EBK INTERMEDIATE ACCOUNTING
3rd Edition
ISBN: 9780136946465
Author: SANNELLA
Publisher: VST
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Chapter 6, Problem 6.6MC
To determine
To identify: The correct option.
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Here are simplified financial statements for Watervan Corporation:
INCOME STATEMENT
(Figures in $ millions)
Net sales
$ 887.00
Cost of goods sold
747.00
Depreciation
37.00
Earnings before interest and taxes (EBIT)
$ 103.00
Interest expense
18.00
Income before tax
$ 85.00
Taxes
17.85
Net income
$ 67.15
BALANCE SHEET
(Figures in $ millions)
End of Year
Start of Year
Assets
Current assets
$ 375
$ 324
Long-term assets
270
228
Total assets
$ 645
$ 552
Liabilities and shareholders’ equity
Current liabilities
$ 200
$ 163
Long-term debt
114
127
Shareholders’ equity
331
262
Total liabilities and shareholders’ equity
$ 645
$ 552
The company’s cost of capital is 8.5%.
Required:
Calculate Watervan’s economic value added (EVA).
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
What is the company’s return on capital? (Use start-of-year rather than average capital.)
Note: Do not…
Here are simplified financial statements for Watervan Corporation:
INCOME STATEMENT
(Figures in $ millions)
Net sales
$ 887.00
Cost of goods sold
747.00
Depreciation
37.00
Earnings before interest and taxes (EBIT)
$ 103.00
Interest expense
18.00
Income before tax
$ 85.00
Taxes
17.85
Net income
$ 67.15
BALANCE SHEET
(Figures in $ millions)
End of Year
Start of Year
Assets
Current assets
$ 375
$ 324
Long-term assets
270
228
Total assets
$ 645
$ 552
Liabilities and shareholders’ equity
Current liabilities
$ 200
$ 163
Long-term debt
114
127
Shareholders’ equity
331
262
Total liabilities and shareholders’ equity
$ 645
$ 552
The company’s cost of capital is 8.5%.
Required:
What is the company’s return on capital? (Use start-of-year rather than average capital.)
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
P.S - Answer is not 17.26%.
Data extracts from Gamma's accounts are shown below
Turnover
Gross Profit
Expenses
Operating Profit
Interest and Tax
Profit for Year
Non-current assets
Inventory
Receivables
Cash at Bank
Payables
Other Current Liabilities
Net current assets
Shareholder funds
10% Debenture (2030)
Required:
Ye-Dec-20
Ye-Dec-19
18,500
16,000
4,500
4,000
1,500
2,400
3,000
1,600
1,100
700
1,900
900
19,600
16,400
840
640
2,790
1,890
450
350
830
570
340
460
2,910
1,850
15,510
13,250
7,000
5,000
22,510
18,250
A) Calculate the following accounting ratios for each year-end
1) Return on Capital Employed
2) Profit Margin on Sales
3) Gearing Ratio
4) Interest Cover Ratio
5) Return to Shareholders
6) Quick Asset or Acid test Ratio
7) Cash Conversion Period (Operating Cash Cycle)
B) Outline the limitations of accounting ratios
Chapter 6 Solutions
EBK INTERMEDIATE ACCOUNTING
Ch. 6 - What are the limitations of the balance sheet?Ch. 6 - What does a firms liquidity measure?Ch. 6 - Prob. 6.3QCh. 6 - What are the four major components of stockholders...Ch. 6 - Prob. 6.5QCh. 6 - Prob. 6.6QCh. 6 - Where is accumulated other comprehensive income...Ch. 6 - Prob. 6.8QCh. 6 - Prob. 6.9QCh. 6 - What are the two main balance sheet formats?...
Ch. 6 - Prob. 6.11QCh. 6 - Prob. 6.12QCh. 6 - What are the two formatting options for reporting...Ch. 6 - What is financial statement articulation?Ch. 6 - How is net income closed? Is the closing entry the...Ch. 6 - Why are the notes to the financial statements an...Ch. 6 - Prob. 6.17QCh. 6 - What is a subsequent event?Ch. 6 - What is a subsequent event under IFRS?Ch. 6 - How do firms report a material subsequent event on...Ch. 6 - Prob. 6.21QCh. 6 - Over what period must management assess the...Ch. 6 - Prob. 6.23QCh. 6 - Prob. 6.24QCh. 6 - Prob. 6.25QCh. 6 - Prob. 6.26QCh. 6 - Prob. 6.27QCh. 6 - Prob. 6.28QCh. 6 - Prob. 6.29QCh. 6 - Prob. 6.30QCh. 6 - Prob. 6.31QCh. 6 - Who is responsible for designing and implementing...Ch. 6 - Prob. 6.33QCh. 6 - What are the two key measures of liquidity?...Ch. 6 - What does the debt-to-equity ratio measure for a...Ch. 6 - What does a high current ratio indicate about a...Ch. 6 - Is it useful to compare working capital among...Ch. 6 - Sykes Corporations comparative balance sheets at...Ch. 6 - During Year 1, Brianna Company had the following...Ch. 6 - Which of the following items would not be included...Ch. 6 - Kong Co. purchased a three-month U.S. Treasury...Ch. 6 - Prob. 6.5MCCh. 6 - Prob. 6.6MCCh. 6 - In its year-end income statement, Black Knights...Ch. 6 - On is current year income statement, Vegas...Ch. 6 - Advantages of the Statement of Financial Position....Ch. 6 - Prob. 6.2BECh. 6 - Prob. 6.3BECh. 6 - Account Classification: Current and Noncurrent...Ch. 6 - Classified Balance Sheet. Armstrong Associates...Ch. 6 - Classified Balance Sheet, Report Format. Martell...Ch. 6 - Classified Balance Sheet, Account Format. Using...Ch. 6 - Classified Balance Sheet. Report Format.Bowe...Ch. 6 - Classified Balance Sheet, Account Format. Using...Ch. 6 - Classification as Operating. Investing, or...Ch. 6 - Prob. 6.11BECh. 6 - Classification as Operating, Investing, or...Ch. 6 - Classification as Operating. Investing, or...Ch. 6 - Classification as Operating, Investing, or...Ch. 6 - Classification as Operating, Investing, or...Ch. 6 - Classification as Operating, Investing, or...Ch. 6 - Classification as Operating, Investing, or...Ch. 6 - Prob. 6.18BECh. 6 - Statement of Cash Flows, Indirect Method. Identity...Ch. 6 - Financial Statement Articulation. Complete the...Ch. 6 - Prob. 6.21BECh. 6 - Prob. 6.22BECh. 6 - Prob. 6.23BECh. 6 - Prob. 6.24BECh. 6 - Statement of Cash Flows, Indirect Method. Tennis...Ch. 6 - Statement of Cash Flows, Direct Method. Use the...Ch. 6 - Prob. 6.27BECh. 6 - Ratio Analyses. Green Grasshopper Incorporated is...Ch. 6 - Classification of Assets and Liabilities. Darin...Ch. 6 - Prob. 6.2ECh. 6 - Prob. 6.3ECh. 6 - Prob. 6.4ECh. 6 - Prepare Balance Sheet. Blackburn Building Products...Ch. 6 - Prepare Balance Sheet. Lake Company provided the...Ch. 6 - Statement of Cash Flows, Indirect Method. Tulsa...Ch. 6 - Prob. 6.8ECh. 6 - Prob. 6.9ECh. 6 - Prob. 6.10ECh. 6 - Prob. 6.11ECh. 6 - Financial Statement Articulation. Use the...Ch. 6 - Prob. 6.13ECh. 6 - Prob. 6.14ECh. 6 - Prob. 6.15ECh. 6 - Prob. 6.16ECh. 6 - Prob. 6.17ECh. 6 - Prob. 6.18ECh. 6 - Prepare Balance Sheet. Larkin Corporation provided...Ch. 6 - Prob. 6.2PCh. 6 - Prepare Balance Sheet. Jennings Incorporated...Ch. 6 - Prepare Stockholders Equity Section of Balance...Ch. 6 - Prepare Stockholders Equity Section of Balance...Ch. 6 - Prepare Classified Balance Sheet.Centre Company...Ch. 6 - Prepare a classified balance sheet at December 31...Ch. 6 - Prob. 6.8PCh. 6 - Statement of Cash Flows, Operating Activities...Ch. 6 - Statement of Cash Flows, Operating Activities...Ch. 6 - Statement of Cash Flows, Direct Method. Prepare...Ch. 6 - Statement of Cash Flows, Indirect Method. Prepare...Ch. 6 - Prob. 6.13PCh. 6 - Statement of Cash Flows, Operating Activities...Ch. 6 - Statement of Cash Flows, Direct Method. Prepare...Ch. 6 - Prob. 6.16PCh. 6 - Prob. 1JCCh. 6 - Prob. 1FSCCh. 6 - Prob. 1SSCCh. 6 - Surfing the Standards Case 2: True and Fair...Ch. 6 - Basis for Conclusions Cases Basis for Conclusions...Ch. 6 - Prob. 2BCC
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