How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask BusinessTutor Your Own Question
BusinessTutor, Bachelor's Degree
Category: Business and Finance Homework
Satisfied Customers: 9866
Experience:  Working towards my MBA degree in Finance (Completed the Foundation Classes with a GPA 4.0)
Type Your Business and Finance Homework Question Here...
BusinessTutor is online now
A new question is answered every 9 seconds

E5-11 (Balance Sheet Preparation) Presented below is the adjusted

Resolved Question:

E5-11 (Balance Sheet Preparation) Presented below is the adjusted trial balance of Kelly Corporation at December 31, 2007.
Debits Credits
Cash $ ?
Office Supplies 1,200
Prepaid Insurance 1,000
Equipment 48,000
Accumulated Depreciation—Equipment $ 4,000
Trademarks 950
Accounts Payable 10,000
Wages Payable 500
Unearned Service Revenue 2,000
Bonds Payable, due 2014 9,000
Common Stock 10,000
Retained Earnings 25,000
Service Revenue 10,000
Wages Expense 9,000
Insurance Expense 1,400
Rent Expense 1,200
Interest Expense 900
Total $ ? $ ?
Additional information:

1. Net loss for the year was $2,500.
2. No dividends were declared during 2007.

Prepare a classified balance sheet as of December 31, 2007.
E24-2 (Post-Balance-Sheet Events) For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose.

______ 1. Settlement of federal tax case at a cost considerably in excess of the amount expected at year-end.
______ 2. Introduction of a new product line.
______ 3. Loss of assembly plant due to fire.
______ 4. Sale of a significant portion of the company’s assets.
______ 5. Retirement of the company president.
______ 6. Prolonged employee strike.
______ 7. Loss of a significant customer.
______ 8. Issuance of a significant number of shares of common stock.
______ 9. Material loss on a year-end receivable because of a customer’s bankruptcy.
______ 10. Hiring of a new president.
______ 11. Settlement of prior year’s litigation against the company.
______ 12. Merger with another company of comparable size.
*E24-5 (Analysis of Given Ratios) Picasso Company is a wholesale distributor of professional equipment and supplies. The company’s sales have averaged about $900,000 annually for the 3-year period 2006–2008. The firm’s total assets at the end of 2008 amounted to $850,000. The president of Picasso Company has asked the controller to prepare a report that summarizes the financial aspects of the company’s operations for the past 3 years. This report will be presented to the board of directors at their next meeting. In addition to comparative financial statements, the controller has decided to present a number of relevant financial ratios which can assist in the identification and interpretation of trends. At the request of the controller, the accounting staff has calculated the following ratios for the 3-year period 2006–2008.

2006 2007 2008
Current ratio 1.80 1.89 1.96
Acid-test (quick) ratio 1.04 0.99 0.87
Accounts receivable turnover 8.75 7.71 6.42
Inventory turnover 4.91 4.32 3.42
Total debt to total assets 51.0% 46.0% 41.0%
Long-term debt to total assets 31.0% 27.0% 24.0%
Sales to fixed assets (fixed asset turnover) 1.58 1.69 1.79
Sales as a percent of 2006 sales 1.00 1.03 1.07
Gross margin percentage 36.0% 35.1% 34.6%
Net income to sales 6.9% 7.0% 7.2%
Return on total assets 7.7% 7.7% 7.8%
Return on stockholders’ equity 13.6% 13.1% 12.7%
In preparation of the report, the controller has decided first to examine the financial ratios independent
of any other data to determine if the ratios themselves reveal any significant trends over the 3-year
(a) The current ratio is increasing while the acid-test (quick) ratio is decreasing. Using the ratios provided,
identify and explain the contributing factor(s) for this apparently divergent trend.
(b) In terms of the ratios provided, what conclusion(s) can be drawn regarding the company’s use of
financial leverage during the 2006–2008 period?
(c) Using the ratios provided, what conclusion(s) can be drawn regarding the company’s net investment
in plant and equipment?
Submitted: 5 years ago.
Category: Business and Finance Homework
Expert:  BusinessTutor replied 5 years ago.

Hello Tiffany


Please click on the following link for the solutions:



P.S. If you like my services, please feel free to direct your future posts to me specifically by typing "For BusinessTutor" at the beginning of your post. Should you choose to do this, please try to allow me 48 hours before the deadline. If you need to meet me online for a timed assignment, please advise me of the date and time (EST) you want me to meet you here and I will. Please make sure you take the length (and number) of the questions into consideration when making your offer to avoid delays in providing solutions.


Thank you

BusinessTutor and 2 other Business and Finance Homework Specialists are ready to help you