University of WindsorCenter
for Executive and Professional EducationalMaster
of Management ProgramAccounting
Concepts and Techniques (78-611)Fall
2013-Mid-Term ExamQuestion No. 1Use
the accounts below for Black and Decker to prepare a balance sheet at December
31, 2009 ($ millions).
Contributed
capital
$ 149.9
Cash
1,083.2
Long-term
debt
1,715.0
Accounts
receivable
832.8
Other
current assets
308.8
Other
long-term assets
2,019.9
Current
liabilities
1,195.9
Inventory
777.1
Other
long-term liabilities
1,285.2
Property
plant and equipment
473.4
Retained
earnings
1,622.0
Other
equity
(472.8)
Question No. 2 15Use
the income statement for Staples, Inc. to compute NOPAT (net operating profit after
tax)The
companys combined federal and state statutory tax rate is 37.9%.
STAPLES,
INC. AND SUBSIDIARIES
Consolidated
Statement of Income for February 2, 2008
(in thousands)
Sales
$19,372,682
Cost
of goods sold and occupancy costs
13,822,011
Gross
profit
5,550,671
Operating
and selling expenses
3,131,774
General
and administrative expenses
854,984
Amortization
of intangibles
15,664
Total
operating expenses
4,002,422
Operating
income
1,548,249
Other
nonoperating income (expense):
Interest
income
46,726
Interest
expense
(28,335)
Miscellaneous
expense
(2,158)
Income
before income taxes and minority interest
1,564,482
Income
tax expense
559,614
Income
before minority interests
1,004,868
Minority
interest income
802
Net
Income
$ 1,005,670
Question No. 3 20Use
the balance sheets for the fiscal 2010 (year ended January 29, 2011) for
Staples, Inc. to compute the following:a. Operating assets b. Operating liabilitiesc. Net operating assets (NOA)
STAPLES, INC. AND
SUBSIDIARIES
Consolidated Balance
Sheets
(in thousands)
January 29, 2011
Cash and cash equivalents
$ 1,461,257
Receivables, net
1,954,148
Merchandise inventories, net
2,359,173
Deferred income tax asset
295,232
Prepaid expenses and other current assets
398,357
Total current assets
6,468,167
Net property and equipment
2,147,771
Intangible assets, net
522,722
Goodwill
4,073,162
Other assets
699,845
Total assets
$13,911,667
Accounts payable
$ 2,208,386
Accrued expenses and other current liabilities
1,497,851
Debt maturing within one year
587,356
Total current liabilities
4,293,593
Long-term debt
2,014,407
Other long-term obligations
652,486
Common stock
545
Additional paid-in capital
4,334,735
Accumulated other comprehensive loss
(96,933)
Retained earnings
6,492,340
Treasury stock
(3,786,977)
Total Staples, Inc. stockholders’ equity
6,943,710
Noncontrolling interests
7,471
Total stockholders equity
6,951,181
Total liabilities and stockholders’ equity
$13,911,667
Question No. 4 10Magic
Animation Corporation has aged its accounts receivable and estimated
uncollectible accounts as follows (in thousands):
Age
of Receivables
Balance
Estimated % uncollectible
Current
$4,000
1%
30-60
days past due
1,600
3%
61-90
days past due
900
6%
Over
90 days past due
510
10%
Total
$7,010
a. Determine the appropriate allowance for
uncollectible accounts.b. How will Magic Animation report its accounts
receivable on the balance sheet?Question No. 5 15The
asset side of the 2011 balance sheet for Leggett & Platt is below. The company reported cost of goods sold
$2,970.7 million in 2011 and $2,703.7 million in 2010.
LEGGETT & PLATT,
INCORPORATED
Consolidated Balance
Sheets
December 31
2011
2010
(in millions)
Cash and cash equivalents
$ 236.3
$ 244.5
Accounts and other receivables, net of allowance of $24.3 and
$22.1
503.6
478.9
Finished goods
261.3
241.1
Work in process
41.5
47.7
Raw materials and supplies
223.9
218.2
LIFO reserve
(85.7)
(71.7)
Total inventories, net
441.0
435.3
Other current assets
43.1
60.4
Total current assets
1,224.0
1,219.1
Machinery and equipment
1,120.1
1,136.6
Buildings and other
608.5
613.0
Land
45.2
48.5
Total property, plant and equipment
1,773.8
1,798.1
Less accumulated depreciation
1,193.2
1,173.9
Net property, plant and equipment
580.6
624.2
Goodwill
926.6
930.3
Other intangibles, less accumulated amortization of $106.2 and
$107.8 at December 31, 2011 and 2010, respectively
116.6
152.3
Sundry
67.3
75.1
TOTAL ASSETS
$2,915.1
$3,001.0
a.
Compute inventory turnover for the years
2011 and 2010 and interpret any change. At December 31, 2009, Total
inventories, net were $409.1 million.b.
Leggett & Platt uses LIFO for at
least some of its inventory method. What would the company have reported as
inventory in 2011 and 2010 if the company had used the FIFO method? At December
31, 2009, the LIFO reserve was $(58.7) million.c.
Recalculate cost of goods sold (COGS)
under the FIFO method for 2011 and 2010. Question No. 6 15Neel Industries recently issued $40
million of 11% coupon bonds, payable semiannually, which mature in 15 years.
The bonds were sold for $37,247,026 to yield a 12% annual rate. Use the table
below to show the amortization of the discount, interest expense, and the
carrying amount of the bonds from issuance till the end of period 4.
University of WindsorCenter
for Executive and Professional EducationalMaster
of Management ProgramAccounting
Concepts and Techniques (78-611)Fall
2013-Mid-Term ExamQuestion No. 1Use
the accounts below for Black and Decker to prepare a balance sheet at December
31, 2009 ($ millions).Contributed
capital$ 149.9 Cash 1,083.2 Long-term
debt 1,715.0 Accounts
receivable 832.8 Other
current assets 308.8 Other
long-term assets 2,019.9 Current
liabilities 1,195.9 Inventory 777.1 Other
long-term liabilities 1,285.2 Property
plant and equipment 473.4 Retained
earnings 1,622.0 Other
equity (472.8)Question No. 2 15Use
the income statement for Staples, Inc. to compute NOPAT (net operating profit after
tax)The
companys combined federal and state statutory tax rate is 37.9%.STAPLES,
INC. AND SUBSIDIARIESConsolidated
Statement of Income for February 2, 2008(in thousands)Sales $19,372,682 Cost
of goods sold and occupancy costs 13,822,011 Gross
profit5,550,671Operating
and selling expenses 3,131,774 General
and administrative expenses854,984 Amortization
of intangibles15,664Total
operating expenses4,002,422Operating
income1,548,249Other
nonoperating income (expense):Interest
income46,726 Interest
expense(28,335)Miscellaneous
expense (2,158)Income
before income taxes and minority interest1,564,482Income
tax expense559,614Income
before minority interests1,004,868 Minority
interest income 802Net
Income$ 1,005,670Question No. 3 20Use
the balance sheets for the fiscal 2010 (year ended January 29, 2011) for
Staples, Inc. to compute the following:a. Operating assets b. Operating liabilitiesc. Net operating assets (NOA)STAPLES, INC. AND
SUBSIDIARIESConsolidated Balance
Sheets(in thousands)January 29, 2011Cash and cash equivalents$ 1,461,257Receivables, net1,954,148Merchandise inventories, net2,359,173Deferred income tax asset295,232Prepaid expenses and other current assets398,357Total current assets6,468,167Net property and equipment2,147,771Intangible assets, net522,722Goodwill4,073,162Other assets699,845Total assets$13,911,667Accounts payable$ 2,208,386Accrued expenses and other current liabilities1,497,851Debt maturing within one year587,356Total current liabilities4,293,593Long-term debt2,014,407Other long-term obligations652,486Common stock545Additional paid-in capital4,334,735Accumulated other comprehensive loss(96,933)Retained earnings6,492,340Treasury stock(3,786,977)Total Staples, Inc. stockholders’ equity6,943,710Noncontrolling interests7,471Total stockholders equity6,951,181Total liabilities and stockholders’ equity$13,911,667Question No. 4 10Magic
Animation Corporation has aged its accounts receivable and estimated
uncollectible accounts as follows (in thousands):Age
of ReceivablesBalanceEstimated % uncollectibleCurrent $4,0001%30-60
days past due 1,6003%61-90
days past due9006%Over
90 days past due51010%Total$7,010a. Determine the appropriate allowance for
uncollectible accounts.b. How will Magic Animation report its accounts
receivable on the balance sheet?Question No. 5 15The
asset side of the 2011 balance sheet for Leggett & Platt is below. The company reported cost of goods sold
$2,970.7 million in 2011 and $2,703.7 million in 2010. LEGGETT & PLATT,
INCORPORATEDConsolidated Balance
SheetsDecember 3120112010(in millions)Cash and cash equivalents$ 236.3 $ 244.5 Accounts and other receivables, net of allowance of $24.3 and
$22.1503.6478.9 Finished goods261.3 241.1 Work in process 41.5 47.7 Raw materials and supplies223.9 218.2 LIFO reserve(85.7) (71.7)Total inventories, net441.0 435.3 Other current assets 43.1 60.4 Total current assets 1,224.0 1,219.1 Machinery and equipment 1,120.11,136.6 Buildings and other608.5 613.0 Land 45.2 48.5 Total property, plant and equipment 1,773.8 1,798.1 Less accumulated depreciation 1,193.2 1,173.9 Net property, plant and equipment580.6 624.2 Goodwill926.6 930.3 Other intangibles, less accumulated amortization of $106.2 and
$107.8 at December 31, 2011 and 2010, respectively116.6 152.3 Sundry 67.3 75.1 TOTAL ASSETS $2,915.1 $3,001.0 a.
Compute inventory turnover for the years
2011 and 2010 and interpret any change. At December 31, 2009, Total
inventories, net were $409.1 million.b.
Leggett & Platt uses LIFO for at
least some of its inventory method. What would the company have reported as
inventory in 2011 and 2010 if the company had used the FIFO method? At December
31, 2009, the LIFO reserve was $(58.7) million.c.
Recalculate cost of goods sold (COGS)
under the FIFO method for 2011 and 2010. Question No. 6 15Neel Industries recently issued $40
million of 11% coupon bonds, payable semiannually, which mature in 15 years.
The bonds were sold for $37,247,026 to yield a 12% annual rate. Use the table
below to show the amortization of the discount, interest expense, and the
carrying amount of the bonds from issuance till the end of period 4.