On Jan 1 ’07 SSS buys 100 US Treasury Bonds (face value $1000 each) for the Trading Portfolio. The bonds carry an annual interest coupon of 4% paid semiannually Jan 1 and July 1. Journalize the purchase.
On July 1 the bonds pay interest. Journalize the receipt of the interest payment.
On Aug 1, SSS sells 50 of the bonds at 98
On December 31 SSS makes an adjusting entry for accrual of interest to be received January 1 2008. Show the adjustment for the accrual of interest.
On Dec 31, the bonds are trading at 97. What fair value adjustment, if any, needs to be made?
How will the bonds be shown on the Balance Sheet?
On January 1, 2008 SSS buys 500 shares of Co common stock for $50/share for the stock portfolio as short-term investment. SSS’s purchase represents 1% of outstanding Co stock and the company exerts no influence on Co. Journalize the purchase by SSS.
On February 1 Co pays a $1/share dividend. Journalize SSS’s receipt of the dividend.
On Feb 15, Co reports $1mm net income. What JE does the company make, if any, to recognize the income?
On March 1 SSS decides to sell 250 shares of its Co stock for $45/share. Journalize SSS’s sale of Co stock.
Fast forward to December 31, 2008: The price of Co shares is $49/share. What fair market adjustment does SSS make, if any?
How will this stock investment be presented on the balance sheet?
Jan 1, SSS buys 60,000 shares of Inc at $20/share as a long-term investment in the stock portfolio. The purchase represents 25% of all outstanding Inc stock and SSS has representation on Inc’s board of directors. Journalize the purchase.
On June 31, 2008 Inc reports net income of $20,000 for its fiscal year ended June 31. Make the journal entry for SSS.
On October 1, Inc pays a $1/share cash dividend. Journalize SSS’s receipt of this dividend.
On Dec 31, Inc shares are trading $18/share. What fair value adjustment, if any, needs to be made?
How will this stock be represented on the SSS balance sheet?
Assume the following asset and liability values represent the average values over the year. Also assume all sales are on credit.
Account
Cash $125,000
Accounts Receivable $175,000
Inventory $125,000
Property, Plant
& Equipment $200,000
Current Liabilities $325,000
Long-term Liabilities $275,000
Stockholders’ Equity $25,000
Total Sales Revenue $800,000
Total Expense $600,000 (includes $250,000 COGS)
Outstanding Shares 100,000
Price per Share $50/shr
What is the Current Ratio?
What is the Acid Test or Quick Ratio?
When would Acid Test Ratio be a better measure of liquidity compared to Current Ratio?
How is Vertical Analysis calculated and what does it communicate
What is the company’s AR Turnover
Inventory Turnover?
Days in Inventory?
what is the company’s profit margin?
what is the company’s Return on Assets?
Return on EQ?
What is another way to calculate ROE?
What is the stock’s P/E ratio?
Why would one company have a higher P/E ratio than another?
What is the company’s Debt Ratio?
What is most important to a Short Term Creditor?
What is most important to Owners?
What the basic types of Financial Analysis?
I can only answer first 3 questions:
1. Current Ratio
Current Ratio is ratio of current assets to the current liabilities
In this case Current Assets are addition of Cash, Account Receivables and Inventory
Cash $125,000
Accounts Receivables $175,000
Inventory $125,000
Total Current assets $425,000
Current Liabilities $325,000
Current Ratio = 425000/325000 = 1.3076923077 = 1.31
2. Quick Ratio
Quick Ratio is (Current Asset - Inventory & Prepaid Expenses)/ Current Liabilities
= (425000-125000)/325000
=0.9230769231
= 0.92
3. The Acid test ratio would be better when company has inventory which cannot be easily sold or in cases where the company might need to liquidate all its current asset in short time to pay for current liabilities (e.g. liquidation)
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