1. The following are Lozier's 2010 and 2011 balance sheets and income statements for the years ended December 31, 2010 and December 31, 2011, respectively.
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2010
|
|
2011
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|
Cash
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$ 200,000
|
|
$ 325,000
|
|
Accounts Receivable
|
400,000
|
|
450,000
|
|
Inventory
|
400,000
|
|
325,000
|
|
Intangible Assets
|
60,000
|
|
54,000
|
|
Total Assets
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$1,060,000
|
|
$1,154,000
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|
|
|
|
|
|
Accounts Payable
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$ 396,000
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$ 420,000
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|
Short-term Notes Payable
|
100,000
|
|
100,000
|
|
Common Stock
|
3,000
|
|
3,000
|
|
Retained Earnings
|
564,000
|
|
636,000
|
|
Total Liabilities and Owner's Equity
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$1,063,000
|
|
$1,159,000
|
|
|
|
|
|
|
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2010
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|
2011
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|
Sales Revenue
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$ 945,000
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$1,190,000
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Cost of Goods Sold
|
(400,000)
|
|
(500,000)
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|
Advertising Expense
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(20,000)
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|
(25,000)
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|
Office Supplies Expense
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(10,000)
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|
(13,000)
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|
Interest Expense
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(5,000)
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|
(5,000)
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|
Net Income
|
$ 510,000
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|
$ 647,000
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Required:
Using an Excel spreadsheet, calculate the following ratios for 2010 and 2011:
1. Quick ratio
2. Accounts receivable turnover ratio
3. Average age of receivables. Assume a 360-day calendar year.
4. Inventory turnover ratio.
5. Calculate the average age of Lozier's inventory for 2010 and 2011. Assume a 360-day calendar year.
6. Given your calculations in parts 1-5, what conclusions might you draw about Lozier's business operations?
3. On January 1, 2010, LoCoco Corporation purchased a new assembly line for $100,000 cash and a $200,000, 10%, 5-year note payable. The assembly line has an estimated salvage value of $20,000 and an estimated useful life of 14 years.
Required:
1. Prepare a journal entry to record the acquisition of the assembly line.
2. Assume that LoCoco depreciates its assets using the straight-line method.
a. Compute depreciation expense for 2010 and 2011. Prepare a journal entry to record 2011 depreciation expense.
b. Compute accumulated depreciation at the end of 2010 and 2011.
c. Compute the assembly line's book value at the end of 2010 and 2011.
4.
Pullam's weekly 5-day payroll includes the following:
Gross Pay $28,000
Less: Payroll Deductions
FICA Taxes $2,200
Federal Income Tax Withholdings 2,000
State Income Tax Withholdings 1,800
Health Insurance Premiums 1,000 (7,000)
Net Payroll $21,000
Prepare the necessary journal entries for the payroll paid on Friday, December 27, 2011.
5.
Ratio Analysis
The following are Brenham Corporation's 2010 and 2011 balance sheets and income statements.
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|
2010
|
|
2011
|
|
Cash
|
$120,000
|
|
$140,000
|
|
Accounts Receivable
|
190,000
|
|
215,000
|
|
Inventory
|
240,000
|
|
260,000
|
|
Buildings and Equipment
|
275,000
|
|
250,000
|
|
Intangible Assets
|
75,000
|
|
67,500
|
|
Total Assets
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$900,000
|
|
$932,500
|
|
|
|
|
|
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Accounts Payable
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$400,000
|
|
$420,000
|
|
Bonds Payable (Long-Term)
|
200,000
|
|
125,000
|
|
Common Stock
|
30,000
|
|
30,000
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Additional Paid-In Capital
|
175,000
|
|
175,000
|
|
Retained Earnings
|
95,000
|
|
182,500
|
|
Total Liabilities and Stockholders' Equity
|
$900,000
|
|
$932,500
|
|
|
|
2010
|
|
2011
|
|
Sales
|
$1,000,000
|
|
$1,200,000
|
|
Cost of Goods Sold
|
(600,000)
|
|
(784,000)
|
|
Gross Profit
|
$400,000
|
|
$416,000
|
|
Advertising Expense
|
(25,000)
|
|
(65,000)
|
|
Depreciation Expense
|
(40,000)
|
|
(51,040)
|
|
Office Supplies Expense
|
(20,000)
|
|
(22,500)
|
|
Interest Expense
|
(40,000)
|
|
(30,000)
|
|
Provision for Income Tax Expense
|
(189,000)
|
|
(159,960)
|
|
Net Income
|
$86,000
|
|
$87,500
|
(a) Calculate Brenham's current ratio at Dec 31, 2010 and Dec 31, 2011.
(b) Calculate Brenham's working capital at Dec 31, 2010 and Dec 31, 2011.
(c) Calculate Brenham's debt to equity ratio at Dec 31, 2010 and Dec 31, 2011.