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              Accounting Project
                  Case Study


               Crystal Head


Case Study 2-51

  1. A transaction is an external event transferring something of value between

     two or more entries. When you do a transaction you will give up or receive

     value from the exchange.

  2. Transactions with cash consequences you are giving customers a credit that

     they will pay you in 30 days. Some customers might not pay you, so then

     you have to write that customer off and lose money. Transactions involving

     cash you receive your money up front; you won’t lose out.

  3. Accrual is concerned future receipts and payments. Deferral is concerned

     with past receipts and payments. Accrual is the accounting process that

     looks at gains and loss on liabilities that are going to accrue. Deferral you

     receive payments in advance, and recognize liability from current cash

     receipts. Examples of Deferrals are prepaid and unearned accounts.

     Examples of Accrual are purchases and sales of goods.
Case Study 7-71

  1. Average receivables 2,840+2,575/2=2,708

     Average receivable                            2,708

     Net Sales                                   344,992

     Average daily sales                             945

     Average collection period                   2.86 days
     (average receivable/average daily sales)

  2. Take Receivables/total assets gives you the percentage for receivables


  3. Memberships and other income/Net sales equals revenue percentage

Case Study 9-97

  1. Gasoline Sales       $ 1,562.5              190.4
     Cost of Goods Sold     -1,372.1             1562.5 = 12%
     Gross Profit         $    190.4

     Merchandise Sales     $ 1,710.3            517.7
     Cost of Goods Sold      1,192.6            1,710.3 = 30%
     Gross Profit          $ 517.7

     When you use your credit card to pay for gas they get charged a fee. This
     takes away from the gross profit. They made more money when people
     carried cash to pay for things because it helped keep the cost down.

  2. Gasoline Cost of Goods Sold 1,372.1
     End of Year Inventory          26.6 = 51.58 time’s inventory turnover

     Merchandise Cost of Goods Sold 1,710.3
     End of Year Inventory             93.9 = 18.21 time’s inventory turnover

  3. Number of Days Sales in Inventory     365/inventory turnover
     Gasoline       7.076
     Merchandise    20.04

  4. 1988. When you subtract Cost of Goods Sales from the total sales the 1988
     sales are higher.

  5. Take total sales x 30%. 3,272.8 x 30% = 981.84
     Subtract 981.84 from 3,272.8 = 2,290.96
     Subtract 2,290.96 from 2,554 = 263.04. Estimated gross profit
Case Study 3-60

1. Debt ratio (total liabilities/total assets)
   Total Liabilities 26,299
   Total Assets      26,299 = 1.00

   Current ratio (current assets/current liabilities)
   Current Assets        2,937
   Current Liabilities   2,917 = 1.01

   Long-term debt as a percentage of total capitalization
   8,298/16,515 = 50%

   Long-term debt as a percentage of net plant
   8,298/18,445 = 45%

2. The most informative—I think the Long-term debt vs the net plant is. It
   gives you an idea of how much your debt is compared to the assets you
   have invested in your plant. If you have a percentage lower than 50%
   the banks will probably give you a loan; whereas, if the percentage is
   above 50% the bank will have to look everything over more closely.
   The least informative—I think is the Debt ratio because everything is
   balanced between assets and liabilities. We can’t see the difference
   between the two of them. The bank can’t tell if you have more assets or
   liabilities in the company. This is a harder way to look at for a loan.
         Case Study 4-62

         1. Comprehensive income is greater because you add translation
            adjustments, gain of securities, and minimum pension liability, you
            also subtract net loss on derivatives from the net income amount.
            That’s why the comprehensive income is greater than the net
         2. The foreign currencies got stronger then the U.S. dollar. The increase
            was due to the ebb and the way the worldwide economy has flowed.
         3. Coca-Cola’s available-for-sale securities portfolio had a $43 million
            increase. This increase is not reported in the net income, but as part
            of the comprehensive income. They are recorded as a “unrealized”
            gain or loss also called paper gain or loss.

Case study 5-65

   1. The cash balance for 2006 is 4,525.
      The paid in capital from common stock balance for 2006 is 5,251.
      The Retained Earnings balance for 2006 is 31,287.
      The treasury stock balance for 2006 is 19,623.

   2. The Coca-Cola Company is buying back stock that they put out in circulation
      when they were having a rough time. Treasury Stock compared to
      Issuances of stock has a ratio of 9 to 1. They want to keep their stock for a
      later time.

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