The MBA802 Company failed to record (accrue) $9,000,000 of cost related to vendor invoices and warranty liability at year-end. With this omission, the company's summary financial statements were stated as follows: Summarized Income Statement Sales $97,000,000 All Cost (incl. Interest & Taxes) $83,000,000 Net Income $14,000,000 Summarized Balance Sheet This Year Last Year Assets: All Current Assets combined $74,000,000 $68,000,000 All Long-Term Assets combined $61,000,000 $59,000,000 Total Assets: $135,000,000 $127,000,000 Liabilities & Stockholders Equity All Current Liabilities combined $61,000,000 $57,000,000 All Long-Term Liabilities combined $35,000,000 $45,000,000 Stockholders Equity $39,000,000 $25,000,000 Total Liabilities & Equity $135,000,000 $127,000,000 Answer the following questions: Current Ratio per Company Statements? Current Ratio if Statements Fixed This Error? Would the Current Ratio Be Better or Worse?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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The MBA802 Company failed to record (accrue) $9,000,000 of cost related to vendor invoices and warranty liability at year-end. With this omission, the company's summary financial statements were stated as follows:
Summarized Income Statement
Sales $97,000,000
All Cost (incl. Interest & Taxes) $83,000,000
Net Income $14,000,000
Summarized
This Year Last Year
Assets:
All Current Assets combined $74,000,000 $68,000,000
All Long-Term Assets combined $61,000,000 $59,000,000
Total Assets: $135,000,000 $127,000,000
Liabilities &
All Current Liabilities combined $61,000,000 $57,000,000
All Long-Term Liabilities combined $35,000,000 $45,000,000
Stockholders Equity $39,000,000 $25,000,000
Total Liabilities & Equity $135,000,000 $127,000,000
Answer the following questions:
Current Ratio if Statements Fixed This Error?
Would the Current Ratio Be Better or Worse?
ROI if Statements Fixed This Error?
Would the ROI be Better or Worse?
ROE per Company Statements?
ROE if Statements Fixed This Error?
Would the ROE be Better or Worse?
Important Notes Regarding How You Should Input Your Answers :
Display Current Ratio in the following format only x.xx (in other words, go to 2 decimal points)
Display ROI and ROE responses in the following format only x.x% (in other words, go to one decimal point and include the percentage sign)
Display the Better/Worse responses only using one of the following 2 choices: Better Worse
Current Ratio per Company Statements? 1.21
Current Ratio if Statements Fixed This Error? 1.185
Would the Current Ratio Be Better or Worse? Little Worse
ROI per Company Statements? 16.87%
ROI if Statements Fixed This Error? 5.53%
Would the ROI be Better or Worse? Worse
ROE per Company Statements? 35.90%
ROE if Statements Fixed This Error? 12.82%
Would the ROE be Better or Worse? Worse
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Company X failed to record (accrue) $5,000,000 of vendor invoices and warranty liability at year-end. As a result of this omission, the company's summary financial statements were stated as follows:
Summarized Income Statement
Sales $50,000,000
All Cost (incl. Interest & Taxes) $40,000,000
Net Income $10,000,000
Summarized
This Year Last Year
Assets:
All Current Assets combined $50,000,000 $40,000,000
All Long-Term Assets combined $50,000,000 $40,000,000
Total Assets: $100,000,000 $80,000,000
Liabilities &
All Current Liabilities combined $30,000,000 $25,000,000
All Long-Term Liabilities combined $25,000,000 $20,000,000
Stockholders Equity $45,000,000 $35,000,000
Total Liabilities & Equity $100,000,000 $80,000,000
Answer the following questions:
Current Ratio if Statements Fixed This Error?
Would the Current Ratio Be Better or Worse once this error is corrected?
ROI if Statements Fixed This Error?
Would the ROI be Better or Worse once this error is corrected?
ROE per Company Statements?
ROE if Statements Fixed This Error?
Would the ROE be Better or Worse once this error is corrected?
Display the Better/Worse responses only using one of the following 2 choices: Better Worse
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