1. Mark Corp. uses the allowance method for bad debts.

During 2008, Mark charged

P 30,000 to bad debts expense, and wrote off P 25,200 of uncollectible accounts receivable.
These transactions resulted in a decrease in working capital of?
 2008 2007
Cash 10,000.00 80,000.00
Marketable Securities 30,000.00 10,000.00
A/R, Net 50,000.00 150,000.00
Inventories 90,000.00 150,000.00
Land and Building 340,000.00 360,000.00
Notes Payable, Trade 70,000.00 110,000.00
Accounts Payable, Trade 20,000.00 40,000.00
Mortgage Payable 270,000.00 280,000.00

Cash Sales 1,800,000.00 1,600,000.00

Credit Sales 500,000.00 800,000.00
Cost of Sales 1,000,000.00 1,400,000.00

1. Quick Ratio
2. Current Ratio
3. Receivable Turnover
4. Inventory Turnover
Preferred Stock, Non- Convertible, 8%, Par 100
Common Stock
Retained Earnings
Dividends Paid on preferred stock for the year ended
Net Income

Compute the Return on Common Equity

Net Income (CS) / Common Equity*

* Common Stock + Retained Earnings

 2007 2008
125,000.00 125,000.00
300,000.00 400,000.00
75,000.00 185,000.00
10,000.00 10,000.00
60,000.00 120,000.00

120,000 - 10,000 / (375,000 + 585,000) /2

Total Equity 100,000,000.00
Less: Preferred Shares - 25,000,000.00
Common Stock 75,000,000.00
Book Value at December 31, 2008 12.00
Quaoted Market value on Stock Exchange on December 31, 2008 9.00
Earnings for 2008 3.00
Par Value 2.00
Dividends for 2008 1.00

What is the Price- Earnings Ratio?

10% Cumulative preferred stock, par and liquidation value of P 100,
issued and outstanding, 1,000 shares
Common Stock, par value P 5, authorized 20,000 shares,
issued and outstanding, 10,000 shares

Net Income for the year ended December 31, 2008 was P 450,000,
but no dividends were declared.

Compute book value per share.

Book Value per Share = Total Equity - Preferred Equity / Shares Issued and Outstanding
= 600,000 - (100,000 + 10,000) / 10,000 shares
Php 49 per Share
100,000.00

50,000.00
Sales 1,000,000.00
Variable Cost 600,000.00
Traceable Fixed Cost 100,000.00
Average Invested Capital 200,000.00
Imputed Interest Rate 0.15%

1. How much is the residual income?

2. How much is the return on investment?

Residual Income = Operating Income - Imputed Interest

Return on Investment = Operating Income / Ave. Investment