14a. The Verifine Department Stores Inc., chief executive


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Assignment is attached. I appreciate your help on my last assignment. Post Test Question Accounting.docx 14a. The Verifine Department Stores Inc., chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the average for the industry. The CEO has given you the company’s income statement and balance sheet as well as the industries average data for retailers. Provided information Verifine Department Stores, Inc. Income Statement Compared with Industry Average Year Ended December 31, 2010 Net sales Cost of goods sold Gross profit Operating expenses Operating income Other expenses Net income Industry Verifine Average $780,000 100.0 % 525,720 65.8 254,280 34.2 162,240 19.7 92,040 14.5 4,680 0.4 $87,360 14.1 % Verifine Department Stores, Inc. Balance Sheet Compared with Industry Average December 31, 2010 Current assets Fixed assets, net Intangible assets, net Other assets Total assets Current liabilities Long−term liabilities Stockholders’ equity Total liabilities and stockholders’ equity Industry Verifine Average $311,880 70.9 % 115,920 23.6 9,660 0.8 22,540 4.7 $460,000 100.0 % $215,280 48.1 % 105,800 16.6 138,920 35.3 $460,000 100.0 % Requirements 1. Prepare a common­size income statement and balance sheet for Verifine. The first column of each statement should present Verifine’s common­size statement, and the second column, the industry averages. 2. For the profitability analysis, compute Verifine’s (a) ratio of gross profit to net sales, (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is Verifine’s profit performance better or worse than the industry average? 3. For the analysis of financial position, compute Verifine’s (a) ratio of current assets to total assets and (b) ratio of stockholders’ equity to total assets. Compare these ratios with the industry averages. Is Verifine’s financial position better or worse than the industry averages? 14b.) Financial Statement Data of Modern Traveler Magazine include the following items (dollars in thousands) Cash Accounts receivable, net Inventories Total assets Short−term notes payable Accounts payable Accrued liabilities Long−term liabilities Net income Common shares outstanding $18,000 $81,000 $183,000 $635,000 $45,000 $104,000 $38,000 $223,000 $70,000 60,000 Requirements 1. Compute Modern Travelers current ratio, debt ratio and earnings per share. Round all ratios to 2 decimal places. 2. Compute the 3 ratios after evaluating the effect of each transaction as follows. Consider each transaction separately. a. b. c. d. Purchased inventory of $44,000 on account. Borrowed $124,000 on a long­term note payable. Issued 6,000 shares of common stock, receiving cash of $108,000. Received cash on account $4,000. 16a) Hummingbird design Inc. is a website design and consulting firm. The firm uses a job order costing system, in which each client is a different job. Hummingbird design traces direct labor, licensing costs, and travel costs directly to each job. It allocates indirect costs to jobs based on predetermined indirect cost allocation rate, computed as a percentage of direct labor costs. Information Given Direct labor hours 7,500 hrs (professional) Direct labor costs (professional) Support staff salaries Computer leases Office supplies Office rent $1,500,000 180,000 46,000 24,000 65,000 Maynard Delightful Dining Chocolates Direct 730 hours labor hours Software licensing costs $2,100 Travel costs 11,000 30 hours $300 — Requirements 1. Compute Hummingbird Design’s predetermined indirect cost allocation rate for 2011. 2. Compute the total cost of each job. 3. If Jacquin wants to earn profits equal to 20% of service revenue, how much (what fee) should it charge each of these 2 clients? 4. Why does Hummingbird design assign costs to jobs? 16b) Sloan manufacturing makes carrying cases for portable devices. It’s cost

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