Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
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Chapter 8, Problem 8.4AP
1.
To determine
Calculate the amount of
2. a.
To determine
Indicate the effect of error (overstated or understated) for the earnings per ratio.
b.
To determine
Indicate the effect of error (overstated or understated) for the fixed asset turnover ratio
c.
To determine
Indicate the effect of each error (overstated or understated) for the
d.
To determine
Indicate the effect of each error (overstated or understated) for the return on assets ratio.
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Sandhill Decor sells home decor items through three distribution channels—retail stores, the Internet, and catalog sales. Each distribution channel is evaluated as an investment center. Selected results from the latest year are as follows:
Retail Stores
Internet
Catalog Sales
Sales revenue
$12,000,000
$3,700,000
$6,600,000
Variable expenses
4,000,000
1,355,000
1,950,000
Direct fixed expenses
5,960,000
994,500
4,188,000
Average assets
8,000,000
3,700,000
2,000,000
Required rate of return
12%
12%
12%
(a1)
Calculate the margin and asset turnover for each of the three distribution channels. (Round answers to 2 decimal places, e.g. 5.12% or 5.12.)
Retail Stores
Internet
Catalog Sales
Margin
enter percentages %
enter percentages %
enter percentages %
Asset turnover
enter a ratio
enter a ratio
enter a ratio
Crane Decor sells home decor items through three distribution channels-retail stores, the Internet, and catalog sales. Each
distribution channel is evaluated as an investment center. Selected results from the latest year are as follows:
Retail Stores
Internet
Catalog Sales
Sales revenue
$10,130,000
$4,080,000
$3,400,000
Variable expenses
4,080,000
1,630,000
1,930,000
Direct fixed expenses
4,580,000
1.130.000
1,330,000
Average assets
8,080,000
4,080,000
1,600,000
Required rate of return
10%
10%
10%
(a)
Your answer is incorrect.
Calculate the current residual income for each distribution channel. (If the residual income is a loss then enter with a negative sign
preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).)
Residual Income
$
Retail
$
Online
$
Catalog
QT, Inc. and Elppa Computers, Inc. compete with each other in the personal computer market. QT assembles computers to customer orders, building and delivering a computer within four days of a customer entering an order online. Elppa, on the other hand, builds computers for inventory prior to receiving an order. These computers are sold from inventory once an order is received. Selected financial information for both companies from recent financial statements follows (in millions):
QT
Elppa
Sales
$35,040
$46,400
Cost of goods sold
29,200
43,800
Inventory, beginning of period
932
4,028
Inventory, end of period
1,132
4,828
a. Determine for both companies (1) the inventory turnover and (2) the number of days' sales in inventory. Round your calculations and answers to one decimal place. Assume 365 days a year.
(refer to image)
b. QT has a ______ (higher/lower) inventory turnover ratio than does Elppa Company. Likewise, QT has a _____ (larger/smaller) number…
Chapter 8 Solutions
Financial Accounting
Ch. 8 - Define long-lived assets. Why are they considered...Ch. 8 - Prob. 2QCh. 8 - What are the classifications of long-lived assets?...Ch. 8 - Prob. 4QCh. 8 - Describe the relationship between the expense...Ch. 8 - Prob. 6QCh. 8 - Prob. 7QCh. 8 - In computing depreciation, three values must be...Ch. 8 - The estimated useful life and residual value of a...Ch. 8 - Prob. 10Q
Ch. 8 - Prob. 11QCh. 8 - Prob. 12QCh. 8 - Prob. 13QCh. 8 - Prob. 14QCh. 8 - Prob. 15QCh. 8 - Why is depreciation expense added to net income...Ch. 8 - Miga Company and Porter Company both bought a new...Ch. 8 - Leslie, Inc.. followed the practice of...Ch. 8 - Prob. 3MCQCh. 8 - Prob. 4MCQCh. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQCh. 8 - Prob. 9MCQCh. 8 - (Chapter Supplement) Irish Industries purchased a...Ch. 8 - Prob. 8.1MECh. 8 - Prob. 8.2MECh. 8 - Prob. 8.3MECh. 8 - Prob. 8.4MECh. 8 - Computing Book Value (Double-Declining-Balance...Ch. 8 - Computing Book Value (Units-of-Production...Ch. 8 - Identifying Asset Impairment LO8-4 For each of the...Ch. 8 - Prob. 8.8MECh. 8 - Prob. 8.9MECh. 8 - Prob. 8.10MECh. 8 - Prob. 8.1ECh. 8 - Prob. 8.2ECh. 8 - Computing and Recording Cost and Depreciation of...Ch. 8 - Determining Financial Statement Effects of an...Ch. 8 - Determining Financial Statement Effects of an...Ch. 8 - Recording Depreciation and Repairs (Straight-Line...Ch. 8 - Prob. 8.7ECh. 8 - Prob. 8.8ECh. 8 - Computing Depreciation under Alternative Methods...Ch. 8 - Computing Depreciation under Alternative Methods...Ch. 8 - Prob. 8.11ECh. 8 - Prob. 8.12ECh. 8 - Prob. 8.13ECh. 8 - Computing Depreciation and Book Value for Two...Ch. 8 - Prob. 8.15ECh. 8 - Recording the Disposal of an Asset at Three...Ch. 8 - Prob. 8.17ECh. 8 - Prob. 8.18ECh. 8 - Prob. 8.19ECh. 8 - Prob. 8.20ECh. 8 - Prob. 8.21ECh. 8 - Prob. 8.22ECh. 8 - (Chapter Supplement) Recording a Change in...Ch. 8 - Prob. 8.24ECh. 8 - Prob. 8.25ECh. 8 - Explaining the Nature of a Long-Lived Asset and...Ch. 8 - Analyzing the Effects of Repairs, an Addition, and...Ch. 8 - Prob. 8.3PCh. 8 - Best Buy Co., Inc., headquartered in Richfield,...Ch. 8 - Evaluating the Effect of Alternative Depreciation...Ch. 8 - Recording and Interpreting the Disposal of Three...Ch. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Computing Goodwill from the Purchase of a Business...Ch. 8 - Prob. 8.10PCh. 8 - Prob. 8.11PCh. 8 - Explaining the Nature of a Long-Lived Asset and...Ch. 8 - Prob. 8.2APCh. 8 - Computing the Acquisition Cost and Recording...Ch. 8 - Prob. 8.4APCh. 8 - Recording and Interpreting the Disposal of Three...Ch. 8 - Prob. 8.6APCh. 8 - Prob. 8.7APCh. 8 - Asset Acquisition, Depreciation, and Disposal Pool...Ch. 8 - Case A. Dr Pepper Snapple Croup, Inc., is a...Ch. 8 - Prob. 8.1BCOMPCh. 8 - Prob. 8.1CCOMPCh. 8 - Case D. Stewart Company reports the following...Ch. 8 - Case E. Matson Company purchased the following on...Ch. 8 - Prob. 8.1CPCh. 8 - Finding Financial Information LO8-1, 8-2, 8-6...Ch. 8 - Comparing Companies within an Industry Refer to...Ch. 8 - Prob. 8.4CPCh. 8 - Prob. 8.5CPCh. 8 - Prob. 8.6CPCh. 8 - Evaluating the Impact of Capitalized Interest on...
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