Serial Problem — SP 4 (Concluded)
Part 6
BUSINESS SOLUTIONS
Balance Sheet
March 31, 2016
Assets
Current assets
Cash………….…………………….……..….…….…….…….…… $ 68,057
Accounts receivable*………………………………….………. 22,867
Merchandise inventory………………….…………….……... 704
Computer supplies……………………………..………………. 2,005
Prepaid insurance……………………………………….……... 1,110
Prepaid rent…………….……………………..….…….…….….. 825
Total plant assets…………………………………..…….…….. 24 ,700
Total assets……………..………………….……………….…….... $120 ,268
Liabilities
Current liabilities
Wages payable………………….………………….…….……... $ 875
Equity
Reporting in Action — BTN 4-1
1. Compute cost of sales for 2013 as follows ($ millions)
September 29, 2012 inventory……………….…….…. $ 791
Plus cost of goods purchased………………..………. ?
Less September 28, 2013 inventory………….…….. (1 ,764 )
2.
2013 2012
($ millions)
Current
Ratio
Acid-Test
Ratio
Current
Ratio
Acid-Test
Ratio
Current assets
Cash and equivalents.......... $14,259 $14,259 $10,746 $10,746
Short–term marketable sec…... 26,287 26,287 18,383 18,383
Accounts receivables, net…... 13,102 13,102 10,930 10,930
Inventories, net………………... 1,764 791
Deferred tax assets…........... 3,453 2,583
Interpretation: The current ratio increased from 1.50 in 2012 to 1.68 in
2013. The acid-test ratio increased from 1.04 in 2012 to 1.23 in 2013. The
3. Solution depends on the financial statement data obtained.
Comparative Analysis — BTN 4-2
1.
Apple Google
($ millions) Current Prior Current Prior
Net sales..…………….. $170,910 $156,508 $59,825 $50,175
Cost of sales……….... 106,606 87,846 25,858 20,634
2. In both years, Google’s gross margin ratio was higher than that for
3. Apple’s gross margin ratio declined from 43.9% to 37.6% and Google’s
Ethics Challenge — BTN 4-3
1. A few students sometimes feel that Amy has devised a clever way to
beat the system. She appears to be succeeding in getting something for
free. However, most students fortunately feel that Amy is abusing the
system and that her ethical conduct needs an overhaul. The instructor
Ethics Challenge, BTN 4-3 — (Concluded)
2. The merchandising company accounts for sales returns using a contra
revenue account called Sales Returns and Allowances. A dress returned
with a sales bill of $200 would be accounted for as follows:
Communicating in Practice — BTN 4-4
Note: While responses will vary, the essence of its content follows:
TO: Mr. V. Velakturi
FROM:
DATE:
SUBJECT: Reply to inventory shrinkage question
You are correct in noting that Music Plus has lost inventory as a result of
shoplifting and other forms of shrinkage. However, you will be pleased to
know your investment in security has paid off. Let me explain.
We maintain a perpetual inventory system, which continuously updates
inventory account balances as goods are purchased, sold, and returned.
I hope this addresses your concern and that you are now confident that net
income is not overstated. If you have any additional questions or require
Taking It to the Net — BTN 4-5
Fiscal Year ($ thousands) 2012 2013 2014
Net sales…………….….…….…….………$1,721,750 $2,227,717 $2,428,257
Cost of goods sold………….………….. 1,042,197 1,240,989 1,422,143
Teamwork in Action — BTN 4-6
1.
a. Net sales computation
Sales……………..…………………….………….…….…….……. $600,000
Less: Sales discounts………………………..………..…... $ 13,000
Sales returns and allowances………………..… 20 ,000
33,000
Net sales………………………………….………………….…….. $567 ,000
c. Cost of goods sold computation
Merchandise inventory, Beginning………………………… $ 98,000
Total cost of merchandise purchased (from b)…….... 362 ,000
Merchandise available for sale………………….…….……. $460,000
Merchandise inventory, Ending…………………..…….….. (84 ,000 )
Cost of goods sold………….………………..…………………. $376 ,000
d. Gross profit computation
Teamwork in Action (Concluded)
e. Net income computation
Gross profit from sales (from d)…………………………. $191,000
Operating expenses (given)……….….…….……..……... 50 ,000
Net income……………..………………………….…….…….…. $141 ,000
2. Net income is $141,000.
3. The inventory account balance is $84,000. If actual (physical) inventory
is $76,000, an $8,000 loss from inventory shrinkage occurred. This
Entrepreneurial Decision — BTN 4-7
1.
Sseko Designs
Forecasted Income Statement
For Year Ended January 31, 2015
Net sales ($1,000,000 x 1.09)…………………..………….…….… $1,090,000
Cost of sales* ($1,090,000 x 61%)………………………….……. 664,900
2. The proposal yields a forecasted net income of $213,100. This compares
favorably to the prior year’s net income of $190,000. Accordingly, based on
these facts alone, the company should implement the proposal.
3. There are many issues that should be considered. Among them are:
First, there is the issue of the prediction itself. That is, are estimates
reasonable or could reality be markedly different from these estimates?
Second, and related to the first, there is a need to consider “ranges” of
Hitting the Road — BTN 4-8
There is no formal solution for this field activity. As the discussion
facilitator, the instructor should try to develop a sense of how willing retail
managers are in granting sales allowances, the range of return policies
employed, and strategies managers use to stem return abuses.
Global Decision — BTN 4-9
1.
(in millions) Samsung* Apple Google
Net sales……………………………………..228,692,667₩$170,910 $59,825
*millions of Korean won
Gross Margin % Rank
Google……………..………….……. 56.8% 1
2. Samsung, Apple and Google each use the multiple-step format for their
income statements. Google’s income statement is a mix between
multiple-step and single-step as it does not report a measure of gross