Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter 13, Problem 13.10E
To determine
Analyse the impact of the given transactions on the
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Alejandro Alvera of Alvear Corp was reading the financial statements of Olivas Medical Supply Company to decide whether he wanted to try to acquire the company. He noticed some mistakes in the Olivas Income Statement:
($ millions)
Year ended 12/31/2015
Sales revenue
$1600
Interest Revenue
50
Total Revenue
1650
Cost of Goods Sold
(800)
Gross Profit
850
SG&A Expense
(400)
Interest Expense
(50)
Operating Income
400
Gain on sale of equipment
200
Pre-tax income
600
Income Tax Expense
(216)
Net Income
384
What is Olivas' Operating Income for the year ended 12/31/2015 after correcting the mistakes?
a) $600
b) $350
c) $400
d) $550
e) $450
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The financial records of DISGRASYA Inc. were destroyed by fire at the end of 2020. Selected information gathered are the following: Inventory on January 1 was P92,000 and decreased by 20% during the year. Sales discount amounted to P17,000. Interest expense is P20,000. Cost of sales is P500,000. Administrative expenses amounted to 20% of cost of sales but only 8% of gross sales. Two thirds of operating expenses relate to sales activities. The company is subject to 30% income tax. How much is the net income (net loss) during 2020?
The changes in account balances of ENIGMA Co. during 2020 are as follows: Assets: P133,500 increase Liabilities: P40,500 decrease Ordinary share capital: P90,000 increase Share premium: P9,000 increase. Assuming there are no changes in retained earnings except for net income and a dividend payment of P19,500, how much is the net income (net loss) for 2020?
The following accounts and their balances appear in an unadjusted trial balance of…
Chapter 13 Solutions
Financial Accounting
Ch. 13 - Who are the primary users of financial statements?Ch. 13 - When considering an investment in stock, investors...Ch. 13 - How does product differentiation differ from cost...Ch. 13 - What are the two general methods for making...Ch. 13 - What are component percentages? Why are they...Ch. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What do profitability ratios focus on? What is an...Ch. 13 - What do turnover ratios focus on? What is an...Ch. 13 - What do liquidity ratios focus on? What is an...Ch. 13 - What do solvency ratios focus on? What is an...
Ch. 13 - What do market ratios focus on? What is an example...Ch. 13 - Prob. 12QCh. 13 - Explain why rapid growth in total sales might not...Ch. 13 - A company has total assets of 500,000 and...Ch. 13 - Prob. 2MCQCh. 13 - Prob. 3MCQCh. 13 - Prob. 4MCQCh. 13 - Prob. 5MCQCh. 13 - Prob. 6MCQCh. 13 - Prob. 7MCQCh. 13 - Prob. 8MCQCh. 13 - Prob. 9MCQCh. 13 - Prob. 10MCQCh. 13 - Prob. 13.1MECh. 13 - Prob. 13.2MECh. 13 - Prob. 13.3MECh. 13 - Computing the Financial Leverage Percentage...Ch. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Prob. 13.6MECh. 13 - Prob. 13.7MECh. 13 - Prob. 13.8MECh. 13 - Prob. 13.9MECh. 13 - Prob. 13.10MECh. 13 - Using Financial Information to Identify Companies...Ch. 13 - Prob. 13.2ECh. 13 - Prob. 13.3ECh. 13 - Prob. 13.4ECh. 13 - Prob. 13.5ECh. 13 - Prob. 13.6ECh. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Inferring Financial Information from Ratios E13-11...Ch. 13 - Prob. 13.12ECh. 13 - Prob. 13.13ECh. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Computing Comparative Financial Statements and...Ch. 13 - Analyzing Financial Statements Using Ratios Use...Ch. 13 - Prob. 13.8PCh. 13 - Prob. 13.9PCh. 13 - Prob. 13.1APCh. 13 - Prob. 13.2APCh. 13 - Calculating Profitability, Turnover, Liquidity,...Ch. 13 - Prob. 13.4APCh. 13 - Prob. 13.5APCh. 13 - Prob. 13.6APCh. 13 - Prob. 13.1CPCh. 13 - Prob. 13.2CPCh. 13 - Comparing Companies within an Industry Refer to...Ch. 13 - Prob. 13.4CPCh. 13 - Inferring Information from the DuPont Model Ratios...Ch. 13 - Prob. 13.6CP
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- 3) a) Shahi Foods & Spices Company purchased goods for OMR 25,000 and sold 70% of such goods during the accounting year ended on 31-12-2019. The market value of remaining goods was OMR 5,000. The company valued the closing inventory at OMR 5,000 and not at OMR 7,500. Is there any violation of accounting concept/convention by Shahi Foods & Spices Company? Justify your answer. b) Sky Jewelers Muscat received an order to supply gold ornaments worth OMR 50,000. They supplied ornaments worth OMR 30,000 up to the year ending 31st December 2020 and rest of the ornaments worth OMR 20,000 were supplied in January 2021. Which accounting concept/convention must be followed by Sky Jewelers while recording this transaction? Discuss.arrow_forwardPlease answer in good accounting form. Thanksarrow_forwardDollar General Corporation operates general merchandise stores that feature quality merchandise at low prices to meet the needs of middle-, low-, and fixed-income families in southern, eastern, and midwestern states. For the year ended January 31, 2014, the company reported averageinventories of $2,475 (in millions) and an inventory turnover of 4.89. Average total fixed assetswere $2,080 (million) and the fixed asset turnover ratio was 8.14.Required:1. Calculate Dollar General’s gross profit percentage (expressed as a percentage with one decimalplace). What does this imply about the amount of gross profit made from each dollar of sales?TIP: Work backward from the fixed asset turnover and inventory turnover ratios to compute theamounts needed for the gross profit percentage.2. Is this an improvement from the gross profit percentage of 31.7 percent earned during theprevious year?arrow_forward
- Blossom Company lost most of its inventory in a fire in December just before the year-end physical inventory was taken. The corporation's books disclosed the following. Beginning inventory Purchases for the year Purchase returns $168,500 Amount of the loss 412,700 30,100 Sales revenue Sales returns Rate of gross profit on net sales $628,200 25,600 20 % Merchandise with a selling price of $20,300 remained undamaged after the fire. Damaged merchandise with an original selling price of $15,200 had a net realizable value of $5,200. Compute the amount of the loss as a result of the fire, assuming that the corporation had no insurance coverage.arrow_forwardP6.1 (LO 1), AN Lanza SA had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 80,000 units of product: net sales RS2,000,000: total costs and expenses R$2.235,000: and net loss R$235.000. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Total R$1,568,000 $17,000 150,000 R$2.235.000 Variable R$1,050,000 92.000 58,000 R$1,200,000 Fixed R$ 518,000 425.000 92.000 R$1,035,000 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling R$200,000 to total salaries of R$40,000 plus a 5% commission on net sales. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. Instructions a. Compute the…arrow_forwardPlease solve the question ASAP.arrow_forward
- During 2015, Company P sold $50,000 of goods to subsidiary Company S at a profit of $12,000. One-fourth of the goods remain unsold at year-end. If no adjustments were made on the consolidated worksheet, what errors would there be on the consolidated income statement and balance sheet?arrow_forwardRoco Company manufactures both industrial and consumer electronics. Due to a change in its strategic focus, the company decided to exit the consumer electronics business, and in 2016 sold the division to Sunny Corporation. The consumer electronics division qualifies as a component of the entity according to GAAP. How should Roco report the sale in its 2016 income statement? a. Include in income from continuing operations as a nonoperating gain or loss. b. As restructuring costs. c. As a discontinued operation, reported below income from continuing operations. d. None of the above.arrow_forwardAndrews Corp. ended the year carrying $50,438,929 worth of inventory. Had they sold their entire inventory at their current prices, how much more revenue would it have brought to Andrews Corp.? O $50,438,929 O $117,002,279 $33,281,675 $83,720,604arrow_forward
- Polycryo, Inc. has a gross profit of $157,500 on sales of $525,000. The balance sheet shows average total assets of $75,000 with an average inventory balance of $55,000. Polycryo's total asset turnover and inventory turnover are closest to: Asset turnover Inventory turnover A. 7.00 times 2.00 times B. 2.00 times 7.00 times C. 7.00 times 7.00 timesarrow_forwardOwearrow_forwardDuring 2015, Company P sold $50,000 of goods to subsidiary Company S at a profit of $12,000. One-fourth of the goods remain unsold at year-end. What specific adjustments are needed on the consolidated worksheet to deal with these issues?arrow_forward
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