Survey of Accounting (Accounting I)
8th Edition
ISBN: 9781305961883
Author: Carl Warren
Publisher: Cengage Learning
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Chapter 3, Problem 3.7.3MBA
To determine
Concept Introduction:
Acid test ratio or Quick Ratio:
Acid test ration is also called Quick ratio. This ratio is calculated by dividing the quick assets (Cash, Cash equivalents, Short term investments and current receivables) by total current liabilities for the year. The formula for Acid test ratio is as follows:
To Indicate:
The Change in liquidity from year 2 to 1
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Ralph Lauren Corporation sells apparel through company-owned retail stores. Recent financial information for Ralph Lauren follows (in thousands):
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Assume that the apparel industry average return on total assets is 8.0% and the average return on stockholders’ equity is 10.0% for the year ended April 2, Year 3.a. Determine the return on total assets for Ralph Lauren for fiscal Years 2 and 3. Round percentages to one decimal place.b. Determine the return on stockholders’ equity for Ralph Lauren for fiscal Years 2 and 3. Round percentages to one decimal place.c. Evaluate the two-year trend for the profitability ratios determined in (a) and (b).d. Evaluate Ralph Lauren’s profit performance relative to the industry.
Chapter 3 Solutions
Survey of Accounting (Accounting I)
Ch. 3 - Assume that a lawyer bills her clients $15000 on...Ch. 3 - On January 24, 20Y8, Niche Consulting collected...Ch. 3 - Prob. 3SEQCh. 3 - If the supplies account indicated a balance of...Ch. 3 - The balance in the unearned rent account for Jones...Ch. 3 - Would AT&T and Microsoft Use the cash basis or the...Ch. 3 - How are revenues and expenses reported on the...Ch. 3 - Fees for services provided are billed to a...Ch. 3 - Employees performed services in 20Y8, but the...Ch. 3 - Prob. 5CDQ
Ch. 3 - Is the Land balance before the accounts have been...Ch. 3 - Is the Supplies balance before the accounts have...Ch. 3 - Prob. 8CDQCh. 3 - Prob. 9CDQCh. 3 - Prob. 10CDQCh. 3 - If the effect of an adjustment is to increase the...Ch. 3 - Prob. 12CDQCh. 3 - (a) Explain the purpose of the accounts...Ch. 3 - Prob. 14CDQCh. 3 - Transactions using accrual accounting Terry Mason...Ch. 3 - Adjustment process Using the data from Exercise...Ch. 3 - Financial statements Using the data from Exercises...Ch. 3 - Prob. 3.4ECh. 3 - Accrual basis of accounting Margie Van Epps...Ch. 3 - Classify accruals and deferrals Classify the...Ch. 3 - Classify adjustments The following accounts were...Ch. 3 - Adjustment for supplies Answer each of the...Ch. 3 - Adjustment for prepaid insurance The prepaid...Ch. 3 - Adjustment for unearned fees The balance in the...Ch. 3 - Adjustment for unearned revenue For a recent year....Ch. 3 - Effect of omitting adjustment At the end of...Ch. 3 - Adjustment for accrued salaries Laguna Realty Co....Ch. 3 - Determine wages paid The balances of the two...Ch. 3 - Effect of omitting adjustment Accrued salaries of...Ch. 3 - Effect of omitting adjustment Assume that the...Ch. 3 - Effects of errors on financial statements For a...Ch. 3 - Effects of errors on financial statements The...Ch. 3 - Effects of errors on financial statements If the...Ch. 3 - Adjustment for accrued fees At the end of the...Ch. 3 - Adjustments for unearned and accrued fees The...Ch. 3 - Effect on financial statements of omitting...Ch. 3 - Adjustment for depreciation The estimated amount...Ch. 3 - Adjustments Clean Air Company is a consulting firm...Ch. 3 - Book value of fixed assets For a recent year....Ch. 3 - Classify assets Identify each of the following as...Ch. 3 - Balance sheet classification At the balance sheet...Ch. 3 - Classified balance sheet Pounds-Away Services Co....Ch. 3 - Prob. 3.29ECh. 3 - Balance sheet List any errors you can find in the...Ch. 3 - Accrual basis accounting San Mateo Health Care...Ch. 3 - Prob. 3.2PCh. 3 - Financial statements Data for San Mateo Health...Ch. 3 - Statement of cash flows Data for San Mateo Health...Ch. 3 - Statement of cash flows Data for San Mateo Health...Ch. 3 - Adjustments and errors At the end of May, the...Ch. 3 - Adjustment process and financial statements...Ch. 3 - Adjustment process and financial statements...Ch. 3 - Adjustment process and financial statements...Ch. 3 - Adjustment process and financial statements...Ch. 3 - Prob. 3.1MBACh. 3 - Prob. 3.2MBACh. 3 - Prob. 3.3MBACh. 3 - Prob. 3.4MBACh. 3 - Prob. 3.5.1MBACh. 3 - Prob. 3.5.2MBACh. 3 - Prob. 3.5.3MBACh. 3 - Prob. 3.5.4MBACh. 3 - Quick ratio The Gap Inc. (GPS)operates specialty...Ch. 3 - Prob. 3.6.2MBACh. 3 - Quick ratio The Gap Inc. (GPs)operates specialty...Ch. 3 - Quick ratio American Eagle Outfitters Inc. (AEO)...Ch. 3 - Quick ratio American Eagle Outfitters Inc. (AEO)...Ch. 3 - Prob. 3.7.3MBACh. 3 - Prob. 3.8MBACh. 3 - Prob. 3.9.1MBACh. 3 - Prob. 3.9.2MBACh. 3 - Prob. 3.9.3MBACh. 3 - Prob. 3.1CCh. 3 - Adjustments for financial statements Several years...Ch. 3 - Prob. 3.3.1CCh. 3 - Prob. 3.3.2CCh. 3 - Prob. 3.4.1CCh. 3 - Prob. 3.4.2CCh. 3 - Accrual versus cash net income. Cigna Corp. (CI)...Ch. 3 - Prob. 3.5.1CCh. 3 - Prob. 3.5.2C
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- 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_forwardRalph 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_forwardFitch sells casual apparel and personal care products for men, women, and children through retail stores located primarily in shopping malls. Its fiscal year ends January 31 of each year. Financial statements for Abercrombie Fitch for fiscal years ending January 31, Year 3, Year 4, and Year 5 appear in Exhibit 4.34 (balance sheets), Exhibit 4.35 (income statements), and Exhibit 4.36 (statements of cash flows). These financial statements reflect the capitalization of operating leases in property, plant, and equipment and long-term debt, a topic discussed in Chapter 6. Exhibit 4.37 (page 312) presents financial statement ratios for Abercrombie Fitch for Years 3 and 4. Selected data for Abercrombie Fitch appear here. Exhibit 4.34 REQUIRED a. Calculate the ratios in Exhibit 4.37 for Year 5. The income tax rate is 35%. b. Analyze the changes in ROA for Abercrombie Fitch during the three-year period, suggesting possible reasons for the changes observed. c. Analyze the changes in ROCE for Abercrombie Fitch during the three-year period, suggesting possible reasons for the changes observed. Exhibit 4.35 Exhibit 4.36 Exhibit 4.37arrow_forward
- Polo 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_forwardAnalyze and compare Kroger and Tiffany The Kroger Company (KR), a national supermarket chain, reported the following data (in millions) in its financial statements for a recent year: a.Compute the asset turnover ratio. Round to two decimal places. b.Tiffany Co. (TIF) is a large North American retailer of jewelry. Tiffanys asset turnover ratio is 0.78. Why would Tiffanys asset turnover ratio be lower than that of Kroger?arrow_forwardAnalyze Lowes for three years Lowes Companies, Inc. (LOW), a major competitor to The Home Depot, Inc. (HD) in the home improvement retail business, operates over 1,800 stores. Lowes 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_forward
- Analyze Dollar General Dollar General Corporation (DG) is a discount retailer with more than 12,000 stores. It offers a wide range of merchandise normally for 10 or less. The following data (in millions) were taken from recent financial statements of Dollar General: a. Compute the asset turnover ratio for Year 2 and Year 1. Round to two decimal places. b. Interpret the change in the asset turnover ratio from Year 1 to Year 2.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_forwardComparing Two Companies in the Same Industry: Chipotle and Panera Bread Refer to the financial information for Chipotle and Panera Bread reproduced at the end of this book and answer the following questions: Required What is the dollar amount of inventories that each company reports on its balance sheet at the end of the most recent year? What percentage of total assets do inventories represent for each company? What does this tell you about the nature of their business? Refer to Note 1 in Chipotles annual report. What inventory valuation method does the company use? Refer to Note 2 in Panera Breads annual report. What inventory valuation method does the company use? How do both companies deal with situations in which the market value of inventory is less than its cost? Given the nature of their businesses, which inventory system, periodic or perpetual, would you expect both Chipotle and Panera Bread to use? Explain your answer.arrow_forward
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