E13-8 Taguchi Company - Indirect method

E13-8 Taguchi Company -  Indirect method

 

 

E13-8 Here are comparative balance sheets for Taguchi Company.

TAGUCHI COMPANY

Comparative Balance Sheets 

31-Dec

Assets                                                                          2011                2010

Cash                                                                            $73,000           $22,000

Accounts receivable                                                    85,000             76,000

Inventories 170,000 189,000                                      170,000           189,000

Land 75,000 100,000                                                  75,000             100,000

Equipment 260,000 200,000                                       260,000           200,000

Accumulated depreciation                                          (66000)            (32000)

Total                                                                            $597,000         $555,000

Liabilities and Stockholders’ Equity             

Accounts payable                                                        $39,000           $47,000

Bonds payable                                                            150,000           200,000

Common stock ($1 par)                                              216,000           174,000

Retained earnings                                                       192,000           134,000

Total                                                                            $597,000         $555,000

Additional information:
1. Net income for 2011 was $103,000.
2. Cash dividends of $45,000 were declared and paid.

3. Bonds payable amounting to $50,000 were redeemed for cash $50,000.

4. Common stock was issued for $42,000 cash.

5. No equipment was sold during 2011, but land was sold at cost.

 

 

Instructions

Prepare a statement of cash flows for 2011 using the indirect method.

 

 

TUTORIAL PREVIEW

Prepare a statement of cash flows for 2011 using the indirect method.

TAGUCHI COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2011
Cash flows from operating activities :
Net income		$103,000
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation expense	$34,000
Increase in accounts receivable	-9,000

 

File name: E13-8 Taguchi.xls File type: .xls  PRICE: $5

A stocks returns have the following distribution

A stock's returns have the following distribution

Demand for the             Probability of This       Rate of Return If This

Company’s Products    Demand Occurring      Demand Occurs

Weak                                                   0.1                   (50 %)

Below average                                     0.2                  (5)
Average                                               0.4                   16
Above Average                                    0.2                   25
Strong                                                  0.1                   60
                                                             1.0

Calculate the stock's expected return, standard deviation, and coefficient of variation. 11.4 may be the answer

SOLUTION PREVIEW
rˆ = (0.1) (-50%) + (0.2)(-5%) + (0.4)(16%) + (0.2)(25%) + (0.1)(60%)


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A cement manufacturer has supplied the following data

A cement manufacturer has supplied the following data:

Tons of cement produced and sold                                 220,000
Sales revenue                                                                $924,000
Variable manufacturing expense                                    $297,000
Fixed manufacturing expense                                         $280,000
Variable selling and admin expense                                $165,000
Fixed selling and admin expense                                    $82,000
Net operating income                                                     $100,000


a. Calculate the company's unit contribution margin
b. Calculate the company's unit contribution ratio
c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be?


TUTORIAL PREVIEW
a. Calculate the company's unit contribution margin
Contribution margin = Sales - Variable expenses Contribution margin
         = $924,000 - ($297,000 + $165,000)


File name: A cement.doc File type: .doc  PRICE: $5

Willies Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows

Willies Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows:

Engine Parts 875000

Shop direct labor 640000
shop & repair equip depre 45000
Shop supervisor salaries 125800
Shop property tax 22600
shop supplies 16600
ad. ex 17800
admin office salaries 75000
admin office depre ex 10000
                                  -------
                               1,827,000
The average shop direct labor rate is $16 per hour


Determine the predetermined shop overhead rate per direct labor hour. Round the answer to nearest whole cent.


SOLUTION
No. of direct labor hours = direct labor cost/direct labor rate per hour


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Week8 Final Exam – PART 1 and PART 2

Week8 Final Exam – PART 1 and PART 2

 

Question 1

(TCO A) An advantage of the corporate form of business is _____. (Points : 5)

it is simple to establish
the corporate tax rate is less than the personal tax rate
corporations must pay dividends
the shareholders are not responsible for the corporation’s debts


Question 2
(TCO A) Which one of the following statements is correct with regard to Dividends? (Points : 5)
Dividends are increased by credits.
Dividends are subtracted on the Income Statement.
Common stock dividends are required to be paid.
Dividends reduce
stockholders’ equity.


Question 3
(TCOs A, B) Below is a partial list of account balances for LBJ Company:
Cash $12,000
Prepaid insurance 1,300
Accounts receivable 7,000
Accounts payable 5,000
Notes payable 9,000
Common stock 22,000
Dividends 2,000
Revenues 45,000
Expenses 35,000


What did LBJ Company show as total debits? (Points : 5)
$57,300
$81,000
$55,300
$56,000


Question 4
(TCOs B, E) Which of the following statements is incorrect with regard to accrual accounting? (Points : 5)
Accrual accounting is consistent with the matching principle.
Accrual accounting does not record expenses until they are paid.
Accrual accounting is more complex than cash basis accounting.
Accrual accounting is required by GAAP.


Question 5
(TCO D) Three different companies each utilize a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)
FIFO will have the highest ending inventory
FIFO will have the highest cost of goods sold
LIFO will have the lowest cost of goods sold
LIFO will have the highest ending inventory


Question 6
(TCOs A, E) Equipment was purchased for $85,000. Freight charges amounted to $2,550 and there was a cost of $10,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $5,000 salvage value at the end of its 6-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)
$13,333
$16,258
$15,425
$13,578


Question 7
(TCOs D, G) When the market rate of interest is equal to the stated rate of interest on the bond, the bond will require _____. (Points : 5)
a debit to Discount on Bonds Payable
a credit to Discount on Bonds Payable
a credit to Bonds Payable
a debit to Bonds Payable


Question 8
(TCO C) Accounts receivable arising from sales to customers amounted to $50,000 and $45,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $150,000. Based on these transactions, the cash flows from operating activities to be reported on the statement of cash flows would be _____. (Points : 5)
$195,000
$145,000
$115,000
$155,000


Question 9
(TCO F) Which one of the following tools uses the percentage change formula to make year-over-year comparisons of sales growth? (Points : 5)
Horizontal analysis
Common-size analysis
Vertical analysis
Ratio analysis


Question 10
(TCO F) When performing a common-size Income Statement, the 100% figure is _____. (Points : 5)
net sales total liabilities plus stockholders’ equity
net income
total assets


Question 11
(TCO F) Ratios are most useful in expressing _____. (Points : 5)
cause-and-effect relationships
the relationships between numbers
the delta between numbers
the root cause of the problem


Question 12 (TCO F) Creditors are usually most concerned with analyzing _____. (Points : 5)
the company stock price
turnover
liquidity
profitability


Question 13 (TCO F) Shareholders are usually most interested in evaluating _____. (Points : 5) profitability
leverage
turnover
the ability to pay debts as they come due


Question 14
(TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)
multiply the stated rate times the bond’s face value
calculate the present value of the principal only
calculate the present value of both the principal and the interest
calculate the present value of the interest only


PART 2
Page 2
Question 1
(TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report:

Income Taxes Payable	$471
Short-term Investments and Marketable Securities	8,109
Cash	8,442
Other non-current Liabilities	10,449
Common Stock	1,760
Receivables	4,812
Other Current Asset	2,973
Long-term Investments	10,448
Other Non-current Assets	3,585
Property, Plant and Equipment	23,486
Trademarks	6,527
Other Intangible Assets	20,810
Allowance for Doubtful Accounts	53
Accumulated Depreciation	9,010
Accounts Payable	8,680
Short Term Notes Payable	17,874
Prepaid Expenses	2,781
Other Current Liabilities	796
Long-Term Liabilities	14,736
Paid-in-Capital in Excess of Par Value	11,379
Retained Earnings	55,038
Inventories	3,264
Treasury Stock	35,009

 

Other information taken from the Annual Report:

Sales Revenue for 2012	$48,017
Cost of Goods Sold for 2012	19,053
Net Income for 2012	9,019
Inventory Balance on 12/31/11	3,092
Net Accounts Receivable Balance on 12/31/11	4,920
Total Assets on 12/31/11	79,974
Equity Balance on 12/31/11	31,921

 

Required:
1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.   (Points : 36)

Question 2
(TCO B) The following selected data was retrieved from the Walmart, Inc. financial statements for the year ending January 31, 2013:

Accounts Payable	$38,080
Accounts Receivable	6,768
Cash	7,781
Common Stock	3,952
Cost of Goods Sold	352,488
Income Tax Expense	7,981
Interest Expenses	2,064
Membership Revenues	3,048
Net Sales	466,114
Operating, Selling and Administrative Expenses	88,873
Retained Earnings	72,978

Required:
Using the information provided above:
1. Prepare a multiple-step income statement
2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.  (Points : 36)


Question 3
(TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the two questions below:

Cash flow from operating activities	In millions	In millions
	For the year ended 2012	For the year ended 2011
Net (loss) earnings	$(12,650)	$7,074
Depreciation and amortization	5,095	4,984
Impairment of goodwill and purchased intangible assets	18,035	885
Stock-based compensation expense	635	685
Provision for doubtful accounts	142	81
Provision for inventory	277	217
Restructuring charges	2,266	645
Deferred taxes on earnings	(711)	166
Excess tax benefit from stock-based competition	(12)	(163)
Other, net	265	(46)
Accounts and financing receivables	1,269	(227)
Inventory	890	(1,252)
Accounts payable	(1,414)	275
Taxes on earnings	(320)	610
Restructuring	(840)	(1,002)
Other assets and liabilities	(2,356)	(293)
Net cash provided by operating activities	10,571	12,639
Cash flows from investing activities:
Investment in property, plant, and equipment	(3,706)	(4,539)
Proceeds from sale of property, plant, and equipment	617	999
Purchases of available-for-sale securities and other investments	(972)	(96)
Maturities and sales of available-for-sale securities and other investment	662	68
Payments in connection with business acquisitions, net of cash acquired	(141)	(10,480)
Proceeds from business divestiture, net	87	89
Net cash used in investing activities	(3,453)	(13,959)
Cash flow from financing activities:
(Payments) issuance of commercial paper and notes payable, net	(2,775)	(1,270)
Issuance of debt	5,154	11,942
Payment of debt	(4,333)	(2,336)
Issuance of common stock under employee stock plans	716	896
Repurchase of common stock	(1,619)	(10,117)
Excess tax benefit from stock-based compensation	12	163
Cash dividends paid	(1,015)	(844)
Net cash used in financing activities	(3,860)	(1,566)
Increase (decrease) in cash and cash equivalents	3,258	(2,886)
Cash and cash equivalents at beginning of period	8,043	10,929
Cash and cash equivalents at end of period	$11,301	$8,043

Required:

1) Please calculate the percentage increase or decrease in cash for the total line of the operating, investing, and financing sections bolded above and explain the major reasons for the increase or decrease for each of these sections.

2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio. (Points : 36)


Question 4

(TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”

Assuming the goal is to maximize net income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported Net Income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet.

Required:

a. Goforit carries significant electronics inventory in a competitive environment in which prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.

b. Goforit has a large investment in warehouse equipment, including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: straight line (SL) or double declining balance (DDB)?  (Points : 36)

Question 5

(TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.

Ratio Name	Johnson & Johnson	Pfizer
Profit margin	16.1%	24.7%
Inventory turnover ratio	3.1	1.7
Average collection period	59.4 days	69.1 days
Cash debt coverage ratio	.27	.16
Debt to Total assets	46.6%	127.5%

Required:
1) Please explain the meaning of each of the Pfizer ratios above.
2) Please state which company performed better for each ratio. (Points : 36)

Ratio Name	Johnson & Johnson	Pfizer
Profit margin	16.1%	24.7%
Inventory turnover ratio	3.1	1.7
Average collection period	59.4 days	69.1 days
Cash debt coverage ratio	.27	.16
Debt to Total assets	46.6%	127.5%

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