Questions:
Q1. The Largest current asset on Waverly Corporation's balance sheet is Short-Term Investments. The investments cost Waverly $8,660, and their market value is $9,000.
Suppose Waverly holds the investments in the hope of selling at a profit within a few months. How will Waverly classify the investments? What will Waverly report on the balance sheet at December 31, 20X6? What will Waverly report on its 20X6 income statement? Show a T-account for short term investments
Q2. Superior Technical Resources (STR) balance sheet at December 31, 20X2, reported:
Account receivable $382
Allowance for doubtful accounts (52)
STR uses both the percentage -of-sales and the aging approaches to account for uncollectible receivables.
Required:
a) How much of the December 31, 20X2, balance of accounts receivables did STR expect to collect? Stated differently, what was the net realizable value of STR's receivables?
b) Journalize, without explanation 20X3 entries for STR:
i) estimated doubtful account expense of $40, based on the percent-of sales method, all during the year.
ii) Write - offs of uncollectible accounts receivable totaling $58. Prepare T-account for allowance for doubtful accounts and post to this account. Show its unadjusted balance at December 31, 20X3.
iii) December 31, 20X3, aging of receivables, which indicates that $47 of the total receivables of $409 is uncollectible at year end. Post to allowance for doubtful accounts, and show its adjusted balance at December 31, 20X3.
c) Show how STR's receivables and related allowance will appear on December 31, 20X3 balance sheet.
d) Show what STR's income statement will report for the foregoing transactions.
Q3. Suppose FedEx purchased equipment on January 1, 20X7, for $44,000. The expected useful life of the equipment is 10 years or 100,000 units of production, and its residual value is $4,000. Under 3 depreciation methods, the annual depreciation expense and the balance of accumulated depreciation at the end of 20X7 and 20X8 are as follows:
Method A Method B Method C
Yr Annual Depr AC. Depr. Annual Depr. Acc. Dep Annual Depr. Acc Depr
20X7 $4,000 $4,000 $8,800 $8,800 $1,200 $1,200
20X8 4,000 8,000 7,040 15,840 5,600 6,800
Required:
1) Identify the depreciation method used in each instance, and show the equation and computation for each. (Round to the nearest dollar)
2) Assume continued use of the same method through year 20X9. Determine the annual depreciation expense, accumulated depreciation, and book value of the equipment for 20X7 through 20X9 under each method, assuming 12, units of production in 20X9.
Q4. a) Cannes Corporation reported the following amounts on its 2008 comparative income statement.
2008 2007 2006
Sales $9,180 $10,095 $9,777
Total expenses 5,985 5,604 5,194
Perform a horizontal analysis of revenue and net income - both in dollar amount and in percentages - for 2008 and 2007 and explain the results
b) The annual report of Classic Cars, Inc. for the year ended December 31, 2007, included the following items (in millions)
Preferred stock outstanding, 4% $500
Net income 990
Number of shares of common stock 200
Questions:
1) Compute earnings per share (EPS) and the price earnings ratio for Classic Cars' stock. Round to the nearest cent. The price of a share of Classic Car stock is $77.60
2) How much does the stock market say $1nof classic Car's net income is worth?