Question

Computing NOPAT, NOPM and RNOA
Selected information from the financial statements of GoPro, Inc. is provided below:

($ thousands)	2014	2013
Revenue	$1,385,306	$995,736
Operating income	187,035	98,703
Net interest expense and other nonoperating expense	7,060	8,374
Net income	118,087	55,578
Operating assets	817,365	440,671
Operating liabilities	276,487	254,227

Assume a statutory tax rate of 35%.

a. Compute GoPro’s net operating profit after taxes (NOPAT) for 2014 and 2013.
Round answers to the nearest whole number.

2014	Answer
2013	Answer

b. Compute GoPro’s net operating profit margin (NOPM) for each year.
Round answers to one decimal place. (Ex: 0.2345 = 23.5%)

2014	Answer
2013	Answer

c. Compute GoPro’s return on net operating assets (RNOA) for 2014.
Round answers to one decimal place. (Ex: 0.2345 = 23.5%)

2014

Answer

Reporting Uncollectible Accounts and Accounts Receivable

LaFond Company analyzes its accounts receivable at December 31, 2016, and arrives at the aged categories below along with the percentages that are estimated as uncollectible.

Age Group	Accounts Receivable	Estimated Loss %
Current (not past due)	$250,000	0.60%
1-30 days past due	90,000	1.0
31-60 days past due	20,000	2.0
61-120 days past due	11,000	5.0
121-180 days past due	6,000	10.0
Over 180 days past due	4,000	25.0
Total accounts receivable	$381,000

At the beginning of the fourth quarter of 2016, there was a credit balance of $4,360 in the Allowance for Uncollectible Accounts. During the fourth quarter, LaFond Company wrote off $3,820 in receivables as uncollectible.

a. What amount of bad debts expense will LaFond report for 2016?
$Answer

b. What is the balance of accounts receivable that it reports on its December 31, 2016, balance sheet?
$Answer

c. Set up T-accounts for both Bad Debts Expense and for the Allowance for Uncollectible Accounts. Enter any unadjusted balances along with the dollar effects of the information described (including your results from parts a and b).

Bad Debts Expense
(a)	Answer	Answer
Balance	Answer	Answer

Allow. For Uncoll. Accounts
Beg. Bal.	Answer	Answer
Write-off	Answer	Answer
(a)	Answer	Answer
Balance	Answer	Answer

Explaining Revenue Recognition and Bundled Sales
A.J. Smith Electronics is a retail consumer electronics company that also sells extended warranty contracts for many of the products that it carries. The extended warranty provides coverage for three years beyond expiration of the manufacturer's warranty. In 2016, A.J. Smith sold extended warranties amounting to $1,800,000. The warranty coverage for all of these begins in 2017 and runs through 2019. The total expected cost of providing warranty services on these contracts is $600,000.

a. How should A.J. Smith recognize revenue on the extended warranty contracts? Select the most appropriate answer below.

A.J. Smith should recognize the extended warranty revenue in the year of sale of the electronics.

A.J. Smith should recognize the extended warranty revenue when the manufacturer's warranty expires.

A.J. Smith should recognize the extended warranty revenue proportionately during the three years of coverage.

A.J. Smith should recognize the extended warranty revenue in the final year of the extended warranty.

b. Estimate the revenue, expense, and gross profit reported from these contracts in the year(s) that the revenue is recognized.
Round answers to the nearest whole numbers.

Year		2017	2018	2019	Total
Revenue		Answer	Answer	Answer	Answer
Warranty expenses		Answer	Answer	Answer	Answer
Gross profit		Answer	Answer	Answer	Answer

c. In 2017, as a special promotion, A.J. Smith sold a digital camera (retail price $360), a digital photograph printer (retail price $150), and an extended warranty contract for each (total retail price $90) as a package for a special price of $499. The extended warranty covers the period from 2018 through 2020. The company sold 200 of these camera–printer packages. Compute the revenue that A.J. Smith should recognize in each year from 2017 through 2020.

	Revenue
2017	Answer
2018	Answer
2019	Answer
2020	Answer
Total	Answer

Explaining Revenue Recognition and Bundled Sales
A.J. Smith Electronics is a retail consumer electronics company that also sells extended warranty contracts for many of the products that it carries. The extended warranty provides coverage for three years beyond expiration of the manufacturer's warranty. In 2016, A.J. Smith sold extended warranties amounting to $1,800,000. The warranty coverage for all of these begins in 2017 and runs through 2019. The total expected cost of providing warranty services on these contracts is $600,000.

Answer 1