The Impact of Management Decisions and Other Topics – balance sheet and income statement of Teramoto Corporation ..

Samsung Electronics Company Assignment – Framework for Executing Strategy

July 12, 2018

International Business Assignment Exercises

July 12, 2018

The Impact of Management Decisions and
Other Topics

The most recent balance sheet and income statement of Teramoto
Corporation appear below:
Comparative Balance Sheet

Ending Balance
Beginning Balance
Assets:
Cash and cash equivalents $43 $35
Accounts receivable 53 59
Inventory
73 69
Plant and equipment 582 490
Less accumulated depreciation 301 286
Total assets
$450 $367
Liabilities and stockholders’ equity
Accounts payable
$57
$48
Wages payable
21
18
Taxes payable 15 13
Bonds payable
21
20

Deferred taxes 20 21
Common stock
55
50
Retained earnings 261 197
Total liabilities and stockholders’ equity $450 $367
Income Statement
Sales
$893—Cost of good sold $587- -Gross margin $306–Selling and
administrative expense $189-
Net operating income$ 117– Income taxes
35– Net income $82
1. The
net cash provided by (used by) investing activities for the year was

A. $92. B. ($92).
C. $77. D. ($77).
2.
Cridwell Company’s selling and administrative expenses for last year
totaled $210,000. During the year, the company’s prepaid expense account
balance increased by $18,000, and accrued liabilities increased by $12,000.
Depreciation charges for the year were $24,000. Based on this information,
selling and administrative expenses adjusted to a cash basis under the direct
method on the statement of cash flows would be
A.
$180,000. B. $240,000. C. $192,000. D.
$228,000.

3-The most
recent balance sheet and income statement of Teramoto Corporation appear
below:

Comparative Balance Sheet

Ending

Balance

Beginning
Balance

Assets:
Cash and cash equivalents
Accounts receivable
Inventory
Plant and equipment
Less accumulated depreciation
Total assets

$43
53
73
582
301
$450

$35
59
69
490
286
$367

Liabilities
and stockholders’ equity
Accounts payable
Wages payable
Taxes payable
Bonds payable
Deferred taxes
Common stock
Retained earnings
Total liabilities and stockholders’ equity

$57
21
15
21
20
55
261
$450

$48
18
13
20
21
50
197
$367

Income Statement
Sales
Cost of good sold
Gross margin
Selling and administrative expense
Net operating income
Income taxes
Net income

$893
587
306
189
117
35
$82

Cash
dividends were $18.

3. The
net cash provided by (used by) financing activities for the year was

A. $1. B. ($18). C. ($12). D. $5.

4-Financial statements for Larkins
Company appear below:
Larkins Company
Statement of Financial Position December 31, Year 2 and Year 1 (dollars in
thousands)

Year
2

Year
1

4-Current
assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net

$180
210
130
50
570

1,540

$180
180
120
50
530

1,480

Total
assets

$2,110

$2,010

Current
liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity

$100
60
90
250

480
730

120
180
240
840
1,380
$2,110

$130
60
120
310

500
810

120
180
240
660
1,200
$2,010

Larkins
Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)

Sales (all
on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income

$2,760
1,930
830
330
500
50
450
135
$315

Dividends during Year 2 totaled $135 thousand, of which
$12 thousand were preferred dividends. The market price of a share of common
stock on December 31, Year 2 was $150.
4. Larkins
Company’s dividend payout ratio for Year 2 was closest to:
A. 40.6%
B. 24.6% C. 42.9% D. 14.8%

5. The Clemson Company reported the following results last
year for the manufacture and sale of one of its products known as a Tam.

Sales
(6,500 Tams at $130 each)

$845,000

Variable
cost of sales

390,000

Variable
distribution costs

65,000

Fixed
advertising expense

275,000

Salary of
product line manager

25,000

Fixed
manufacturing overhead

145,000

Net
operating loss

$(55,000)

Clemson Company is trying to determine whether to discontinue the manufacture
and sale of Tams. The operating results reported above for last year are
expected to continue in the foreseeable future if the product isn’t dropped.
The fixed manufacturing overhead represents the costs of production
facilities and equipment that the Tam product shares with other products
produced by Clemson. If the Tam product were dropped, there would be no
change in the fixed manufacturing costs of the company.
Assume that discontinuing the manufacture and sale of Tams will have no
effect on the sale of other product lines. If the company discontinues the
Tam product line, the change in annual operating income (or loss) should be a
A. $65,000 decrease. B. $70,000 increase. C. $55,000 decrease. D$90,000decrease.

6. Fonics
Corporation is considering the following three competing investment
proposals:

Aye

Bee

Cee

Initial
investment required

$62,000

$74,000

$95,000

Net present
value

$10,000

$8,000

$12,000

Internal
rate of return

15%

17%

18%

Using the project profitability
index, how would the above investments be ranked (highest to lowest)?

A. Cee, Bee, Aye B. Aye, Bee, Cee C. Aye, Cee, Bee D. Bee, Cee, Aye

7. Which of the following would be classified
as a financing activity on the statement of cash flows?

A. Dividends
received on investments in another company’s common stock
B. Dividends paid to shareholders of
the company on the company’s common stock
C. Interest received on investments in another company’s
bonds
D. Interest paid on bonds issued by the reporting company

8. (Ignore income
taxes in this problem.) The following data pertain to an investment:

Cost of the investment $18,955. Life of the project 5
years. Annual cost savings $5,000
Estimated salvage
value $1,000. Discount rate 10%
The net present
value of the proposed investment is
A. $621. B. $0. C. $3,355. D. $(3,430).

9. A project
profitability index greater than zero for a project indicates that
A. the discount rate is less than the internal rate of return.

B. the project is unattractive and shouldn’t be pursued.
C. the company should reevaluate its discount rate.
D. there has been a calculation error.

10. Centerville
Company’s debt-to-equity ratio is 0.60 Total assets are $320,000, current
assets are $170,000, and working capital is $80,000. Centerville’s long-term
liabilities must be
A. $120,000. B. $80,000. C. $90,000. D. $30,000.

11. Kava Inc.
manufactures industrial components. One of its products, which is used in the
construction of industrial air conditioners, is known as K65. Data concerning
this product are given below:
Per Unit
Selling price $180–Direct
materials $29–Direct labor $5—Variable manufacturing overhead $4
Fixed manufacturing
overhead $21—-Variable selling expense $2â
Fixed selling and administrative expense $17
The above per unit data are based on annual production of
4,000 units of the component. Direct labor can be considered to be a variable
cost. (Source: CMA, adapted)
The company has received a special, one-time-only order
for 500 units of component K65. There would be no variable selling expense on
this special order, and the total fixed manufacturing overhead and fixed
selling and administrative expenses of the company wouldn’t be affected by
the order. Assuming that Kava has excess capacity and can fill the order
without cutting back on the production of any product, what is the minimum
price per unit on the special order below which the company shouldn’t go?
A. $59 B. $38 C. $180 D. $78

12-Financial statements for Larkins Company appear
below:
Larkins Company Statement of Financial Position December 31, Year 2 and
Year 1 (dollars in thousands)

Year 2

Year 1

Current
assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net

$180
210
130
50
570

1,540

$180
180
120
50
530

1,480

Total
assets

$2,110

$2,010

$100
60
90
250

480
730

120
180
240
840
1,380
$2,110

$130
60
120
310

500
810

120
180
240
660
1,200
$2,010

Larkins
Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)

Sales
(all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income

$2,760
1,930
830
330
500
50
450
135
$315

Dividends during Year 2 totaled
$135 thousand, of which $12 thousand were preferred dividends. The market
price of a share of common stock on December 31, Year 2 was $150.
12- Larkins Company’s earnings per share of
common stock for Year 2 was closest to:
A. $25.00. B. $17.50. C. $7.21. D. $16.83.

13. Brittman
Corporation makes three products that use the current constraint-a particular
type of machine. Data concerning those products appear below:

Selling
price per unit

$183.57

$207.74

$348.15

Variable
cost per unit

$144.42

$155.04

$269.50

Minutes on
the constraint

2.90

3.40

5.50

Assume that sufficient constraint
time is available to satisfy demand for all but the least profitable product.
Up to how much should the company be willing to pay to acquire more of the
constrained resource?
A. $15.50 per minute B. $13.50 per minute C. $78.65 per unit D. $39.15 per unit

14-The
most recent balance sheet and income statement of Teramoto Corporation
appear below:

Comparative Balance Sheet

Ending
Balance

Beginning
Balance

Assets:
Cash and cash equivalents
Accounts receivable
Inventory
Plant and equipment
Less accumulated depreciation
Total assets

$43
53
73
582
301
$450

$35
59
69
490
286
$367

Liabilities
and stockholders’ equity
Accounts payable
Wages payable
Taxes payable
Bonds payable
Deferred taxes
Common stock
Retained earnings
Total liabilities and stockholders’ equity

$57
21
15
21
20
55
261
$450

$48
18
13
20
21
50
197
$367

Income Statement
Sales
Cost of good sold
Gross margin
Selling and administrative expense
Net operating income
Income taxes
Net income

$893
587
306
189
117
35
$82

The net
cash provided by (used by) operations for the year was

A. $117. B. $52. C. $112. D. $30.

15.
Which of the following would be considered a “use” of cash for
the purpose of constructing a statement of cash flows?
A.
Issuing long-term debt B. Amortizing a
patent
C. Purchasing equipment D. Selling the company’s own common stock to investors
16-Financial statements for Larkins Company appear below:
Larkins Company Statement of Financial Position
December 31, Year 2 and Year 1 (dollars
in thousands)

Year
2

Year
1

Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net

$180
210
130
50
570

1,540

$180
180
120
50
530

1,480

Total assets

$2,110

$2,010

Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity

$100
60
90
250

480
730

120
180
240
840
1,380
$2,110

$130
60
120
310

500
810

120
180
240
660
1,200
$2,010

Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)

Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income

$2,760
1,930
830
330
500
50
450
135
$315

Dividends
during Year 2 totaled $135 thousand, of which $12 thousand were preferred
dividends. The market price of a share of common stock on December 31, Year 2
was $150.
16. Larkins Company’s price-earnings ratio on
December 31, Year 2 was closest to:
A. 6.00
B. 8.57 C. 8.91 D. 20.79
17-Financial statements for Larkins Company appear below:
Larkins Company
Statement of Financial Position
December 31, Year 2 and Year 1
(dollars in thousands)

Year
2

Year
1

Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net

$180
210
130
50
570

1,540

$180
180
120
50
530

1,480

Total assets

$2,110

$2,010

Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity

$100
60
90
250

480
730

120
180
240
840
1,380
$2,110

$130
60
120
310

500
810

120
180
240
660
1,200
$2,010

Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)

Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income

$2,760
1,930
830
330
500
50
450
135
$315

Dividends
during Year 2 totaled $135 thousand, of which $12 thousand were preferred
dividends. The market price of a share of common stock on December 31, Year 2
was $150.. Larkins Company’s book value
per share at the end of Year 2 was closest to:
A. $70.00. B. $10.00. C. $23.33. D. $76.67.
18. Ignore income taxes in this problem.)
Purvell Company has just acquired a new machine. Data on the machine follow:
Purchase
cost $50,000 Annual cost savings
$15,000 Life of the machine 8 years
The company uses straight-line depreciation
and a $5,000 salvage value. (The company considers salvage value in making
depreciation deductions.) Assume cash flows occur uniformly throughout a year.
The
simple rate of return would be closest to
A. 12.5%.
B. 17.5%. C. 30.0%. D. 18.75%.
19-Financial statements for Larkins Company appear below:
Larkins Company Statement of Financial Position December 31, Year 2 and Year 1
(dollars in thousands)

Year
2

Year
1

Current assets:
Cash and marketable securities
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Noncurrent assets:
Plant & equipment, net

$180
210
130
50
570

1,540

$180
180
120
50
530

1,480

Total assets

$2,110

$2,010

Current liabilities:
Accounts payable
Accrued liabilities
Notes payable, short term
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total liabilities
Stockholders’ equity:
Preferred stock, $20 par, 10%
Common stock, $10 par
Additional paid-in capital–common stock
Retained earnings
Total stockholders’ equity
Total liabilities & stockholders’ equity

$100
60
90
250

480
730

120
180
240
840
1,380
$2,110

$130
60
120
310

500
810

120
180
240
660
1,200
$2,010

Larkins Company
Income Statement
For the Year Ended December 31, Year 2
(dollars in thousands)

Sales (all on account)
Cost of goods sold
Gross margin
Selling and administrative expense
Net operating income
Interest expense
Net income before taxes
Income taxes (30%)
Net income

$2,760
1,930
830
330
500
50
450
135
$315

Dividends
during Year 2 totaled $135 thousand, of which $12 thousand were preferred
dividends. The market price of a share of common stock on December 31, Year 2
was $150.
19.Larkins Company’s dividend yield ratio on December 31, Year 2 was closest
to:
A. 4.1%.
B. 4.6%.
C. 5.0%. D. 2.1%.
20. An increase in the market price of a
company’s common stock will immediately affect its
A. earnings per share of common stock.
B.
dividend payout ratio.
C.
debt-to-equity ratio.
D.
dividend yield ratio.