = FV
FV = 196,726.82
Number of periods = 29 years
Interest rate = 8.82%
Annual Payment (PMT) = $3689.96
inflation rate) - 1
 Account Debit Credit
a. Raw Materials 660,000.00
Accounts Payable 660,000.00
To record purchases on account

b. Work in Process 504,000.00

Manufacturing Overhead 73,500.00
Raw Materials 577,500.00
To record requisitioning of raw materials

c. Work in Process 586,000.00

Manufacturing Overhead 95,500.00
Direct Labor 586,000.00
Indirect Labor 95,500.00
To record labor incurred

Work in Process 95,500.00

Manuacturing Overhead 95,500.00
To apply labor costs

d. General Labor Expense 123,870.00

Sales Expenses 218,610.00
Administrative Expenses 133,560.00
Cash 476,040.00
To record other costs

e. General Labor Expense 30,450.00

Sales Expenses 25,830.00
Administrative Expenses 18,690.00
Prepaid Expense - General Labor 30,450.00
Prepaid Expense - Sales Expenses 25,830.00
Prepaid Expense - Administrative Expenses 18,690.00
To record expired portion of prepaid expenses

f. Manufacturing Overhead 163,800.00

Accumulated Depreciation - Office Building 88,200.00
Accumulated Depreciation - Office Equipment 45,150.00
Accumulated Depreciation - Factory Equipment 30,450.00
To record depreciation expense

Work in Process 163,800.00

Manufacturing Overhead 163,800.00
To apply overhead costs

g. Work in Process 375,500.00

Manufacturing Overhead 375,500.00
 To record factory labor

h. Finished Goods 871,800.00

Work in Process 871,800.00
To record finished goods

i. Cost of goods sold 860,000.00

Finished Goods 860,000.00
To record finished goods