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    Financial Accounting Problems.

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    During March, the activities of Evergreen Landscaping included the following transactions and events, among others. Which of these items represented expenses in March? Explain.
    a. Purchased a copying machine for $2,750 cash.
    b. Paid $192 for gasoline purchase for a delivery truck during March.
    c. Paid $2,280 salary to an employee for time worked during March.
    d. Paid an attorney $560 for legal services rendered in January.
    e. Declared and paid a $1,800 dividend to shareholders.

    Financial Statements.
    As you can see, someone has spilled ink over some of the entries in the balance sheet and income statement of Transylvania Railroad (blue color). Use the following information to work out the missing entries.

    Ratios Definitions
    Long-term debt ratio 0.40 = LTD / (LTD + Equity)
    Time interest earned 8.00 = EBIT / Interest Payments
    Current ratio 1.40 = Current Assets / Current Liabilities
    Quick ratio 1.00 = (Cash + A/R) / Current Liabilities
    Cash ratio 0.20 = (Cash) / Current Liabilities
    Return on assets 0.18 = (Net Income + Interest) / Avg. Assets
    Return on equity 0.41 = Net Income / Avg. Equity
    Inventory turnover 5.00 = COGS / Average Inventory
    Average collection period 71.20 = Average A/R / Average Daily Sales

    Income Statement
    (figures in millions of dollars)
    Net Sales
    Cost of goods sold
    Selling, general, and administrative expenses 10.00
    Depreciaiton 20.00
    Earnings before interest and taxes (EBIT)
    Interest expense
    Income before tax
    Net Income

    Balance Sheet This Year Last Year
    Cash and marketable securities 20
    Receivables 34
    Inventories 26
    Total current assets 80
    Net property, plant, and equipment 25
    Total assets 105

    Liabilities and shareholders' equity:
    Accounts payable 25 20
    Notes payable 30 35
    Total current liabilities 55
    Long-term debt 20
    Shareholders' equity 30
    Total liabilities and shareholders' equity 115 105

    Equity Accounts.
    The authorized share capital of the Ace Company is 100,000 shares. The equity is currently shown in the company?s books as follows:

    Common stock ($1.00 par value) $70,000
    Additional paid-in capital 10,000
    Retained earnings 30,000
    Common equity $110,000
    Treasury stock (5,000 shares) 15,000
    Net common equity $95,000

    a. How many shares are issued?
    b. How many are outstanding?
    c. How many more shares can be issued?

    Cash Budget.
    The following data are from the budget of Ritewell Publishers. Half the company?s sales are transacted on a cash basis. The other half are paid for with a 1-month delay. The company pays all its credit purchases with a one month delay. Credit purchases in January were $30 and total sales in January were $180. Complete the following cash budget (see below).

    February March April
    Total sales 200 220 180
    Cash purchases 70 80 60
    Credit purchases 40 30 40
    Labor and administrative expenses 30 30 30
    Taxes, interest, and dividends 10 10 10
    Capital expenditures 100 0 0

    Complete the following cash budget February March April
    Sources of cash
    Collections on current sales
    Collections on accounts receivable
    Total sources of cash
    Uses of cash
    Payments of accounts payable
    Cash purchase
    Labor and administrative expenses
    Capital expenditures
    Taxes, interest, and dividends
    Total uses of cash
    Net cash inflow
    Cash as start of period 100
    + Net cash inflow
    = cash at end of period
    + Minimum operating cash balance 100 100 100
    = Cumulative short-term financing required

    Common stock ($1.00 par value) $70,000
    Additional paid-in capital 10,000
    Retained earnings 30,000
    Common equity $110,000
    Treasury stock (5,000 shares) 15,000
    Net common equity $95,000

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    Solution Summary

    The solution includes a word file that answers the questions about expense recognition, completing income statements, stockholders' equity and budgets