ACC/305 ACC305 ACC 305 WEEK 10 HOMEWORK 2

ACC 305 WEEK 10 HOMEWORK 2

Homework - Chapter 24 Appendix A

Brief Exercise 24-8

Answer each of the questions in the following unrelated situations.

(a) The current ratio of a company is 6:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $498,500, what is the amount of current liabilities?

(b) A company had an average inventory last year of $294,000 and its inventory turnover was 5. If sales volume and unit cost remain the same this year as last and inventory turnover is 7 this year, what will average inventory have to be during the current year? (Round answer to 0 decimal places, e.g. 125.)

(c) A company has current assets of $89,690 (of which $38,820 is inventory and prepaid items) and current liabilities of $38,820. What is the current ratio? What is the acid-test ratio? If the company borrows $14,370 cash from a bank on a 120-day loan, what will its current ratio be? What will the acid-test ratio be? (Round answers to 2 decimal places, e.g. 2.50.)

(d) A company has current assets of $597,200 and current liabilities of $220,000. The board of directors declares a cash dividend of $177,300. What is the current ratio after the declaration but before payment? What is the current ratio after the payment of the dividend? (Round answers to 2 decimal places, e.g. 2.50.)

Exercise 91

The following information pertains to Wamser Company:

Compute the following: (Round answers to 2 decimal places e.g. 15.25.)

Exercise 92

The following data is given:

Compute the following ratios: (Round answers to 2 decimal places e.g. 15.25.)

Exercise 24-4

As loan analyst for Utrillo Bank, you have been presented the following information.

Each of these companies has requested a loan of $49,720 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one of these requests is to be granted.

Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)

Problem 24-3

Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2015, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,420 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $6,560 is due on March 31, 2016, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn’s cash flow problems are due primarily to the company’s desire to finance a $302,000 plant expansion over the next 2 fiscal years through internally generated funds.

The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal years.

(a)

Compute the following items for Bradburn Corporation. (Round answer to 2 decimal places, e.g. 2.25.)