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financial reporting and analysis

Financial Reporting And Analysis 4th Edition Lawrence Revsine, Daniel Collins - Solutions

The December 31, 2008 balance sheet of Ratio, Inc. follows. These are the only accounts in Ratio’ balance sheet. Amounts indicated by a question mark (?) can be calculated from the additional information given.Required:Compute the December 31, 2008 balance for each missing item. Assets Cash
Following are the comparative statements of cash flows for Toys "A" Us for 2002, 2001, and 2000. The company reported sales (in millions) of $11,305, $11,019, and $11,332, respectively, in those years.Required:1. What is the purpose of preparing common-size statements of cash flows? For example,
Maytag Corporation manufactures and distributes a broad line of home appliances including gas and electric ranges, dishwashers, refrigerators, freezers, laundry equipment, and vacuum cleaning products. The home appliance segment contributes about 87% of Maytag’s total sales.The company’s other
Margaret O'Flaherty, a portfolio manager for MCF Investments, is considering investing in Alpine Chemical 7% bonds, which mature in 10 years. She asks you to analyze the company to Analyzing ratios determine the riskiness of the bonds.Required:1. Using the data provided in the accompanying
A cash flow statement and partial balance sheet for Woods Company and supplemental information follow. The omitted items are numbered from (1) through (16) and can be calculated from the other information given.Woods Company neglected to amortize $2,000 of intangibles in 2007. The correction of
Use the following information and your knowledge of financial ratios and balance sheet relationships to fill in the missing items on the balance sheet of Clapton Corporation. Round all amounts to the nearest dollar.Additional Information:. Days accounts payable outstanding was 45.6 in 2008 compared
Kroger operates retail food and drug stores, multidepartment stores, jewelry stores, and convenience stores throughout the United States. These stores are operated under banners such as Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Dillon's, and City Market. The company operated 2,468
Crocs designs, develops, and manufactures consumer products from specialty resins. The company's primary product line is Crocs-branded footwear for men, women, and children. It sells its products through traditional retail channels, including specialty footwear stores. Deckers Outdoor designs and
It's late Tuesday evening, and you've just received a phone call from Dennis Whiting, your boss at GE Capital. Dennis wants to know your reaction to the Argenti loan request before tomor- row's loan committee meeting. Here's what he tells you:We've provided seasonal loans to Argenti for the past 20
Alpha Manufacturing, Inc. issued audited financial statements on March 10, 2009, for its year ended December 31, 2008. The following events occurred after December 31, 2008, but before the financial statements were issued.1. Alpha Manufacturing received legal notification on January 18, 2009 that
John Rigas founded Adelphia Communications Corporation with a $300 license in 1952, took the company public in 1986, and built it into the sixth largest cable television operator by acquiring other systems in the 1990s. As the company grew, it also expanded into other fields. It operated a
The balance sheet and income statement for Debbie Dress Shops are presented along with some additional information about the accounts. You are to answer the questions that follow concerning cash flows for the period.a. All accounts receivable and accounts payable are related to trade merchandise.
Following is Drop Zone Corporation's balance sheet at the end of 2007 and its cash flow statement for 2008. Drop Zone manufactures equipment for sky divers.Additional Information:a. During 2008, 500 shares of common stock were sold to the public.b. Land was sold during 2008 at an amount that
The following information was taken from Kellogg Company’s Year 2 statement of cash flows.Kellogg is the world’s largest maker of ready-to-eat cereals. Its cereal products account for about 38% of the U.S. market and 52% oft he non-U.S. market. Some ofi ts more famous brandname products include
Motley Company’s merchandise inventory and other related accounts for 2008 follow:Required:Assuming that the merchandise inventory buildup was relatively constant during the year, how many times did the merchandise inventory turn over during 2008? Sales $3,000,000 Cost of goods sold 2,200,000
Selected data of Islander Company follow:Required:1. What is the accounts receivable turnover for 2008?2. What is the inventory turnover for 2008? As of December 31 Balance Sheet Data Accounts receivable Allowance for doubtful accounts Net accounts receivable Inventories-lower of cost or market
On January 1, 2008, River Company’s beginning inventory was \($400,000\). During 2008, the company purchased \($1,900,000\) of additional inventory, and on December 31, 2008 its ending inventory was $500,000.Required:What is the inventory turnover for 2008?
Utica Company’s net accounts receivable was \($250,000\) at December 31, 2007 and \($300,000\) at December 31, 2008. Net cash sales for 2008 were \($100,000\). The accounts receivable turnover for 2008 was 5.0, which was computed from net credit sales for the year.Required:What was Utica’s
Todd Corporation wrote off $100,000 of obsolete inventory at December 31, 2008.Required:What effect did this write-off have on the company’s 2008 current and quick ratios?
The following data were taken from the financial records of Glum Corporation for 2008:Required:How many times was bond interest earned in 2008? Sales $3,600,000 Bond interest expense 120,000 Income taxes 600,000 Net income 800,000
In a comparison of 2008 to 2007 performance, Neir Company’s inventory turnover increased substantially although sales and inventory amounts were essentially unchanged.Required:Which of the following statements best explains the increased inventory turnover ratio?1. Cost of goods sold decreased.2.
Selected information taken from the accounting records of Vigor Company follows:Required:1. What was Vigor’s gross margin for 2008?2. Suppose that there are 360 business days in the year. What were the number of days sales outstanding in average receivables and the number of days sales
Typical balance sheet classifications appear follow:Required:Use the preceding letters to indicate the proper classification for each of the following December 31, 2008, balance sheet items. Place brackets around the chosen letter for items that are contra accounts. a. Current assets b. Long-term
The following balance sheet for Northumberland Farm Machinery and Supply, Inc. was prepared by an inexperienced accountant and contains several errors.Additional Information:1. Inventory is valued at cost (FIFO). At December 31, 2008, the inventory could have beenreplaced at a total cost of
A number of balance sheet accounts for Harvey’s Heavy Metals, Inc. follow.. Raw materials inventory . Available-for-sale securities . 5,000 shares of XYZ common stock . Property taxes payable . Prepaid customer orders . Accrued salaries . Machinery held for sale . Treasury stock .Cash dividends
Bunny's Fashions, Inc. used the following headings on the company’s December 31, 2008 balance sheet.a. Current assetsb. Long-term investmentsc. Property, plant, and equipmentd. Intangible assetse. Other assetsf. Current liabilities g. Long-term obligations h. Capital stock i. Additional
During 2008, Kew Company, a service organization, had \($200,000\) in cash sales and \($3,000,000\) in credit sales. The accounts receivable balances were \($400,000\) and \($485,000\) at December 31, 2007 and 2008, respectively.Required:What was Kew Company’s cash receipts from sales in 2008?
The following information is available from Sand Corporation’s accounting records for the year ended December 31, 2008:Required:Compute cash flow provided by operations for 2008. Cash received from customers $870,000 Rent received 10,000 Cash paid to suppliers and employees 510,000 Taxes paid
Fresh Company is preparing its cash budget for the month of May. The following information is available concerning its accounts receivable:Required:What are the estimated cash receipts from accounts receivable collections in May? Estimated credit sales for May $200,000 $150,000 20% Actual credit
The following information is available for Alex Corporation's first year of operation:All merchandise items were marked to sell at 30% above cost.Required:What should be the ending balance in Accounts receivable, assuming all accounts are deemed collectible? Payment for merchandise purchases
Serven Corporation has estimated its accrual-basis revenue and expenses for June 2008 and would like your help in estimating cash disbursements. Selected data from these estimated amounts are as follows:Required:On the basis of the preceding data, what are the estimated cash disbursements from
The following information was taken from the 2008 financial statement of Planet Corporation:No accounts receivable were written off or recovered during the year.Required:Determine the cash collected from customers by Planet Corporation in 2008. Accounts receivable, January 1, 2008 Accounts
Lance Corporation's statement of cash flows for the year ended September 30, 2008, was prepared using the indirect method, and it included the following items:Lance reported revenues from customers of $75,000 in its 2008 income statement.Required:What amount of cash did Lance receive from customers
The following information was taken from the 2008 financial statements of Eiger Corporation, a maker of equipment for mountain and rock climbers:Required:1. Calculate Eiger’s cash flow from operating activities for 2008.2. Explain the reasons for the difference between the firm’s‘net income
The following information was taken from the 2008 financial statements of Zurich Corporation, a maker of fine Swiss watches:Required:1. Calculate Zurich’s cash flow from operating activities for 2008.2. Explain the reasons for the difference between the firm’s net income and its cash flow from
The following information was taken from Abbott Laboratory’s financial statements. Abbott makes a variety of health care products and uses the indirect method to determine cash flows from operations:Required Determine which of the preceding items would appear as a separate line-item on Abbott
Bambis House Wares, Inc. produced the unadjusted trial balance shown below at December 31, 2008.Required:Prepare a balance sheet at December 31, 2008 for Bambi’s House Wares, Inc. The company’s tax rate is 35%. Accounts payable Accounts receivable Accrued interest payable Accrued salaries
Shawn Mikeska, Inc. prepared the following balance sheet at December 31, 2007.The following occurred during 2008.1. Exchanged \($25,000\) in cash and a \($35,000\) note payable for land valued at \($60,000.2.\) Bonds payable (maturing in 2012) in the amount of \($20,000\) were retired by
A December 31, 2008, post-closing trial balance for Short Erin Company follows.1. Cash includes \($12,000\) in U.S. treasury bills purchased on December 21, 2008 that mature in January 2009. The account also includes \($8,500\) in stock purchased just before year-end that the company plans to sell
In reviewing Graceland Rock Company’s financial statements, you note that net income increased but cash flow from operations decreased from 2008 to 2009.Required:1. Explain how net income could increase for Graceland while cash flow from operations decreased. Your answer must include three
Karr, Inc. reported net income of \($300,000\) for 2008. Changes occurred in several balance sheet accounts as follows:Additional Information: AICPA ADAPTEDa. During 2008 Karr sold equipment costing \($25,000\), with accumulated depreciation of \($12,000\), for a gain of $5,000.b. In December 2008
The following data have been extracted from the financial statements of Prentiss, Inc., a calendar- Rae |year merchandising corporation:• ‘Total sales for 2009 were \($1,200,000\) and for 2008 were \($1,100,000\). Cash sales were 20% of total sales each year.• Cost of goods sold was
The following cash flow information pertains to the 2008 operations of Matterhorn, Inc., a maker of ski equipment:The following additional information comes from Matterhorn’s 2008 income statement:The following additional information comes from Matterhorn’s 2007 and 2008 comparative balance
The following cash flow information pertains to the 2008 operations of Divemaster, Inc., a maker of scuba diving equipment:The following additional information comes from Divemaster’s 2008 income statement:The following additional information comes from Divemaster’s 2007 and 2008 comparative
The following information is taken from the operating section of the statement of cash flows (direct method) of Battery Builders, Inc.:The following information is obtained from the income statement of Battery Builders:In addition, the following information is obtained from the comparative balance
The following information was taken from Microsoft Corporation’s Year 2 balance sheet; .Microsoft is one of the largest independent computer software makers in the United States.The following is Microsoft's Year 1 balance sheet.Required:1. Solve for the missing values and present Microsoft's Year
The following information was taken from one of Hewlett-Packard Company’s recent balance sheets. Hewlett-Packard is a major designer and manufacturer of electronic measurement and computing equipment, including workstations, PCs, and laser printers.Required:1. Use the information in the problem
The following are Food Tiger’s 2007 and 2008 balance sheets and 2008 income statement.Additional Information:1. The Accounts payable—trade account is used only for purchases of merchandise inventory.2. The balance in the Prepaid Expenses account represents prepaid selling and administrative
Vanguard Corporation is a distributor of food products. The corporation has approximately 1,000 stockholders, and its stock, which is traded “over-the-counter,” is sold throughout 2008 at about \($7\) a share with little fluctuation. The corporation's balance sheet at December 31, 2007
The purpose of this problem is to familiarize you with the statement of cash flows of a publicly held company. Its primary objective is to test your understanding of the relationships underlying the cash flow statement. It also serves as a natural way to expand your understanding of accounting
Mai Fuji started a business on January 1, 2008. Key operating statistics for 2008 were as follows:\Direct production costs were \($12\) per unit. There were no fixed costs or selling/delivery expenses. The selling price per unit was \($16.On\) January 1, 2009, Fuji decided to liquidate the
Agri Pro, a farm corporation, produced 15,000 bushels of wheat in its first year of operations.During the year, it sold 10,000 bushels of the grain produced for \($2.40\) per bushel and collected three-fourths of the selling price on the grain sold; the balance is to be collected in equal amounts
Lowery, Inc., an Arizona land speculator, started business on May 1, 2008. It sold 700 acres of desert sand to a local developer for \($960\) an acre. Lowery is paid 60% of the selling price when the contract is signed, with the balance due in 24 months; however, collection is not
Howe, Inc., a Texas crude oil producer, started business on May 1, 2008. It sells all of its production, F.0.B. shipping point, to a single customer at the current spot price for West Texas crude. The customer pays Howe 60% of the selling price on delivery with the remaining to be paid in 10
In 2008, Long Construction began work under a three-year contract whose price is $800,000.Long uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the
MSK Construction Company contracted to construct a factory building for $525,000.Construction started during 2008 and was completed in 2009. Information relating to the contract follows:Required:Record the preceding transactions in MSK’s books under the completed-contract and the
Maple Corporation sells farm machinery on the installment plan. On July 1, 2008, it enteredinto an installment sale contract with Agriculture, Inc., for an eight-year period. Equal annualpayments under the installment sale are \($100,000\) and are due on July 1. The first payment was made on July
Englewood Marine builds 30-foot fiberglass fishing boats, which it markets through a network of third-party dealers on a consignment basis. The consignment agreement stipulates that Englewood retains title to the boats until final sale to the customer. Dealers can return unsold boats to Englewood
Composite, Inc. manufactures modular homes. Due to lack of storage space for raw material inventories, Composite implemented a just-in-time inventory process in early 2006. Composite contracts with qualified vendors to be sole suppliers for a given raw material. In return, the vendors guarantee
Brio derives revenues from two sources, perpetual license fees and services. Services include software maintenance and support, training and consulting, and system implementation services. Maintenance and support consist of technical support and software upgrades and enhancements. Significant
Holman Electronics manufactures audio equipment, selling it through various distributors.Holman’s days sales outstanding (Accounts receivable / Average daily credit sales) figures increased steadily in 2008 and then spiked dramatically in 2009, peaking at 120 days in the second quarter. In the
GWH Enterprises began operations in January 2006 to manufacture a cleaning solution that promised to be more effective and less toxic than existing products. Family members, one of whom was delegated to be the office manager and bookkeeper, staffed the company. Although conscientious, the office
In 2008, the new CEO of Watsontown Electric Supply became concerned about the company’s apparently deteriorating financial position. Wishing to make certain that the grim monthly re- ™ -ports he was receiving from the company’s bookkeeper were accurate, the CEO engaged a CPA Correcting
On July 1, 2008, Quincy Company sold a piece of industrial equipment to Tana Company for S200. The equipment cost Quincy $80,000 to manufacture. Per the sales agreement, Tana made a 20% down payment and paid the remaining balance in four equal quarterly installments plus 10% on the unpaid balance,
Thomas Smith owns and operates a farm in Kansas. During 2008, he produced and harvested 40,000 bushels of wheat. He had no inventory of wheat at the start of the year. Immediately after harvesting the wheat in the late summer of 2008, Smith sold 30,000 bushels to a local grain elevator operator. As
London, Inc. began operation ofi ts construction division on October 1, 2008 and entered into contracts for two separate projects. The Beta project contract price was \($600,000\) and provided for penalties of \($10,000\) per week for late completion. Although during 2009 the Beta project had been
Stewart & Stevenson Services, Inc. manufactures motors and generators. The following is extracted from the Year 2 financial statements of Stewart & Stevenson Services, Inc.Assumption: All sales revenue is from long-term construction contracts.Required:1. Using the preceding information,
Uncle Mike's is a discount club retailer that generates revenues from membership fees and selling products at discounted prices to its club members. To shop at its stores, the customer must purchase a \($40\) annual membership, which expires on December 31. The cost of the membership is prorated
Give Three Inc., a maker of a popular series of video games for various systems, shipped several thousand units to three distributors of its games on December 20, 2008, to ensure that the anticipated heightened demand for its games would be met during the last two weeks of the calendar and fiscal
ClearOne Communications, Inc. is a provider of end-to-end video and audio conferencing services, including the manufacture and sale of video and audio conferencing products.From its inception as a manufacturer of this equipment through 2001, ClearOne sold its products through a nationwide network
Symbol Technologies, Inc. is a leading manufacturer of bar code scanners and related information technology whose stock is traded on the New York Stock Exchange. In 2003, the SEC filed allegations that during the period 1998 to 2002, the company manipulated millions of dollars in revenue, net
Austins Steaks & Saloon, Inc. (Austins) operates and/or franchises restaurants. It currently has approximately 118 franchisees operating 186 Western Sizzlin, Western Sizzlin Wood Grill, Market Street Buffet and Bakery, and Great American Steak & Buffet restaurants in 22 states.Austins’
The following was excerpted from The Wall Street Journal Online:The Dallas technology outsourcer [Affiliated Computer Services] acknowledged Mayaf 10, after a preliminary internal probe, that it had issued executive stock options that carried “effective dates” preceding the written approval of
Seldin Company owns a royalty interest in an oil well. The contract stipulates that Seldin will receive royalty payments semiannually on January 31 and July 31. The January 31 payment will be for 20% of the oil sold to jobbers between the previous June 1 and November 30, and the July 31 payment
a. On January 1, 2008, Frances Corporation started doing business and the owners contributed \($200,000\) capital in cash.b. The company paid \($24,000\) to cover the rent for the office space for the 24-month period from January 1, 2008, to December 31, 2009.c. On March 1, 2008, MSK Inc. entered
The following information pertains to Baron Flowers, a calendar-year sole proprietorship, which maintained its books on the cash basis during the year.The “Baron, drawings” account is used to record any distributions to Mark Baron. The “Baron, capital” account is used to record any capital
The following is the preclosing trial balance of Antonia Retailers, Inc.:The following additional information is provided:a. The company paid a salary advance of $10,000 to one of its employees, a total that was debited to the Salaries expense account. This was an advance against the employee’s
The following is selected information from Flightscape Adventures’ financial statements. Solve for the missing amounts for each of the five years. You may have to use some numbers from the year before or the year after to solve for certain current year numbers. (NA = not available.) Year 2007
During August 2008, Packer Manufacturing had the following cash receipts and disbursements:Assume all sales and purchases are on account.Required:1. Determine sales for August 2008.2. Determine salary expense for August 2008.3. Determine cost of goods sold for August 2008. Cash received from
During the month of October 2008, HAWK-I Rentals had the following cash receipts and payments:Of the rental receipts collected, \($2,000\) was reported as Rent receivable at September 30, and \($3,500\) was a prepayment of November’s rent. An insurance premium of \($1,000\) was owed at the end of
Bob’s Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip cookies, started business October 1, 2008. The following transactions occurred during the month.a. Common stock of \($90,000\) was sold to start the business.b. Equipment consisting of mixers and ovens was
The following is the pre-adjusted trial balance of JetCo Fuel Services as of December 31, 2008.Additional Information:a. A fuel tanker was purchased July 1, 2008 by issuing a three-year 10% interest-bearing note payable for \($75,000\). The tanker is expected to last 10 years and then be scrapped.
The following information was taken from a recent iiicome statement of [VAX Corporation. IVAX is a holding company with subsidiaries providing research, development, manufacturing, and marketing of brand name pharmaceutical products.Required:1. Recast IVAX’s income statement and present it in
The following condensed statement of income of Helen Corporation, a diversified company, is presented for the two years ended December 31, 2008 and 2007:On January 1, 2008, Helen entered into an agreement to sell for \($3,200,000\) the assets and product line of one of its separate operating
Jordan Wing, Inc., a sporting goods retailer, began operations on January 2, 2006. It reported net income of \($3,091,660\) during 2008. Additional information about transactions occurring in 2008 follows:1. Jordan Wing realized \($175,000\) from settling a trademark infringement lawsuit.2. The
For 2008, Silvertip Construction, Inc. reported income from continuing operations (after tax) of \($1,650,000\) before considering the following information. On November 15, 2008, the company adopted a plan to dispose of a component of the business. This component qualifies for discontinued
The preliminary 2008 income statement of Athletic Footwear, Inc. follows.Additional facts pertaining to the company’s 2008 operations follow:. Selling and administrative expenses included \($6,231,000\) in restructuring costs.. Other income represents a gain on the early extinguishment of debt..
The following information was taken from the records of Liz’s Theatrical Supplies for 2008. In addition to selling theatrical supplies, Liz owned and operated a theater until October 15, 2008, when Liz sold this component of the business. All listed amounts are pre-tax, but are subject to a 38%
The income statement of Smithfield Beverage, Inc. that follows does not include any required reporting related to a \($62,000\) pre-tax gain that was realized in 2008 when Smithfield repurchased and retired \($1\) million of its 8% term bonds (scheduled to mature in 2015). Smithfield’s income tax
Roger’s Plumbing, Inc. operates two segments: (1) a division that installs residential and commercial plumbing in buildings being constructed and (2) a service division that has both residential and commercial components. A recent construction boom has kept Roger’s so busy operations that it
Bettner, Inc. operates a hardwood lumber export business. It began operations as a family business in 1997 and incorporated in 1999. On January 3, 2000, Bettner acquired Needham Bros. lumber and appropriately recorded $1 million of goodwill related to this transaction. Bettner’s accounting policy
Barden, Inc. operates a retail chain that specializes in baby clothes and accessories that are made to its specifications by a number of overseas manufacturers. Barden began operations in 1998 and has always employed the FIFO method to value its inventory. Since 1998, prices have generally declined
The Mohegan Tribe is a federally recognized Native American tribe with an approximately 405-acre reservation located in southeastern Connecticut. Under the Indian Gaming Regulatory Act of 1988, or IGRA, federally recognized Native American tribes are permitted to conduct full-scale casino gaming
The following information is based on the annual report and 10-K statement of Baldwin Piano and Organ Company.The company is the largest domestic manufacturer of keyboard musical instruments, and it manufactures or distributes all major product classes of pianos and electronic organs. The company
Neville Company decides at the beginning of 2008 to adopt the FIFO method of inventory valuation.It had used the LIFO method for financial and tax reporting since its inception on January 1, 2006, and had maintained records that are sufficient to retrospectively apply the FIFO method. Neville
In addition to the information provided in Baldwin Piano I, consider the following information provided with information from the annual report and 10-K statement of Baldwin Piano and Organ company.Interest income on installment receivables represents interest on receivables not sold to the
The following data pertain to Pell Company’s construction jobs, which commenced during 2008:Required:1. If Pell used the completed-contract method, what amount of gross profit (loss) would it report in its 2008 income statement?2. If Pell used the percentage-of-completion method, what amount of
Haft Construction Company has consistently applied the percentage-of-completion method.On January 10, 2008, Haft began work ona \($3,000,000\) construction contract. At the inception date, the estimated cost of construction was \($2,250,000\). The following data relate to the progress of the
Lang Company uses the installment method of revenue recognition. The following data pertain to its installment sales for the years ended December 31, 2008 and 2009:Required:What amount should Lang report as deferred gross profit in its December 31, 2008 and 2009 balance sheets? Installment
Because there is no reasonable basis for estimating the degree of collectibility, Astor Company uses the installment method of revenue recognition for the following sales:Required:What amount should Astor report as deferred gross profit in its December 31, 2008 balance sheet for the 2007 and 2008

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