ACC 406 Lecture Notes - Lecture 9: Whiteboard, Retained Earnings

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cerisefish402

10 Dec 2015

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This was an in-class exercise (not in the text book) that started and ended with a balance sheet. Item 2 in the given information tells you that projected sales for qu1, 2014 is. 1000 units, so 0. 1 x 1000 units = 100 units is therefore projected for the end of 2013, which is also the. You"ll see that projected purchases for qu. 4 are ,100. Item 4 in the given information tells you that half of purchases are paid in the quarter of purchase, the remaining half the following quarter. So at year end the balance sheet will show the outstanding 1/2 x ,100 or ,550. Just add in the 2014 projected income of ,720. 10-45 golding company (parts 1 and 2 only)

Related Questions

The asset side of the 2015 balance sheet for Leggett & Plattis below. The company reported cost of sales of $2,998.8 million in2015 and $2,959.4 million in 2014. Use this information to answerthe requirements.

LEGGETT & PLATT, INCORPORATED Consolidated Balance Sheets
December 31	2013	5	2014
(in millions)
Cash and cash equivalents	$ 272.7		$ 359.1
Trade and other receivables, net of allowance of $15.2 and $19.2	467.4		446.2
Inventories:
Finished goods	270.5		275.7
Work in process	59.3		55.0
Raw materials and supplies	239.4		229.4
LIFO reserve	(73.3	)	(71.1	)
Total inventories, net	495.9		489.0

Other current assets	45.7		44.8
Total current assets	1,281.7		1,339.1

Machinery and equipment	1,184.5		1,161.7
Buildings and other	612.2		603.2
Land	44.5		45.3
Total property, plant and equipment	1,841.2		1,810.2
Less accumulated depreciation	1,266.6		1,237.4
Net property, plant and equipment	574.6		572.8
Goodwill	926.8		991.5
Other intangibles, less accumulated amortization	203.4		206.3
Sundry	121.6		145.2
TOTAL ASSETS	$3,108.1		$3,254.9

Required:

a.	Calculate common-sized inventories for both years and comment onany differences that you note. Given that the company is in thefurniture manufacturing industry, does this ratio seemappropriate?
b.	Compute inventory turnover for both years and interpret anychange. At December 31, 2013, Total inventories, net were $441million.
c.	Leggett & Platt uses LIFO for at least some of its inventorymethod. What would the company have reported as inventory in 2015and 2014 if the company had used the FIFO method? At December 31,2013, the LIFO reserve was $(85.7) million.
d.	Recalculate cost of goods sold (COGS) under the FIFO method.
e.	Recompute the inventory turnover ratios for 2015 and 2014 underthe FIFO method. What difference do you notice between theFIFO-based ratios and the LIFO-based ratios?

coffeeeel7

Ralph and InventoryManagement

During discussions, Ralph, our hospital stockroom managergestures proudly at the ceiling-high stocked warehouse and statesthat he has never had to turn away any request for any item. Inother words, he is providing his users 100% CSL (cycle servicelevel). We ask him what the average lead times are for the mostused meds and he responds âwithin 3 days for most itemsâ. He thengoes quiet, as the implications of what he has just said sink in âwhy keep so much inventory of everything when replenishments areonly 3 days away? Well, he says defensively, after a pregnantpause, âAs I said, I have never had to turn any user away and youdonât know how wildly variable demand can be in a hospitalâ. Sure,we think, but not so variable as to call for a warehouse full ofmed items! Letâs help Ralph out.

- Pick a few âAâ or vital SKUs from inventory,based on importance in terms of sales, profits, stockoutconsequences to customers, or cost of holding.

We pick a high cost and vital item, heart stents, with uncertaindemand.

- Find out the current formal inventorypolicies, if any, in use for those items (and when these wereset).

Ralph uses a continuous inventory management system forstents:

Order size: 300 units per order

ROP: 200 units (inclusive of safety stock of 50 units), i.e.,order whenever the inventory position falls to 200 units

- Find out whether these policies are beingfollowed.

Ralph confirms that he inherited these policies and followsthem.

- Ascertain current operational inventorymanagement parameters.

Ralph provides the following estimates:

Holding cost H = 25% of item cost

Ordering cost S = $100/order

Current supply lead times LT: 3 days stable

Average daily demand d: 50 units/day

Standard deviation of daily demand Ï_d:3units

Actual customer cycle service level: 100%

Item cost: $1000/unit

Assume 365 working days in a year

1. Develop recommended order size (EOQ) and aROP for the selected SKU using the above current operationalinventory management parameters. Maintain CSL at 100%.

a) Recommended EOQ = ? units

b) Recommended ROP = ? units

EOQ = â (2*D*S)/H; where D = Annualdemand; S = Cost of placing one order; H = Cost of holding 1 unitin inventory for 1 yr

ROP = d * Leadtime + Safety Stock

Safety Stock = z value correspondingto CSL of 100% * Ï_d âLT;

where d is average daily demand,Ï_{d =} standard deviation of demand, LT = leadtime

# of orders/yr= D/EOQ (order qty)

2. Compute and show the differences inrecommended order size, ROP, and total costs for the selected SKUvs. current figures.

Current System

Total cost = TotalHolding Cost + Total Ordering Cost

= Avg Inventory * H + # of Orders/yr *S

= Avg Inventory * H + (D/Order Qty) *S

= ?

Average Inventory = ? units

Recommended System

Total cost = ?

Average Inventory = ? units

Total cost saving with recommendedsystem comparted to current system= $?

Capital investment avoided = ? (fromreducing average inventory @$1000/unit)

3. Can we do even better?

a) If Ralph could reduce the current lead time of 3 days to 2days without significant cost increases:

Revised ROP = ? units

Reduced safety stock = ? units

Reduced average inventory = ?units

b) If Ralph could reduce the cost of placing an order (S) to say$50 instead of the current $100/order by migrating the orderingprocess to a web based system:

Revised EOQ = ? units

Which means that:

Revised average inventory = ?units

and,

Revised total costs = $?

c) Anything else Ralph can do tolower the Total Cost?

PLEASE SHOW EVERY STEP OFTHIS PROBLEM PRECISILY WHEN SOLVED SO I CAN UNDERSTAND THE STEPS. IWOULD REALLY APPRECIATE IF THE SOLUTIONS WOULD BE SHOWN OUT STEP BYSTEP

graysheep764

PROBLEM 14-7 Prepare a statement of Cash Flows (L014-1, L014-2] Comparative financial statements for Weaver Company follow Weaver Company Comparative Balance Sheet December 31, 2014 and 2013 2014 2013 Assets Cash ........ 340 484 Accounts receivable ................. Inventory ........................... Prepaid expenses ..................... Total current assets .................... Property, plant, and equipment ........... Less accumulated depreciation ......... Net property, plant, and equipment ....... Long-term investments .......... Total assets ..... *******41118 8801981123382982513 $ Liabilities and Stockholders' Equity Accounts payable ... Accrued liabilities Income taxes payable ......... Total current liabilities ........ Bonds payable .................. Total liabilities ........................ Common stock ....................... Retained earnings ................... Total stockholders' equity .............. Total liabilities and stockholders' equity .... 310 700 210 107 Weaver Company Income Statement For the Year Ended December 31, 2014 $800 500 300 213 Sales ......... Cost of goods sold .................. Gross margin ........... Selling and administrative expenses ..... Net operating income ....... Nonoperating items: Gain on sale of investments ......... Loss on sale of equipment .......... Income before taxes ................. Income taxes . . . . . . . . . ... Net income ...................... During 2014, Weaver sold some equipment for $20 that had cost $40 and on which there was accumulated depreciation of $16. In addition, the company sold long-term investments for $10 that had cost $3 when purchased several years ago. A cash dividend was paid during 2014 and the company repurchased $40 of its own stock. Weaver did not retire any bonds dur- ing 2014 Required: 1. Using the indirect method, determine the net cash provided by operating activities for 2014. 2. Using the information in (1) above, along with an analysis of the remaining balance sheet accounts, prepare a statement of cash flows for 2014.

ACC 406 Lecture Notes - Lecture 9: Whiteboard, Retained Earnings

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