Accounting

Homework Assignment # 1 In dropbox Friday, January 29 by 11:59 p.m.

Chapter 2 Problem 4, page 50. Operating profit (LO1) A-Rod Fishing Supplies had sales of $2,500,000 and cost of goods sold of $1,710,000. Selling and administrative expenses represented 10 percent of sales. Depreciation was 6 percent of the total assets of $4,680,000. What was the firm’s operating profit?

Chapter 2 Problem 21, page 54. Depreciation and cash flow (LO5) The Rogers Corporation has a gross profit of $880,000 and $360,000 in depreciation expense. The Evans Corporation also has $880,000 in gross profit, with $60,000 in depreciation expense. Selling and administrative expense is $120,000 for each company.

Given that the tax rate is 40 percent, compute the cash flow for both companies. Explain the difference in cash flow between the two firms.

Chapter 3, Problem 1, page 79. Profitability ratios (LO2) Low Carb Diet Supplement Inc. has two divisions. Division A has a profit of $156,000 on sales of $2,010,000. Division B is able to make only $28,800 on sales of $329,000. Based on the profit margins (returns on sales), which division is superior?

Chapter 3, Problem 14, page 81 Du Pont system of analysis (LO3) Gates Appliances has a return-on-assets (investment) ratio of 8 percent.

a. If the debt-to-total-assets ratio is 40 percent, what is the return on equity?

b. If the firm had no debt, what would the return-on-equity ratio be?

Chapter 3, Problem 22, page 83. Overall ratio analysis (LO2) The balance sheet for Stud Clothiers is shown next. Sales for the year were $2,400,000, with 90 percent of sales sold on credit.

STUD CLOTHIERS
Balance Sheet 20X1
Assets	Liabilities and Equity
Cash……………………	$ 60,000	Accounts payable……………..	$ 220,000
Accounts receivable…...	240,000	Accrued taxes…………………	30,000
Inventory………………	350,000	Bonds payable (long-term)……………………	150,000
Plant and equipment…...	410,000	Common stock………………..	80,000
		Paid-in capital…………………	200,000
		Retained earnings……………..	380,000
Total assets………...	$1,060,000	Total liabilities and equity…	$1,060,000

Compute the following ratios:

a. Current ratio.

b. Quick ratio.

c. Debt-to-total-assets ratio.

d. Asset turnover.

e. Average collection period.