Accounting 207 Ahadiat

[Admin]

Just picked up the textbook today and did not have finish the chapter. Here is what I've got for question #5:

Compute the financial leverage ratio for 2004. What does this suggest about Patrie Plastics?

Financial leverage ratio measures the relationship between total assets and 
the stockholder's capital that finances them. The higher the ratio, the more debt is assumed by the company to finance assets. It is computed as follows:

Financial Leverage Ratio = Average Total Assets / Average Stockholders' Equity
"Average" is (Last Year's Amount + This Year's Amount) / 2

Originally Posted by Question #5

35,000+3,000+5,000+4 0,000+2,000+80,000+1 50,000=315,000 (2003 Assets)
20,000+25,000+3,000+ 12,000+80,000+150,00 0+50,000=340,000 (2003 Equity)

30,000+10,000+20,000 +12,000+15,000+20,00 0+20,000=127,000 (2004 Assets)
6,000+42,000+15,000+ 85,000+2,000=150,000 (2004 Equity)

315,000+127,000=442, 000
340,000+150,000=490, 000

442,000/490,000=0.9020408

I might have the numbers wrong. Could I see #1 through #4? Post here or e-mail me. Thanks.

[Admin]

#4 by Ted

Patrie Plastics Company
Balance Sheet at December 31, 2004

Assets
Current Assets
Cash …………………………………………………… …………………… $ 35,000.00
Receivables and other assets…………………………………… …………… 7,000.00
Inventories……………………… …………………………………………... 40,000.00

Non-current Assets
Investments……………………… ………………………………………….. 3,000.00
Property, plant, and equipment…………………………… ………………… 230,000.00
Intangible assets…………………………………… ………………………... 5,000.00
Total assets…………………………………… ……………………………. 320,000.00

Liabilities And Stock holder’s Equity
Current Liabilities
Accounts payable………………………………… ………………………….. 108,000.00
Other short-term obligations……………………… ………………………..... 12,000.00

Long-term Liabilities
Stockholder’s Equity

Contributed Capital………………………………… ………………………… 150,000.00
Retained Earnings……………………………… …………………………….. 50,000.00
Total liabilities and stockholder’s equity…………………………………. .. 320,000.00

[shibby]

who do u have for acc?

[Admin]

Taking the accounting 207 course with N. Ahadiat.

[Admin]

Recording Transactions in T-Accounts, Preparing the Balance Sheet, and evaluating the Financial Leverage Ratio
Problem: P2-3


Patrie Plastics Company has been operating for three years. At December 31, 2003, the accounting records reflected the following:

Cash - $35,000
Short-term investments – 3,000
Accounts receivable – 5,000
Inventory – 40,000
Long-term note receivable – 2,000
Equipment – 80,000
Factory Building – 150,000
Intangibles – 5,000
Accounts payable – 25,000
Accrued liabilities payable – 3,000
Short-term note payable – 12,000
Long-term note payable – 80,000
Contributed capital – 150,000
Retained earnings – 50,000

#1 Create T-accounts for each of the accounts on the balance sheet and enter the balances at the end of 2003 as beginning balances for 2004
[Chart not posted.]

#2 Record each of the events for 2004 in T-accounts (including referencing) and determine the ending balances
Assets and Non-current Assets
[Chart not posted.]



#3 Explain your response to Event (h)
Since there was no effect recorded for hiring the new president it does not need to be recorded. In order for something to be recorded there has to be an exchange receipt of cash, goods, or services.



#4 Balance Sheet at December 31, 2004
Assets
Current Assets
Cash …………………………………………………… …………………… $ 19,000.00
Receivables and other assets…………………………………… …………19,000.00
Inventories……………………… …………………………………………... 40,000.00

Non-current Assets
Investments……………………… ………………………………………….. 18,000.00
Property, plant, and equipment…………………………… ………………… 300,000.00
Intangible assets…………………………………… ………………………... 11,000.00
Total assets…………………………………… ……………………………. 407,000.00


Liabilities And Stock holder’s Equity
Current Liabilities
Accounts payable………………………………… ………………………….. 135,000.00
Other short-term obligations……………………… ………………………..... 52,000.00
Long-term Liabilities
Stockholder’s Equity
Contributed Capital………………………………… ………………………… 170,000.00
Retained Earnings……………………………… …………………………….. 50,000.00
Total liabilities and stockholder’s equity…………………………………. .. 407,000.00


#5 Compute the financial leverage ratio for 2004. What does this suggest about Patrie Plastics?

Financial leverage ratio measures the relationship between total assets and the stockholder's capital that finances them. The higher the ratio, the more debt is assumed by the company to finance assets. It is computed as follows: Financial Leverage Ratio = Average Total Assets / Average Stockholders' Equity "Average" is (Last Year's Amount + This Year's Amount)/2

35,000+3,000+5,000+4 0,000+2,000+80,000+1 50,000+5,000=320,000 (2003 Assets)
150,000+50,000=200,0 00 (2003 Equity) 19,000+19,000+40,000 +18,000+300,000+11,0 00=407,000 (2004 Assets)
170,000+50,000=220,0 00 (2004 Equity)
(320,000+407,000)/2=363,500
(200,000+220,000)/2=210,000
363,500/210,000=1.73

[Admin]

Chapter 2 Investing and Financing Decisionsand the Balance Sheet
Group 3 Problem E2-7

Recording Investing and Financing Activities
For each of the events in E2-5, prepare journal entries, checking that debits equal credits.

Explain your response to Event (d)
Given:
a) Purchased $216.3 in property,plant, and equipment; paid by signing a $5 long-term note and the rest in cash
b) Issued $21.1 in additional stock for cash.
c) Declared $100 in dividends; paid $78.8 during the year and owed the rest to be paid in the following year.
d) Several Nike investors sold their stock to other investors on the stock exchange for $21.
e) Sold $1.4 in investments in other companies for $1.4 cash.
1) Journal entry:

Debit Credit
a) Land, plant, and equipment(+A) 216.3
Cash(-A) 5
Note Payable(+L) 211.3
216.3 = 5 + 211.3 accounting equation is in balance

b) Cash(+A) 21.1
Contributed Capital(+SE) 21.1
21.1 = 21.1 accounting equation is in balance



Debit Credit
c) Dividends Payable(-SE) 100
Retained Earning(+L) 78.8
Long-term Note Payable(+L) 21.2
100 = 78.8 + 21.2 accounting equation is in balance

d) Not an account transaction; have no reflect on the company. No account are affected.

e) Cash(+A) 1.4
Investment(-A) 1.4
1.4= 1.4 accounting equation is in balance.
1.5


2) Explain your response to Event (d):
The transaction of stock between company’s investors and other have no affect on the company and so no account are effected.

[Admin]

                Balance Sheet        Income Statement
        
Assets        
Liabilities        Stockholders’ Equity        
Revenues        
Expenses        Net 
Income
a.        +        NE        +        NE        NE        NE
b.        +        +        NE        NE        NE        NE
c.        +        +        NE        NE        NE        NE
d.        +        NE        +        +        NE        +
e.        NE        +        –        NE        +        –
f.        +        NE        +        +        NE        +
g.        –        –        NE        NE        NE        NE
h.        –        NE        –        NE        +        –
i.        +        NE        +        +        NE        +
j.        –        NE        –        NE        +        –
k.        –        NE        –        NE        NE        NE
l.        + / –        NE        NE        NE        NE        NE
m.        –        +        –        NE        +        –
n.        –        NE        –        NE        +        –

[Admin]

Spring 2004 - Group Presentation Schedule
[See syllabus for group presentation schedule]
Note:

1. The presentations are to be made in the numerical order of the assignments (i.e. exercises will be presented before the problems).
2. You should develop and use Powerpoint slides for all of your presentations.
3. Be sure to use appropriate colors, background and font size in preparing your Powerpoint slides.
4. Each member of the group must be present and an active participant in each presentation.
5. Failure to appear at your scheduled group presentation will result in a grade of zero for that presentation unless your absence is justified (e.g. documented sickness, jury duty, etc.). In that case and depending on your group members' confirmation of your contribution to the group in preparing for the presentation, you may receive up to 50% of the grade assigned to that presentation.

[Admin]

Question P8-1

Requirement 1

Long-lived assets are tangible and intangible resources owned by a business and used in its operations over several years. Tangible assets (such as property, plant, and equipment or natural resources) are assets that have physical substance. Intangible assets (such as goodwill or patents) are
assets that have special rights but not physical substance.


Requirement 2

Date Assets Liabilities Stockholders’ Equity
Jan 2 Equipment(1)
Cash +71,520
-2,000 Note payable
Accounts payable(2) +40,000
+23,520 Common stock(3)
Additional paid-in capital(4) +2,000
+4,000
Jan 15 Cash -24,000 Accounts payable -23,520 Financing
expense -480

Computations:
(1) Equipment: $70,000 invoice – $480 (2% of $24,000
cash to be paid*)
+ $2,000 installation
* Assets are recorded at the cash equivalent price

(2) Balance payable: $70,000 invoice – $40,000 note
payable
– $6,000 common stock and additional paid in capital
–
$480 (2% of $24,000 cash to be paid)

(3) Common stock: $1 par value x 2,000 shares

(4) Additional paid-in capital: ($3 market value -
$1 par value) x 2,000 shares


Requirement 3

Cost of the machinery includes installation costs.
Freight was excluded because it was an expense to the
vendor. No discount was taken because Blumkin Company
paid the cash balance due after the discount period
ended. Common stock is valued at $3 per share—for
accounting purposes, this amount is allocated between
the common stock account for the par value ($1 per
share) and the additional paid-in capital account for
the remaining value ($2 per share in excess of par
value).