Chapter 7: Reporting and Interpreting Sales Revenue, Receivables, and Cash

Checklist of Key Figures

Chapter 7: Reporting and Interpreting Sales Revenue, Receivables, and Cash

Exercises

E7-1No check figure

E7-2Net sales = $2,280

E7-3Net sales = $8,880

E7-4Net sales = $9,630

E7-5No key figure

E7-6Req. 1: 3rd quarter 2006, ratio 1 = 75%; 2nd quarter 2007, ratio 3 = 77%

E7-7Req. 1: Gross margin = $98,000; Income tax expense = $11,400

Req. 2: Gross profit percentage = 40%

E7-8Req. 1: Net income = $24,067

Req. 2: Gross profit percentage = 30%

E7-9Req. 2: Balance of account = $7,964 (rounded)

E7-10No key figure

E7-11No key figure

E7-12Req. 1: Write-offs = $196

Req. 2: Cash collections = $36,021

E7-13Req. 1: bad dept expense = $2,261

Req. 2: Net decrease in working capital = $1,582.7

E7-14Bad Dept Expense = $2,680

E7-15Req. 2: Bad debt expense = $1,500

Req. 3: Accounts receivable, net = $48,500

E7-16Req. 2: Accounts receivable = $25,500

E7-17Req. 1: Receivables turnover = 8.74 times

E7-18Average net trade accounts receivable = $49,500

E7-19Req. 1: Receivables turnover, Air Canada = 13.95

Average collection period, WestJet Airlines = 6.8 days (rounded)

E7-20Req. 1: Decrease cash flow from operations by $37 million

E7-21No key figure

E7-22Total cash and cash equivalents = $71,000

E7-23Req. 1: Ending correct cash balance = $7,350

Req. 4: Cash = $7,650

E7-24Req. 1: Ending correct cash balance = $5,500

E7-25December 6, 2006,Cash = $5,292

E7-26Net income, 2007 = $600,000

Problems

P7-1No key figure

P7-2Req. 1: (g) Sales discounts = $2,000; (m) Bad debt expense = $750

Req. 2: Net sales revenue = $297,320

P7-3Case A: f. $143,750; c. $27,500

Case B: b. $64,200; f. $16,000

P7-4Req. 2: Write-offs, 2002 = 11.8

P7-5Req. 2: Estimated uncollectible = $2,660

Req. 3: Bad debt expense = $1,640

P7-6Req. 1: Ending balance = $660,000

Req. 2: Bad debt expense = $44,600

P7-7Req. 1: Net income = $23,400

Req. 2: Gross profit percentage = 42.0%

P7-8Req. 1: Total approximate amount stolen = $4,820

P7-9Req. 1: Ending correct cash balance = $22,330

Req. 4: Cash = $22,430

P7-10Req. 3: Ending balance per Cash account = $20,280

Ending correct cash balance = $22,530

Alternate Problems

AP7-1No key figure

AP7-2Req. 1: (g) Sales discounts = $1,000; (m) Bad debt expense = $796

Req. 2: Net sales revenue = $156,248

AP7-3Req. 2: Bad debt expense, 2003 = $39

AP7-4Req. 2: Estimated uncollectible = $4,275

Req. 3: Bad debt expense = $5,825

AP7-5Req. 1: Net income = $35,000

Req. 2: Gross profit percentage = 32.3%

AP7-6Req. 2: Ending correct cash balance = $8,158

Cases and Projects

CP7-1Req. 4: Revenue recognition policy is disclosed in Note 2 j

CP7-2Req. 3: Receivables turnover = 21.7 times

Req. 4: information is disclosed in Note 8

CP7-3Req. 1: FGL, Gross margin, 2005 = $333,896

Req. 2: Receivables turnover ratio, FGL 2004 = 26.0 (rounded)

CP7-4No key figure

CP7-5Req. 2: Receivables turnover = 9.3 times

Req. 4: Write-offs = $139,592

CP7-6No key figure

CP7-7No key figure

CP7-8No key figure

CP7-9No key figure

CP7-10Req. 1: Receivable turnover, projected change = 8.7

CP7-11No key figure

CP7-12No key figure

Chapter 8: Reporting and Interpreting Cost of Goods Sold and Inventory

Exercises

E8-1No key figure

E8-2Cost of goods sold, Case A = $300; Case B = $750; Case D = $450

E8-3Gross profit, Case A = $2,100; Gross profit, Case C = $520

E8-4Purchases = $1,096,450,000

E8-5Req. 2: COGS = Overstated

E8-6Case B: Cost of goods sold = $1,875

E8-7Req. 1: Corrected income = $20,506,758

E8-8Req. 3: Pretax income, 1st quarter = $6,400

E8-9Req. 1: Pretax income, FIFO = $129,000; Ending inventory, LIFO = $96,000

E8-10Req. 1: Cost of goods sold, FIFO = $305,600

Pretax income, LIFO = $121,000

Net income, Weighted Average= $87,724

E8-11Req. 1: Cost of goods sold, FIFO = $10,030; Ending inventory, LIFO = $17,700

E8-12Req. 2: Impact on COGS = $11 million

E8-13Inventory valuation, LCM = $7,450

E8-14Req. 1: Inventory turnover = 24.1

E8-15Case A: Inventory turnover = 3.0

E8-16No key figure

E8-17Req. 1: Cost of goods sold, Case A = $116,000

Ending inventory, Case B = $102,000

E8-18Req. 4 (a): Credit to Inventory = $80

Problems

P8-1Correct inventory, December 31, 2007 = $52,450

P8-2Req. 1: Cost of goods sold, 2007 = $46,000

Req. 2: Gross profit percentage, 2006, after correction = .37

P8-3Req. (b): Average unit cost = $32.80

Req. (c): Cost of goods sold, LIFO = $26,960

P8-4Req. 1: Ending inventory, FIFO = $3,600; Cost of goods sold, LIFO = $4,500

P8-5Req. 1: Pretax income = $245,000

Req. 2: Ending inventory = $375,000

Req. 4: If FIFO is used, ending inventory = $125,000

P8-6Req. 1: Pretax income = $95

P8-7Req. 1: Prices rising – Case A, Net income, FIFO = $1,610

Prices falling – Case D, Gross profit, LIFO = $6,400

P8-8Req. 1: Cost of ending inventory = $1,402

Req. 4: Overstatement of cost of goods sold = $260

P8-9Req. 1: Ending inventory = $35,000; Gross profit = $103,000

Req. 2: Net income was reduced by $6,300

P8-10Req. 1: Inventory turnover, projected change = 18.1

P8-11Req. 1: Total cost of goods sold = $2,192

P8-12No key figure

Alternate Problems

AP8-1Req. 1: Net income, 2008 = $245,000; Net income, 2006 = $175,000

AP8-2Req. (b): Ending inventory, LIFO = $6,050

Ending inventory, specific identification = $7,733

Req. (c): Cost of goods sold, FIFO = $8,840

AP8-3Req. 2: Cost of goods sold = $26,200

Req. 3: Weighted average unit cost = $21.16

AP8-4Req. 1: Inventory turnover, projected change = 4.53

AP8-5No key figure

Cases and Projects

CP8-1Req. 2: Purchases (and production) = $670,973

Req. 4: Inventories increased by $19,815,000

CP8-2Req. 3: Inventory turnover = 6.49

CP8-3Req. 1: Inventory turnover for FGL = 2.42

CP8-4No key figure

CP8-5No key figure

CP8-6Req. 2: Ending inventory was decreased by approximately $24 million

CP8-7Req. 1: Net income is overstated by $28.2 million

Req. 2: Net income will increase by $1.3 million

CP8-8No key figure

Chapter 9: Reporting and Interpreting Property, Plant, and Equipment; Natural Resources; and Intangibles

Exercises

E9–1No key figure

E9–2No key figure

E9–3No key figure

E9–4Fixed asset turnover ratio = 1.76

E9–5Req. 1: Fixed asset turnover ratio, 2003 = 3.74

E9–6Cost ofbuilding = $375,000

E9–7Req. 1: Cost of building = $158,000

Req. 4: Book value at end of Year 2 = $179,000

E9–8Req. 2: Acquisition cost = $23,450

Req. 5: Book value at end of 2006 = $19,783

E9–9No key figure

E9–10Req. 2: Amortization expense, 2007 = $7,625

E9–11Req. 1: Amortization expense – SL = $1,400; DDB, Year 2 = $1,600

E9–12Req. 1: Net book value = $6,500

Req. 2: Amortization Expense, 2008 = $2,688

E9–13No key figure

E9–14No key figure

E9–15Req. 1: Double-declining balance, Year 2 = $15,600

E9–16Cost of Property and equipment written off = $43

E9–17(b) Gain on disposal of long-term asset = $600

E9–18Req. 2: Loss on disposal of truck = $900

E9–19Req. 4: Depletion rate = $0.60 per cubic yard

E9–20No key figure

E9–21Req. 2: Patent amortization expense = $434

Req. 3: Long-term Assets = $31,446

E9–22Req. 4: Total expense = $52,800

E9–23No key figure

E9–24Req. 2: Age of Machine = 2 years

Req. 3: Annual amortization = $4,000

E9–25Req. 2; Amortization expense = $21,000

Problems

P9–1Req. 1: Net book value = $720

Req. 2: The average cost per hour of use = $2.67

P9–2Req. 2: Machinery = $71,520

P9–3Req. 1: Accumulated amortization,12/31/1996 = $9,742.9

P9–4Req. 1: Apportioned Cost, Machine C = $6,800, Cost of Machine C = $7,600

Req. 2: Amortization expense, Machine B = $5,120

P9–5Req. 1: Amortization expense = $2,101

Req. 2: Effect on return on equity, overstated

P9–6Req. 1: Units of production, Net book value, Year 1 = $60,725

Double declining balance, Amortization expense, Year 2 = $10,916

P9–7Req. 1: Age = 5 years

Req. 2: Gain on disposal = $2,875

P9–8Req. 1: Amortization expense = $1,208.6

Req. 2: Cash proceeds from disposals and transfers = $3,005.0

P9–9Req. 1: (b) Loss on disposal of machine B = $1,755

P9–10Req. 1: Machine A, (f) Amortization expense = $ 5,800, Loss on disposal = $2,300

Req. 2: Amortization expense for 2008; Machine B = $5,000,

Amortization of Leasehold improvements = $1,200

P9–11 Req. 1: Goodwill = $103,389

P9–12No key figure

P9–13Req. 2: Net book value of Patent,Jan. 1, 2006 = $47,775

P9–14Req. 2: Amortization expense for 2008 = $11,000

Alternate Problems

AP9–1Req. 2: Interest expense = $1,500

AP9–2Req. 1: Accumulated amortization, 12/31/2008 = $72,500

AP9–3Req. 1: Cost of Machine C = $28,700

Req. 2: Amortization of Machine B, units-of-production = $5,810

AP9–4Req. 1: Amortization expense = $33,939

Req. 2: Effect on Fixed asset turnover ratio: understated

AP9–5Req. 1: Age = 4 years

Req. 2: Gain on disposal = $3,000

AP9–6Req. 1: Gain on disposal of Machine B = $1,625

AP9–7Req. 1: Amortization expense, Machine A = $6,250, Gain on disposal = $1,250

Req. 2: Amortization expense, Machine B = $7,400,

Amortization of Leasehold improvements = $600

AP9–8Req. 1: Patent amortization = $1,133.33

Req. 2: Net Book Value, License = $7,500

Cases and Projects

CP9–1Req. 2: Accumulated depreciation and amortization = $139,130,000, Note 8

Req. 5: Fixed asset turnover ratio = 3.0

CP9–2 Req. 1: Percentage for WestJet, 2004 = 85.3%

Req. 2: Percentage for Southwest = 26.8%

Req. 3: Fixed asset turnover ratio, Southwest = 0.81

CP9–3No key figure

CP9–4No key figure

CP9–5Req. 1: Expected life, Current Year = 8.7 years

Req. 2: Average age, Previous Year = 2.8 years

CP9–6Req. 1: Cost = $321,089

Req. 2: Approximate age = 14 years

Req. 3: Fixed asset turnover ratio = 0.74 times

CP9–7Disposals = $1,011

CP9–8No key figure

CP9–9No key figure

CP9–10No key figure

CP9–11 No key figure

Irwin/McGraw-Hill© The McGraw-Hill Companies, Inc., 2006

Financial Accounting, 2nd Canadian edition 1-1