ACC102 Written Assignment 2

Accounting 102 OL
Written Assignment 2

Complete the following end-of-chapter exercises and problem, and submit your answers to your mentor.
Chapter 14:
- Exercise 14.1, page 662
- Exercise 14.2, page 662
- Problem 14.6A, page 670
Chapter 14:
● (Learning Objective 1)Exercise 14.1, page 662 (Percentage Changes)
Selected information taken from the financial statements of Maxum Company for two successive years follows. You are to compute the percentage change from 2010 to 2011 whenever possible. Round all calculations to the nearest whole percentage.

2011
2010
a.
Accounts receivable
$
126,000
160,000
b.
Marketable securities

0
250,000
c.
Retained earnings

80,000
-80,000
d.
Notes receivable

120,000
0
e.
Notes Payable

870,000
800,000
f.
Cash

84,000
80,000
g.
Sales

970,000
910,000

Solution:

●(Learning objective 4, 5 and 7) Exercise 14.2, page 662 (Trend Percentages)
Compute trend percentages for the following items taken from the financial statements of Lopez Plumbing over a five-year period. Treat 2007 as the base year. State whether the trends are favorable or unfavorable. (Dollar amounts are stated in thousands)

2011
2010
2009
2008
2007

Sales
81,400
74,000
61,500
59,000
50,000

Cost of goods sold
58,500
48,000
40,500
37,000
30,000

Solution:

Lopez Plumbing
Trend Analysis (Base Year 2007) (Dollar Amounts Stated in Thousands)

2011
2010
2009
2008
2007
Sales
$81,400
$74,000
$61,500
$59,000
$50,000
Cost of goods sold
58,500
48,000
40,500
37,000
30,000

Trend Percentages
2011
2010
2009
2008
2007
Sales
163%
148%
123%
118%
100%
Cost of Goods Sold
195%
160%
135%
123%
100%

●(Learning objective 4) Problem 14.6A, page 670 Financial Statement Analysis
Shown below is selected information from the financial statements of Downing, Inc. , a retail furniture store.

Instructions:
a. Explain how the interest expense shown in the income statement could be $84,000, when the interest payment appearing in the cash flows is only