SlideShare a Scribd company logo
1 of 5
Download to read offline
Chapter 02: Review of Accounting




                                   Frantic Fast Foods
          a. Year 2009
                Earnings per share  Earnings after taxes
                                     Shares outstanding

                                          $390,000 = $1.30
                                           300,000
          b. Year 2010
                 Earnings after taxes  $390,000  1.20  $468,000
                  Shares outstanding  300,000  25,000  325,000

                  Earnings per share  $468,000  $1.44
                                       325,000

2.     Income Statement (LO1) Bettis Bus Company had earnings after taxes of $600,000 in the
       year 2009 with 300,000 shares of stock outstanding. On January 1, 2010, the firm issued
       40,000 new shares. Because of the proceeds from these new shares and other operating
       improvements, earnings after taxes increased by 25 percent.
       a. Compute earnings per share for the year 2009.
       b.    Compute earnings per share for the year 2010.

2-2.      Solution:
                                   Bettis Bus Company
          a. Year 2009

                Earnings per share = Earnings after taxes
                                     Shares outstanding

                                        = $600,000 = $2.00
                                           300,000
          b. Year 2010


                                              2-4
Chapter 02: Review of Accounting




                   Earnings after taxes  $600,000  1.25  $750,000
                    Shares outstanding  300,000  40,000  340,000
                     Earning per share  $750,000  $2.21
                                           340,000

3.     a.      Gross profit (LO1) Hillary Swank Clothiers had sales of $360,000 and cost of goods
               sold of $244,800. What is the gross profit margin (ratio of gross profit to sales)?
       b.      If the average firm in the clothing industry had a gross profit of 35 percent, how is the
               firm doing?

2-3.         Solution:
                                    Hillary Swank Clothiers
            a. Sales ............................................................ $360,000
                   Cost of goods sold ................................ 244,800
                          Gross Profit ................................... $115,200

                Gross Profit Margin  Gross Profit $115,200 = 32%
                                         Sales     $360,000
            b. With a gross profit 32 percent, the firm is under-performing the
               industry average of 35 percent.

4.     Operating Profit (LO1) A-Rod Fishing Supplies had sales of $2,000,000 and cost of
       goods sold of $1,250,000. Selling and administrative expenses represented 8 percent of
       sales. Depreciation was 5 percent of the total assets of $4,000,000. What was the firm’s
       operating profit?


2-4.         Solution:




                                                    2-5
Chapter 02: Review of Accounting




                                  A-Rod Fishing Supplies
          Sales .............................................................. $2,000,000
          Cost of goods sold ......................................... 1,250,000
            Gross Profit............................................... 750,000
          Selling and administrative expense* ............. 160,000
          Depreciation expense** ................................ 200,000
            Operating profit ........................................ $ 390,000
                 * 8% × $2,000,000 = $160,000
                ** 5% × $4,000,000 = $200,000
5.     Income statement (LO1) Arrange the following income statement items so they are in the
       proper order of an income statement:
         Taxes                                     Earnings per share
         Shares outstanding                        Earnings before taxes
         Interest expense                          Cost of goods sold
         Depreciation expense                      Earnings after taxes
         Preferred stock dividends                 Earnings available to common
         Operating profit                              stockholders
         Sales                                     Selling and administrative expense
         Gross profit


2-5.      Solution:

          Sales
          -Cost of goods sold
          Gross profit
          -Selling and administrative expense
          -Depreciation expense
          Operating profit
          -Interest expense
          Earnings before taxes
          -Taxes
          Earnings after taxes
          -Preferred stock dividends

                                                  2-6
Chapter 02: Review of Accounting




          Earnings available to common stockholders
          Shares outstanding
          Earnings per share
6.     Income statement (LO1) Given the following information prepare in good form an
       income statement for the Dental Drilling Company.

        Selling and administrative expense ........................................ $ 60,000
        Depreciation expense .............................................................             70,000
        Sales ....................................................................................... 470,000
        Interest expense ......................................................................        40,000
        Cost of goods sold .................................................................. 140,000
        Taxes ......................................................................................   45,000


2-6.      Solution:
                                        Dental Drilling Company
                                                Income Statement
          Sales ..............................................................                   $ 470,000
          Cost of goods sold .........................................                           $ 140,000
             Gross Profit...............................................                         $ 330,000
          Selling and administrative expense ...............                                     $ 60,000
          Depreciation expense ....................................                              $ 70,000
             Operating profit ........................................                           $ 200,000
          Interest expense .............................................                         $ 40,000
             Earnings before taxes ...............................                               $ 160,000
          Taxes .............................................................                    $ 45,000
             Earnings after taxes ..................................                             $ 115,000




                                                                2-7
Chapter 02: Review of Accounting


7.     Income Statement (LO1) Given the following information, prepare in good form an
       income statement for Jonas Brothers Cough Drops.

        Selling and administrative expense ........................................ $250,000
        Depreciation expense ............................................................. 190,000
        Sales ....................................................................................... 1,600,000
        Interest expense ...................................................................... 120,000
        Cost of goods sold .................................................................. 480,000
        Taxes ...................................................................................... 165,000


2-7.      Solution:
                                     Jonas Brothers Cough Drops
                                          Income Statement
          Sales .............................................................. $1,600,000
          Cost of goods sold ......................................... 480,000
             Gross profit ............................................... 1,120,000
          Selling and administrative expense ............... 250,000
          Depreciation expense .................................... 190,000
             Operating profit ........................................ 680,000
          Interest expense ............................................. 120,000
             Earnings before taxes ............................... 560,000
          Taxes ............................................................. 165,000
             Earnings after taxes .................................. $395,000




                                                                 2-8

More Related Content

What's hot

Comptabilite generale exercices et corriges 2
Comptabilite generale exercices et corriges 2Comptabilite generale exercices et corriges 2
Comptabilite generale exercices et corriges 2Tanger Outlets
 
Coût marginal-comptabilité analytique
Coût marginal-comptabilité analytique Coût marginal-comptabilité analytique
Coût marginal-comptabilité analytique manalsiy
 
Cost Of Good Sold
Cost Of Good SoldCost Of Good Sold
Cost Of Good Soldjunaid khan
 
Compta analytique pr kaoutar el menzhi - Téléchargeable sur : www.coursdefsj...
Compta analytique pr kaoutar el menzhi - Téléchargeable sur  : www.coursdefsj...Compta analytique pr kaoutar el menzhi - Téléchargeable sur  : www.coursdefsj...
Compta analytique pr kaoutar el menzhi - Téléchargeable sur : www.coursdefsj...cours fsjes
 
Comptabilite-analytique
 Comptabilite-analytique Comptabilite-analytique
Comptabilite-analytiqueMejdoubi Amal
 
Compta analyt cours exercices
Compta analyt cours exercicesCompta analyt cours exercices
Compta analyt cours exercicesGEANT_ATLAS
 
Solution Chapter 3 l Cost Accounting Planning and Control by Matz.Hammer an...
Solution Chapter 3   l Cost Accounting Planning and Control by Matz.Hammer an...Solution Chapter 3   l Cost Accounting Planning and Control by Matz.Hammer an...
Solution Chapter 3 l Cost Accounting Planning and Control by Matz.Hammer an...Bushra Sultana Malik
 
cours de comptabilité générale:Les amortissements
cours de comptabilité générale:Les amortissementscours de comptabilité générale:Les amortissements
cours de comptabilité générale:Les amortissementsMoùhcine Mast
 
Exercices corrigés-de-la-comptabilité-analytique-faculté-pluridisciplinaire-n...
Exercices corrigés-de-la-comptabilité-analytique-faculté-pluridisciplinaire-n...Exercices corrigés-de-la-comptabilité-analytique-faculté-pluridisciplinaire-n...
Exercices corrigés-de-la-comptabilité-analytique-faculté-pluridisciplinaire-n...amin lord
 
Absorption And Variable Costing
Absorption And Variable CostingAbsorption And Variable Costing
Absorption And Variable CostingBilal riaz
 
Cours des réductions financières et commerciales semestre1
Cours des réductions financières et commerciales semestre1Cours des réductions financières et commerciales semestre1
Cours des réductions financières et commerciales semestre1Jamal Yasser
 
Mathematique financiere
Mathematique financiereMathematique financiere
Mathematique financiereJamal Yasser
 
Solution manual chapter 3 fap
Solution manual chapter 3 fapSolution manual chapter 3 fap
Solution manual chapter 3 fapFaiz Ahmed
 
Exercices d analyse financière s4
Exercices d analyse financière s4 Exercices d analyse financière s4
Exercices d analyse financière s4 Jamal Yasser
 
Chapter 5 Cost Behavior: Analysis and Use
Chapter 5 Cost Behavior: Analysis and UseChapter 5 Cost Behavior: Analysis and Use
Chapter 5 Cost Behavior: Analysis and UseViệt Hoàng Dương
 

What's hot (20)

Comptabilite generale exercices et corriges 2
Comptabilite generale exercices et corriges 2Comptabilite generale exercices et corriges 2
Comptabilite generale exercices et corriges 2
 
Coût marginal-comptabilité analytique
Coût marginal-comptabilité analytique Coût marginal-comptabilité analytique
Coût marginal-comptabilité analytique
 
Cost Of Good Sold
Cost Of Good SoldCost Of Good Sold
Cost Of Good Sold
 
Tva cours et-exercices
Tva cours et-exercicesTva cours et-exercices
Tva cours et-exercices
 
Compta analytique pr kaoutar el menzhi - Téléchargeable sur : www.coursdefsj...
Compta analytique pr kaoutar el menzhi - Téléchargeable sur  : www.coursdefsj...Compta analytique pr kaoutar el menzhi - Téléchargeable sur  : www.coursdefsj...
Compta analytique pr kaoutar el menzhi - Téléchargeable sur : www.coursdefsj...
 
tifawt.com2
tifawt.com2tifawt.com2
tifawt.com2
 
Budget exercices
Budget exercicesBudget exercices
Budget exercices
 
Compta analytique
Compta analytiqueCompta analytique
Compta analytique
 
TCE2-Math financier
TCE2-Math financierTCE2-Math financier
TCE2-Math financier
 
Comptabilite-analytique
 Comptabilite-analytique Comptabilite-analytique
Comptabilite-analytique
 
Compta analyt cours exercices
Compta analyt cours exercicesCompta analyt cours exercices
Compta analyt cours exercices
 
Solution Chapter 3 l Cost Accounting Planning and Control by Matz.Hammer an...
Solution Chapter 3   l Cost Accounting Planning and Control by Matz.Hammer an...Solution Chapter 3   l Cost Accounting Planning and Control by Matz.Hammer an...
Solution Chapter 3 l Cost Accounting Planning and Control by Matz.Hammer an...
 
cours de comptabilité générale:Les amortissements
cours de comptabilité générale:Les amortissementscours de comptabilité générale:Les amortissements
cours de comptabilité générale:Les amortissements
 
Exercices corrigés-de-la-comptabilité-analytique-faculté-pluridisciplinaire-n...
Exercices corrigés-de-la-comptabilité-analytique-faculté-pluridisciplinaire-n...Exercices corrigés-de-la-comptabilité-analytique-faculté-pluridisciplinaire-n...
Exercices corrigés-de-la-comptabilité-analytique-faculté-pluridisciplinaire-n...
 
Absorption And Variable Costing
Absorption And Variable CostingAbsorption And Variable Costing
Absorption And Variable Costing
 
Cours des réductions financières et commerciales semestre1
Cours des réductions financières et commerciales semestre1Cours des réductions financières et commerciales semestre1
Cours des réductions financières et commerciales semestre1
 
Mathematique financiere
Mathematique financiereMathematique financiere
Mathematique financiere
 
Solution manual chapter 3 fap
Solution manual chapter 3 fapSolution manual chapter 3 fap
Solution manual chapter 3 fap
 
Exercices d analyse financière s4
Exercices d analyse financière s4 Exercices d analyse financière s4
Exercices d analyse financière s4
 
Chapter 5 Cost Behavior: Analysis and Use
Chapter 5 Cost Behavior: Analysis and UseChapter 5 Cost Behavior: Analysis and Use
Chapter 5 Cost Behavior: Analysis and Use
 

Viewers also liked

Chapter 2 answers
Chapter 2 answers Chapter 2 answers
Chapter 2 answers cwood
 
Chapter 2 basic financial statements exercise
Chapter 2 basic financial statements exerciseChapter 2 basic financial statements exercise
Chapter 2 basic financial statements exerciseMuhammad Sher
 
Accounting principles weygandt 11th edition solutions manual
Accounting principles weygandt 11th edition solutions manual Accounting principles weygandt 11th edition solutions manual
Accounting principles weygandt 11th edition solutions manual abb183n
 
Chapter 3 Answers
Chapter 3 Answers Chapter 3 Answers
Chapter 3 Answers cwood
 

Viewers also liked (6)

Transport number
Transport numberTransport number
Transport number
 
Chapter 2 answers
Chapter 2 answers Chapter 2 answers
Chapter 2 answers
 
Chapter 2 basic financial statements exercise
Chapter 2 basic financial statements exerciseChapter 2 basic financial statements exercise
Chapter 2 basic financial statements exercise
 
Chapter 1
Chapter 1Chapter 1
Chapter 1
 
Accounting principles weygandt 11th edition solutions manual
Accounting principles weygandt 11th edition solutions manual Accounting principles weygandt 11th edition solutions manual
Accounting principles weygandt 11th edition solutions manual
 
Chapter 3 Answers
Chapter 3 Answers Chapter 3 Answers
Chapter 3 Answers
 

Similar to Chapter 2 problems

Due Tues., May 2- 7 questions Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions  Big Time Picture Frames h.docxDue Tues., May 2- 7 questions  Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions Big Time Picture Frames h.docxsagarlesley
 
Advanced accounting 12th edition fischer solutions manual
Advanced accounting 12th edition fischer solutions manualAdvanced accounting 12th edition fischer solutions manual
Advanced accounting 12th edition fischer solutions manualQpin2003
 
Leverage analysis
Leverage analysisLeverage analysis
Leverage analysisAjay Yadav
 
Income statement ((LO1) Given the following information prepare in goo.docx
Income statement ((LO1) Given the following information prepare in goo.docxIncome statement ((LO1) Given the following information prepare in goo.docx
Income statement ((LO1) Given the following information prepare in goo.docxolsenlinnea427
 
EXERCISE 5–2 Variable Costing Income Statement; Explanation of Dif.docx
EXERCISE 5–2 Variable Costing Income Statement; Explanation of Dif.docxEXERCISE 5–2 Variable Costing Income Statement; Explanation of Dif.docx
EXERCISE 5–2 Variable Costing Income Statement; Explanation of Dif.docxrhetttrevannion
 
Week five exercise_assignment_b
Week five exercise_assignment_bWeek five exercise_assignment_b
Week five exercise_assignment_bHafeez Abdullah
 
Variable costing & absorption costing
Variable costing & absorption costingVariable costing & absorption costing
Variable costing & absorption costingnaimhossain8
 
Depreciation is $8K (on the bottom)What do you do with goodwill.pdf
Depreciation is $8K (on the bottom)What do you do with goodwill.pdfDepreciation is $8K (on the bottom)What do you do with goodwill.pdf
Depreciation is $8K (on the bottom)What do you do with goodwill.pdfalshaikhkhanzariarts
 
Group Case 1 Part 1 Schedules of Cost of Goods Manufactured and C.docx
Group Case 1 Part 1 Schedules of Cost of Goods Manufactured and C.docxGroup Case 1 Part 1 Schedules of Cost of Goods Manufactured and C.docx
Group Case 1 Part 1 Schedules of Cost of Goods Manufactured and C.docxshericehewat
 
A manager should always reject a special order ifThe .docx
A manager should always reject a special order ifThe .docxA manager should always reject a special order ifThe .docx
A manager should always reject a special order ifThe .docxstelzriedemarla
 
2 cash flow and financial statement analysis
2   cash flow and financial statement analysis2   cash flow and financial statement analysis
2 cash flow and financial statement analysisMalinga Perera
 
Question 11. The management of Rathburn Corporation would like to.docx
Question 11. The management of Rathburn Corporation would like to.docxQuestion 11. The management of Rathburn Corporation would like to.docx
Question 11. The management of Rathburn Corporation would like to.docxteofilapeerless
 
Exercises1. Horizontal analysis. Mary Lynn Corporation has been .docx
Exercises1. Horizontal analysis. Mary Lynn Corporation has been .docxExercises1. Horizontal analysis. Mary Lynn Corporation has been .docx
Exercises1. Horizontal analysis. Mary Lynn Corporation has been .docxSANSKAR20
 
Business Financials in Plain English: a Focused Overview
Business Financials in Plain English: a Focused OverviewBusiness Financials in Plain English: a Focused Overview
Business Financials in Plain English: a Focused OverviewJonathan Jordan
 

Similar to Chapter 2 problems (20)

Brewer chapter 10
Brewer chapter 10Brewer chapter 10
Brewer chapter 10
 
Due Tues., May 2- 7 questions Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions  Big Time Picture Frames h.docxDue Tues., May 2- 7 questions  Big Time Picture Frames h.docx
Due Tues., May 2- 7 questions Big Time Picture Frames h.docx
 
Advanced accounting 12th edition fischer solutions manual
Advanced accounting 12th edition fischer solutions manualAdvanced accounting 12th edition fischer solutions manual
Advanced accounting 12th edition fischer solutions manual
 
Leverage analysis
Leverage analysisLeverage analysis
Leverage analysis
 
Income statement ((LO1) Given the following information prepare in goo.docx
Income statement ((LO1) Given the following information prepare in goo.docxIncome statement ((LO1) Given the following information prepare in goo.docx
Income statement ((LO1) Given the following information prepare in goo.docx
 
EXERCISE 5–2 Variable Costing Income Statement; Explanation of Dif.docx
EXERCISE 5–2 Variable Costing Income Statement; Explanation of Dif.docxEXERCISE 5–2 Variable Costing Income Statement; Explanation of Dif.docx
EXERCISE 5–2 Variable Costing Income Statement; Explanation of Dif.docx
 
Week five exercise_assignment_b
Week five exercise_assignment_bWeek five exercise_assignment_b
Week five exercise_assignment_b
 
Account asst
Account asstAccount asst
Account asst
 
Variable costing & absorption costing
Variable costing & absorption costingVariable costing & absorption costing
Variable costing & absorption costing
 
New World Chemicals Inc
New World Chemicals IncNew World Chemicals Inc
New World Chemicals Inc
 
Section 4
Section 4Section 4
Section 4
 
Depreciation is $8K (on the bottom)What do you do with goodwill.pdf
Depreciation is $8K (on the bottom)What do you do with goodwill.pdfDepreciation is $8K (on the bottom)What do you do with goodwill.pdf
Depreciation is $8K (on the bottom)What do you do with goodwill.pdf
 
Group Case 1 Part 1 Schedules of Cost of Goods Manufactured and C.docx
Group Case 1 Part 1 Schedules of Cost of Goods Manufactured and C.docxGroup Case 1 Part 1 Schedules of Cost of Goods Manufactured and C.docx
Group Case 1 Part 1 Schedules of Cost of Goods Manufactured and C.docx
 
A manager should always reject a special order ifThe .docx
A manager should always reject a special order ifThe .docxA manager should always reject a special order ifThe .docx
A manager should always reject a special order ifThe .docx
 
2 cash flow and financial statement analysis
2   cash flow and financial statement analysis2   cash flow and financial statement analysis
2 cash flow and financial statement analysis
 
Question 11. The management of Rathburn Corporation would like to.docx
Question 11. The management of Rathburn Corporation would like to.docxQuestion 11. The management of Rathburn Corporation would like to.docx
Question 11. The management of Rathburn Corporation would like to.docx
 
Budgets
Budgets  Budgets
Budgets
 
Exercises1. Horizontal analysis. Mary Lynn Corporation has been .docx
Exercises1. Horizontal analysis. Mary Lynn Corporation has been .docxExercises1. Horizontal analysis. Mary Lynn Corporation has been .docx
Exercises1. Horizontal analysis. Mary Lynn Corporation has been .docx
 
ratio analysis.ppt.ppt
ratio analysis.ppt.pptratio analysis.ppt.ppt
ratio analysis.ppt.ppt
 
Business Financials in Plain English: a Focused Overview
Business Financials in Plain English: a Focused OverviewBusiness Financials in Plain English: a Focused Overview
Business Financials in Plain English: a Focused Overview
 

Recently uploaded

Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...Matthews Bantsijang
 
Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707harshan90
 
Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Guillaume Ⓥ Sarlat
 
Stock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfStock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfMichael Silva
 
Hungarys economy made by Robert Miklos
Hungarys economy   made by Robert MiklosHungarys economy   made by Robert Miklos
Hungarys economy made by Robert Miklosbeduinpower135
 
MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.Arifa Saeed
 
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdfAdnet Communications
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Commonwealth
 
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...mwangimwangi222
 
India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023SkillCircle
 
Buy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxBuy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxPrecize Formely Leadoff
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingHenry Tapper
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoCoinGecko
 
Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfMichael Silva
 
LIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxLIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxsonamyadav7097
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfAdnet Communications
 
Introduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an EntrepreneurIntroduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an Entrepreneurabcisahunter
 
The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?Stephen Perrenod
 

Recently uploaded (20)

Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
Remembering my Totem _Unity is Strength_ growing in Bophuthatswana_Matthews B...
 
Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707
 
Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024
 
Stock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfStock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdf
 
Hungarys economy made by Robert Miklos
Hungarys economy   made by Robert MiklosHungarys economy   made by Robert Miklos
Hungarys economy made by Robert Miklos
 
MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.MARKET FAILURE SITUATION IN THE ECONOMY.
MARKET FAILURE SITUATION IN THE ECONOMY.
 
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]
 
Monthly Economic Monitoring of Ukraine No.230, March 2024
Monthly Economic Monitoring of Ukraine No.230, March 2024Monthly Economic Monitoring of Ukraine No.230, March 2024
Monthly Economic Monitoring of Ukraine No.230, March 2024
 
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
 
India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023
 
Buy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxBuy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptx
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB funding
 
Commercial Bank Economic Capsule - March 2024
Commercial Bank Economic Capsule - March 2024Commercial Bank Economic Capsule - March 2024
Commercial Bank Economic Capsule - March 2024
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
 
Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdf
 
LIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxLIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptx
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
 
Introduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an EntrepreneurIntroduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an Entrepreneur
 
The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?
 

Chapter 2 problems

  • 1. Chapter 02: Review of Accounting Frantic Fast Foods a. Year 2009 Earnings per share  Earnings after taxes Shares outstanding  $390,000 = $1.30 300,000 b. Year 2010 Earnings after taxes  $390,000  1.20  $468,000 Shares outstanding  300,000  25,000  325,000 Earnings per share  $468,000  $1.44 325,000 2. Income Statement (LO1) Bettis Bus Company had earnings after taxes of $600,000 in the year 2009 with 300,000 shares of stock outstanding. On January 1, 2010, the firm issued 40,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 25 percent. a. Compute earnings per share for the year 2009. b. Compute earnings per share for the year 2010. 2-2. Solution: Bettis Bus Company a. Year 2009 Earnings per share = Earnings after taxes Shares outstanding = $600,000 = $2.00 300,000 b. Year 2010 2-4
  • 2. Chapter 02: Review of Accounting Earnings after taxes  $600,000  1.25  $750,000 Shares outstanding  300,000  40,000  340,000 Earning per share  $750,000  $2.21 340,000 3. a. Gross profit (LO1) Hillary Swank Clothiers had sales of $360,000 and cost of goods sold of $244,800. What is the gross profit margin (ratio of gross profit to sales)? b. If the average firm in the clothing industry had a gross profit of 35 percent, how is the firm doing? 2-3. Solution: Hillary Swank Clothiers a. Sales ............................................................ $360,000 Cost of goods sold ................................ 244,800 Gross Profit ................................... $115,200 Gross Profit Margin  Gross Profit $115,200 = 32% Sales $360,000 b. With a gross profit 32 percent, the firm is under-performing the industry average of 35 percent. 4. Operating Profit (LO1) A-Rod Fishing Supplies had sales of $2,000,000 and cost of goods sold of $1,250,000. Selling and administrative expenses represented 8 percent of sales. Depreciation was 5 percent of the total assets of $4,000,000. What was the firm’s operating profit? 2-4. Solution: 2-5
  • 3. Chapter 02: Review of Accounting A-Rod Fishing Supplies Sales .............................................................. $2,000,000 Cost of goods sold ......................................... 1,250,000 Gross Profit............................................... 750,000 Selling and administrative expense* ............. 160,000 Depreciation expense** ................................ 200,000 Operating profit ........................................ $ 390,000 * 8% × $2,000,000 = $160,000 ** 5% × $4,000,000 = $200,000 5. Income statement (LO1) Arrange the following income statement items so they are in the proper order of an income statement: Taxes Earnings per share Shares outstanding Earnings before taxes Interest expense Cost of goods sold Depreciation expense Earnings after taxes Preferred stock dividends Earnings available to common Operating profit stockholders Sales Selling and administrative expense Gross profit 2-5. Solution: Sales -Cost of goods sold Gross profit -Selling and administrative expense -Depreciation expense Operating profit -Interest expense Earnings before taxes -Taxes Earnings after taxes -Preferred stock dividends 2-6
  • 4. Chapter 02: Review of Accounting Earnings available to common stockholders Shares outstanding Earnings per share 6. Income statement (LO1) Given the following information prepare in good form an income statement for the Dental Drilling Company. Selling and administrative expense ........................................ $ 60,000 Depreciation expense ............................................................. 70,000 Sales ....................................................................................... 470,000 Interest expense ...................................................................... 40,000 Cost of goods sold .................................................................. 140,000 Taxes ...................................................................................... 45,000 2-6. Solution: Dental Drilling Company Income Statement Sales .............................................................. $ 470,000 Cost of goods sold ......................................... $ 140,000 Gross Profit............................................... $ 330,000 Selling and administrative expense ............... $ 60,000 Depreciation expense .................................... $ 70,000 Operating profit ........................................ $ 200,000 Interest expense ............................................. $ 40,000 Earnings before taxes ............................... $ 160,000 Taxes ............................................................. $ 45,000 Earnings after taxes .................................. $ 115,000 2-7
  • 5. Chapter 02: Review of Accounting 7. Income Statement (LO1) Given the following information, prepare in good form an income statement for Jonas Brothers Cough Drops. Selling and administrative expense ........................................ $250,000 Depreciation expense ............................................................. 190,000 Sales ....................................................................................... 1,600,000 Interest expense ...................................................................... 120,000 Cost of goods sold .................................................................. 480,000 Taxes ...................................................................................... 165,000 2-7. Solution: Jonas Brothers Cough Drops Income Statement Sales .............................................................. $1,600,000 Cost of goods sold ......................................... 480,000 Gross profit ............................................... 1,120,000 Selling and administrative expense ............... 250,000 Depreciation expense .................................... 190,000 Operating profit ........................................ 680,000 Interest expense ............................................. 120,000 Earnings before taxes ............................... 560,000 Taxes ............................................................. 165,000 Earnings after taxes .................................. $395,000 2-8