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EXERCISE n.1 (14 points)
At the end of year 2008 the balance sheet of Access Co. is the following
ASSE!S "
Cash and Cash E#$i%alents &2'000
Acco$nt Recei%ables 1'&000
In%entories '11000
Short)ter* in%est*ents 121000
+re),aid E-,enses '0&/
Total current assets 1'22&/
ote Recei%ables &0
Intangible assets 182'
3i-t$re and E#$i,*ent 8820
4and 220000
5$ildings '1/000
Total long-term assets 0'
Total assets 1&2'8
4IA5I4I!IES A6 S!7C9746ERS E:;I! inco*e ta- rate.
Create the !)acco$nts and ,re,are the classified balance sheet and the inco*e state*ent for yearend 200.
S74;!I7
!)acco$nts balance sheet
Cash Accounts Receivable Inventory
Beg. 723,000
(3) 187,165
(4) 43,500(5) 327,000(9) 8,000
46,000 (1)
16,000 (3)
5,040 (8)
Beg. 137,000
(2) 350,000(5) 123,000
Beg. 311,000
250,000 (2)
1,221,625 610,000 61,000
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Fixture and Equipment Land Lease Liability
Beg. 89,820
(1) 553,912.8
Beg. 220,000
(7) 20,000(1) 12,765.23
553,912.8 (1)
643,732.8 240,000 541,147.57
Unearned rent (L) onds !ayable "iscount on bondspayable (#L)
8,000 (9)Beg. 256,783
(3) 200,000
(3) 12,835
1,284 (3)
8,000 456,783 11,551
Allo$ance %or doubt%ulaccounts (#A)
!re&!aid Expense Accumulated "epreciaiton
50,000 (6)Beg. 30,745
(8) 5,040
1,680 (8) 22,156.51 (1)
50,000 34,105 22,156.51
!aid&in capital Common 'toc
13,600 (7)
6,400 (7)
13,600 6,400
Income ax !ayable "e%erred ax Asset
152,686.31 (9)(9) 2,560
152,686.31 2,560
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T-accounts: income statement
ad debt expense Insurance Expense Interest Expense
(6) 50,000 (8)1,680 (1) 33,234.77 (3) 17,284
50,000 1,680 50,518.77
Revenues Cost o% *oods sold "epreciation Expense
350,000 (2)43,500 (4)450,000 (5)
(2) 250,000 (1) 22,156.51
843,500 250,000 22,156.51
Income ax Expense
(9) 150,126.31
150,126.31
4ease calc$lation
Debit Credit
3i-t$re (DA= //'12.8
4ease liability (D4= //'12.8
At year end (t1=
6e,reciation e-,ense (DE)SE= 22,156.51
Acc$*$lated de,reciation (XA)A= 22,156.51
Interest e-,ense (DE)SE= 33,234.77
4ease liability ()4= 12,765.23
Cash ()A= 46,000
+B of the fi-t$re
+=
22=0.01(0.0
1
0.0
1000PV
//'12.8"
!he ad$st*ents at year end (t1=6e,reciation e-,ensecost)resid$al %al$eF1G$sef$l life6e,reciation e-,ense//'12.8G2/221/./1"
Interest e-,ense//'12.8F0.0''2'.&&"4ease liability000)''2'.&&12&/.2'" (the ,ortion of the e#$i,*ent that is nowowned=
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!ransaction '+resent Bal$e of the ,rinci,al
882"
Ann$al Interest +ay*ents 200000 - 0.081000"
+B Interest +ay*ents
Iss$e (sale= ,rice882D1028'18&1/"6isco$nt on bonds ,ayable 200000)18&1/128'/"128'/ "G10128" (straight)line a*ortiHation of bond disco$nt=5ond Interest e-,ense1000D1281& 28"
!ransaction Sales re%en$es)Credit card disco$nts)Sales Ret$rns and Allowancesnet sales re%en$es/0000)(/0000F0.0'=)(1G10F/0000='/00"
!ransaction &
800 shares F 2/"20000" (land=+$rchased land by iss$ing ca,ital stoc? recorded at *ar?et %al$e of the stoc?800 shares F8"00" (co**on stoc?=+aid)in ca,ital20000")00"1'00"
!ransaction 8/00F1G'180"
!ransaction (to record this transaction yo$ *$st co*,$te the ,re)ta- inco*e=8000" are recogniHed as rent e-,enses in 2010 financial inco*e b$t are ta-ed in 200.
!a-able inco*e1.&2 "(,re)ta- inco*e=D8000" (rent e-,ense=&&1.&2"Inco*e !a- +ayable&&1.&2"F'2>1/28.'1"6eferred !a- Asset8000"F'2>2/0"Inco*e !a- E-,ense1/28.'1)2/01/012.'1"
10
=0.01(
000200
+
=PV
"8'102
=0.01(0.0
1
0.0
10001
10
=
+=PV
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Inco*e state*ent
Revenues:Net saes !e"enues
Costs and expenses:#ost o$ goo%s so%
&e'!eciation e'ense nsu!ance e'ense
Operating income
Other revenues and gainsnte!est e'enseBa% %e*t e'ense
Pre-tax incomencome ta e'enseNet Income
843,500
(250,000)
(22,156.51)(1,680)
569,663.49
(50,518.77)(50,000)
469,144.72(150,126.31)
319,018.41
5alance Sheet
ASSE!S
Cash and Cash E#$i%alents 12212/
Acco$nt Recei%ables (net of Allowance for do$btf$l acco$nts= /0000
In%entories 1000
Short)ter* in%est*ents 121000
6eferred !a- Asset 2/0
+re),aid E-,enses '10/
Total current assets 200020
ote Recei%ables &0
Intangible assets 182'3i-t$re and E#$i,*et (net of acc$*$lated de,reciation= 21/&
4and 20000
5$ildings '1/000
Total long-term assets 1201'/
Total assets '201
4IA5I4I!IES A6 S!7C9746ERS E:;I!2.
=(
=+=
+=
e
fMife
r
rrrr
>2.
=0
1'0>=(./>=(01(>0/.10
==(=(1(
=
+=
+=
u
uu
ducue
r
rr
E
DrrTrr
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;C31.2/)''.2)1.2/.'
3ro* 2010 to 2011 there is an increase in wor?ing ca,ital of 1.2 that needs to be s$btracted tocalc$late the ;C3.
'. Calc$late the %al$e of 6elta Co*,any with the A+B *ethod (ass$*,tion that cash flows areconstant in ,er,et$ity=
6/F0.'28&.& *ln E$ros
B;C3Gr$ D!a- rateF6ebtB/.'G0.02 D0.F28&.&&0'.&B6DE&0'.&28&.&DE
E1.0
. Calc$late the rKACC
/. Calc$late the +GE and E+S ratios
6E4!A Co*,any!arget ,rice1.0G12.&1et earnings1.//)2.2'.'+GE1.0G'.'11.2E+S'.'G12.'rd&>
Co*,any a**a+GE0G&/.2E+S&/G'2.20rd/.>
E%en if the co*,any 6elta shows a cost of debt higher than co*,any a**a it has a betterrelati%e ,osition in ter*s of *ar?et e-,ectations (+GE= and earnings ,er share (E+S=.
/=0&.1(
0001
=0&.1(
0/
/
1
=+==t
tP
ecdWA rED
ETr
ED
Dr
++
+= =1(
eWArr +=
&.&0'
0.1=.01>(&
&.&0'
&.28&
>&0.10
=0.1
&.28&>=(&>2.>=(01(>2.
==(=(1(
=
+=
+=
e
ducue
r
EDrrTrr
>0.8>&.10&.&0'
0.1=.01>(&
&.&0'
&.28&=+=WAr
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