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Financial Accounting Tools for business decision making 6th Edition Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso - Solutions

The 2009 financial statements of Tootsie Roll Industries, Inc. are provided in Appendix A.InstructionsRefer to Tootsie Roll’s financial statements to answer the following questions.(a) What were Tootsie Roll’s total assets at December 31, 2009? At December 31, 2008?(b) How much cash did
Tootsie Roll’s financial statements are presented in Appendix A, and the financial statements of The Hershey Company are presented in Appendix B.Instructions(a) Based on the information in these financial statements, determine the following for each company.(1) Total assets at December 31,
The September 3, 2009, issue of BusinessWeek includes an article by Lindsey Gerdes entitled “The Best Places to Launch a Career.” It provides interesting information regarding the job opportunities for accounting students.InstructionsRead the article and answer the following questions. (a) What
Xerox was not having a particularly pleasant year. The company??s stock price had already fallen in the previous year from $60 per share to $30. Just when it seemed things couldn??t get worse, Xerox??s stock fell to $4 per share. The data below were taken from the statement of cash flows of Xerox.
Purpose: Identify summary information about companies. This information includes basic descriptions of the company’s location, activities, industry, financial health, and financial performance. Steps1. Type in a company name, or use the index to find company name.2. Choose Quote, then choose
Kim Walters recently accepted a job in the production department at Tootsie Roll. Before she starts work, she decides to review the company’s annual report to better understand its operations.InstructionsUse the annual report provided in Appendix A to answer the following questions.(a) What CPA
Jane Noonan is the bookkeeper for Wilson Company, Inc. Jane has been trying to get the company??s balance sheet to balance. She finally got it to balance, but she still isn??t sure that it is correct. InstructionsExplain to Jane Noonan in a memo(a) The purpose of a balance sheet, and (b) Why this
Rules governing the investment practices of individual certified public accountants prohibit them from investing in the stock of a company that their firm audits. The Securities and Exchange Commission (SEC) became concerned that some accountants were violating this rule. In response to an SEC
Some people are tempted to make their finances look worse to get financial aid. Companies sometimes also manage their financial numbers in order to accomplish certain goals. Earnings management is the planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income. In
Who are the two key international players in the development of international accounting standards? Explain their role.
What might explain the fact that different accounting standard-setters have developed accounting standards that are sometimes quite different in nature?
Discuss the potential advantages and disadvantages that countries outside the United States should consider before adopting regulations, such as those in the Sarbanes-Oxley Act, that increase corporate internal control requirements.
The financial statements of Zetar plc are presented in Appendix C. The company’s complete annual report, including the notes to its financial statements, is available at www.zetarplc.com.InstructionsVisit Zetar’s corporate website and answer the following questions from Zetar’s 2009 annual
Define current assets. What basis is used for ordering individual items within the current assets section?
Distinguish between long-term investments and property, plant, and equipment.
Identify the two parts of stockholders’ equity in a corporation and indicate the purpose of each.
(a) Julia Alter believes that the analysis of financial statements is directed at two characteristics of a company: liquidity and profitability. Is Julia correct? Explain.(b) Are short-term creditors, long-term creditors, and stockholders primarily interested in the same characteristics of a
Name ratios useful in assessing (a) Liquidity, (b) Solvency, and (c) Profitability.
What do these classes of ratios measure?(a) Liquidity ratios.(b) Profitability ratios.(c) Solvency ratios.
Holding all other factors constant, indicate whether each of the following signals generally good or bad news about a company.(a) Increase in earnings per share.(b) Increase in the current ratio.(c) Increase in the debt to total assets ratio.(d) Decrease in free cash flow.
Which ratio or ratios from this chapter do you think should be of greatest interest to:(a) A pension fund considering investing in a corporation’s 20-year bonds?(b) A bank contemplating a short-term loan?(c) An investor in common stock?
(a) What are generally accepted accounting principles (GAAP)?(b) What body provides authoritative support for GAAP?
(a) What is the primary objective of financial reporting?(b) Identify the characteristics of useful accounting information.
Dan Fineman, the president of King Company, is pleased. King substantially increased its net income in 2012 while keeping its unit inventory relatively the same. Howard Gross, chief accountant, cautions Dan, however. Gross says that since King changed its method of inventory valuation, there is a
Describe the two constraints inherent in the presentation of accounting information.
Your roommate believes that international accounting standards are uniform throughout the world. Is your roommate correct? Explain.
Laurie Belk is president of Better Books. She has no accounting background. Belk cannot understand why fair value is not used as the basis for all accounting measurement and reporting. Discuss.
What is the economic entity assumption? Give an example of its violation.
What was Tootsie Roll’s largest current asset, largest current liability, and largest item under “Other assets” at December 31, 2009?
The following are the major balance sheet classifications:Current assets (CA) .................. Current liabilities (CL)Long-term investments (LTI) ............ Long-term liabilities (LTL)Property, plant, and equipment (PPE) ......... Common stock (CS)Intangible assets (IA) .................
A list of financial statement items for Georges Company includes the following: accounts receivable $14,000; prepaid insurance $2,600; cash $10,400; supplies $3,800, and short-term investments $8,200. Prepare the current assets section of the balance sheet listing the items in the proper sequence.
The following information (in millions of dollars) is available for Limited Brands for 2008: Sales revenue $9,043; net income $220; preferred stock dividend $0; average shares outstanding 333 million. Compute the earnings per share for Limited Brands for 2008.
For each of the following events affecting the stockholders’ equity of Willis, indicate whether the event would: increase retained earnings (IRE), decrease retained earnings (DRE), increase common stock (ICS), or decrease common stock (DCS)._____ (a) Issued new shares of common stock._____ (b)
These selected condensed data are taken from a recent balance sheet of Bob Evans Farms (in millions of dollars).Cash ............. $ 29.3Accounts receivable .......... 20.5Inventory ............ 28.7Other current assets ............ 24.0Total current assets ..... $102.5Total current liabilities
Kalb’s Books & Music Inc. reported the following selected information at March 31.2012Total current assets ............. $262,787Total assets ............... 439,832Total current liabilities .......... 293,625Total liabilities .............. 376,002Cash provided by operating activities .....
Indicate whether each statement is true or false(a) GAAP is a set of rules and practices established by accounting standard-setting bodies to serve as a general guide for financial reporting purposes.(b) Substantial authoritative support for GAAP usually comes from two standards-setting bodies: the
The accompanying chart shows the qualitative characteristics of useful accounting information. Fill in theblanks.
Given the characteristics of useful accounting information, complete each of the following statements.(a) For information to be _____, it should have predictive and confirmatory value.(b) _____ is the quality of information that gives assurance that it is free from error and bias.(c) _____ means
Here are some qualitative characteristics of useful accounting information:1. Predictive value 2. Neutral 3. Verifiable4. TimelyMatch each qualitative characteristic to one of the following statements. ——— (a) Accounting information should help provide accurate expectations about future
Heather Corporation has collected the following information related to its December 31, 2012, balance sheet. Prepare the assets section of Heather Corporation??s balancesheet.
The following financial statement items were taken from the financial statements of Jing Corp. Match each of the financial statement items to its proper balance sheet classification.If the item would not appear on a balance sheet, use ?NA.?
The following information is available for Gerard Corporation (a) Compute earnings per share for 2012 and 2011 for Gerard, and comment on the change. Gerard??s primary competitor, Thorpe Corporation, had earnings per share of $1 per share in 2012. Comment on the difference in the ratios of the two
The following are characteristics, assumptions, principles, or constraints that guide the FASB when it creates accounting standards. Relevance ........... Periodicity assumptionFaithful representation ...... Going concern assumption Comparability ..........
The following are the major balance sheet classifications.Current assets (CA)Current liabilities (CL)Long-term investments (LTI)Long-term liabilities (LTL)Property, plant, and equipment (PPE)Stockholders?? equity (SE)Intangible assets (IA)InstructionsClassify each of the following financial
The major balance sheet classifications are listed in E2-1 above.InstructionsClassify each of the following financial statement items based upon the major balance sheet classifications listed inE2-1.
The following items were taken from the December 31, 2009, assets section of the Boeing Company balance sheet. (All dollars are in millions.) InstructionsPrepare the assets section of a classified balance sheet, listing the current assets in order of theirliquidity.
The following information (in thousands of dollars) is available for H.J. Heinz Company-famous for ketchup and other fine food products??for the year ended April 29, 2009. InstructionsPrepare the assets section of a classified balance sheet, listing the items in proper sequence and including a
These items are taken from the financial statements of Victory Co. at December 31, 2012.Buildings .............. $105,800Accounts receivable .......... 12,600Prepaid insurance ............. 3,200Cash ................ 11,840Equipment ............. 82,400Land ................ 61,200Insurance expense
The following items were taken from the 2009 financial statements of Texas Instruments, Inc. (All dollars are in millions.) InstructionsPrepare a classified balance sheet in good form as of December 31,2009.
The following information is available for Callaway Golf Company for the years 2008 and 2007. (Dollars are in thousands, except share information.) There were 73,139,000 shares outstanding at the end of 2006.Instructions(a) What was the company's earnings per share for each year?(b) Based on
These financial statement items are for Whitnall Corporation at year-end, July 31,2012.Salaries and wages payable ....... $ 2,080Salaries and wages expense ........ 57,500Supplies expense ............ 15,600Equipment ............... $18,500Accounts payable ............ 4,100Service revenue
Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data (in millions of dollars) for the year ended January 31, 2009, follow Instructions(a) Compute working capital and the current ratio at the beginning of the year and at the end of the current year.(b)
The chief financial officer (CFO) of Padilla Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 2012, so that the CFO could get an idea of how the company stood. He knows that certain debt agreements with its creditors require the company to
The following data were taken from the 2009 and 2008 financial statements of American Eagle Outfitters. (All dollars are in thousands.) InstructionsPerform each of the following.(a) Calculate the debt to total assets ratio for each year.(b) Calculate the free cash flow for each year.(c)
Presented below are the assumptions and principles discussed in this chapter.1. Full disclosure principle. 2. Going concern assumption. 3. Monetary unit assumption. 4. Periodicity assumption.5. Cost principle.6. Economic entity assumption.InstructionsIdentify by number the accounting assumption or
Rosman Co. had three major business transactions during 2012.(a) Reported at its fair value of $260,000 merchandise inventory with a cost of $208,000.(b) The president of Rosman Co., Jay Rosman, purchased a truck for personal use and charged it to his expense account.(c) Rosman Co. wanted to make
The following items are taken from the 2008 balance sheet of Yahoo! Inc. (All dollars are in thousands.)Intangible assets ............... $3,926,749Common stock ................. 6,282,504Property and equipment, net .......,.... 1,536,181Accounts payable ...........,..... 151,897Other assets
These items are taken from the financial statements of Xenox Corporation for 2012.Retained earnings (beginning of year) ... $31,000Utilities expense .............. 2,000Equipment ............... 66,000Accounts payable ........... 18,300Cash ................ 10,100Salaries and wages payable
You are provided with the following information for Merrell Enterprises, effective as of its April 30, 2012, year-end.Accounts payable ........... $ 834Accounts receivable ........... 810Accumulated depreciation-equipment .... 670Cash ................ 1,270Common stock ............ 900Cost of goods
Comparative financial statement data for Duran Corporation and Kiepert Corporation, two competitors, appear below. All balance sheet data are as of December 31, 2012. Instructions(a) Comment on the relative profitability of the companies by computing the net income and earnings per share for each
Here and on page 85 are financial statements of Batcha Company. Additional information: The cash provided by operating activities for 2012 was $190,800. The cash used for capital expenditures was $92,000. The cash used for dividends was $31,000. The average number of shares outstanding
Condensed balance sheet and income statement data for Sievert Corporation are presented here and on the next page. InstructionsCompute these values and ratios for 2011 and 2012.(a) Earnings per share.(b) Working capital.(c) Current ratio.(d) Debt to total assets ratio.(e) Free cash flow.(f)
Selected financial data of two competitors, Target and Wal-Mart, are presented here. (All dollars are in millions.) InstructionsFor each company, compute these values and ratios.(a) Working capital.(b) Current ratio.(c) Debt to total assets ratio.(d) Free cash flow.(e) Earnings per share.(f)
A friend of yours, Ana Gehrig, recently completed an undergraduate degree in science and has just started working with a biotechnology company. Ana tells you that the owners of the business are trying to secure new sources of financing which are needed in order for the company to proceed with
The following items are from the 2009 balance sheet of Kellogg Company. (All dollars are in millions.)Common stock ....... $ 577Other assets ......... 5,632Notes payable-current ....... 44Other current assets ...... 221Cash and cash equivalents ... 334Other long-term liabilities ... 1,802Retained
These items are taken from the financial statements of Tilley, Inc.Prepaid insurance .......... $ 1,400Equipment .............. 31,000Salaries and wages expense ....... 36,000Utilities expense ........... 2,100Accumulated depreciation-equipment .... 8,600Accounts payable ............. 8,200Cash
You are provided with the following information for Rapp Corporation, effective as of its April 30, 2012, year-end.Accounts payable ........... $ 2,100Accounts receivable ........... 9,150Accumulated depreciation-equipment .... 6,600Depreciation expense ......... 2,200Cash ................
Comparative statement data for Al Sharif Company and Weber Company, two competitors, are presented below. All balance sheet data are as of December 31, 2012. Instructions(a) Compute the net income and earnings per share for each company for 2012.(b) Comment on the relative liquidity of the
The financial statements of DeVoe Company are presented here. Instructions(a) Compute the following values and ratios for 2012. (We provide the results from 2011 for comparative purposes.)(i) Current ratio. (2011: 2.4:1)(ii) Working capital. (2011: $178,000)(iii) Debt to total assets ratio.
Condensed balance sheet and income statement data for Fellenz Corporation are presented below. InstructionsCompute the following values and ratios for 2011 and 2012.(a) Earnings per share.(b) Working capital.(c) Current ratio.(d) Debt to total assets ratio.(e) Free cash flow.(f) Based on the
Selected financial data of two competitors, Blockbuster Inc. and Movie Gallery, Inc., in a recent year are presented below and on page 91. (All dollars are in millions.) InstructionsFor each company, compute these values and ratios.(a) Working capital.(b) Current ratio. (Round to two decimal
Net Nanny Software International Inc., headquartered in Vancouver, specializes in Internet safety and computer security products for both the home and commercial markets. In a recent balance sheet, it reported a deficit (negative retained earnings) of US $5,678,288. It has reported only net losses
After investigating the different forms of business organization, Natalie Koebel decides to operate her business as a corporation, Cookie Creations Inc., and she begins the process of getting her business running.While at a trade show, Natalie is introduced to Gerry Richards, operations manager of
The financial statements of Tootsie Roll Industries, Inc., appear in Appendix A at the end of this book. InstructionsAnswer the following questions using the financial statements and the notes to the financial statements.(a) What were Tootsie Roll’s total current assets at December 31, 2009,
The financial statements of The Hershey Company appear in Appendix B, following the financial statements for Tootsie Roll in Appendix A. Assume Hershey’s average number of shares outstanding was 227,517,000, and Tootsie Roll’s was 56,072,000.Instructions(a) For each company calculate the
The April 27, 2009, edition of the Wall Street Journal Online includes an article by Cari Tuna entitled “Corporate Blogs and ‘Tweets’ Must Keep SEC in Mind.” InstructionsRead the article and answer the following questions.(a) At the time of the article, how many of the Fortune 500 companies
The following information was reported by Gap, Inc. in its 2009 annual report. (a) Determine the overall percentage decrease in Gap's total assets from 2005 to 2009. What was the average decrease per year?(b) Comment on the change in Gap's liquidity. Does working capital or the current ratio
As a financial analyst in the planning department for Lindemann Industries, Inc., you have been requested to develop some key ratios from the comparative financial statements. This information is to be used to convince creditors that Lindemann Industries, Inc. is liquid, solvent, and profitable,
T. J. Cerrillo is the chief executive officer of Tomorrow’s Products. T. J. is an expert engineer but a novice in accounting.InstructionsWrite a letter to T. J. Cerrillo that explains (a) The three main types of ratios; (b) Examples of each, how they are calculated, and what they measure; and (c)
At one time, Boeing closed a giant deal to acquire another manufacturer, McDonnell Douglas. Boeing paid for the acquisition by issuing shares of its own stock to the stockholders of McDonnell Douglas. In order for the deal not to be revoked, the value of Boeing’s stock could not decline below a
If your school has a subscription to the FASB Codification, to log in and prepare responses to the followingInstructions(a) Access the glossary (“Master Glossary”) at the FASB Codification website to answer the following.(1) What is the definition of current assets?(2) What is the definition of
In what ways does the format of a statement of financial of position under IFRS often differ from a balance sheet presented under GAAP?
The statement of financial position for Diaz Company includes the following accounts: Accounts Receivable .... £12,500;Prepaid Insurance ...... £3,600;Cash ........... £15,400;Supplies .......... £5,200; andShort-Term Investments ..... £6,700.Prepare the current assets section of the statement
Zurich Company recently received the following information related to the company's December 31, 2012, statement of financial position. Prepare the assets section of the company's classified statement of financial position.
The following information is available for Karr Bowling Alley at December 31, 2012. Prepare a classified statement of financial position; assume that $13,900 of the notes payable will be paid in2013.
The financial statements of Zetar plc are presented in Appendix C. The company’s complete annual report, including the notes to its financial statements, InstructionsIdentify five differences in the format of the statement of financial position used by Zetar plc compared to a company, such as
(a) “The steps in the accounting cycle for a merchandising company differ from the steps in the accounting cycle for a service company.” Do you agree or disagree?(b) Is the measurement of net income in a merchandising company conceptually the same as in a service company? Explain.
How do the components of revenues and expenses differ between a merchandising company and a service company?
Rachel Harpole, CEO of Bargain Den Stores, is considering a recommendation made by both the company’s purchasing manager and director of finance that the company should invest in a sophisticated new perpetual inventory system to replace its periodic system. Explain the primary difference between
(a) Explain the income measurement process in a merchandising company.(b) How does income measurement differ between a merchandising company and a service company?
Markoff Co. has sales revenue of $100,000, cost of goods sold of $70,000, and operating expenses of $18,000. What is its gross profit?
Peggy Wilder believes revenues from credit sales may be earned before they are collected in cash. Do you agree? Explain.
(a) What is the primary source document for recording (1) Cash sales and (2) Credit sales?(b) Using XXs for amounts, give the journal entry for each of the transactions in part (a), assuming perpetual inventory.
A credit sale is made on July 10 for $900, terms 1/15, n/30. On July 12, the purchaser returns $100 of goods for credit. Give the journal entry on July 19 to record the receipt of the balance due within the discount period.
As the end of Agnew Company’s fiscal yearend approached, it became clear that the company had considerable excess inventory. Belden Glass, the head of marketing and sales, ordered salespeople to “add 20% more units to each order that you ship. The customers can always ship the extra back next
To encourage bookstores to buy a broader range of book titles, and to discourage price discounting, the publishing industry allows bookstores to return unsold books to the publisher. This results in very significant returns each year. To ensure proper recognition of revenues, how should publishing
Goods costing $1,900 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18, the purchaser receives a $300 credit from the supplier for damaged goods. Give the journal entry on July 24 to record payment of the balance due within the discount period.
Frattura Company reports net sales of $800,000, gross profit of $560,000, and net income of $230,000. What are its operating expenses?
Rai Company has always provided its customers with payment terms of 1/10, n/30. Members of its sale force have commented that competitors are offering customers 2/10, n/45. Explain what these terms mean, and discuss the implications to Rai of switching its payment terms to those of its competitors.
In its year-end earnings announcement press release, Longwell Corp. announced that its earnings increased by $15 million relative to the previous year. This represented a 20% increase. Inspection of its income statement reveals that the company reported a $20 million gain under “Other revenues

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