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business
financial reporting and analysis
Financial Reporting And Analysis Using Financial Accounting Information 9th Edition Charles H Gibson, Patricia A Frishkoff - Solutions
The following is the balance sheet of Ingram Industries.Required Indicate your criticisms of the balance sheet and briefly explain the proper treatment of any item criti- cized.
The following information was obtained from the accounts of Alleg, Inc. as of December 31, 2003. It is presented in scrambled order.Required Prepare a classified balance sheet in report form. For assets, use the classifications of current assets, plant and equipment, intangibles, and other assets.
The following information was obtained from the accounts of Lukes, Inc. as of December 31, 2003. It is presented in scrambled order. Common stock, no par value, 10,000 shares authorized, 5,724 shares issued Retained earnings Deferred income tax liability (long term) $ 3,180 129,950 24,000 Long-term
The following information was obtained from the accounts of Airlines International dated December 31, 2003. It is presented in alphabetical order. Accounts payable Accounts receivable $ 77,916 67,551 Accrued expenses 23,952 Accumulated depreciation 220,541 Allowance for doubtful accounts 248
Describe the account "accumulated other comprehensive income."
Should depreciation be recognized on a building in a year in which the cost of replacing the building rises? Explain.
Which depreciation method will result in the most depreciation over the life of an asset?
An accelerated system of depreciation is often used for income tax purposes but not for financial report- ing. Why?
What are the three factors usually considered when computing depreciation?
Describe depreciation, amortization, and depletion. How do they differ?
How does a company recognize, in an informal or formal way, that it has guaranteed commitments to fu- ture contributions to an ESOP to meet debt-service requirements?
Describe donated capital. Assume that a city donated land to a company.
What are some possible disadvantages of an employee stock ownership plan?
Why are commercial lending institutions, insurance companies, and mutual funds willing to grant loans to an employee stock ownership plan at favorable rates?
Describe employee stock ownership plans (ESOPs).
Describe the presentation of this plan on the balance sheet.
Assume that an equity-oriented deferred compensation plan involves cash or a subsequent election of ei- ther cash or stock.
What accounts would be affected by this donation, and what would be the value? Describe quasi-reorganization.
Why should it be included with debt for purposes of financial state- ment analysis?
Describe the item "unrealized decline in market value of noncurrent equity investments." What is redeemable preferred stock?
Would the answer change if it owned only 60%? Will there ever be a case in which the subsidiary, Little Florida, is not consolidated?
DeLand Company owns 100% of Little Florida, Inc. Will DeLand Company show a minority interest on its balance sheet?
How is an unconsolidated subsidiary presented on a balance sheet? When would minority interest be presented on a balance sheet?
A firm, with no opening inventory, buys 10 units at $6 each during the period. In which accounts might the $60 appear on the financial statements?
What is treasury stock? Why is it deducted from stockholders' equity?
Describe the account "unrealized exchange gains or losses."
Explain these preferred stock characteristics:a. Accumulation of dividendsb. Participation in excess of stated dividend rate C. Convertibility into common stockd. Callability by the corporatione. Preference in liquidation
a. Classify each of the following as a (CA) current asset, (NA) noncurrent asset, (CL) current liability, (NL) noncurrent liability, or (E) equity account. Choose the best or most frequently used classification. Suppliesb. Notes receivable k. Wages payable 1. Mortgage bonds payable C. Unearned
Explain how the issuance of a convertible bond can be a very attractive means of raising common equity funds.
Many assets are presented at historical cost. Why does this accounting principle cause difficulties in fi- nancial statement analysis?
To be conservative, how should minority interest on the balance sheet be handled for primary analysis?
A bond carries a stated rate of interest of 6% and par of $1,000. It matures in 20 years. It is sold at 83 (83% of $1,000, or $830).a. Under normal conditions, why would the bond sell at less than par?b. How would the discount be disclosed on the statements?
A rental agency collects rent in advance. Why is the rent collected treated as a liability?
For reporting purposes, management prefers higher profits; for tax purposes, lower taxable income is de- sired. To meet these goals, firms often use different methods of depreciation for tax and reporting pur- poses. Which depreciation method is best for reporting and which for tax purposes? Why?
What is depreciation? Which tangible assets are depreciated and which are not? Why?
What types of inventory will a retailing firm have? A manufacturing firm?
Differentiate between accounts receivable and accounts payable.
Differentiate between marketable securities and long-term investments. What is the purpose of owning each?
Usually current assets are listed in a specific order, starting with cash. What is the objective of this order of listing?
Classify the following as (CA) current asset, (TV) investments, (IA) intangible asset, or (TA) tangible asset:a. Land g. Toolsb. Cash h. Prepaidsc. Copyrights i. Buildingsd. Marketable securities j. Accounts receivablee. Goodwill k. Long-term investment in stockf. Inventories 1. Machinery
Are the following balance sheet items (A) assets, (L) liabilities, or (E) stockholders' equity?a. Cash dividends payable k. Retained earningsb. Mortgage notes payable 1. Donated capitalc. Investments in stock m. Accounts receivabled. Cash n. Taxes payablee. Land o. Accounts payablef. Inventory p.
Name and describe the three major categories of balance sheet accounts.
Required A company prepares financial statements in order to summarize financial information. Below is a list of fi- nancial statements and a list of descriptions. Financial Statementsa. Balance sheetb. Income statement C. Statement of cash flowsd. Statement of stockholders' equity Descriptions 1.
An auditor's report is the formal presentation of all the effort that goes into an audit. Below is a list of the classifications of audit opinions that can be found in an auditor's report as well as a list of phrases de- scribing the opinions. Classifications of Audit Opinionsa. Unqualified
The following are selected accounts of the Laura Gibson Company on December 31: Permanent (P) or Temporary (T) Normal Balance (Dr.) or (Cr.) Cash Accounts Receivable Equipment Accounts Payable Common Stock Sales Purchases Rent Expense Utility Expense Selling Expense
Required Answer the following multiple-choice questions:a. Audit opinions cannot be classified as which of the following? 1. All-purpose 2. Disclaimer of opinion 3. Adverse opinion 4. Qualified opinion 5. Unqualified opinionb. From the point of view of analysis, which classification of an audit
Required Answer the following multiple-choice questions:a. The balance sheet equation can be defined as which of the following? 1. Assets + Stockholders' Equity = Liabilities 2. Assets +Liabilities 3. Stockholders' Equity Assets Liabilities - Stockholders' Equity 4. Assets Liabilities Stockholders'
The DeCort Company had these adjusting entry situations at the end of December: 1. On May 1, the DeCort Company paid $960 for a two-year insurance policy. The policy was for the period May 1 through April 30 (2 years). This is the first year of the policy. The transaction was recorded as insurance.
Required The Gaffney Company had these adjusting entry situations at the end of December. 1. On July 1, Gaffney Company paid $1,200 for a one-year insurance policy. The policy was for the pe- riod July 1 through June 30. The transaction was recorded as prepaid insurance and a reduction in cash. On
The Darlene Cook Company engaged in the following transactions during the month of July: July 1 8 12 Acquired land for $10,000. The company paid cash. Billed customers for $3,000. This represents an increase in revenue. The customer has been billed and will pay at a later date. An asset, accounts
Required The Mike Szabo Company engaged in the following transactions during the month of December: December 2 Made credit sales of $4,000 (accepted accounts receivable). 6 Made cash sales of $2,500. 10 Paid office salaries of $500. 14 Sold land that originally cost $2,200 for $3,000 cash. 17 Paid
Where must a company's code of ethics be made available?
What is the basic guideline for consolidation?
Consolidated statements may be issued to show financial position as it would appear if two or more com- panies were one entity. What is the objective of these statements?
Describe the purchase method of accounting for a business combination.
Considering the EMH, how could abnormal returns be achieved?
Considering the EMH, it is best if financial disclosure is made in the body of the financial statements. Comment.
Why would the use of insider information be of concern if the market is efficient?
Identify the usual forms of a business entity and describe the ownership characteristic of each.
The NYSE has trouble competing with many foreign exchanges in the listing of foreign stocks. Discuss.
Why aren't all transactions recorded in the general journal?
Why are adjusting entries necessary?
A typical accrual recognition for salaries is as follows: Salaries Expense Salaries Payable $1,000 (increase) 1,000 (increase) Explain how the matching concept applies in this situation.
Define the following:a. Permanent accountsb. Temporary accounts
What is the relationship between the accounting equation and the double-entry system of recording trans- actions?
Identify the basic accounting equation.
What is the relationship between ethics and law?
Describe the relationship between the terms ethics and morals.
Where do we find a description of a firm's accounting policies?
Can cash dividends be paid from retained earnings? Comment.
Why review footnotes to financial statements?
What are the three major categories on a balance sheet?
Which two principal financial statements explain the difference between two balance sheet dates? De- scribe how these financial statements explain the difference between two balance sheet dates.
What are the major sections of a statement of cash flows?
Comment on the typical number of financial pages in a summary annual report as compared to a full an- nual report.
If a company issues a summary annual report, where can the more extensive financial information be found?
Briefly describe a summary annual report.
Describe a proxy statement.
Which of the following events, occurring subsequent to the balance sheet date, would require a footnote? Major fire in one of the firm's plantsa. b. Increase in competitor's advertising C. Purchase of another companyd. Introduction of new management techniquese. Death of the corporate treasurer
What are contingent liabilities? Are lawsuits against the firm contingent liabilities?
Why are footnotes to statements necessary?
What are the three principal financial statements of a corporation? Briefly describe the purpose of each statement.
Are all financial statements presented with some kind of an accountant's report? Explain.
What type of opinion is expressed on a compilation?
Describe the accountant's re- port for reviewed financial statements.
Describe an auditor's review of financial statements. Will the accountant express an opinion on reviewed financial statements?
Why do some unqualified opinions have explanatory paragraphs?
What is the purpose of the SEC's integrated disclosure system for financial reporting?
What are the roles of management and the auditor in the preparation and integrity of the financial state- ments?
a. Nd Name the type of opinion indicated by each of the following situations; in) There is a material uncertainty.b. There was a change in accounting principle. (May QUALE WATTP C. There is no material scope limitation or material departure from GAAP. UNQUALITIEDd. The financial statements do not
In the summer of 1993, the Senate and the House introduced identical bills to amend the Internal Revenue Code of 1986. Section 4 of these bills addressed stock option compensation and financial re- porting. SEC. 4 STOCK OPTION COMPENSATION. Section 14 of the Securities Exchange Act of 1934 (15
Even though accounting records go back hundreds of years, there was little effort to develop accounting standards until the 1900s. The first major effort to develop accounting standards in the United States came in 1939 when the American Institute of Certified Public Accountants formed the
The following data relate to Jones Company for the year ended December 31, 2002: Sales on credit $80,000 Cost of inventory sold on credit 65,000 Collections from customers 60,000 Purchase of inventory on credit 50,000 Payment for purchases 55,000 Cash collections for common stock 30,000 Dividends
Required Answer the following multiple-choice questions:a. Which of the following does the Financial Accounting Standards Board not issue? 1. Statements of Position (SOPs) Statements of Financial Accounting Standards (SFASS) 2. 3. Interpretations 4. Technical bulletins 5. Statements of Financial
Required Answer the following multiple-choice questions:a. Which of the following is a characteristic of information provided by external financial reports? 1. The information is exact and not subject to change. 2. The information is frequently the result of reasonable estimates. 3. The information
Certain underlying considerations have had an important impact on the development of generally ac- cepted accounting principles. Following is a list of these underlying considerations, as well as a list of state- ments describing them. Going concern or continuity Monetary unit Conservatism Matching
FASB Statement of Concepts No. 2 indicates several qualitative characteristics of useful accounting in- formation. Following is a list of some of these qualities, as well as a list of statements and phrases de- scribing the qualities.a. Benefits > costsf. Verifiability, neutrality,b. Decision
It is not important to know when cash is received and when payment is made. Comment.
The cash basis does not reasonably indicate when the revenue was earned and when the cost should be recognized. Comment.
Briefly explain the difference between an accrual basis income statement and a cash basis income state- ment.
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