Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 15, Problem 4PA
O’Brien Industries Inc. is a book publisher. The comparative unclassified balance sheets for December 31, 2017 and 2016 follow. Selected missing balances are shown by letters.
Note 1. Investments are classified as available for sale. The investments at cost and fair value on December 31, 2016, are as follows:
Note 2. The investment in Jolly Roger Co. stock is an equity method investment representing 30% of the outstanding shares of Jolly Roger Co. The following selected investment transactions occurred during 2017:
| May 5. | Purchased 3,080 shares of Gozar Inc. at $30 per share including brokerage commission. Gozar Inc. is classified as an available-for-sale security. |
| Oct. 1. | Purchased $40,000 of Nightline Co. 6%, 10-year bonds at 100. The bonds are classified as available for sale. The bonds pay interest on October 1 and April 1. |
| 9. | Dividends of $12,500 are received on the Jolly Roger Co. investment. |
| Dec. 31. | Jolly Roger Co. reported a total net income of $112,000 for 2017. O’Brien Industries Inc. recorded equity earnings for its share of Jolly Roger Co. net income. |
| 31. | Accrued three months of interest on the Nightline bonds. |
| 31. | Adjusted the available-for-sale investment portfolio to fair value, using the following fair value per-share amounts: |
| 31. | Closed the O’Brien Industries Inc. net income of $146,230. O’Brien Industries Inc. paid no dividends during the year. |
Instructions
Determine the missing letters in the unclassified
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1,500
3,600
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Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2018 and 2019 are as follows:
See images
Dividends were paid on ordinary shares of £70,000 and £72,000 for 2018 and 2019, respectively.
Required:
(a) Calculate the following financial ratios for both 2018 and 2019 (using year-end figures for statement of financial position items):
1 return on capital employed
2 operating profifit margin
3 gross profifit margin
4 current ratio
5 acid test ratio
6 settlement period for trade receivables
7 settlement period for trade payables
8 inventories turnover period.
(b) Comment on the performance of Threads Limited from the viewpoint of a business considering supplying a substantial amount of goods to Threads Limited on usual trade credit terms.
Following is a portion of the investments footnote from Redfield Inc.'s 2017 annual report.
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Chapter 15 Solutions
Financial Accounting
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Ch. 15.MJ - IFRS Activity 1
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