For Magdalen Industries, compute the net incomebefore

Why is it important for engineers and managers tounderstandaccountingprinciples? Namea few waysthat they can do so.

Explain the accountingfunction within a firm. Whatdoes this function do, and why is it important? Whattypes of data does it provide?

Manipulation of financial data by the Enron Cor-poration was revealed in October 2001. Firm exec- utives were sentenced to prison. Arthur Andersen,which had been one of the Big 5 accounting firmsand Enronsauditor, surrenderedits licensesto prac-tice as certified public accountants in August 2002.This and other scandals led to the passage of thefederal SarbanesOxley(SarbOx) legislation in July2002. What are the key components of this law?

How would the information and activities in Figure17-1 relate to potential contributions by externalprofessional services that firms will often hire(a)consulting engineers?(b)management consulting firms?(c)accounting firms for auditing?

Consider Figure 17-1 and external professional ser-vices that firms will often hire. What ethical ques- tions seem likely to arise when a firms hires(a)consulting engineers for design?(b)management consulting firms?(c)accounting firms for auditing?

Insolvency or cash flow problems in the U.S. bank-ing industry started the financial crisis of 2007.Have significant changes in accounting standardsand practices been forced through legislation? If so,what are these changes?

Accounting and finance are required topics formost management degrees, and many engineers dobecome managers during their careers. After grad-uation with a B.S. in engineering, what coursesare available to you from your or another nearbyuniversity?

Develop short definitions for the following terms:balance sheet, income statement, and fundamentalaccounting equation.

Explain the difference between short-term and long-term liabilities.

Calculate the equity of the Gravel Construction Com-pany if it has $1 million worth of assets. Gravelhas $127,000 in current liabilities and$210,000 inlong-term liabilities.

Matbach Industries has $870,000 in current assetsand $430,000 in fixed assets less $180,000 inaccumulated depreciation. The firms currentliabilities total$330,000,and the long-term liabilities$115,000.(a)What is the firms equity?(b)If the firms stock and capital surplus total$305,000, what is the value for retainedearnings?

CalcTech has $930,000 in current assets and$320,000 in fixed assets less $108,000 in accumu- lated depreciation. The firms current liabilities total$350,000, and the long-term liabilities$185,000.(a)What is the firms equity?(b)If the firms stock and capital surplus total$402,000, what is the value for retained earn-ings?

Mama Ls Baby Monitor Company has current assetsof $5 million and current liabilities of $2 million.Give the companys working capital and current ratio.(Answers:$3 million; 2.50)

For Gee-Whiz Devices, calculate the following:working capital, current ratio, and acid-test ratio.Gee- Whiz Devices BalanceSheetDataCash$100,000Market securities45,000Net accounts and notes receivable 150,000Retailers inventories200,000Prepaid expenses8,000Accounts and notes payable315,000(short term)Accrued expenses90,000(Answers: $90,000; 1.22; 0.73)

From the following data,taken from the balancesheetof Peteys Widget Factory, determine the workingcapital, current ratio, and acid-test ratio.Cash$ 90,000Net accounts and notes receivable 175,000Retailers inventories210,000Prepaid expenses6,000Accounts and notes payable 322,000(short term)Accrued expenses87,000

(a)For Evergreen Environmental Engineering(EEE), determine the working capital, currentratio, and acid-test ratio. Evaluate the companyseconomic situation with respect to its ability topay off debt.EEE BalanceSheet Data ($1000s)Cash$110,000Securities40,000Accounts receivable160,000Inventories250,000Prepaid expenses3,000Accounts payable351,000Accrued expenses89,000(b)The entries to complete EEEs balance sheetinclude:More EEE BalanceSheet Data ($1000s)Long-term liabilities$220,000Land25,000Plant and equipment510,000Accumulated depreciation210,000Stock81,000Capital surplus15,000Retained earningsValue not givenConstruct EEEs balance sheet.(c)What are EEEs values for total assets, totalliabilities, and retained earnings?

Turbo Start has current assets totaling $1.5 million(this includes $500,000 in current inventory) andcurrent liabilities totaling$50,000. Find the currentratio and acid-test ratio. Are the ratios at desirablelevels? Explain.

(a)For J&W Graphics Supply, compute the cur-rent ratio. Is this a financially healthy company?Explain.J&W Graphics Supply BalanceSheetData($1000s)AssetsCash$1740Accounts receivable2500Inventories900Bad debt provision75LiabilitiesAccounts payable1050Notes payable500Accrued expenses125(b) The entries of complete J&Ws balance sheetinclude:More J&W BalanceSheetData ($1000s)Long-term liabilities$950Land475Plant and equipment 3100Accumulated depreciation 1060Stock680Capital surplus45Retained earnings Value not givenConstruct J&Ws balance sheet.(c)What are J&Ws values for total assets, totalliabilities, and total earnings?

For Sutton Manufacturing, determine the currentratio and the acid-test ratio. Are these valuesacceptable? Why or why not?SuttonManufacturingBalanceSheetData($1000s)AssetsLiabilitiesCurrent assetsCurrent liabilitiesCash$ 870 Notes payable $ 500Accounts 450 Accounts payable 600receivableInventory 1200 Accruals 200Prepaid expenses 60 Taxes payable 30Current portion 100Total current assets 2670 long-term debtNet fixed assetsTotal currentLand1200 liabilities1430Plant and 3800 Long-term debt 2000equipmentOfficer debt 200(less1000 (subordinated)accumulatedTotal liabilities3630depreciation)EquityOther assetsCommon stock 1670Notes receivable 200 Capital surplus 400Intangibles 120 Retained earnings 1200Total equity 3270Total assets 6900 Total liabilities6900and equity

If a firm has a current ratio less than 2.0 and an acid-test ratio less than 1.0, will the company eventuallygo bankrupt and out of business? Explain youranswer.

What is the advantage of comparing financialstatements acrossperiods or against industry bench- marks over looking at statements associated with asingle date or period?IncomeStatement

List the two primary general accounting statements.What is each used for, and how do the two differ?Which is most important?

Scarmacks Paint Company has annual sales of$500,000 per year. If there is a profit of $1000 perday, 6 days per week operation, what is the totalyearly business expense? All calculations are on abefore- tax basis. (Answer:$188,000)

Find the net income of Turbo Start (Problem 17-17)given the following data from the balance sheet andincome statement.Turbo Start Data($1000s)Accounts payable$ 1,000Selling expense5,000Sales revenue50,000Owners equity4,500Income taxes2,000Cost of goods sold30,000Accounts receivable 15,000(Answer:$13,000,000)

Lailas Surveying Inc. had revenues of $100,000 in2010. Expenses totaled $60,000. What was her netprofit (or loss)?

The generalledgerof the Fly-Buy-Nite (FBN) Engi-neering Company contained the following accountbalances. Construct an income statement. What isthe net income before taxes and the net profit (orloss) after taxes? FBN has a tax rate of 27%.Amount($1000s)Administrative expenses $ 2,750Subcontracted services 18,000Development expenses900Interest expense200Sales revenue30,000Selling expenses4,500

For Magdalen Industries, compute the net incomebefore taxes and net profit (or loss). Taxes for theyear were $1 million.(a)Calculate net profit for the year.(b)Construct the income statement.(c)Calculate the interest coverage and net profitratio. Is the interest coverage acceptable?Explain why or why not.Magdalen Industries IncomeStatementData ($M)RevenuesTotal operating revenue$81(including sales of $48 million)Total nonoperating revenue5ExpensesTotal operating expenses70Total nonoperating expenses7(interest payments)

For Andrews Electronic Instruments, calculate theinterest coverage and net profit ratio. Is Andrewsbusiness healthy?IncomeStatementfor AndrewsElectronicsforEnd of Year 2010($1000s)RevenuesOperating revenuesSales$395(minus) Returns15Total operating revenues380Nonoperating revenuesInterest receipts50Stock revenues25Total nonoperating revenues75Total revenues, R455ExpensesOperating expensesCost of goods and services soldLabor200Materials34Indirect cost68Selling and promotion20Depreciation30General and administrative10Lease payments10Total operating expenses372Nonoperating expensesInterest payments22Total nonoperating expenses22Total expenses, E394Net income before taxes, RE61Incomes taxes30Net profit (Loss) for the year 201031

Sutton Manufacturing (balance sheet at the end oflastyearin Problem17-19)hadthe following entriesin this years income statement.Depreciation $420,000Profit480,000In addition, we also know the firm purchased$800,000 of equipment with cash. The firm paid$200,000 in dividends this year.What are the entries in the balance sheet at theend of this year for(a)plant and equipment?(b)accumulated depreciation?(c)retained earnings?

Magdalen Industries (Problem 17-27) had thefollowing entries in its balance sheet at the endof last year.Plant and equipment$15 million(less accumulated depreciation) 8 millionRetained earnings60 millionIn addition to the income statement data for thisyear in Problem 17-27, we also know that the firmpurchased $3 million of equipment with cash andthat depreciation expenses were $2 million of the$70 million in operating expenses listed in Problem17-27. The firm paid no dividends this year.What are the entries in the balance sheet at the endof this year for(a)plant and equipment?(b)accumulated depreciation?(c)retained earnings?Allocating Costs

Categorize each of the following costs as direct orindirect. Assume that a traditional costing system isin place.Machine run costs Cost to market the productMachine depreciation Cost of storageMaterial handling costs Insurance costsCost of materials Cost of product sales forceOvertime expenses Engineering drawingsMachine operator wages Machine laborUtility costsCost of tooling and fixturesSupport (administrative)staff salaries

LeGaroutte Industries makes industrial pipemanufacturing equipment. Use direct-labor hoursas the burden vehicle, and compute the total costperunit for each model given in the table. Total manu- facturing indirect costs are $15,892,000, and thereare 100,000 units manufactured per year for ModelS, 50,000 for ModelM, and 82,250 for ModelG.ItemModelSModelMModelGDirect-material costs $3,800,000 $1,530,000 $2,105,000Direct-labor costs 600,000 380,000 420,000Direct-labor hours 64,000 20,000 32,000(Answers:$132; $93; $84)

RLW-II Enterprises estimated that indirectmanufacturing costs for the year would be $60million and that 12,000 machine-hours would beused.(a)Compute the predetermined indirect costapplication rate using machine hours as theburden vehicle.(b)Determine the total cost of production fora product with direct material costs of $1million, direct-labor costs of$600,000,and 200machine- hours.(Answers:$5000; $2.6 million)

Par Golf Equipment Company produces two typesof golf bag: the standard and deluxe models. Thetotal indirect cost to be allocated to the two bags is$35,000. Determine the net revenue that Par Golfcan expect from the sale of each bag.(a)Use direct-labor cost to allocate indirect costs. (b)Use direct-materials cost to allocate indirectcosts.Data ItemStandardDeluxeDirect-labor cost $50,000 $65,000Direct-material cost 35,000 47,500Selling price60 95Units produced1800 1400