Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
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Question
Chapter 2, Problem 6E
1.
To determine
Indicate the account, amount and direction of the effect on the
2.
To determine
Explain the appropriate response to transaction (c).
3.
To determine
Explain whether company N has relied on creditors financing or stockholders financing.
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Assume a company's Income Statement for Year 12 is as follows:
is
Income Statement Data
Net Revenues from Footwear Sales
Cost of Pairs Sold
Warehouse Expenses
Marketing Expenses
3.00.
2.10.
2.20.
29.0.
4.00.
Administrative Expenses
Operating Profit (Loss)
Interest Income (Expense)
Pre-tax Profit (Loss)
Income Taxes
Net Profit (Loss)
Year 12
(in 000s)
$ 580,000
350,000
45,000
90,000
15,000
80,000
Based on the above income statement data and the formula for calculating the interest coverage ratio
presented in the Help section for p. 5 of the Footwear Industry Report, the company's interest coverage ratio
(20,000)
60,000
18,000
$ 42,000
Ans
>
Upda
Profitability Ratios
East Point Retail, Inc., sells professional women's apparel through company-owned retail stores. Recent financial information for East Point is provided below (all
numbers in thousands).
Fiscal Year 2
EGO
Fiscal Year 3
Net income
$141,900
$73,100
Interest expense
2,900
10,900
Fiscal Year 3
Fiscal Year 2
Fiscal Year 1
Total assets (at end of fiscal year)
$2,215,224
$2,107,164
$1,892,836
Total stockholders' equity (at end of fiscal year)
1,224,949
1,200,693
887,879
Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders' equity is 15.0% for the year ended April 2, Year 3.
a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round to one decimal place.
Fiscal Year 3
%
Fiscal Year 2
%
b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round to one decimal place.
Fiscal Year 3
%
Fiscal Year 2
%
c. The return on stockholders' equity is
the return on…
Profitability Ratios
East Point Retal, Inc. seils apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands):
Fiscal Year 3 Fiscal Year 2
$145,000
$(74,600)
3,000
11,200
Fiscal Year 3
Fiscal Year 2 Fiscal Year 1
Net income (los)
Interest expense
Total assets (at and of fiscal year)
Total stockholders equity (at end of fiscal year)
Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3.
$1,307,759
1,010,000
Fiscal Year 3
Fiscal Year 2
$1,243,965
990,000
$1,106,719
724,942
a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a
negative return on total assets.
%
b. Determine the retum on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to…
Chapter 2 Solutions
Fundamentals Of Financial Accounting
Ch. 2 - Define the following: a. Asset b. Current asset c....Ch. 2 - Define a transaction anti give an example of each...Ch. 2 - For accounting purposes, what is an account?...Ch. 2 - What is the basic accounting equation?Ch. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - What is a journal entry? What is the typical...Ch. 2 - What is a T-account? What is its purpose?Ch. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Which of the following is not an asset account? a....Ch. 2 - Which of the following statements describe...Ch. 2 - Total assets on a balance sheet prepared on any...Ch. 2 - The duality of effects can best be described as...Ch. 2 - The T-account is used to summarize which of the...Ch. 2 - Prob. 6MCCh. 2 - A company was recently formed with 50,000 cash...Ch. 2 - Which of the following statements would be...Ch. 2 - Prob. 9MCCh. 2 - Prob. 10MCCh. 2 - Prob. 1MECh. 2 - Prob. 2MECh. 2 - Matching Terms with Definitions Match each term...Ch. 2 - Prob. 4MECh. 2 - Prob. 5MECh. 2 - Prob. 6MECh. 2 - Prob. 7MECh. 2 - Identifying Events as Accounting Transactions Half...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Preparing Journal Entries For each of the...Ch. 2 - Posting to T-Accounts For each of the transactions...Ch. 2 - Reporting a Classified Balance Sheet Given the...Ch. 2 - Prob. 13MECh. 2 - Prob. 14MECh. 2 - Identifying Transactions and Preparing Journal...Ch. 2 - Prob. 16MECh. 2 - Prob. 17MECh. 2 - Prob. 18MECh. 2 - Prob. 19MECh. 2 - Prob. 20MECh. 2 - Prob. 21MECh. 2 - Prob. 22MECh. 2 - Prob. 23MECh. 2 - Prob. 24MECh. 2 - Prob. 25MECh. 2 - Prob. 1ECh. 2 - Identifying Account Titles The following are...Ch. 2 - Classifying Accounts and Their Usual Balances As...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Recording Journal Entries Refer to E2-4. Required:...Ch. 2 - Prob. 6ECh. 2 - Recording Journal Entries Refer to E2-6. Required:...Ch. 2 - Analyzing the Effects of Transactions in...Ch. 2 - Inferring Investing and Financing Transactions and...Ch. 2 - Analyzing Accounting Equation Effects, Recording...Ch. 2 - Recording Journal Entries and Preparing a...Ch. 2 - Analyzing the Effects of Transactions Using...Ch. 2 - Explaining the Effects of Transactions on Balance...Ch. 2 - Calculating and Evaluating the Current Ratio...Ch. 2 - Prob. 15ECh. 2 - Determining Financial Statement Effects of Various...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Prob. 1PACh. 2 - Recording Transactions (in a Journal and...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Determining Financial Statement Effects of Various...Ch. 2 - Prob. 2PBCh. 2 - Recording Transactions (in a Journal and...Ch. 2 - Finding and Analyzing Financial Information Refer...Ch. 2 - Finding and Analyzing Financial Information Refer...Ch. 2 - Prob. 4SDCCh. 2 - Prob. 5SDCCh. 2 - Accounting for the Establishment of a Business...
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