Work4Me Managerial Accounting Simulations. Problem Fifteen

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1 Work4Me Managerial Accounting Simulations 1 st Web-Based Edition Problem Fifteen Balance Sheet Analysis Jacob Hardware, Incorporated Page 1

2 INTRODUCTION Jacob Hardware, Incorporated is a wholesaler of industrial hardware supplies who sells to retail hardware stores in northern Oregon. Management wants you to prepare a comparative balance sheet and provide an analysis of the changes between the items appearing on the balance sheets of the last and current years. This will require the preparation of the comparative balance sheet and calculation of financial ratios. Log In to Managerial Accounting Work4Me. From the program Menu Bar select Problems then select Problem 15 Balance Sheet Analysis. Move the pointer to Analysis in the program Menu Bar and select Balance Sheet Analysis Comparative Balance Sheet. A form for completing the comparative balance sheet will appear on the screen. The following schedule includes the input data for the form. Current Year Item Amount Cash $2,900 Accounts receivable (net) $7,800 Merchandise inventory $14,100 Other current assets $1,800 Buildings and equipment (net) $12,000 Accounts payable $5,300 Other short-term liabilities $1,400 Bonds payable, 6% $8,000 Common stock, $5 par $15,000 Retained earnings $8,900 Supplemental information: Cash dividends declared and paid were $2,000. Credit sales were $48,500 and the cost of goods sold was $28,000. Jacob Hardware, Incorporated is open for business 365 days a year. Page 2

3 Beginning with Cash, enter 2,900, then tab down the column entering the required values. The tabbing will go only to those boxes requiring input. After entering all of the values, click on Statement. Click on Print and print a copy of the comparative balance sheet (with horizontal analysis). Keeping the Comparative Balance Sheet on the screen, calculate the following, writing your answers in the spaces provided: Working capital: Current ratio: Assume that $1,000 of accounts payable paid before the end of the accounting period was not recorded. Make the appropriate changes to the Comparative Balance Sheet to reflect the $1,000 payment. Keeping the Comparative Balance Sheet on the screen, calculate the following, writing your answers in the spaces provided: Working capital: Current ratio: Management is not altogether happy with the comparative balance sheet. The concerns are that the statement shows trends, but doesn t clearly show how the current year s balance sheet compares to that of the previous year. If you have not exited the program, move the pointer to Analysis and select Balance Sheet Analysis Common-size Balance Sheet. A form for completing the common-size balance sheet will appear on the screen. If you have exited the program, log In to Managerial Accounting Work4Me. From the program Menu Bar select Problems then select Problem 15 Balance Sheet Statement Analysis. Move the pointer to Analysis in the program Menu Bar and select Balance Sheet Analysis Common-Size Balance Sheet. A form for completing the common-size balance sheet will appear on the screen. Input the required data. Beginning with Cash, enter 2,900, then tab down the column entering the required values. Click on Statements then click on Print and print the statement. Use the printed statements to answer the examination questions. Move the pointer to Evaluations and select Exam 15: Balance Sheet Analysis. If the examination and the examination results are to be ed to your instructor, move the pointer to Evaluations, select Problem 15 Balance Sheet Analysis, and follow the directions on the examination. Page 3

4 MANAGERIAL WORK4ME PROBLEM 15 BALANCE SHEET ANALYSIS NAME CLASS DAY AND TIME DATE 1. Question 1 refers to the comparative balance sheet. What was the net income for the current year? A. $3,100 B. $5,100 C. $2,000 D. None of the above 2. Questions 2 to 10 refer to financial ratios calculated from the results of the comparative balance sheet. What is the working capital for this year? A. $25,600 B. $19,900 C. $11,900 D. $23, Compute all ratios to the nearest hundredth. What is the current ratio (original input) for this year? A. 3.97:1 B. 4.49:1 C. 2.63:1 D. 1.81:1 4. What would be the current ratio if the $1,000 payment of accounts payable had been recorded? A. 3.97:1 B. 4.49:1 C. 2.63:1 D. 1.81:1 5. What is the acid-test ratio for this year? A. 3.97:1 B. 4.49:1 C. 1.60:1 D. 1.81:1 6. What is the accounts receivable turnover for this year? A B C D Page 4

5 MANAGERIAL WORK4ME PROBLEM What is the inventory turnover for this year? A B C D What is the debt-to-equity ratio for this year? A B C D What is the average sale period (turnover in days) for this year? A. 167 B. 65 C. 63 D What was the average collection period for this year (in days)? A. 121 B. 65 C. 63 D Questions 11 to 15 refer to the common-size balance sheet. Stockholders equity is what percent of total equity for the current year? A % B % C % D % 12. Which item had the most significant positive change as a percentage of total assets for the current year? A. Other current assets B. Merchandise inventory C. Accounts receivable (net) D. Buildings and equipment (net) 13. What was the base dollar amount for the percentage calculations for the current year? $ Page 5

6 MANAGERIAL WORK4ME PROBLEM Which type of balance sheet statement is best suited to show trend percentages? A. Comparative balance sheet B. Common-size balance sheet 15. Total dollar value of common stock did not change. The decrease in the common-size percentage from the last year to this year was the result of? A. common stock being less of a percentage of total liabilities and stockholders equity than last year B. the increase in current liabilities C. the decrease in bonds payable D. the increase in merchandise inventory Page 6