Financial Reporting And Analysis 5th Edition Lawrence Revsine, Daniel Collins - Solutions

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Return on assets
Return on equityf. Evaluate the performance of the corporation. What other transactions would you typically expect to see?g. What if the corporation discontinued part of its operations during the year and incurred a loss of $45,000 on the disposal? What impact would this have on the income
Boomingdales, Inc., reported the following transactions:
Purchased $150 of equipment on account. The corporation has over $1 million in assets.
Sold merchandise at retail of $150,000 during the year on account. Customers returned $10,000 of merchandise at retail for credit on their accounts. (Ignore cost of goods sold.)
Received $40,000 in advance from customers.
Recorded annual depreciation of $280,000.Requireda. Record the above transactions in the accounting equation. Set up separate account columns as needed.b. Discuss the generally accepted accounting principles that guide accountants in recording each of these transactions properly
Use the following comparative income statements to evaluate Clarkson Brewery’s performance for the year ended December 31, 1999 and 1998.1999 1998 Net sales $405,000 $378,000 Operating expenses:Cost of goods sold 163,250 154,400 Selling expense 81,000 48,360 General and administrative expense
Amherst Trucking Co. had the following pre-tax amounts of revenues, expenses, gains, and losses during 2000. All items are subject to an income tax rate of 40%.Revenues $1,500,000 Operating expenses $ 900,000 Extraordinary loss $ 400,000 Requireda. Determine the firm’s total income tax expense
Equity Cushion Co. reports the following items in its financial statements:1998 1999 Net income $16,000,000 $24,000,000 Common shares outstanding 1,000,000 shares 1,200,000 shares Requireda. Determine the firm’s earnings per share (EPS) in both 1998 and 1999.b. Determine the percentage change in
P-Town O’Malley’s 2000 income statement reported net income of $6 million. A vertical analysis of the income statement shows the following:Net sales percentage ?%Cost of products sold percentage ?Gross profit percentage 48 Selling and administrative expense percentage ?Operating income
The Miami Rockies, a recently transplanted baseball franchise, reported the following income statement and horizontal percentages:1999 Amount Percentage Changes(Hundreds of $) During 2000 Revenues $ 6,500 +10%Operating expenses (4,800) + 8%Operating income $ 1,700 ?Income tax (40%) (680) ?Net
Ben-Shien’s Wonton Works produces two grades of dumpling wrappers, standard and deluxe. Sales and cost of sales for both products for 1999 and 2000 were:1999 2000(Dollars in thousands)Standard Deluxe Standard Deluxe Sales $600 $900 $900 $600 Cost of sales $500 $600 $750 $400 Requireda. Determine
The following transactions are given:1, Rent for two months of $1,200 was paid in advance.2, A customer’s order was received for a bridal veil that will be billed at delivery for $120.3, Supplies, purchased three months ago at a cost of $300, were used in the current month.4, An etching by
Consider the following transactions for the publishers of Mobile Home Improvement. This magazine is produced monthly and sold on newsstands and to annual subscribers.1, Mobile Home Improvement received cash for 100 two-year subscriptions($48 each) and 3,000 one-year subscriptions ($36 each).2,
McGucken’s Software sold $1,354,000 of merchandise for cash and had credit sales totaling $2,658,000. It collected cash from customers in the amount of$3,396,000. McGucken’s received merchandise from suppliers invoiced at$1,100,000 and paid suppliers $900,000.Requireda. Determine the amount of
Denny’s CPA School provided the following vertical analysis of its income statements for 1999 and 2000:Percentage of Revenues 1999 2000 Revenues 100% 100%Salaries expense 40 45 Rentals expense 20 25 Books and supplies 10 10 Advertising 10 15 Operating income 20 5 Income tax 8 2 Net income 12 3 In
Prepare Neville Company’s disclosure related to the accounting change; limit disclosure of financial statement line items affected by the change in accounting principle to those appearing on the company’s income statements for the years presented. LO.1
Prepare Neville Company’s 2011 and 2010 income statements reflecting the retrospective application of the accounting change from the LIFO method to the FIFO method. LO.1
McDonald’s believes that locally owned and operated restaurants help the Company maximize brand performance and are at the core of its competitive advantage, making McDonald’s not just a global brand but also a locally relevant one. To that end, for 2008 and 2009 combined, the Company
McDonald’s uses different critical events to recognize revenue for its different business activities. Identify the critical events and rank them from the most to the least conservative policy based on your judgment of the circumstances. For each source of revenue, does the chosen revenue
Is there any reason for management to prefer discontinued operations treatment for these noncore business units? LO.1
Assume that in February 2011 a potential buyer of another of the domestic noncore business units insisted on a site assessment prior to signing a purchase commitment. The assessment’s purpose was to determine whether the site was environmentally impaired.Unfortunately for Corrpro, trace amounts
Suppose that in March 2011 a buyer signed a purchase commitment for Corrpro’s Rohrback Cosasco Systems division. This sale requires regulatory approval that is expected to take at least 18 months to obtain. Should Corrpro’s 2011 financial statements include this division in assets and
What criteria must be met to warrant reclassifying the noncore business units as discontinued operations effective with the quarter ending September 30, 2010? LO.1
Identify the key differences between Stanley’s current presentation and the format under the FASB/IASB proposal. LO.1
Prepare Stanley’s Statement of Comprehensive Income for 2009 using the sections and categories recommended in the joint FASB/IASB proposed exposure draft on financial statement presentation. LO.1
Draft the disclosures required by current GAAP related to this restatement. LO.1
Restate the 2010 financial statements as they should appear for comparative purposes in the 2011 annual report. LO.1
Prepare whatever disclosure is required under current GAAP as a result of this change. LO.1
How should Barden’s 2011 comparative financial statements reflect this change in accounting principle? LO.1
Smithfield has been in business for 65 years. The company occasionally issues term bonds, but has not previously retired bonds prior to normal maturity. LO.1
Such early debt retirements are part of Smithfield’s risk management strategy. LO.1
The firm experienced an (extraordinary) uninsured tornado pre-tax loss in the amount of $83,500. LO.1
Jordan Wing suffered a $23,000 impairment loss in 2010, which it failed to record. LO.1
The firm changed its method of depreciating fixed assets from the straight-line method to the declining balance method, which was used to determine income in 2011. LO.1
Sale of 10,000 shares of Xerox stock held as a short-term investment resulted in a gain of$23,450. LO.1
The corporation disposed of its catalog sales component at a pre-tax loss of $345,000. This transaction meets the criteria for discontinued operations. LO.1
Jordan Wing realized $175,000 from settling a trademark infringement lawsuit. LO.1
Starting with the revised income from continuing operations numbers you obtained in requirement 1, prepare the revised comparative income statements for 2011 and 2010 showing appropriate details for gain (loss) from discontinued operations. LO.1
In preparing a revised comparative statement of income, Helen should report income from continuing operations after income taxes for 2011 and 2010, respectively, amounting to how much? LO.1
Assume that you are a financial analyst for AJAX. Your boss has asked you to project next year’s net earnings. What earnings number from the information provided here would you use as the basis for your projection? Why? LO.1
AJAX’s income statements over the last three years report research and development expenses averaging $51.3 million per year. AJAX incurred these expenses to enhance current products and to develop new products in the hope of generating higher future sales. GAAP requires that all such costs be
Consider the item called Restructuring costs and asset write-downs. What impact did this charge have on AJAX’s cash flows? LO.1
Recast AJAX’s income statement and present it in good form. Fill in the missing data. LO.1
Determine cost of goods sold for August 2011. LO.1
Determine salary expense for August 2011. LO.1
Determine sales for August 2011. LO.1
Prepare a balance sheet as of December 31, 2011. LO.1
Prepare the necessary adjusting entries for the year ended December 31, 2011. LO.1
Write a brief memo to Stein explaining why the bank would require financial statements prepared on the accrual basis instead of the cash basis. LO.1
Determine the adjustments required to convert Stein Flowers’ trial balance to the accrual basis of accounting for the year ended December 31, 2011. Prepare formal journal entries to support your adjustments. LO.1
Prepare a balance sheet as of December 31, 2011. LO.1
Prepare an income statement for the year ended December 31, 2011. LO.1
Provide adjusting entries at the end of the year. LO.1
Provide journal entries for each of these transactions. LO.1
Equipment was sold at a loss.Required:For each event, (1) identify the appropriate reporting treatment from the following list (consider each event to be material), and (2) indicate whether it would be included in income from continuing operations, would appear on the income statement below that
The company wrote off inventory that was not salable at the insistence of its auditors. LO.1
Due to technological advances in golf club manufacturing, management determined that production equipment would need to be upgraded more frequently than in the past.Consequently, the useful lives of equipment for depreciation purposes were reduced. LO.1
Krewatch changed its method of accounting for inventory from FIFO to the average cost method. LO.1
Krewatch extinguished $200 million in 30-year bonds issued 18 years ago. These bonds were the only ones issued in the company’s history. Krewatch recognized a gain on this transaction. LO.1
Krewatch incurred restructuring costs of $12,562,990 when it eliminated a layer of middle management. LO.1
After several years of production problems at the accessories manufacturing plant, Krewatch sold the plant to an investor group headed by a former manager at the plant. Krewatch plans to continue to carry the accessory line in its retail stores and is committed to purchase the plant’s entire
Prepare the journal entry to record the change in accounting principle at the beginning of 2011. LO.1
Calculate the balance in retained earnings at the time of the change (beginning of 2011) as it would have been reported had FIFO been previously used. LO.1
KEW lost $395,000 (pre-tax) when a plant it operated in a third-world country was expropriated following a revolution. There was no prior history of the government expropriating assets of companies operating in that country. LO.1
KEW sold a division during 2011 resulting in a pre-tax loss of $890,000. The operating loss incurred by the discontinued division prior to its sale was $650,000; the loss from its disposal was $240,000. This transaction meets the criteria for discontinued operations. LO.1
KEW sold machinery for $85,000 that originally cost $300,000. Accumulated depreciation at the time of the sale amounted to $225,000. KEW sells unneeded machinery occasionally when retooling one of its production processes. LO.1
The company reviewed its notes receivable and discovered that a note carried at $16,000 was 18 months past due. The note was not likely to be collected. LO.1
On January 1, 2011, the company purchased 10 lawnmowers at $3,000 per unit. They are expected to last for three years with no salvage value.On December 31, 2011, Hentzel did not record any adjusting entries with respect to these transactions. LO.1
The company had borrowed $50,000 from HomeTown Financing on April 1, 2011, at a 12%interest rate per annum. The principal, along with all the interest, is due on April 1, 2012. LO.1
The company’s gasoline bill for $2,500 for the month of December 2011 was not received until January 15, 2012. LO.1
On March 1, 2011, Hentzel received $18,000 for landscaping services to be rendered for 18 months (beginning July 1, 2011). This amount was credited to Unearned landscaping revenue. LO.1
During the first year of its operations, Hentzel purchased supplies in the amount of$12,000 (debited to Supplies inventory), and of this amount, $3,000 were unused as of December 31, 2011. LO.1
Under the cash basis of income determination, how much should Dart report as revenue for 2011? LO.1
What amount of revenue should Bullseye recognize from this sale during 2011 on an accrual basis? LO.1
How the various asset, liability, and stockholders’ equity accounts on a typical corporate balance sheet are measured and classified. LO.1
How to use balance sheet information to understand key differences in the nature of firms’ operations and how those operations are financed. LO.1
Differences in balance sheet terminology and presentation format in countries outside the United States. LO.1
The information provided in notes to the financial statements on significant accounting policies, subsequent events, and related-party transactions. LO.1
How successive balance sheets and the income statement can be used to determine cash inflows and outflows for a period. LO.1
How information provided in the cash flow statement can be used to explain changes in noncash accounts on the balance sheet. LO.1
The distinction between operating, investing, and financing sources and uses of cash. LO.1
How changes in current asset and current liability accounts can be used to adjust accrual earnings to obtain cash flows from operations. LO.1
The reporting entity and its principal owners, management or members of their immediate families, and members of the board of directors. LO.1
Subsidiaries of a common parent. LO.1
The reporting entity and nonconsolidated affiliates in which it holds a significant ownership stake. LO.1
Herb Wilson, Robin Hansen, and Barbara Reynolds each contributed $3,500 cash on April 1 for shares of the company’s common stock. LO.1
HRB rented office space beginning April 1, and paid the full year’s rental of $2,000 per month, or $24,000, in advance. LO.1
The company borrowed $10,000 from a bank on April LO.1
The principal plus accrued interest is payable January 1, 2012, with interest at the rate of 12% per year. LO.1
HRB purchased office equipment with a five-year life for $15,000 cash on April LO.1
Salvage value is zero and the equipment is being depreciated using the straight-line method. LO.1
HRB sold and billed customers for $65,000 of advertising services rendered between April 1 and December LO.1
Of this amount, $20,000 was still uncollected by year-end. LO.1
By year-end, the company incurred and paid the following operating costs: (a) utilities,$650; (b) salaries, $36,250; and (c) supplies, $800. LO.1
The company had accrued (unpaid) expenses at year-end as follows: (a) utilities, $75;(b) salaries, $2,400; and (c) interest, $900. LO.1
Supplies purchased on account and unpaid at year-end amounted to $50. When supplies are purchased, they are charged to an asset account. LO.1
Supplies inventory on hand at year-end amounted to $100. LO.1
Annual depreciation on office equipment is $15,000/5 5 $3,000. Because the equipment was acquired on April 1, the depreciation expense for 2011 is $3,000 3 9/12 5 $2,250. LO.1

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Financial Reporting And Analysis 5th Edition Lawrence Revsine, Daniel Collins - Solutions

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