A04 Assignment 04

A04 Assignment 04

A04 Intermediate Accounting I  

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Directions: Be sure to make an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in complete sentences, and be sure to use correct English spelling and grammar. Sources must be cited in APA format. Refer to the "Assignment Format" page for specific format requirements.

Part A (40 points)

Vince Corporation has current assets of $300,000 and current liabilities of $175,000.

Compute the effect of each of the following transactions on Vince’s current ratio:

Refinanced a $50,000 long-term mortgage with a short-term note.

Purchasing $80,000 of merchandise inventory with short-term accounts payable.

Paying $30,000 of short-term accounts payable.

Collecting $40,000 of short-term accounts receivable.

Part B (20 points)

Selected data of the Peninsula Company follow:

As of December 31

Balance Sheet Data

2014

2013

Accounts receivable

$671,000

$642,000

Allowance for doubtful accounts

31,000

22,000

Net accounts receivable

$640,000

$620,000

Inventories—lower of cost or market

$542,500

$642,500

Year Ended December 31

Income Statement Data

2014

2013

Net credit sales

$3,150,000

$3,000,000

Net cash sales

800,000

600,000

Net sales

$3,950,000

$3,600,000

Cost of goods sold

$2,370,000

$2,160,000

Selling, general, and administrative expenses

475,000

350,000

Other

150,000

125,000

Total operating expenses

$2,995,000

$2,635,000

Net income

$955,000

$965,000

What is the accounts receivable turnover for 2014?

What is the inventory turnover for 2014?

Part C (40 points)

Selected information taken from the 2014 annual report of Aardvark Company follows. During 2014, the company had no nonoperating or nonrecurring items included in income and had no outstanding preferred stock.

($ in millions)

2014

2013

Sales

$19,903

$18,781

Interest expense

130

169

Net income

1,153

1,088

Total assets

12,673

12,461

Dividends

(153)

(131)

Total stockholders’ equity

$4,288

$4,007

Assumed tax rate

35%

35%

Industry ROA

7.32%

Industry operating profit margin

6.1%

For 2014, calculate:

a. ROA

b. ROCE

c. Operating profit margin

d. Asset turnover.

Round your percentage answers to one decimal place. For example, .1234 = 12.3%.