Financial Accounting
14th Edition
ISBN: 9781305088436
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 26E
a)
To determine
Determine the total liabilities at the end of the years 2 and 1 for Company THD.
b)
To determine
Determine the ratio of liabilities to stockholders' equity of Company THD.
c)
To determine
Derive a conclusion regarding the margin of protection to the creditors from the ratio of liabilities to stockholders' equity of Company THD.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Joseph Berio is a loan officer with the First Bank of Tennessee. Red Brick, Inc., a major producer of masonry products, has applied for a short-term loan. Red Brick supplies building material throughout the southern states, with brick plants located in Tennessee, Alabama, Georgia, and Indiana.The firm’s income statement and balance sheet are given below. The third table presents both a ratio analysis of Red Brick’s previous year’s financial statements and the industry averages of the ratios.
Red Brick Income Statement
(for the period ending December 12/31/20X1)
Sales
$
151,000,000
Cost of goods sold
134,000,000
Administrative expenses
25,000,000
Operating income
$
-8,000,000
Interest expense
13,000,000
Taxes
400,000
Net income
$
-21,400,000
Red Brick Balance Sheet as of 12/31/20X2
Assets
Liabilities and Stockholders’ Equity
Cash
$
600,000
Accounts payable
$
33,000,000
Accounts receivable
39,000,000
*
Notes payable
8,000,000…
Compute and Discuss the following financial ratios:
-Current Ratio (Current Assets / Current Liabilities)
-Quick Ratio (Current Assets minus Inventory / Current Liabilities)
The transactions for the Year ending December 31 for The Fitness Center were as follows:
The company had Cash Sales of $750,000 for Membership Fees for the fitness center.
The company had Cash Sales of $400,000 for Personal Trainer Fees for the fitness center.
The company had Cash Sales of $850,000 for Equipment Sales for the distribution center.
The Cost of Goods Sold from the Equipment Inventory for the Equipment Sales was $300,000 for the distribution center.
The company purchased Equipment Inventory on credit (Accounts Payable) in the amount of $500,000 for the distribution center.
The company paid $2,500 Cash for Towel Laundry Expense for the fitness center.
The company paid $250,000 Cash for the CEO Wage Expense.
The company paid $1,500 Cash for Advertising Expense for the fitness center.
The company paid…
At the end of a recent year, National Cleaning Service, a full-service house and office cleaning service, had total assets of $5180 and equity of $3650. How much were National Cleaning Service's liabilities?
Chapter 1 Solutions
Financial Accounting
Ch. 1 - Prob. 1DQCh. 1 - Prob. 2DQCh. 1 - Prob. 3DQCh. 1 - Josh Reilly is the owner of Dispatch Delivery...Ch. 1 - On July 12, Reliable Repair Service extended an...Ch. 1 - Prob. 6DQCh. 1 - Describe the difference between an account...Ch. 1 - A business had revenues of 679,000 and operating...Ch. 1 - A business had revenues of 640,000 and operating...Ch. 1 - The financial statements are interrelated. (a)...
Ch. 1 - On February 22, Kountry Repair Service extended an...Ch. 1 - On March 31, Higgins Repair Service extended an...Ch. 1 - Brock Hahn is the owner and operator of Dream-It...Ch. 1 - Fritz Evans is the owner and operator of...Ch. 1 - Arrowhead Delivery Service is owned and operated...Ch. 1 - Interstate Delivery Service is owned and operated...Ch. 1 - Prob. 4PEACh. 1 - The revenues and expenses of Sentinel Travel...Ch. 1 - Using the income statement for Ousel Travel...Ch. 1 - Using the income statement for Sentinel Travel...Ch. 1 - Using the following data for Ousel Travel Service...Ch. 1 - Using the following data for Sentinel Travel...Ch. 1 - A summary of cash flows for Ousel Travel Service...Ch. 1 - A summary of cash flows for Sentinel Travel...Ch. 1 - Prob. 8PEACh. 1 - Prob. 8PEBCh. 1 - The following is a list of well-known companies:...Ch. 1 - Prob. 2ECh. 1 - Ozark Sports sells hunting and fishing equipment...Ch. 1 - Prob. 4ECh. 1 - Prob. 5ECh. 1 - Prob. 6ECh. 1 - Annie Rasmussen is the owner and operator of Go44,...Ch. 1 - Indicate whether each of the following is...Ch. 1 - Describe how the following business transactions...Ch. 1 - Prob. 10ECh. 1 - Indicate whether each of the following types of...Ch. 1 - The following selected transactions were completed...Ch. 1 - Teri West operates her own catering service....Ch. 1 - The income statement of a proprietorship for the...Ch. 1 - Four different proprietorships, Jupiter, Mars,...Ch. 1 - From the following list of selected items taken...Ch. 1 - Based on the data presented in Exercise 1-16,...Ch. 1 - Financial information related to Udder Products...Ch. 1 - Dairy Services was organized on August 1, 2016. A...Ch. 1 - One item is omitted in each of the following...Ch. 1 - Prob. 21ECh. 1 - Prob. 22ECh. 1 - Indicate whether each of the following activities...Ch. 1 - A summary of cash flows for Ethos Consulting Group...Ch. 1 - Prob. 25ECh. 1 - Prob. 26ECh. 1 - Lowes Companies Inc., a major competitor of The...Ch. 1 - On April 1 of the current year, Andrea Byrd...Ch. 1 - The amounts of the assets and liabilities of...Ch. 1 - Seth Feye established Reliance Financial Services...Ch. 1 - On July 1, 2016, Pat Glenn established Half Moon...Ch. 1 - DLite Dry Cleaners is owned and operated by Joel...Ch. 1 - The financial statements at the end of Wolverine...Ch. 1 - Amy Austin established an insurance agency on...Ch. 1 - The amounts of the assets and liabilities of...Ch. 1 - Jose Loder established Bronco Consulting on August...Ch. 1 - On April 1, 2016, Maria Adams established Custom...Ch. 1 - Bevs Dry Cleaners is owned and operated by Beverly...Ch. 1 - The financial statements at the end of Atlas...Ch. 1 - Prob. 1COPCh. 1 - Colleen Fernandez, president of Rhino Enterprises,...Ch. 1 - Prob. 2CPCh. 1 - Prob. 3CP
Knowledge Booster
Similar questions
- Lowes Companies Inc., a major competitor of The Home Depot in the home improvement business, operates over 1,700 stores. Lowes recently reported the following balance sheet data (in millions): a. Determine the total stockholders equity at the end of Years 2 and 1. b. Determine the ratio of liabilities to stockholders equity for Year 2 and Year 1. Round to two decimal places. c. What conclusions regarding the risk to the creditors can you draw from (b)? d. Using the balance sheet data for The Home Depot in Exercise 1-26, how does the ratio of liabilities to stockholders equity of Lowes compare to that of The Home Depot?arrow_forwardAnalyze The Home Depot for three years The Home Depot, Inc. (HD), is the worlds largest home improvement retailer and one of the largest retailers in the United States based on sales volume. Home Depot operates over 2,200 stores that sell a wide assortment of building, home improvement, and lawn and garden items. Home Depot recently reported the following end-of-year balance sheet data (in millions): a. Compute the ratio of liabilities to stockholders equity for all three years. Round to two decimal places. b. What conclusions regarding the margin of protection to creditors can you draw from the trend in this ratio for the three years?arrow_forwardPolo Ralph Lauren Corporation designs, markets, and distributes a variety of apparel, home decor, accessory, and fragrance products. The companys products include such brands as Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren, Polo Jeans Co., and Chaps. Polo Ralph Lauren reported the following (in thousands) for two recent years: Assume that accounts receivable (in millions) were 486,200 at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place. b. Compute the days sales in receivables for Year 2 and Year 1. Use 365 days and round to one decimal place. c. What conclusions can be drawn from these analyses regarding Ralph Laurens efficiency in collecting receivables?arrow_forward
- Ralph Lauren Corporation designs, markets, and distributes a variety of apparel, home decor, accessory, and fragrance products. The companys products include such brands as Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren, Polo Jeans Co., and Chaps. Polo Ralph Lauren reported the following (in thousands) for two recent years: Assume that accounts receivable (in millions) were 607,000 at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places. b. Compute the days sales in receivables for Year 2 and Year 1. Use 365 days and round to one decimal place. c. What conclusions can be drawn from these analyses regarding Ralph Laurens efficiency in collecting receivables?arrow_forwardKyzera manufactures, markets, and sells cellular telephones. The average total assets for Kyzera is $250,000. In its most recent year, Kyzera reported net income of $65,000 on revenues of $475,000. What is the average total amount of liabilities plus equity for Kyzera?arrow_forward[The following information applies to the questions displayed below.] You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked you to perform a comprehensive analysis of the company’s financial statements, including comparing Lydex’s performance to its major competitors. The company’s financial statements for the last two years are as follows: Lydex CompanyComparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 1,010,000 $ 1,250,000 Marketable securities 0 300,000 Accounts receivable, net 2,900,000 2,000,000 Inventory 3,650,000 2,000,000 Prepaid expenses 270,000 210,000 Total current assets 7,830,000 5,760,000 Plant and equipment, net 9,620,000 9,100,000 Total assets $ 17,450,000 $…arrow_forward
- This year, a business bought $10,000,000 worth of products from its suppliers. Its accounts payable balance shown on the balance sheet is $1,000,000. During the following year, the company expects to buy $12,000,000 worth of products from its suppliers and estimate its accounts payable to increase by $300,000. This year's average payment period is ______.arrow_forwardKyzera manufactures, markets, and sells cellular telephones. The average total assets for Kyzera is$250,000. In its most recent year, Kyzera reported net income of $65,000 on revenues of $475,000. Required What is the average total amount of liabilities plus equity for Kyzera?arrow_forwardBusiness Allen Interiors Incorporated is a leading manufacturer and retailer of home furnishings in the United States and abroad. The following is adapted from Business Allen’s June 30, 2019, trial balance. (The amounts shown represent millions of dollars.) Accounts Payable $ 132 Accounts Receivable 18 Cash 116 Common Stock 31 Equipment 315 Inventory 152 Notes Payable (long-term) 175 Notes Payable (short-term) 2 Prepaid Rent 33 Retained Earnings 341 Salaries and Wages Payable 28 Software 75 Assume that the following events occurred in the following quarter. Paid $55 cash for additional inventory. Issued additional shares of common stock for $45 in cash. Purchased equipment for $170; paid $80 in cash and signed a note to pay the remaining $90 in two years. Signed a short-term note to borrow $15 cash. Conducted negotiations to purchase a sawmill, which is expected to cost $38. Prepare a classified balance sheet at September 30, 2019. (Enter your answers…arrow_forward
- During the first month of operations, the following transactions occur for Orison Supply Store. The owner invested $105,000 into the Business. Equipment worth $84,000 was purchased in part by a $63,000 bank loan. Supplies totalling $10,500 were purchased by cash. Inventory of $42,000 was purchased on credit. Rent for the following three months of $31,500 was paid. What are the total assets after these transactions? (Ignore GST for this question)arrow_forwardCompute and Discuss the following financial ratios: -Return on Assets (Net Income / Total Assets) -Return on Equity (Net Income / Total Owner’s Equity) The transactions for the Year ending December 31 for The Fitness Center were as follows: The company had Cash Sales of $750,000 for Membership Fees for the fitness center. The company had Cash Sales of $400,000 for Personal Trainer Fees for the fitness center. The company had Cash Sales of $850,000 for Equipment Sales for the distribution center. The Cost of Goods Sold from the Equipment Inventory for the Equipment Sales was $300,000 for the distribution center. The company purchased Equipment Inventory on credit (Accounts Payable) in the amount of $500,000 for the distribution center. The company paid $2,500 Cash for Towel Laundry Expense for the fitness center. The company paid $250,000 Cash for the CEO Wage Expense. The company paid $1,500 Cash for Advertising Expense for the fitness center. The company paid $100,000 Cash for the…arrow_forwardListed below are several statements that relate to financial accounting and reporting. Identify the accounting concept that applies to each statement.7. IBM Corporation, a multibillion dollar company, purchased some small tools at a cost of $800. Even thoughthe tools will be used for a number of years, the company recorded the purchase as an expense.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,