1) How would a company estimate the percentage of its sales that will be uncollectible?
2) Anstendig Corp. has 250,000 shares of common stock authorized. It has issued
75,000 shares and has reacquired 12,000 of these shares as treasury stock. Anstendig
subsequently declared a cash dividend of $3 per share. What is the total amount of
dividends that were declared?
3) Jersey Corporation is considering purchasing equipment that costs $80,000 and is
expected to provide the following cash inflows over its five-year useful life:
Calculate the payback period for this investment. Would you recommend that Jersey
purchase the equipment?
4) The Furniture Division of Waverly Company reports the following results for 2012:
Waverly Company has set a target return on investment (ROI) of 12% for the Furniture
Division.
Assume that the division believes its revenues and operating expenses will continue to
be $400,000 and $360,000, respectively. To what level would the Furniture Division
have to reduce its operating assets to achieve the target ROI?
5) Indicate how each event affects the elements of financial statements. Use the
following letters to record your answer in the box shown below each element. You do
not need to enter amounts.
Ransom Company borrowed $10,000 by issuing a promissory note. The note was for
twelve months at an annual interest rate of 8%.
6) In an inflationary period, which inventory cost flow method, LIFO or FIFO, will
produce the smaller amount of net income? Explain.
7) What is treasury stock?
8) Creighton Company’s balance sheet and income statement are provided below:
Required:
1) Compute the margin, turnover, and return on investment for Creighton Company.
2) What is the advantage of expanding the ROI formula to measure margin and turnover
separately?