Posted: April 11th, 2016

What type of transaction would account for the increase in Halfway’s goodwill in 2012?

Halfway Company: See the attachment for the full information.

1a Compute current ratio for both years.
1b Compute quick ratio for both years.
1c Comment briefly on Halfway’s liquidity position.
1d Identify the chief weakness of current ratio as an analytical tool.
2a Compute days sales in accounts receivable for 2012 and 2011, and comment briefly on the change.
2b Identify two possible causes of the change noted in 2a.
2c For each item in 2b, identify a possible course of action for Halfway to address the situation.
3a Distinguish briefly between accounts payable and accrued liabilities.
3b Give one possible example of each.
4a What is meant by “noncontrolling interest”?
4b Why does this item appear on the 2012 balance sheet, but not 2011?
5a Compute inventory turnover for 2012.
5b Identify two additional important pieces of information you would like to have in order to meaningfully interpret the turnover computed in 5a. Explain briefly.
6a Define “goodwill”.
6b What type of transaction would account for the increase in Halfway’s goodwill in 2012?
6c Explain why goodwill is considered a risky asset when analyzing financial statements.
7a Compute the debt ratio for 2012 and 2011.
7b Compute debt to tangible net worth for 2012 and 2011.
7c Comment briefly on Halfway’s long-term solvency.
8a Halfway had restructuring charges of $200,000 in 2012. Where on the income statement are those charges found?
8b Give an example of the type of cost included in restructuring charges.
9 What amount would you expect to appear on the Statement of Cash Flows as “dividends paid”? Explain.
10 Halfway’s holdings of securities appear in two different places on the balance sheet. What rule is followed in classifying securities under one heading or the other?
11 The only transaction affecting Halfway’s contributed capital was the exercise of stock options. What was the total amount paid to Halfway for these shares?

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