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Submit Submitresponses to the individual assignment for week 4 posted in the Course-Materials forum. Problem 1: Grading: This problem is worth a total of 18.75 points. There are 22grading elements each worth 18.75 x 2/3 / 22= 0.5682 points. There are 18.75 x 1/3 = 6.25 points available for effort. The FJF Company does not employ a full-time accountant. However they do employ a bookkeeper that records entries and attempts to prepare drafts of financial statements. You have been retained by the company to review the bookkeeperâ€™s work and prepare correct financial statements for 2014. You have completed your review of the bookkeeperâ€™s work and, based upon your review, the bookkeeper has prepared the following draft balance sheet for your review.
FJF Company Balance sheet For the year ended December 31, 2014 Stockholdersâ€™ s equity Common stock, $9 par, authorized 70,000 shares, Issued 48,000 shares Additional paid-in capital Retained earnings Intangible assets Goodwill Prepaid expenses Cash surrender value of life insurance Trading securities at cost (fair value $177,000) Property, plant, and equipment Land held for future use Building (net) Office equipment (net) Current assets Cash Accounts receivable (net) Inventories at lower of average cost or market Current liabilities Accounts payable Notes payable (due next year) Pension obligation Rent payable Premium on bonds payable Long-term liabilities Bonds payable
$432,000 237,000 118,000 18,000 133,000 207,000 259,000 843,000 237,000 340,000 503,000 593,000 200,000 185,000 121,000 72,000 78,000 739,000
Additional information: The company ends its fiscal accounting year on December 31. The accumulated depreciation on the building totals $237,000. The accumulated depreciation on the office equipment totals $155,000. The allowance for doubtful accounts has a balance of $25,000. The pension obligation is considered a long-term liability. The bookkeeper did not know how to compute retained earnings. Instructions: Prepare a correct balance sheet is good form.
Problem 2: Grading: This problem is worth a total of 18.75 points. There are 24grading elements each worth 18.75 x 2/3 / 24 = 0.5208 points. There are 18.75 x 1/3 = 6.25 points available for effort. The WLO Company has prepared the following trial balance as of the end of its fiscal accounting year on December 31, 2013. Debits Accounts Payable Accounts Receivable Accrued Liabilities Accumulated Depreciation â€“ Buildings Accumulated Depreciation â€“Equipment Additional Paid-in Capital Administrative Expenses Allowance for Doubtful Accounts Bonds Payable Buildings Cash Common Stock ($1 par) Cost of Goods Sold Dividends Payable Equipment Extraordinary Gain Franchise Interest Expense Inventories Investment Revenue Land Long-term Investments in Bonds Long-term Investments in Stocks Long-term Notes Payable Patent Retained Earnings Sales Selling Expenses Short-term Notes Payable Trading Securities Treasury Stock
$516,000 114,000 180,000 71,000 95,000 1,067,000 30,000 1,185,000 1,233,000 233,000 1,185,000 5,689,000 161,000 711,000 95,000 190,000 250,000 708,000 75,000 308,000 354,000 328,000 1,067,000 231,000 91,000 9,600,000 2,370,000 107,000 181,000 226,000 $14,595,000
Instructions: Ignoring income taxes, prepare a balance sheet in good form as of December 31, 2013. Problem 3: Grading: This problem is worth a total of 18.75 points. There are 11grading elements each worth 18.75 x 2/3 / 11 = 1.1364 points. There are 18.75 x 1/3 = 6.25 points available for effort. Consider each of the following independent post –balance-sheet events (subsequent events) related to the ILJ Company. 1. The ILJ Company was sued by a competitor in a prior year for trademark infringement. The suit is now settled. 2. A large customer of the ILJ Company, representing 10% of ILJ Company’s annual revenues, cancelled their contract with the ILJ Company. 3. The ILJ Company was in litigation with the Internal Revenue Service concerning a tax matter related to a previous year’s income tax return. The matter was settled at a cost significantly in excess of the amount expected at year-end. 4. The ILJ Company sold one of its factories representing approximately 30% of its total assets. 5. The ILJ Company merged with the NYP Company. Both companies were approximately the same size prior to the merger. 6. A large customer of the ILJ Company filed for bankruptcy resulting in a significant loss on the year-end accounts receivables. 7. The ILJ Company launched a new product line. 8. The ILJ Company experienced an extended strike by its employees. 9. The ILJ Company hired a new president to replace the prior president that retired. 10. The ILJ Company experienced a fire at an administrative office. The building was a total loss. 11. The ILJ Company issued 100,000 shares of common stock increasing the total number of shares outstanding to 250,000.
Instructions: Each of the events occurred after the date of the balance sheet but before the financial statements were issued. For each of the above events, indicate the action ILJ Company should take to report the event to their shareholders and other users of their financial statements. Should ILJ Company: A: Adjust the financial statements to be issued. B: Disclose the event in the notes to the financial statements to be issued. C: Neither adjust nor disclose the event in the financial statements to be issued. Problem 4: Grading: This problem is worth a total of 18.75 points. There are 7grading elements each worth 18.75 x 2/3 / 7 = 1.7857 points. There are 18.75 x 1/3 = 6.25 points available for effort. Consider the following balance sheets from two companies, the GYF Company and the AIT Company. Assets Cash Receivables Inventories Total current assets Other assets Total assets Liabilities and Stockholdersâ€™ Equity Current liabilities Long-term liabilities Capital stock and retained earnings Total liabilities and stockholdersâ€™ equity Annual sales Rate of gross profit on sales
$96,000 176,000 457,000 $729,000 401,000 $1,130,000
$256,000 241,000 414,000 $911,000 489,000 $1,400,000
$244,000 321,000 565,000
$280,000 400,000 720,000
$1,130,000 $745,000 30.00%
$1,400,000 $1,199,000 40.00%
Instructions: As a bank loan officer, it is your responsibility to evaluate loan application. Both companies are applying for a short-term loan. Using the above information and applicable ratio analysis, determine which company is the better credit risk and why. Include the computations of the appropriate ratios used in your analysis.