1) A company’s January 1 goods in process inventory contained 30,000 units that were
25% complete with respect to direct labor. The beginning inventory was completed this
year and another 120,000 units were started. Of those started, 80,000 were finished and
the remaining 40,000 were 20% complete. Calculate the equivalent units of production
for the year using the FIFO method.
2) Armstrong plans to leave the FAP Partnership. The recorded balance in her capital
account is $48,000. The remaining partners, Peters and Floyd, agree to pay Armstrong
$58,000 cash and Armstrong accepts. The partners share income and loss equally.
Prepare the journal entry to record the transaction.
3) Sweeny Co. is preparing a cash budget for the second quarter of the coming year.
The following data have been forecasted:
Additional data:
(1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in
the month following the sale and 50% in the month thereafter. Total sales in March
were $125,000.
(2) Purchases are all on credit, with 40% paid in the month of purchase and the balance
paid in the following month.
(3) Operating expenses are paid in the month they are incurred.
(4) A minimum cash balance of $40,000 is required at the end of each month.
(5) Loans are used to maintain the minimum cash balance. At the end of each month,
interest of 1% per month is paid on the outstanding loan balance as of the beginning of
the month. Repayments are made whenever excess cash is available.
Prepare the company’s cash budget for May. Show the ending loan balance at May 31.
4) A corporation reported net income of $3,730,000 and paid preferred cash dividends
of $100,000 during the current year. There were 600,000 weighted-average shares of
common stock outstanding and the market price per common share was $88.33 at
year-end. Calculate the company’s price-earnings ratio.
5) A company had net sales of $541,500 in 2010 and $475,300 in 2011. Its average
assets were $410,000 for 2010 and $400,000 for 2011. (1) Calculate the total asset
turnover for each year. (2) Interpret and comment on the company’s efficiency in the
use of its assets.
6) The income level most likely to continue into the future and is commonly used in PE
ratios and other market-based measures of performance is the
______________________.
7) The _____________________ ratio is used to assess the risk of a company’s
financing structure.