Serial Problem — SP 5 (Continued) Part 3
BUSINESS SOLUTIONS
Partial Work Sheet
March 31, 2016
Acct.
No. Account Title
Una
dju
ste
d
Tria
l
Bal
anc
e
Adjustments
Adjusted
Trial Balance
101 Cash……………………………………
68,05
7
68,057
106.1 Alex’s Engineering Co…………. 0 0
106.2 Wildcat Services………………….
2,800 2,800
106.3 Easy Leasing………………………
9,047 9,047
106.4 IMF Co………………………………..
5,220 5,220
623 Wages expense…………………..
2,375 (c) 875 3,250
637 Insurance expense……………… 0(b) 555 555
640 Rent expense……………………… 0(d) 2,475 2,475
57
sSerial Problem — SP 5 (Continued)
Part 4
BUSINESS SOLUTIONS
Income Statement
For Three Months Ended March 31, 2016
Revenues
Computer services revenue………………………………. $25,307
Net sales*…………………………………………………………. 18 ,693
Total revenues………………………………………………….. 44,000
Expenses
Cost of goods sold……………………………………………. $14,052
* Net sales = $19,240 – $500 – $47 = $18,693
Part 5
BUSINESS SOLUTIONS
Statement of Owner’s Equity
For Three Months Ended March 31, 2016
S. Rey, Capital, Dec. 31, 2015…………………………….. $ 80,360
Plus: Investments by owner………………………………. 25,000
Serial Problem — SP 5 (Concluded)
Part 6
BUSINESS SOLUTIONS
Balance Sheet
March 31, 2016
Assets
Current assets
Cash………………………………………………………………… $ 68,057
Accounts receivable*…………………………………………. 22,867
Merchandise inventory………………………………………. 704
Liabilities
Current liabilities
Action — BTN 5-1
1. Compute cost of sales for 2013 as follows ($ millions)
September 29, 2012 inventory……………………….. $ 791
Then, solve for:
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 $10,746
Short-term marketable sec…… 26,287 26,287 18,383 18,383
Interpretation: The current ratio increased from 1.50 in 2012 to 1.68 in
2013. The acid-test ratio increased from 1.04 in 2012 to 1.23 in 2013. The
3. Solution depends on the financial statement data obtained.
Comparative Analysis — BTN 5-2
1.
Apple Google
($ millions) Current Prior Current Prior
Net sales……………… $170,910 $156,508 $59,825 $50,175
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
gross margin ratio declined from 58.9% to 56.8%.
Ethics Challenge — BTN 5-3
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 5-3 — (Concluded)
2. The merchandising company accounts for sales returns using a contra
Also, if the item is returned to inventory (and it had cost $160), the
following entry is made:
Communicating in Practice — BTN 5-4
Note: While responses will vary, the essence of its content follows:
TO: Mr. V. Velakturi
FROM:
DATE:
SUBJECT: Reply to inventory shrinkage question
You are correct in noting that Music Plus has lost inventory as a result of
shoplifting and other forms of shrinkage. However, you will be pleased to
know your investment in security has paid off. Let me explain.
We maintain a perpetual inventory system, which continuously updates
inventory account balances as goods are purchased, sold, and returned.
I hope this addresses your concern and that you are now confident that net
Taking It to the Net — BTN 5-5
Fiscal Year ($ thousands) 2012 2013 2014
Net sales……………………………………$1,721,750 $2,227,717 $2,428,257
Analysis: J. Crew’s gross margin ratio improved from 39.5% in 2012 to
Teamwork in Action — BTN 5-6
1.
a. Net sales computation
33,000
Net sales………………………………………………………….. $567 ,000
b. Total cost of merchandise purchases computation
Invoice cost of merchandise purchases……………….. $360,000
c. Cost of goods sold computation
Merchandise inventory, Beginning……………………….. $ 98,000
d. Gross profit computation
Net sales (from a)………………………………………………. $567,000
e. Net income computation
2. Net income is $141,000.
3. The inventory account balance is $84,000. If actual (physical) inventory
Entrepreneurial Decision — BTN 5-7
1.
Sseko Designs
Forecasted Income Statement
For Year Ended January 31, 2015
Net sales ($1,000,000 x 1.09)……………………………………… $1,090,000
2. The proposal yields a forecasted net income of $213,100. This compares
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
Third, there is a concern with the impact of these changes on customer
In addition to issues of confidence in prediction, one should also
Currently, the company sends a signal to customers through terms of
n/60 that it is willing to wait 60 days for payment. By changing the terms to
Hitting the Road — BTN 5-8
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 5-9
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