Question

Required (dollars are in thousands):

1. Complete the blank cells in the first table in the Excel document on D2L to determine what the company's accounting records look like after you made the journal entries as part of the CFO's special project. Note that when you made the journal entry, the Property and Equipment, Net account accumulated the “magic” numbers each quarter. For example, in Q1 Year 1 the entry to Property and Equipment, Net account results in a balance of $38,000 plus $900 or $38,900. In Q2 Year 1 the amount would be $33,000 plus $900 from the prior quarter plus another $500 for the current quarter or $34,400 and so on. Included in your workbook spreadsheet are the adjustment amounts for each of the 5 quarters so you can refer to those cells when doing your calculations. Also note the operation expenses will be reduced each period by the amount capitalized in that period. For example, in Q1 Year 1 operating expenses would be reduced by the $900 and in Q2 Year 2 operating expenses would be reduced by $500.

2. Complete the second table in the Excel document on D2L using the before the magic entry numbers. You will need to compute the fixed asset turnover ratio (rounded to three decimal places) for the periods ended Q2–Q4 of year 1 and Q1 of year 2. Note you can’t answer this for Q1 of Year 1 because you don’t have beginning Property and Equipment, Net. For these same 4 quarters also calculate the net profit margin before the magic entry.

Magic entry amounts by quarter	Q1 Year 1		Q2 Year 1		Q3 Year 1		Q4 Year 1		Q1 Year 2
Amounts in thousands of US dollars	900		500		700		1,000		900
Question #1 (fill in the blank cells)
	Q1 Year 1		Q2 Year 1		Q3 Year 1		Q4 Year 1		Q1 Year 2
	(March 31)		(June 30)		(Sept 30)		(Dec 31)		(March 31)
Amounts in thousands of US dollars	Before your magic entry	After your magic entry	Before your magic entry	After your magic entry	Before your magic entry	After your magic entry	Before your magic entry	After your magic entry	Before your magic entry	After your magic entry
Property & Equipment, net	$38,000		$33,000		$35,000		$36,000		$37,000
Sales Revenue	9,000		9,100		8,900		8,700		8,800
Operating Expenses	8,000		8,500		8,600		8,900		8,200
Income from Operations (before taxes)	1,000		600		300		(200)		600
Question #2 (fill in the blank cells)
	Q2 Year 1	Q3 Year 1	Q4 Year 1	Q1 Year 2
Fixed Asset Turnover before the magic entries using average Property and Equipment, Net, across the applicable quarters
Net profit margin before the magic the entries (une income from operations before taxes divided by sales)

Answer 1

FA turnover ratio= Net Annualised Sales for Quarter / ((Opening Net Fixed Assets+Closing Net Fixed Assets)/2)

Magic entry amounts by quarter	Q1 Year 1		Q2 Year 1		Q3 Year 1		Q4 Year 1		Q1 Year 2
Amounts in thousands of US dollars	900		500		700		1,000		900
Question #1 (fill in the blank cells)
	Q1 Year 1		Q2 Year 1		Q3 Year 1		Q4 Year 1		Q1 Year 2
	(March 31)		(June 30)		(Sept 30)		(Dec 31)		(March 31)
Amounts in thousands of US dollars	Before your magic entry	After your magic entry	Before your magic entry	After your magic entry	Before your magic entry	After your magic entry	Before your magic entry	After your magic entry	Before your magic entry	After your magic entry
Property & Equipment, net	$38,000	$38,900	$33,000	$34,400	$35,000	$37,100	$36,000	$39,100	$37,000	$41,000
Sales Revenue	9,000	9,000	9,100	9,100	8,900	8,900	8,700	8,700	8,800	8,800
Operating Expenses	8,000	7,100	8,500	8,000	8,600	7,900	8,900	7,900	8,200	7,300
Income from Operations (before taxes)	1,000	1,900	600	1,100	300	1,000	-200	800	600	1,500
Question #2 (fill in the blank cells)
	Q2 Year 1	Q3 Year 1	Q4 Year 1	Q1 Year 2
Fixed Asset Turnover before the magic entries using average Property and Equipment, Net, across the applicable quarters	1.025	1.047	0.980	0.924
Net profit margin before the magic the entries (une income from operations before taxes divided by sales)	6.59%	3.37%	-2.30%	6.82%