ACC 421 Week 4 Individual Assignment P1 P2 P3 And P4

Submit responses to the individual assignment for week 4 posted in the Course-Materials forum.

Problem 1:

Grading: This problem is worth a total of 18.75 points. There are 22grading elements each worth 18.75 x 2/3 / 22= 0.5682 points. There are 18.75 x 1/3 = 6.25 points available for effort.

The FJF Company does not employ a full-time accountant. However they do employ a bookkeeper that records entries and attempts to prepare drafts of financial statements. You have been retained by the company to review the bookkeeper’s work and prepare correct financial statements for 2014. You have completed your review of the bookkeeper’s work and, based upon your review, the bookkeeper has prepared the following draft balance sheet for your review.

FJF Company

Balance sheet

For the year ended December 31, 2014

Stockholders’ s equity

Common stock, $9 par, authorized 70,000

shares, Issued 48,000 shares $432,000

Additional paid-in capital 237,000

Retained earnings

Intangible assets

Goodwill 118,000

Prepaid expenses 18,000

Cash surrender value of life insurance 133,000

Trading securities at cost (fair value $177,000) 207,000

Property, plant, and equipment

Land held for future use 259,000

Building (net) 843,000

Office equipment (net) 237,000

Current assets

Cash 340,000

Accounts receivable (net) 503,000

Inventories at lower of average cost or market 593,000

Current liabilities

Accounts payable 200,000

Notes payable (due next year) 185,000

Pension obligation 121,000

Rent payable 72,000

Premium on bonds payable 78,000

Long-term liabilities

Bonds payable 739,000

Additional information:

The company ends its fiscal accounting year on December 31.

The accumulated depreciation on the building totals $237,000.

The accumulated depreciation on the office equipment totals $155,000.

The allowance for doubtful accounts has a balance of $25,000.

The pension obligation is considered a long-term liability.

The bookkeeper did not know how to compute retained earnings.

Instructions:

Prepare a correct balance sheet is good form.

Problem 2:

Grading: This problem is worth a total of 18.75 points. There are 24grading elements each worth 18.75 x 2/3 / 24 = 0.5208 points. There are 18.75 x 1/3 = 6.25 points available for effort.

The WLO Company has prepared the following trial balance as of the end of its fiscal accounting year on December 31, 2013.

Debits Credits

Accounts Payable $539,000

Accounts Receivable$516,000

Accrued Liabilities 114,000

Accumulated Depreciation – Buildings 180,000

Accumulated Depreciation –Equipment 71,000

Additional Paid-in Capital 95,000

Administrative Expenses1,067,000

Allowance for Doubtful Accounts 30,000

Bonds Payable 1,185,000

Buildings1,233,000

Cash233,000

Common Stock ($1 par) 1,185,000

Cost of Goods Sold5,689,000

Dividends Payable 161,000

Equipment711,000

Extraordinary Gain 95,000

Franchise190,000

Interest Expense250,000

Inventories708,000

Investment Revenue 75,000

Land308,000

Long-term Investments in Bonds354,000

Long-term Investments in Stocks328,000

Long-term Notes Payable 1,067,000

Patent231,000

Retained Earnings 91,000

Sales 9,600,000

Selling Expenses2,370,000

Short-term Notes Payable 107,000

Trading Securities181,000

Treasury Stock226,000

$14,595,000 $14,595,000

Instructions:

Ignoring income taxes, prepare a balance sheet in good form as of December 31, 2013.

Problem 3:

Grading: This problem is worth a total of 18.75 points. There are 11grading elements each worth 18.75 x 2/3 / 11 = 1.1364 points. There are 18.75 x 1/3 = 6.25 points available for effort.

Consider each of the following independent post –balance-sheet events (subsequent events) related to the ILJ Company.

1. The ILJ Company was sued by a competitor in a prior year for trademark infringement. The suit is now settled.

2. A large customer of the ILJ Company, representing 10% of ILJ Company’s annual revenues, cancelled their contract with the ILJ Company.

3. The ILJ Company was in litigation with the Internal Revenue Service concerning a tax matter related to a previous year’s income tax return. The matter was settled at a cost significantly in excess of the amount expected at year-end.

4. The ILJ Company sold one of its factories representing approximately 30% of its total assets.

5. The ILJ Company merged with the NYP Company. Both companies were approximately the same size prior to the merger.

6. A large customer of the ILJ Company filed for bankruptcy resulting in a significant loss on the year-end accounts receivables.

7. The ILJ Company launched a new product line.

8. The ILJ Company experienced an extended strike by its employees.

9. The ILJ Company hired a new president to replace the prior president that retired.

10. The ILJ Company experienced a fire at an administrative office. The building was a total loss.

11. The ILJ Company issued 100,000 shares of common stock increasing the total number of shares outstanding to 250,000.

Instructions:

Each of the events occurred after the date of the balance sheet but before the financial statements were issued.

For each of the above events, indicate the action ILJ Company should take to report the event to their shareholders and other users of their financial statements. Should ILJ Company:

A: Adjust the financial statements to be issued.

B: Disclose the event in the notes to the financial statements to be issued.

C: Neither adjust nor disclose the event in the financial statements to be issued.

Problem 4:

Grading: This problem is worth a total of 18.75 points. There are 7grading elements each worth 18.75 x 2/3 / 7 = 1.7857 points. There are 18.75 x 1/3 = 6.25 points available for effort.

Consider the following balance sheets from two companies, the GYF Company and the AIT Company.

GYF Company AIT Company

Assets

Cash $96,000 $256,000

Receivables 176,000 241,000

Inventories 457,000 414,000

Total current assets $729,000 $911,000

Other assets 401,000 489,000

Total assets $1,130,000 $1,400,000

Liabilities and Stockholders’ Equity

Current liabilities $244,000 $280,000

Long-term liabilities 321,000 400,000

Capital stock and retained earnings 565,000 720,000

Total liabilities and stockholders’ equity $1,130,000 $1,400,000

Annual sales $745,000 $1,199,000

Rate of gross profit on sales 30.00% 40.00%

Instructions:

As a bank loan officer, it is your responsibility to evaluate loan application. Both companies are applying for a short-term loan. Using the above information and applicable ratio analysis, determine which company is the better credit risk and why.

Include the computations of the appropriate ratios used in your analysis.

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