1)

Present below are data from Shore Co.: 2011 2012 Credit Sales $800,000 $1,000,000 Allowance for doubtful accounts (Jan 1) 8,000 ? Allowance for doubtful accounts (Dec 31) ? ? Collection of accounts written off in prior years 10,000 0 Customer accounts written off 20,000 24,000 Accounts receivable (Jan 1) ? 300,000 Accounts receivable (Dec 31) 300,000 500,000 (a) (3 Points) Shore Co. collected $680,000 from customer account receivables during 2011. What should be the balance in Accounts Receivable at Jan 1, 2011? (b) (3 Points) For 2011, Shore Co. provides for doubtful accounts based on 5% of credit sales. What is the balance in Allowance for Doubtful Accounts at Dec 31, 2011? (c) (4 Points) For 2012, doubtful accounts are 4% of the ending balance of accounts receivable, determine (i) the balance in Allowance for doubtful Accounts at Dec 31, 2012, and (ii) bad debt expense to be reported for 2012. Record journal entry for part (ii).

 

2)

P3. (10 Points) The panel below reports cash flows and earnings for Wal-Mart from 1988 to 1996 (in millions of dollars, except per share numbers):

	1988	1989	1990	1991	1992	1993	1994	1995	1996
Cash from operations	536	828	968	1,422	1,553	1,540	2,573	3,410	2,993
Cash investments	627	541	894	1,526	2,150	3,506	4,486	3,792	3,332
Free cash flow	(91)	287	74	(104)	(597)	(1,966)	(1,913)	(382)	(339)
Net Income	628	837	1,076	1,291	1,608	1,995	2,333	2,681	2,740
EPS	0.28	0.37	0.48	0.57	0.70	0.87	1.02	1.17	1.19

 
(3 Points) What can you tell from the EPS data? Perform a horizontal analysis to support your view.
(2 Points) What is the definition of free cash flow? How do we use free cash flow in financial statement analysis?
(2 Points) Why would Wal-Mart have such negative free cash flows?
(3 Points) What explains the difference between Wal-Mart’s cash flows and earnings? Any implications for Wal-Mart’s financial position and performance?

 

 

3)

P2. (10 points) 

.  Presented below are data for Cars Corp (in millions)

                                                                                     2013               2014

Balance Sheet:

Assets, January 1                                      $4,560                    ?

Liabilities, January 1                                           ?           $2,736

Stockholders’ Equity, Jan. 1                              ?             2,750

Dividends                                                          7                    6

Common Stock                                             608                650

Stockholders’ Equity, Dec. 31                    2,750             2,166

Income Statement:

                  Cost of goods sold                                      $100

                  Dividend revenue                                             5

                  Sales return                                                     10

                  Income tax expense                                        12

                  Operating expenses                                        46

                  Sales revenue                                                200

Net Income                                                        ?                     ?

Compute the following items:

(a)   (2 Points) The ending balance of Assets for 2013;

(b)  (2 Points) The amount of gross profit in Cars’s multiple-step income statement for 2013;

(c)   (2 Points) Net income for 2013;

(d)  (2 Points) The beginning balance of Stockholders’ Equity for 2013;

(e)   (2 Points) Net income for 2014;