1. The following balance sheet information (in $ millions) comes from the Annual Report to Shareholders of Marriott International Inc. for the 2008 fiscal year. (Certain amounts have been replaced with question marks to test your under- standing of balance sheets.) In addition, you’re provided with the following information from an analysis of Marriott’s financial position at the same date:
Current ratio = 1.3296486 Acid-test ratio = 0.407422 Debt-to-equity ratio = 5.4514493
Compute the missing amounts (rounded to the nearest $ in millions) in the Marriott balance sheet.
EXAMINATION NUMBER: 06150400
Examination
Assets Current assets
Cash and equivalents Accounts and notes receivable Inventory
Other Total current assets
Property and equipment, net Intangible assets, net Investments
Notes and other receivables, net Other
Total non-current assets Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued payroll and benefits Other payables and accruals Total current liabilities
Long-term debt
Other long-term liabilities
Total long-term liabilities Total liabilities Shareholders’ equity
Class A common stock Additional paid-in capital Retained earnings Treasury stock and other Total shareholders’ equity
Total liabilities and shareholders’ equity
$1,443) ?) 346) 988) 1,173)
?) 2,015) 5) 3,590) 3,565) (5,780)
$134 355 ?
$704 633 1,196 2,533
1,380 $8,903
2Intermediate Accounting 1
2. The following information is provided in the 2011 annual report to shareholders of paris-perfume.com:
Accounts receivable Inventory
Other assets
Total assets
Total liabilities
Total stockholders’ equity
Net sales Cost of goods sold Net income
Return on assets
Receivables turnover Inventory turnover
Asset turnover
Return on stockholders’ equity Profit margin on sales
40908 $70 million
For the year ended Dec. 31, 2011
$40 million
10% 8.0 12.0 2.5 20% 4%
December 31, 2010 $100 million
$30 million
$170 million
$300 million
$100 million $200 million
Required: Compute the missing amount in the paris-perfume.com financial statement information, indicated by in the table above.
3. Shown below is activity for one of the products of Denver Office Equipment:
January 1 balance, 500 units @ $55 $27,500 Purchases
January 10 500 units @ $60
January 20 1,000 units @ $63 Sales:
January 12 800 units January 28 750 units
Compute the ending inventory and cost of goods sold assuming Denver uses FIFO.
Compute the ending inventory and cost of goods sold assuming Denver uses LIFO
and a perpetual inventory system.
Compute the ending inventory and cost of goods sold assuming Denver uses
average cost and a periodic inventory system.
Compute the ending inventory and cost of goods sold assuming Denver uses
average cost and a perpetual inventory system.
Compute the ending inventory and cost of goods sold assuming Denver uses LIFO
and a periodic inventory system.
Final Examination
3Part B: Ten questions worth 4 points each. Show all work.
1. The following information ($ in millions) comes from a recent annual report of Amazon.com, Inc.:
Net sales Total assets
End of year balance in cash
Total stockholders’ equity
Gross profit (Sales – Cost of Sales) Net increase in cash for the year Operating expenses
Net operating cash flow
Other income (expense), net
Compute Amazon’s balance in cash at the beginning of the year.
Compute Amazon’s total liabilities at the end of the year.
Compute cost of goods sold for the year.
Compute the income before income tax for Amazon.
$10,711) 4,363) 1,022) 431) 2,456) 9) 2,067) 702) (12)
The current asset section of Seifert & Seifert, CPA’s balance sheet consists of cash, accounts receivable, investments, and prepaid expenses. The 2011 balance sheet reported the following: cash, $110,000; investments, $22,000; prepaid expenses, $18,000; non current assets, $422,000; and shareholders’ equity, $350,000. The cur- rent ratio at the end of the year was 1.6 and the debt to equity ratio was .8.
Required: Determine the following 2011 amounts and ratios:
a. Current liabilities.
b. Long-term liabilities. c. Accounts receivable. d. The acid-test ratio.
Canton Corporation reported the following items in its adjusted trial balance for the year ended December 31, 2011:
Income from continuing operations before income taxes Extraordinary gain on property condemnsation Extraordinary loss on natural disaster
Canton is subject to a 30% tax rate.
$110,000) 28,000) (50,000)
Required: Prepare the December 31, 2011, income statement for Canton Corporation, starting with income from continuing operations before income taxes.
4Intermediate Accounting 1
4. In 2011, KP Building Inc. began work on a four-year construction project (called “Cincy One”). The contract price is $300 million. KP uses the percentage-of-completion method of accounting. At the end of 2011, the following financial statement information indicates the results to date for Cincy One:
INCOME STATEMENT
Gross Profit (before-taxes) recognized in 2011
BALANCE SHEET
Accounts Receivable from construction billings Construction in progress
Less: Billings on construction
Net billings in excess of construction in progress
$66 million ($75 million)
$22 million
$10 million
$9 million
Required: Compute the following, placing your answer in the spaces provided and showing supporting computations:
Items to compute:
Cash collected by KP on Cincy One during 2011
Actual costs incurred by KP on Cincy One during 2011
At 12/31/2011, the estimated remaining costs to complete Cincy One The percentage of Cincy One that was completed during 2011
On June 30, 2011, Gunderson Electronics issued 8% stated rate bonds with a face amount of $300 million. The bonds mature on June 30, 2031 (20 years). The market rate of interest for similar bond issues was 10% (5% semiannual rate). Interest is paid semiannually (4%) on June 30 and December 31, beginning on December 31, 2011.
Required: a. Determine the price of the bonds on June 30, 2011.
b. Calculate the interest expense Gunderson reports in 2011 for these bonds.
During Burns Company’s first year of operations, credit sales totaled $140,000 and col- lections on credit sales totaled $105,000. Burns estimates that bad debt losses will be 1.5% of credit sales. By year-end, Burns had written off $300 of specific accounts as uncollectible.
Required: Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expense.
Show the year-end balance sheet presentation for accounts receivable.
Final Examination
5Appleton Inc. adopted dollar-value LIFO on January 1, 2011, when the inventory value was $1,200,000. The December 31, 2011, ending inventory at year-end costs was $1,430,000 and the cost index for the year is 1.1.
Required: Compute the dollar-value LIFO inventory valuation for the December 31, 2011, inventory.
DK Super Stores Inc. uses the average cost retail method to estimate its ending inventory. Information at June 30, 2011, is as follows:
Beginning inventory Net purchases
Net sales Ending inventory
Cost64000 Retail $105,000 375,000 380,000
Required: Compute the cost-to-retail percentage used by DK.
9. Schefter Mining operates a copper mine in Wyoming. Acquisition, exploration, and development costs totaled $8.2 million. Extraction activities began on July 1, 2011. After the copper is extracted in approximately six years, Schefter is obligated to restore the land to its original condition, including constructing a park. The company’s controller has provided the following three cash flow possibilities for the restoration costs:
The company’s credit-adjusted, risk-free rate of interest is 5%, and its fiscal year ends on December 31.
Required: What is the initial cost of the copper mine? (Round computations to nearest whole dollar.)
How much accretion expense will Schefter report in its 2011 income statement?
What is the carrying value (book value) of the asset retirement obligation that
Schefter will report in its 2011 balance sheet?
Assume that actual restoration costs incurred in 2017 totaled $860,000. What
amount of gain or loss will Schefter recognize on retirement of the liability?
Probability
$700,000 30%
$800,000 25%
$900,000 45%
Cash Flow
Financial Accounting
10. On March 30, 2011, Calvin Exploration purchased a drilling machine for $840,000. The estimated useful life of the machine is 10 years, and no residual value is anticipated. An important component of the machine is the drill housing component that will need to be replaced in five years. The $200,000 cost of the drill housing component is included in the $840,000 cost of the machine. Calvin uses the straight-line deprecia- tion method for all machinery. The company’s fiscal year ends on December 31.
Required:a. Calculate depreciation on the drilling machine for 2011 and 2012 applying the typical U.S. GAAP treatment.
b. Repeat requirement 1 applying IFRS.
