Financial Management Assets Current Assets

Financial Management Assets Current Assets Cash 3,000 Receivables, less allowance 3,000 Inventory Prepaid expenses 2,000 Non-current/Fixed Assets Buildings Machinery and equipment Less: Accumulated depreciation Other assets (long-term) 7,000 Liabilities Current Liabilities Accounts payable Non-current Liabilities Long-term debt Deferred income tax liability (long-term) Accrued income taxes 3,000 Other accrued expenses Current portion of long-term debt 7,000 Stockholders' Equity Common stock, no par value, 10,000 shares authorized, 5,724 shares issued $3,180 Retained earnings Annual Depreciation Expense = ($100,000 - $10,000)/10 yrs = $9,000 for each of the first three years b.

We will use the double declining method, which means that the depreciation rate used will be (100%)/10 yrs times 2 = 20% Book Value Beginning of Year Depreciation Rate Depreciation Expense Accumulated Depreciation Book Value End of Year 100,000 (Original Cost) The depreciation in the first three years according to this method is $20,000, $16,000 and $8,800. c. Depreciable Cost = $90,000 The sum of the digits = 55. Depreciation rates are: 10/55 for the first year, 9/55 for the second year and 8/55 for the thirds. Thus, 1 yrs - $16,363 yrs - $14,727 yrs - $13,090 P4-1. a.

Operating Revenues Sales Selling expenses Operating Expenses Administrative expense $ Income taxes Interest expense Flood loss (net of tax) Purchases Merchandise inventory, 1/1 Merchandise inventory 12/31 Non-operating Revenues Dividend income b. Earnings per share = $9.57 c. Revenues & Gains $967,000 Expenses & Losses $1,762,000 Net Income - $795,000 5-1. a. The current assets proportion of total assets in 2006 was 67.3%, while in 2007 this figure was 66.9%. As we can see, there is a slight, but not significant decrease from 2006 to 2007, mainly explainable through an increase in total assets at a more accelerated pace than current assets.

At the same time, long-term debt to total assets was 4.29% in 2007 and 1.5% in 2006, marking a significant increase of almost three times from one year to the other. The explanation is justified by a significant increase in the long-term debt, which, despite being at reasonable levels in absolute terms, has grown significantly as a proportion of the long-term debt. b. If 2006 is considered 100%, the total current assets in 2007 amounted to 137%, a 37% increase from the previous year.

At the same times, with 2006 as 100, 2007 total assets were 114%, a small increase compared to the previous year. The same is noticeable for total liabilities. c. The trend showed gradual increases for all components of the balance sheet, showing a regular and sustained development of the company. Some of these however had a more sustained ascending trend. 5-4. a. Revenue from services Net earnings b.

As compared to the 2004 base, net earnings have increased in 2006 with almost 200%, similar figures being noticeable in comparison with 2004 to many of the other figures on the statement of earnings. 6-2. a. days' sales in receivables 2007 = 220,385/$3,233 = 68.17 days' sales in receivables 2006 = 240,360/$6,027 = 39.88 b. accounts receivables turnover 2007 = 1,180,178/220,385 = 5.355 accounts receivables turnover 2006 = 2,200,000/240,360 = 9.15 c. Both ratios show that the company's liquidity has decreased, mainly due to bad collection policies. 6-6. a. The days' sales in inventory =.