Hello All,
Quiz2 grades have been posted. Below is the general analysis:
Q1
(a) The grade distribution is as follows: 1 mark for writing the title of the balance sheet, e.g., "YWC Repair Shop, Balance Sheet, January 1, 2022." Another mark has been assigned for outlining the general structure of the balance sheet, which includes mentioning current and fixed assets, as well as current and long-term liabilities and owner's equity. The remaining two marks have been assigned for the correctness of each item on the balance sheet. The single most common error was distinguishing between the bank loan that must be paid in the upcoming year and the bank loan in long-term liabilities. Since starting June 30, 2022, the amount of $100K will be paid in quarterly payments; thus, the bank loan amount in the upcoming year is $300,000. The rest of the bank loan in the long-term liability section would be equal to $1,800K - $300K = $1,500K. Some students made an error in calculating the cash in current assets, which is $425. Another point of confusion was owner's equity, which is 3 * $1,200 = $3,600. No marks have been deducted for these last two points, as long as I could follow through with the rest of your solution.
(b) To get the full mark, students should mention the title of the income statement (1 mark) and calculate the net profit (3 marks). To compute the net profit correctly, it is important to first compute the cost of goods sold (COGS) = $200 + $1,300 - $600 = $900 and Depreciation = ($1,400 - $300) / 25 + ($700 - $100) / 10 = $44 + $60 = $104. Then, we can compute the net profit as +sales - wages - COGS - utilities - interest - depreciation - advertisement - property tax.
(c) In this question, 2 points have been assigned for computing cash, 1 point for owner's equity, and 1 point for current liabilities. The most common error was in computing cash, as many items should have been considered together. A frequent mistake was not including the amount of the bank loan (from the current liabilities in part(a)) when calculating the end-of-year cash.
(d) In this part, 1 mark has been assigned for computing the current ratio and acid-test ratio, and another mark for the discussion and comments. Many students wrote the formula for the current ratio and acid-test ratio correctly. However, the numbers used in the formula were often wrong due to a mistake in computing "current assets". Please note that current assets = cash + inventory + accounts receivable = $130 + $600 + $400 = $1,130. The most common error was not including the accounts receivable. The grading policy for this part has been the following: if a student had gotten wrong numbers in the previous parts (a)-(c), but I have been able to recognize that they performed the process correctly in part (d), I have given them full marks.
Q2
(a) To receive full marks on this part, students needed to compute the selling price and show that it is higher than the $40K that the customer is willing to pay. Students who calculated the selling price correctly should have received full marks. Otherwise, some students computed the cost of goods made and the cost of goods sold, showing that COGS > 40K in which case they too have been given full marks. If a student did not compute either the selling price or COGS, they did not receive full marks, but partial marks could have been assigned for any correct and useful value that they have mentioned.
(b) In this part, one mark has been assigned for mentioning that the absolute minimum price is the marginal cost, which is $25K. Another mark has been assigned for some discussion about how any revenue above the marginal cost would contribute to covering overhead costs. Many students did not mention the marginal cost, in which case they lost the entire two marks for part (b). If a student has mentioned the marginal cost (or prime cost) along with some short discussion, they have received full marks.
Quiz 2 Analysis