Use the spreadsheet provided to complete this assignment. Kite Corporation, a merchandiser, recently completed its calendar-year 2011 operations.
For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses.
The company’s balance sheets and income statement follow.
Additional Information on Year 2011 Transactions:
1. The loss on the cash sale of equipment was $2,100 (details in b).
2. Sold equipment costing $51,000, with accumulated depreciation of $20,850, for $28,050 cash.
3. Purchased equipment costing $113,250 by paying $38,250 cash and signing a long-term note payable for the balance.
4. Borrowed $6,000 cash by signing a short-term note payable.
5. Paid $45,000 cash to reduce the long-term notes payable.
6. Issued 3,000 shares of common stock for $11 cash per share.
7. Declared and paid cash dividends of $63,000.
1. complete statement of cash flows; report its operating activities using the indirect method.
2. Disclose any noncash investing and financing activities in a note.
2. Company owner Abel Terrio has reviewed the 2011 financial statements you prepared for Jackson Company as the accountant, and questions the $6,000 loss reported on the sale of its investment in Blackhawk Co. common stock.
Jackson acquired 50,000 shares of Blackhawk’s common stock on December 31, 2009, at a cost of $500,000. This stock purchase represented a 40% interest in Blackhawk. The 2010 income statement reported that earnings from all investments were $126,000.
On January 3, 2011, Jackson Company sold the Blackhawk stock for $575,000. Blackhawk did not pay any dividends during 2010 but reported a net income of $202,500 for that year. Terrio believes that because the Blackhawk stock purchase price was $500,000 and was sold for $575,000, the 2011 income statement should report a $75,000 gain on the sale.
explain why the $6,000 loss on sale of Blackhawk stock is correctly reported.
3. Sanderson Company’s year-end financial statements follow. Analyze its year-end short-term liquidity position at the end of 2012, 2011, and 2010 by computing:
1.the current ratio
2.the acid-test ratio
Evaluate the company’s efficiency and profitability by computing the following for 2012 and 2011:
1.profit margin ratio
2.total asset turnover
3.return on total assets