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Assignment Exercise 10–1: Components of Balance Sheet and Statement of Net Income
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Identify the following MHS balance sheet components. List the name of each component and its amount(s) from the appropriate MHS financial statement.
Current Liabilities
Total Assets
Income from Operations
Accumulated Depreciation
Total Operating Revenue
Current Portion of Long-Term Debt
Interest Income
Inventories
Assignment Exercise 10–2: Components of Balance Sheet and Income Statement
Refer to the Metropolis Health System (MHS) balance sheet and statement of revenue and expense in Chapter 28’s MHS Case Study. Patient accounts receivable of $7,400,000 is shown as net of $1,300,000 allowance for bad debts (8,700,000 − 1,300,000 = 7,400,000).
What percentage of gross accounts receivable is the allowance for bad debts?Assignment Exercise 10–3: Components of Balance Sheet and Income Statement
Refer to the Metropolis Health System (MHS) balance sheet and statement of revenue and expense in Chapter 28’s MHS Case Study. Property, plant, and equipment of $19,300,000 is shown as “net,” meaning net of the reserve for depreciation. If the $19,300,000 is reduced by $200,000 (meaning the reserve for depreciation has risen), what happens on the income statement?
If the reserve for depreciation has risen, that is the $19,300,000 is reduced by $200,000, it would mean that the net income would be lower. A higher depreciation lowers operating income and this would be reflected on the income statement.
Assignment Exercise 11–1: Liquidity Ratios
Refer to the Metropolis Health System (MHS) case study in Chapter 28.
Set up a worksheet for the liquidity ratios.The liquidity ratios are
- Compute the four liquidity ratios using the Chapter 28 MHS financial statement
Assignment Exercise 11–2: Solvency Ratios
Refer to the Metropolis Health System (MHS) case study in Chapter 28.
Set up a worksheet for the solvency ratios.- Compute the solvency ratios using the Chapter 28 MHS financial statements
Assignment Exercise 11–3: Profitability Ratios
Refer to the Metropolis Health System (MHS) case study in Chapter 28.
Set up a worksheet for the profitability ratios.The profitability ratios are: –
Compute the profitability ratios using the Chapter 28 MHS financial statementsAssignment Exercise 12–1: Unadjusted Rate of Return
Metropolis Health Systems’ Laboratory Director expects to purchase a new piece of equipment. The assumptions for the transaction are as follows:
Compute the unadjusted rate of return using the original investment amount.
Compute the unadjusted rate of return using the average investment method.Assignment Exercise 12–2: Finding the Future Value (with a Compound Interest Table)
Compute how much money will be in the account at the end of four more years. (Use the compound interest table found in Appendix 12-B.)
Assignment Exercise 12–3: Finding the Present Value (with a Present-Value Table)
Part 1—Dr. John Whitten is still figuring out his equipment fund. According to his calculations he needs $250,000 to be accumulated six years from now. John is now trying to find the present value of the $250,000. He continues to assume an interest rate of 5%.
Compute the present value of $250,000 accumulated fifteen years from now. Assume an interest rate of 5%. (Use the Present-Value Table found in Appendix 12-A at the back of this chapter.)
Part 2—John doesn’t like the answer he gets. What if he can raise the interest rate to 7%? How much difference would that make?
Compute the present value of $250,000 accumulated fifteen years from now assuming an interest rate of 7%.
Compare the difference between this amount and the present value at 5%.
Assignment Exercise 12–4: Computing an Internal Rate of Return
Dr. Whitten has decided to purchase equipment that has a cost of $60,000 and will produce a pretax net cash inflow of $30,000 per year over its estimated useful life of six years. The equipment will have no salvage value and will be depreciated by the straight-line method. The tax rate is 50%. Determine Dr. Whitten’s approximate after-tax internal rate of return.
Assignment Exercise 12–5: Payback Period
Based on the calculations, he should purchase Machine B. It would take approximately two and a half years (2.4 years) for the investment made in Machine B to be equal to the amount of cash originally spent buying the machine. It would take Machine A 3 years to pay back the money spent to purchase it.
