Plant and Equipment and the Allowance

UCLA-NUS Name: ________________
August 2019 Quiz 2
Please refer to the financial statements of Bed Bath & Beyond (referred to as, BB&B or “the
company”) for fiscal year 2018 which ended on March 2, 2019 in answering the following
questions. Note that there are notes on Property, Plant and Equipment and the Allowance for
Doubtful Accounts following the financial statements.
I. Focus on Balance Sheet Accounts (all dollars in millions except share data)
1. a. What is the amount of credit sales
outstanding as of March 2, 2019 that
management should pursue
collecting? (2 points)
b. What percentage of the total amount
owed by its customers as of March 2,
2019 does the company expect to be
able to collect? (3 points)
1.a. the amount of credit sales outstanding as of march 2, 2019 that
management should pursue collecting is 485.8.
b. the company expect to be able to collect 24.40% of the total
amount owed by its customers as of march 2, 2019.B.
2. In preparing the financial statements
for the third quarter of fiscal 2018,
management recorded a Bad Debt
Expense of $2.5.
How did the recording of the Bad
Debt Expense affect the items shown
on the right? (3 points)
2.
circle the correct response
(i) Accounts Receivable, net increased / decreased / no effect
(ii) Current Ratio increased / decreased / no effect
(iii) Total Liabilities / Total Assets increased / decreased / no effect
3. Refer to Schedule II on page 5 of the
financial statements.
a. Based on the information provided,
what was the total amount of the Bad
Debt Expense for fiscal 2018? (2
points)
b. What was the amount of the
Accounts Receivable written off in
fiscal 2018? (2 points)
c. How would the write off of an
account receivable during fiscal 2018
affect the items shown on the right?
(3 points)
3. a. the total amount of the bad debt expense for fiscal 2018 is $40.
b. the amount of the account receivable written off in fiscal 2018
is(378-40)=338
c. circle the correct response
(i) Amount of Accounts Receivable expected
to be collected as of March 2, 2019 would be:
higher / lower / the same
(ii) Income from Continuing Operations would be:
higher / lower / the same
(iii) Quick Ratio would be: higher / lower / the same
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4. Prepaid Expenses reported on the Balance
Sheet declined from $156.0 to $90.0
from the end of fiscal year 2017 to the
end of fiscal year 2018. A note reveals
that during fiscal year 2018, BB&B
prepaid for an insurance policy in the
amount of $34.0 and for leases in the
amount of $50.0. Assuming that there
was just one other transaction during the
year, what was it and what was the
associated dollar amount? (4 points)
4.. there are just one other transaction during the year,
(156+34+50)=240
Therefore, (240-90)=150
So, 150 was the associated dollar amount in prepaid expenses
reported on the balance sheet.
5. BB&B bought 1000 shares of Tesla stock
in early December for $360 a share. By
December 31, the share price had fallen
to $300.
a. In accounting for this, what accounts will
be affected on the Balance Sheet, Income
Statement and Cash Flow Statement and
by what amount? (Use + to indicate an
increase and – to indicate a decrease. For
example, if Cash goes up by 10, you
would write Cash +10.) (4 points)
5.
Income Statement
Balance Sheet
In tesla stock accounts will be affected on the balance sheet that is
(1000*360)=3,60,000
Cash Flow Statement
(1000+360-300)=1060.
6. BB&B failed to make an adjusting entry
to record interest owed of $5.5 on an
outstanding loan. By failing to record
this, how would the items on the right be
impacted? (3 points)
6.
circle the correct response
(i) Current Ratio increased / decreased / no effect
(ii) Prepaid Expenses increased / decreased / no effect
(iii) Cash Flow from Operating Activities
increased / decreased / no effect
(iv) Operating Income Expenses increased / decreased / no effect
7. a. Is BB&B liquid as of March 2, 2019?
Justify your answer using appropriate
ratios. (3 points)
b. Is there anything that would cause you to
have concerns about its liquidity?
Explain? (2 points)
7.a. liquid ratio= (cash+ account receivable)/current liabilities
=(509+485.8)/2077.6=0.47882. So the liquid ratio is not 1:1 in
BB&B liquid as of march 2, 2019. The company’s liquid condition
is in stable condition as it able to pay current liabilities using its
current assets.
b. No, as the liquid asset conditions is in favorable compare into
current liabilities so therefore no issues regarding the liquidity of
the company.
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