Devry ACCT504 Financial Analysis of Nike and Under Armour

Devry ACCT504 Full Course Latest
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Devry ACCT504 Full Course Latest
Devry ACCT504 Week 1 Discussion Latest
Financial Reporting Environment, Financial Statements, and Ratios (graded)
What is the purpose of Accounting? Who are the users of Accounting information?
Accounting Equation, Accounting Cycle, and Accrual Accounting (graded)
In this area, we will discuss the significance of the accounting equation, the rules of debit and
credit, and the steps in the accounting cycle. We will talk about recording of transactions, normal
balances, and the creation of the trial balance.
Let’s begin by asking this question: What is the role of the accounting equation in the analysis of
business transactions?
Merchandising Operations, Income Statements, and Inventory Cost-Flow Assumptions

(graded)
In this area, we will discuss the accounting for inventory transactions of merchandising
companies, the two formats of preparing the income statement, and how to evaluate the
profitability of a merchandising company. We will also discuss how companies determine the
year-end inventory value and cost of goods sold using one of the cost-flow assumptions. Finally,
we will also examine the impact of choosing a certain cost-flow assumption on the tax liability
and other financial statement numbers of a company.
Let’s begin with this question: How is the income statement of a merchandising company
different from that of a service company?
Internal Control, Reporting Cash, and Accounting for Receivables (graded)
In this area, we will talk about the importance of internal control in a business organization and
the reporting of cash on the balance sheet as well as managing receivables and estimating
uncollectible accounts. What is internal control, and what are the objectives of a well-designed
internal control structure in an organization?
Plant Assets, Intangibles, and Accounting for Liabilities (graded)
Companies have a significant amount of investment in long-lived assets, which include property,
plant and equipment (commonly referred to as plant assets), and intangible assets. We will also
discuss different types of liabilities and understand how to account for and report those
liabilities.
Let’s begin by talking about plant assets. Can you tell us what kind of plant assets are used in
your company or place of business? Do you have an estimate of the amount invested in those
plant assets?

Accounting for and Reporting Equity and the Statement of Cash Flows (graded)
Stockholders’ equity is an important heading in a corporate Balance Sheet. Let’s begin the
discussion of stockholders’ equity by asking: How is the stockholders’ equity section of a
corporate Balance Sheet different from that in a single-owner business?
Different Tools of Financial Analysis (graded)
There are different tools for analyzing the financial statements of a company, such as horizontal
analysis, vertical analysis, ratios for measuring financial health and profitability, and so forth.
Before we begin using these tools, however, it is important to know the purpose of each tool.
Why do we need different tools for analyzing the financial statements? Don’t the numbers in the
financial statements speak for themselves?
Devry ACCT504 Week 3 Case Study Latest
CASE STUDY – THE COMPLETE ACCOUNTING CYCLE
Name: ___________________________________
This Case Study is worth 100 points, or 10% of your final course grade.
This Case Study relates to TCOs E and F, and Chapters 2 and 3.
MAKE SURE TO COMPLETE ALL REQUIREMENTS WHICH ARE
LISTED BELOW.

There are 10 sheets in the Workbook, including this one.
All of the information that you need for the project is located in this
Workbook.
Requirements
Sheet in
Workbook
Requirement 1—Prepare the Journal Entries in the General Journal Journal Entries
Requirement 2—Post Journal Entries to the General Ledger General Ledger
Requirement 3—Prepare a Trial Balance Trial Balance
Requirement 4—Prepare the Adjusting Entries Adjusting Entries
Requirement 5—Post Adjusting Entries to the General Ledger General Ledger
Requirement 6—Prepare an Adjusted Trial Balance
Adjusted Trial
Balance
Requirement 7—Prepare the Financial Statements
Financial
Statements
Requirement 8—Prepare the Closing Entries Closing Entries
Requirement 9—Post Closing Entries to the General Ledger General Ledger
Requirement 10—Prepare the Post Closing Trial Balance
Post-Closing Trial
Balance
Hint for success: Review the Week 2 Lesson prior to starting this
project.
There are also hints contained within certain cells on some of the
Worksheet tabs.
You can hover over the red pointer at the top right-hand corner of the
cell to read the hint.
Hints are provided for the following balances:
1) The debits for the journal entries are on the Journal Entries tab.
2) The credits for the journal entries are on the Journal Entries tab.
3) The cash balance is on the General Ledger tab.
4) The debits for the trial balance are on the Trial Balance tab.
5) The credits for the trial balance are on the Trial Balance tab.
6) The debits for the adjusted trial balance are on the Adjusted Trial
Balance tab.
7) The credits for the adjusted trial balance are on the Adjusted Trial
Balance tab.
8) Net income for the income statement is on the Financial Statements
tab.
9) Retained earnings as of July 31 are on the Financial Statements tab.
10) Total assets for the balance sheet are on the Financial Statements
tab.
11) Total liabilities and shareholders’ equity for the balance sheet are on

the Financial Statements tab.
12) The debits for the post-closing trial balance are on the Post-Closing
Trial Balance tab.
13) The credits for the post-closing trial balance are on the Post-Closing
Trial Balance tab.
Requirement
#1:
During its first
month of
operation, the
Melvin
Plumbing
Corporation,
which
specializes in
residential
plumbing,
completed the
following
transactions.
July 1
Began business by
making a deposit in a
company bank account
of $90,000, in
exchange
for 9,000 shares of $10
par value common
stock.
July 3
Paid the current
month’s rent, $5,500.
July 5
Paid the premium on a
1-year insurance
policy, $4,800
July 7
Purchased supplies on
account from Little
Company, $900.
July 10
Paid employee
salaries, $3,300
July 14 Purchased equipment

from Lake Company,
$11,500. Paid $1,500
down and the balance
was
placed on account.
Payments will be
$500.00 per month for
20 months. The first
payment is due 8/1.
Note: Use accounts
payable for the balance
due.
July 15
Received cash for
plumbing revenue for
the first half of July,
$7,700
July 19
Made payment on
account to Lake
Company, $500.
July 31
Received cash for
plumbing revenue for
the last half of July,
$8,505
July 31
Declared and paid cash
dividends of $600
Prepare journal
entries to
record the July
transactions in
the General
Journal below.
Use the
following
account
names for
journal
entries.
General
Journal
Chart of
Accounts:
Account Title
(Normal
Balance)
Date
Description(Account
Name)
Debit Credit
Assets
Cash (Debit)
Prepaid
Insurance

(Debit)
Supplies
(Debit)
Equipment
(Debit)
Accumulated
Depreciation
– Equipment
(Credit)
Liabilities
Accounts
Payable
(Credit)
Income Tax
Payable
(Credit)
Stockholders’
Equity
Common
Stock (Credit)
Retained
Earnings
(Credit)
Dividends
(Debit)
Revenue
Revenue
(Credit)
Expenses
Rent Expense
(Debit)
Salaries
Expense
(Debit)
Insurance
Expense
(Debit)
Supplies
Expense
(Debit)
Depreciation

Expense
(Debit)
Income Tax
Expense
(Debit)
0 0
Note:
Remember that
debits must
equal credits—
All of your
journal entries
should balance.
Devry ACCT504 Week 7 Course Project Latest
Course Project: A Financial Statement Analysis
A Comparative Analysis of Nike, Inc. and Under Armour, Inc.
Below is the link for the financial statements for Nike, Inc. for the fiscal year ending 2014. First,
select 2014using the drop-down arrow labeled Year, and then select Annual Filings using the
drop-down arrow labeled All.
You should select the 10k dated 7/25/2014,and choose to download in PDF, Word, or Excel
format.
http://investors.nike.com/investors/news-events-and-reports/?toggle=filings
Below is the link for the financial statements for Under Armour, Inc. for the fiscal year ending
2014.
First, select Annual using the drop-down arrow labeled View, and then select 2015 using the
drop-down arrow labeled Year.
You should select the 10k dated 2/20/2015, and choose to download it in PDF or Excel format.
http://www.uabiz.com/sec.cfm

A sample project template is available for download from the Course Resources page’s Course-
Specific Resources section.The sample project compares the ratio performance of Tootsie Roll
and Hershey using the 2014 financial statements of Tootsie Roll and Hershey provided at their
websites.
Description
This course contains a Course Project, where you will be required to submit one draft of the
project at the end of Week 5, and the final completed project at the end of Week 7. Using the
financial statements for Nike, Inc. and Under Armour, Inc.,respectively, you will calculate and
compare the financial ratios listed further down this documentfor the fiscal year ending 2014,
and prepare your comments about the two companies’performancesbased on your ratio
calculations. The entire project will be graded by the instructor at the end of the final submission
in Week 7, and one grade will be assigned for the entire project.
Overall Requirements
For the Final Submission:
Your final Excel workbook submission should contain the following. You cannot use any other
software but Excel to complete this project.
1. 1. A Completed Worksheet Title Page tab, which is really a cover sheet with your name,
the course, the date, your instructor’s name, and the title for the project.
2. 2. A CompletedWorksheetProfiles tab which contains a one-paragraph description
regarding each company with information about their history, what products they sell,
where they are located,and so forth.
3. 3. All 16 ratios for each company with the supporting calculations and commentary on
your Worksheet Ratio tab. Supporting calculations must be shown either as a formula or
as text typed into a different cell.The ratios are listed further down this document. Your
comments for each ratio should include more than just a definition of the ratio.You
should focus on interpreting each ratio number for each company and support your
comments with the numbers found in the ratios.You need to specifically state which
company performed better for each ratio.
4. 4. The Summary and ConclusionsWorksheet tab is an overall comparison of how each
company compares in terms of the major category of ratios described in Chapter 13 of
your textbook.A nice way to conclude is to state which company you think is the better
investment and why.
5. 5. The Bibliography Worksheet tab must contain at least your textbook as a reference.
Any other information that you use to profile the companies should also be cited as a
reference.
Required Ratios for Final Project Submission
1. 1. Earnings per Share of Common Stock
2. 2. Current Ratio

3. 3. Gross (Profit) MarginPercentage
4. 4. Rate of Return (Net Profit Margin) on Sales
5. 5. Inventory Turnover
6. 6. Days’ Inventory Outstanding (DIO)
7. 7. Accounts Receivable Turnover
8. 8. Days’ Sales Outstanding (DSO)
9. 9. AssetTurnover
10. 10. Rate of Return on Total Assets (ROA)
11. 11. Debt Ratio
12. 12. Times-Interest-Earned Ratio
13. 13. Dividend Yield[For the purposes of this ratio, use Yahoo Finance to look up current
dividend per share and stock price; just note the date that you looked up this information.]
14. 14. Rate of Return on Common Stockholders’ Equity (ROE)
15. 15. Free cash flow
16. 16. Price-Earnings Ratio (Multiple) [For the purpose of this ratio, for Nike, use the
market price per share on May 30, 2014,and for Under Armour, use the market price per
share on December 31, 2014.]
The Excel files uploaded in the Dropboxes should not include any unnecessary numbers or
information (such as previous years’ ratios, ratios that were not specifically asked for in the
project, etc.).
Please upload your final submission to the Week 7 Dropbox by the Sunday ending Week 7.
For the Draft:
Create an Excel spreadsheet or use the project template to show your computations for the first
10 ratios listed above. The more you can complete regarding the other requirements, the closer
you will be to completion when Week 7 arrives. Supporting calculations must be shown either as
a formula or as text typed into a different cell. If you plan on creating your own spreadsheet,
please follow the format provided in the Tootsie Roll and Hershey template file.
Please upload your draft submission to the Week 5 Dropbox by the Sunday at the end of Week 5.
Other Helpful Information:
If you feel uncomfortable with Excel, you can find many helpful tutorials on Excel by
performing a Google search.
Chapter 13 contains ratio calculations and comparison comments related to Apple and Dell, so
you will likely find this information helpful.
BigCharts.com provides historical stock quotes.

Either APA or MLA style can be used to complete the references on your Bibliography tab.
There is a tutorial for APA and MLA style within the Plagiarism link, which can be accessed
through the Syllabus
Go to
the
Course
Resour
ces
page
within
the
Course
-
Specifi
c
Resour
ces
section
. The
Course
Resour
ces
page is
under
Course
Home.
Compl
ete
your
Title
page
on this
tab.
Please
include
your
name,
the
course,
the
date,
your
instruc
tor’s

name,
and the
title
for the
project
.
Compl
ete one
paragr
aph,
profili
ng
each
compa
ny’s
busine
ss,
includi
ng
inform
ation
such as
a brief
history
, where
they
are
located
,
numbe
r of
emplo
yees,
the
produc
ts they
sell,
and so
forth.
Please
referen
ce any
websit
es that
you
used

for the
Profile
s on
the
Biblio
graphy
tab.
Tootsi
e Roll
Industr
ies
began
in a
small
candy
store
in New
York
in
1896.
Tootsi
e Roll
is now
headqu
artered
in
Chicag
o and
primari
ly sells
their
produc
ts in
the
United
States,
Canad
a, and
Mexic
o.
Accord
ing to
Yahoo
Financ
e,

Tootsi
e Roll
has
2,000
full-
time
emplo
yees.
Tootsi
e Roll
sells
the
followi
ng
brande
d
candy:
Tootsi
e Roll,
Tootsi
e Roll
Pop,
Charm
s Blow
Pop,
Mason
Dots,
Andes,
Sugar
Daddy,
Charle
ston
Chew,
Double
Bubble
,
Razzle
s,
Caram
el
Apple
Pop,
and
Junior
Mints.
Tootsi

e Roll
had
2014
net
produc
t sales
of
$539.9
million
.
Hershe
y
Compa
ny was
founde
d by
Milton
S.
Hershe
y in
1893
and is
headqu
artered
in
Hershe
y,
Pennsy
lvania.
Accord
ing to
Yahoo
Financ
e,
Hershe
y has
20,800
full-
time
emplo
yees.
Hershe
y is
famous
for
Good

&
Plenty,
Hershe
y Bar,
Hershe
y’s
Kisses,
Hershe
y’s
Bliss,
Reese’
s,
Rolo,
Twizzl
ers,
Almon
d Joy,
Kit
Kat,
and Ice
Breake
rs.
Hershe
y had
net
produc
t sales
of $7.4
billion
for
2014.
Use this Excel spreadsheet to compute ratios; show your
computations for all ratios on this tab, and also include
your commentary.
The 2014 financial statements used to calculate these
ratios are available in the Investor Relations section of
the Tootsie Roll and Hershey websites.
To
otsi
e
Rol
l
Her
she
y
Interpr
etation
and
compa
rison
betwee
n the
two

compa
nies’
ratios
(readin
g
Chapte
r 13
will
help
you
prepar
e the
comm
entary)
.
The
compa
rison
of the
ratios
is an
import
ant
part of
the
project
. A
good
approa
ch is
to
briefly
explai
n what
the
ratio
tells
us.
Indicat
e
wheth
er a
higher
or
lower
ratio is

better.
Then
compa
re the
two
compa
nies
on this
basis.
Reme
mber
—
each
ratio
below
requir
es a
compa
rison.
Earnings per Share of Common Stock (basic –
common)
As
given
in the
income
statem
ent
##
$
3.9
1
Current Ratio
Curren
t assets
###
###
= ## =
1.1
6
Curren
t
liabiliti
es
###
###
Gross (Profit) Margin Percentage
Gross
margin
###
###
= ## =
45.
0%
Net
sales
###
###
Rate of Return (Net Profit Margin) on Sales
Net
income
###
###
= ## =
11.
4%
Net
sales
###
###
Inventory Turnover
Cost of
goods
sold
###
###
5.2 5.6
Averag ### times tim

e
invent
ory
### es
Days’ inventory outstanding (DIO) 365 365 = 71 =65
Invent
ory
turnov
er
5.2 days
day
s
Accounts Receivable Turnover
Net
sales
(assum
e all
sales
are
credit
sales)
###
###
= ## =
13.
8
Averag
e net
accoun
ts
receiva
ble
###
###
Days’ Sales Outstanding (DSO) 365 365 = ## =
26.
4
Accou
nts
receiva
ble
turnov
er
12.
9
days
day
s
Asset turnover
Net
sales
###
###
= ## =
1.3
5
Averag
e total
assets
###
###
Rate of Return on Total Assets (ROA)
Rate of
return
on
sales
times
asset
turnov
= ## =
15.
4%

er
Debt Ratio
Total
Liabilit
ies
###
###
= ## =
73.
0%
Total
Assets
###
###
Times-Interest-Earned Ratio
Incom
e from
operati
ons
###
###
= ## =
16.
6
Interes
t
expens
e
$99
Dividend Yield
Divide
nd per
share
of
comm
on
stock
(Yaho
o
Financ
e
12/24/
2015)
$0.
36
= ## =
2.6
%
(Please follow the Course Project instructions to
calculate the current dividend yield.)
Market
price
per
share
of
comm
on
stock
(Yaho
o
Financ
e
12/24/
2015)
$32
.04
Rate of Return on Common Stockholders’ Equity
(ROE)
Net
income
###
###
= ## =
54.
0%

–
Preferr
ed
divide
nds
Averag
e
comm
on
stockh
olders’
equity
###
###
Free cash flow
Net
cash
provid
ed by
operati
ng
activiti
es
minus
cash
payme
nts
earmar
ked for
invest
ments
in
plant
assets
= ##
###
###
=
Price-Earnings Ratio (Multiple)
Market
price
per
share
of
comm
on
stock
as of
12/31/
2014
$30
.65
= 29 =27
(Please see the Course Project instructions for the dates Earnin $1.

to use for this ratio.) gs per
share
05
Your textbook and any information that you use to
profile the companies should be cited as a reference
below.
Big Charts for Hershey (12/31/2014). Retrieved
December 24, 2015 from
http://bigcharts.marketwatch.com/historical/default.asp?
symb=hsy&closeDate=12%2F31%2F14&x=0&y=0
Big Charts for Tootsie Roll (12/31/2014). Retrieved
http://bigcharts.marketwatch.com/historical/default.asp?
symb=tr&closeDate=12%2F31%2F14&x=0&y=0
Harrison, W.T., Horngren C.T. & Thomas, C.W.
(2015). Financial Accounting, 10th ed. Upper Saddle
River, NJ: Pearson Education, Inc.
Hershey’s 2014 Annual Report (2015). Retrieved
http://www.thehersheycompany.com/pdfs/PDF_Proxy%
20Statement_2014.pdf
HSY Profile (2015). Retrieved December 24, 2015 from
http://finance.yahoo.com/q/pr?s=HSY+Profile
HSY Stock Price (2015). Retrieved December 24, 2015
from http://finance.yahoo.com/q?s=hsy&ql=1
Tootsie Roll Industries 2014 Annual Report (2015).
Retrieved December 24, 2015 from
http://tootsie.com/financials/
TR Profile (2015). Retrieved December 24, 2015 from
http://finance.yahoo.com/q/pr?s=TR+Profile
TR Stock Price (2015). Retrieved December 24, 2015
from http://finance.yahoo.com/q?s=TR&ql=1
Devry ACCT504 Week 4 Midterm Latest
Question 1. Question :
(TCO A) Assets include

prepaid insurance and prepaid rent.
dividends paid to shareholders.
loans obtained by the company.
stockholders’ investment in the business.
(TCO B) For 2014, CAP Corporation reported net income of $96,000; net sales $1,440,000; and
weighted average shares outstanding of 9,600. There were no preferred dividends. What was the
2014 earnings per share?
$100.00
$150.00
$10.00
$15.00
(TCO C) Issuing debt is an example of a(n)
operating activity.
investing activity.
financing activity.
noncash investing and financing activity.
(TCO D) What is the correct order to create the financial statements?
Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash flows.
Statement of Cash flows, Balance Sheet, Statement of Retained Earnings, and Income Statement.
Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of Cash flows.
Income Statement, Balance Sheet, Statement of Retained Earnings, and Statement of Cash flows.

(TCO E) Which of the following describes the normal balance and classification of the
Accumulated Depreciation account?
Debit, asset
Credit, liability
Credit, asset
Debit, expense
(TCO F) Which of the following items is handled as a deferral?
Accrued Expenses
Accrued Revenues
Prepaid Expenses
Depreciation
(TCO A) XYZ Company recorded the following events involving a recent merchandise
purchase.
– Received goods for $50,000, terms 2/10, n/30.
– Returned $1,000 of the shipment for credit due to damaged goods.
– Paid $1,500 for freight-in.
– Paid the invoice within the discount period.
As a result of these events, the company’s merchandise inventory
increased by $50,500.
increased by 49,500.

(TCO B) In a period of declining prices, which of the following inventory methods generally
results in the highest gross profit figure?
Average cost method
LIFO
FIFO
Cannot be determined based on the information given
(TCO A) On a classified balance sheet, which is the least liquid asset listed below?
Inventories
Cash and cash equivalents
Accounts receivable, net
Short-term investments
(TCO E) Which of the following is an internal control procedure?
Control environment
Comparisons and compliance monitoring
Promote operational efficiency
Encourage employees to follow company policies
(TCOs A and E) Your friend, Lisa, has hired you to evaluate the following internal control
procedures.

Explain to your friend whether each of the numbered items below is an internal control strength
or weakness. You must also state which internal control procedure relates to each of the internal
controls
For the weaknesses, you also need to state a recommendation for improvement.
(1) Paychecks are left on the desk for pick-up.
(2) Supervisors count cash receipts daily.
(3) Invoices are pre-numbered.
(4) Bonding of the cashiers is required.
(5) The accountant purchases and pays for supplies.
(1) Weakness; limited access; recommend someone personally hand out the checks or require
direct deposit.
(2) Strength; comparisons and compliance monitoring.
(3) Strength; adequate records.
(4) Strength; smart hiring practices.
(5) Weakness, separation of duties; someone other than the accountant should purchase the
supplies and the accountant can pay for them.
(TCOs E and F) Please prepare the following journal entries. Indicate which account should be
debited and which account should be credited, along with the dollar amount of the debit and
credit.
(1) Investors invest $70,000 in exchange for 1,000 shares of common stock.
(2) Company paid a utility bill for $2,000.
(3) The unadjusted balance of the Supplies account is $5,200 and the total cost of supplies on
hand is $4,000.
(4) Company received $5,000 for services performed.
(5) The company needs to record $15,000 for depreciation.

(TCOs B and D) The following items are taken from the financial statements of Butler Company
for 2012:
Accounts Receivable $20,000
Cost of Goods Sold 95,000
Utilities Expense 3,500
Accounts Payable 7,000
Common Stock 100,000
Rent Expense 5,500
Advertising Expense 9,000
Dividends 10,000
Insurance Expense 2,000
Note Payable (due 2014) 50,000
Depreciation Expense 10,000
Prepaid Insurance 18,000
Accumulated Depreciation 30,000
Retained Earnings (beginning) 33,000
Salaries Expense 40,000
Salaries Payable 4,500
Net sales 170,000
Supplies 3,000
Supplies Expense 2,500
(b) Calculate the balance of Retained Earnings that would appear on a Balance Sheet at
December 31, 2012.
Retained Earnings, January 1 $33,000
Add: Net Income 2,500
35,500
Less: Dividends 10,000
Retained Earnings, December 31 $25,500
(c) Calculate the gross profit percentage.
Net sales $170,000
Less Cost of Goods Sold 95,000
Gross profit 75,000
Gross profit percentage $75,000 divided by $170,000 equals 44.1%.

(TCO D) The following items are taken from the financial statements of BGS Company for
2012:
Cash $500,000
Accounts Receivable 200,000
Supplies 70,000
Unearned Service Revenue 18,000
Equipment, net of accumulated depreciation 212,000
Retained Earnings 12/31/2011 78,300
Long-term debt 142,400
Service revenue 240,000
Rent expense 36,000
Supplies expense 12,000
Insurance expense 24,000
Instructions
(a) Please create a classified balance sheet in good form for the year ended 2012. (25 points)
(b) Please calculate the current ratio. (5 points)
(a) Please create a classified balance sheet in good form for the year ended 2012.
BGS Company
Balance Sheet
Year Ended December 31, 2012
Current assets:
Cash $500,000
Accounts Receivables 200,000
Supplies 70,000
Total current assets 770,000
Equipment, net of accumulated depreciation 212,000
Total assets $982,000
Current liabilities:

Accounts payable $147,300
Unearned service revenue 18,000
Total current liabilities 165,300
Long-term debt 142,400
Total liabilities 307,700
Shareholders’ equity:
Retained Earnings 174,300
Total shareholders’ equity 674,300
Total liabilities and shareholders’ equity $982,000
(b) Please calculate the current ratio.
Total current assets $770,000
Total current liabilities $165,300
Current ratio equals 4.66
Devry ACCT504 Week 8 Final Exam Latest
Question 1.
(TCO D) Please describe the purpose of the Income Statement and the interrelationship between
the income statement and the other major financial statements that we covered in this class. In
your answer, please also address which financial statements should be created before the Income
Statement, if any, and which financial statements need to be completed after the Income
Statement, if any.
(TCO E) Your friend, Lisa, plans to open a nail salon. Lisa states that she does not have time to
develop and implement a system of internal controls.
(a) Explain to Lisa the components of internal control. (10 points)
(b) Explain to Lisa at least 5 internal control procedures she must establish to protect herself
against fraud. You should state specific internal control procedures from the textbook, and relate
your answer to her nail salon business. (15 points)

(TCO A) The following items are taken from the financial statements of PQR Company for
2013:
Cash $100,000
Inventory 150,000
Accounts Receivable 40,000
Supplies 10,000
Salaries Payable 30,000
Unearned Revenue 75,000
Intangible assets 78,000
Property, plant, and equipment, net 156,000
Long term debt 50,000
Common Stock 25,000
Additional Paid in Capital 175,000
Retained Earnings, 12/31/2012 13,000
Service revenue 402,000
Rent expense 48,000
Supplies expense 25,000
Insurance expense 36,000
Instructions:
(1) Create a classified balance sheet in good form for the year ended 2013. (30 points)
(2) Calculate the current ratio and debt ratio and explain your findings. (6 points)
(TCO B) The Delta Company gathered the following condensed data for the year ended
December 31, 2014:
Cost of goods sold $300,000
Net sales 525,000
Administrative expenses 110,000
Interest expense 18,000
Common stock dividends paid 25,000
Selling expenses 52,000
Income tax percentage 33%

Instructions:
(1) Prepare a multiple-step income statement for the year ended December 31, 2014. (30 points)
(2) Compute the gross margin percentage and net profit margin ratio. Delta Company’s assets at
the beginning of the year were $800,000, and the total assets were $1,000,000 at the end of the
year. To qualify for full credit, you must state the formula you are using, show your
computations, and explain your findings. (6 points)
(TCO C) This is a 2-part question.
Part 1) Indicate which section of the statement of cash flows should contain each of the
following items, and whether each item would result in an inflow or outflow of cash. The
sections are Operating, Investing, and Financing. (30 points)
(a) Amortization of a patent
(b) Increase in accounts payable
(c) Paid cash dividends to common stockholders
(d) Purchased equipment with cash
(e) Increase in inventory
Part 2) Please explain how to calculate free cash flow and the importance of free cash flow to
investors. (6 points)
(TCO F) This is a 2-part question.
Part 1) Journalize the adjusting entries below at year-end December 31, XXXX. Please share
your supporting calculations for the adjusting entries requiring computations.
(a) Beginning prepaid insurance, $500. Payments for insurance during the period are $900.
Ending prepaid insurance is $600.
(b) Interest revenue of $1,500 has been earned but not yet received.
(c) Accrued Service Revenue of $12,000
(d) The weekly payroll is $20,000. Employees are owed for 4 days of a 5-day work week.
The unadjusted balance of the Supplies account is $1,200. The total cost of supplies remaining is
$300.
(f) Equipment was purchased at the beginning of the year for $25,000. The equipment’s useful
life is 5 years, and the residual value is $5,000. Record the depreciation for this year.
(30 points)
Part 2) Calculate the overall overstatement or understatement of net income if the above
adjusting entries were not made. Please share your work. (6 points)

(TCO G) Please review the following 6 ratios for Johnson Company and Lee Enterprises for the
year ended 2014, and address the 2 questions below.
Ratio Name Johnson Company Lee Enterprises
(a) Accounts receivable turnover 6.5 5.3
(b) Days’ inventory outstanding 40 35
(c) Debt ratio 29.3% 25.7%
(d) Return on common stockholders’ equity 14.7% 10.5%
(e) Current ratio 2.50 3.60
(f) Price/Earnings ratio 10 12
Instructions: This is a 2-part question.
(1) Explain the meaning of each of the Johnson Company ratios above. (18 points)
(2) State which company performed better for each ratio. (18 points)
Instructions: This is a 2-part question.
(1) Explain the meaning of each of the Johnson Company ratios above. (18 points)
(2) State which company performed better for each ratio. (18 points)

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