Question : 11.On December 31, 2015, Seminole Co. had current assets of : 1241697

 

11.On December 31, 2015, Seminole Co. had current assets of $25,000 in cash and current liabilities of $8,000 in accounts payable, resulting in a current ratio of 3.13. The company estimates that warranty expense for 2015 is 6% of sales that totaled $200,000. Calculate Seminole’s current ratio after warranty expense is recognized.

 

 

 

12.As a security analyst for Market Masters, Inc., you have chosen to invest in one high-tech firm.  You have narrowed your choice between RamTech Company or Accutrex Industries, firms of similar size and direct competitors in the industry. The following information was taken from their 2015 annual reports:

 

 

RamTech

Accutrex

 

2015

2014

2015

2014

Deferred income tax liability

$    19,400

$15,600

$   19,800

$21,800

Income before taxes

163,000

 

158,500

 

Income tax expense

(50,000)

 

(52,500)

 

Net income

113,000

 

106,000

 

Effective income tax rate

35%

 

35%

 

 

 

 

 

13.PorterProductsrecognizes expenses for wages, interest and rent when cash payments are made.  The following related cash payments were made during December2015:

 

December 5 & 20

Wages in the amount of $15,000 are paid on the 5th and the 20th of each month for the fifteen days just ended.  The next payment will be on January 5, 2010.

December 15

Paid a semi-annual $300 interest payment on an outstanding note payable with a face value of $10,000 and a 6 percent annual interest rate.

 

As of December 31, the current assets and current liabilities reported on Porter’s balance sheet were $36,000 and $22,500, respectively.  Porter’s income statement reported net income of $11,250.

 

Required:  Compute Porter’s current ratio and net income if the company were to account for wages, interest, and rent on an accrual basis.

 

 

14.Farley Incorporated instituted a defined benefit pension plan for its employees at the beginning of 2011.  An actuarial method that is acceptable under GAAP indicates that the company should contribute $80,000 each year to the pension fund to cover the benefits that will be paid to the employees.  Farley funded 80% in 2011 and 2012, 90% in 2013 and 2014, and 100 percent in 2015.

 

Required:

 

(1)Prepare the journal entries to accrue the pension liability and fund it for 2011 through 2015.

(2)Compute the balance in the pension liability account as of December 31, 2015.

 

 

15.On December 31, 2015, Barton Incorporated had total liabilities of $60,000 and total shareholders’ equity of $90,000, resulting in a debt/equity ratio of 0.67 before income tax expense is recognized. On December 31, 2015, Barton paid its 2015 income taxes of $6,000 while its income tax expense on its 2015 income statement was $8,000. This difference exists because Barton uses straight-line depreciation on its books and double-declining-balance depreciation on its tax returns. What is Barton’s debt/equity ratio after the tax expense and deferred tax liability are recognized?

 

 

 

 

 

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