1) Total quality management involves assessing a company’s value chain to eliminate
non-value-added activities
2) As of December 31, 2012, Walton Corporation had a current ratio of 1.84, quick ratio
of 1.45, and working capital of $18,000. The company uses a perpetual inventory
system and sells merchandise for more than it cost. Indicate how the given transaction,
if it occurred in January 2013, would affect Walton’s current ratio, quick ratio, and
working capital. Use a + for an increase, a – for a decrease, and 0 for no effect.
Walton’s board of directors declared a cash dividend
3) The following information is from the financial records of Bloomington Company
for 2012:
Required:
Calculate the number of times interest is earned for Bloomington in 2012 .
4) The Woods and Water Company has two operating divisions, the Service Division
and the Irrigation Division. The company evaluates the performance of its divisions
using the return on investment (ROI) measure. The following information pertains to
the two divisions as of the end of the current year:
During the year, the Service Division repaired 8,000 units at an average service fee of
$50.00 per unit. The Irrigation Division sold 250 units at an average price of $5,000.
The company requires a minimum rate of return of 12%.
Required:
Compute the Return on Investment (ROI) measure for both divisions and the company
as a whole. Based on ROI alone which division had the better performance? Round ROI
measures to the nearest whole percent.
5) As of December 31, 2012, Walton Corporation had a current ratio of 1.84, quick ratio
of 1.45, and working capital of $18,000. The company uses a perpetual inventory
system and sells merchandise for more than it cost. Indicate how the given transaction,
if it occurred in January 2013, would affect Walton’s current ratio, quick ratio, and
working capital. Use a + for an increase, a – for a decrease, and 0 for no effect.
Walton sold inventory on account for $6,000
6) World Classics Publishing Company produces literary classic books targeted for
children. Its book-binding machines are capable of producing 50 books per hour. World
Classics has a total of 5,000 machine hours of capacity on its book-binding machines.
The unit-related cost of producing most books is $3.00, and World Classics sells its
books for $10 each. SpeedyRead Publishing has asked the company to produce 10,000
copies of a book at a price of $7.00 each. World Classics estimates that for this special
order the unit-related cost of producing the book will be $4.00. In addition, to complete
the special order, World Classics will have to purchase an additional special-purpose
machine that costs $10,000 and for which it has no other use.
Required:
Assume that existing demand for World Classics’ children’s classics is 230,000 units.
Prepare an analysis that indicates whether or not the special order should be accepted.
7) Indicate whether each of the following statements about financial accounting is true
or false.
1>Financial accounting information is used by government agencies, analysts,
investors, and creditors
2>Financial accounting information is characterized by objectivity and reliability
3>Financial accounting information pertains primarily to the company as a whole
4>Financial accounting has a current or future orientation
5>Financial accounting information includes financial data and economic and
non-financial data as well
8) Indicate whether each of the following statements about financial statement analysis
is true or false.
1>Net margin indicates the amount remaining from each sales dollar after cost of goods
sold has been subtracted out
2>Generally, a company’s current assets should be purchased using long-term financing
such as bonds payable
3>Net margin is sometimes called the return on sales ratio
4>The net margin ratio provides a measure of the effectiveness of the company’s
management
5>The ratio, plant assets to long-term liabilities, is a measure of a company’s ability to
obtain additional long-term financing
9) Define “accelerated depreciation method” and give an example of such a method.