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financial reporting and analysis
Financial Accounting Reporting And Analysis 6th Edition Earl K. Stice, James Stice, Michael Diamond, James D. Stice - Solutions
Define prepaid expenses and identify examples of two types of prepaid expenses. E-967
Describe five general types of current assets.Why do you think managers and analysts might prefer that firms generally use these categories and definitions for current assets? E-967
Describe how LIFO provides better matching of revenues and expenses than FIFO.Why would such an attribute be desirable for income measurement? E-967
Discuss the relationships between “lower of cost or market” and the various methods that might be used to determine inventory costs, such as FIFO and LIFO.? E-967
What steps can a firm take to protect cash held on its premises? E-967
Discuss the criterion “available-for-sale” as it is used in determining how marketable securities are reported in the firm’s financial statements. E-967
Under what circumstances can accounts receivable be turned into cash, almost“overnight”? E-967
Under what circumstances might cash not be considered a current asset? E-967
Describe two different methods of accounting for marketable securities.Why is one method preferable? E-967
Describe one method that can be used to estimate a firm’s uncollectible accounts expense. E-967
What policies (within the firm) will help determine how quickly a firm collects cash on its credit sales? What customer attributes will also affect cash collections? E-967
Does a firm’s recognition of revenue depend on whether the transaction is a cash sale or a credit sale? Why? E-967
Discuss the typical relationship between inventory and accounts receivable.How are the dollar amounts reported in inventory related to those reported as accounts receivable? Are the dollar amounts comparable or related to each other in any systematic manner? Under what circumstances could a firm
Why would a firm extend credit to its customers? Identify some firms that rarely offer credit terms. How have bank credit cards changed some of these credit practices? Identify some industries where credit is an essential part of daily business. E-967
Explain the relationship between inventory cost flows and the actual flow of goods into and out of the firm’s storeroom. E-967
Describe how market valuations are applied to short-term equity investments. E-967
Under what circumstances could a firm’s cash balance be negative? Why? E-967
Why would a business usually want to have a positive cash balance? What does a firm usually do with cash? Describe how a firm might operate with a cash balance of zero in its accounting records. E-967
What does the term cash,as shown on financial statements,usually include? Discuss cash and cash equivalents separately. E-967
Understand the nature of prepaid expenses. E-967
Analyze a firm’s inventory management practices. E-967
Understand the various inventory cost flow assumptions and the effect that the firm’s choice of inventory method has on its taxes, the quality of information in its financial statements,its management compensation, its loan covenants, and its stock price. E-967
Assess if a firm’s allowance for uncollectible accounts is adequate. E-967
Determine if a firm is properly managing its accounts receivable. E-967
Comprehend the basic accounting for marketable securities and the limitations of generally accepted accounting principles in this area. E-967
Understand the need for cash planning and how firms exercise control over cash. E-967
Identify the items included in cash. E-967
The Limpid Pool Company reports net income of $25 million for 2000. Balance sheets at the beginning and end of the year are shown below.December 31 1999 2000(Dollars in millions)Cash $ 50 $ 70 Other current assets 80 145 Property, plant, and equipment (net) 170 135 Total assets $300 $350 Current
Income tax payable increased by $9 million.Required Based on the above information, determine the amount of net income reported by Blunt for 2001. E-967
Inventory balances increased by $18 million. E-967
Supplier accounts payable decreased by $8 million. E-967
Noncurrent debt was increased by $35 million. E-967
Depreciation expense was $24 million. E-967
Dividends paid to common shareholders were $20 million. E-967
Customer accounts receivable increased by $6 million. E-967
The Blunt Instrument Company reports cash flow from operations of $65 million for 2001.You are provided the following additional information for the year:
The following financial statements for Swale, LTD are provided:Swale Limited Income Statement For the Year Ended December 31, 2000 Revenues:Sales $97,800 Interest revenue 1,300$99,100 Expenses:Cost of goods sold 56,500 Salary expense 19,000 Depreciation expense 3,000 Interest expense 1,500 Tax
The following are comparative balance sheets for the Paulino Corporation for 2000 and 1999 and the income statement for the year ended December 31, 2000:Paulino Corporation Comparative Balance Sheets December 31 2000 1999 Assets Cash $ 89,000 $ 60,000 Accounts receivable 65,000 50,000 Inventory
The following condensed information (dollars in thousands) is available from Mary’s Muffins.Assume that all sales are credit sales (accounts receivable) and all purchases are also on credit (accounts payable).December 31 Year 1 Year 2 Balance Sheet Data:Accounts receivable $55 $ 53 Prepaid
The following financial statements for Lucy Enterprises are provided:Income Statement for Year Ending December 31, 1999 Sales revenues $550,000 Cost of goods sold 210,000 Gross margin $340,000 Salary expenses (115,000)Interest expense (15,000)Interest revenue 20,000 110,000 Net income before taxes
Certifications in accounting include the Certificate of Public Accounting (CPA), Certificate of Internal Auditing (CIA), and Certificate of Management Accounting(CMA). Certification examinations must be passed before gaining these professional qualifications. Go to the following Web sites and
Find out more about a career in accounting by going to Ohio State University’s home page containing information on “Careers in Finance, Accounting, and Consulting,”located at:www.cob.ohio-state.edu/dept/acctmis/students/careers.html Requireda. List the key job functions in accounting.b. List
Go to the home page of the United States Securities and Exchange Commission(SEC) located at:www.sec.gov/Requireda. Briefly describe the role of the SEC. Which laws does it enforce?b. How many commissioners sit on the board of the SEC? Who is the current chairperson of the SEC? Who has the authority
Bowling Green State University maintains the following two Web sites containing a “Directory of CPA Firms”:www.cpafirms.com(www.eyi.com)Access one of these sites and locate the Web page for Ernst & Young, a large(“Big Five”) accounting firm.Requireda. List six countries (other than the
An accounting group has adopted new definitions of earnings or profits. These changes include the following:• Reporting comprehensive earnings, along with net income, for the company.This could result in several new profit numbers for most companies.• Comprehensive earnings include external
The accounting profession considered increasing its required disclosures and the type of information that is required from public companies. The following paragraphs appeared in The Wall Street Journal (August 26, 1993, p. A4):A key accounting group calls for a sharp increase in the amount of
Write a short essay indicating how you might use accounting in a professional or business capacity? p-968
Describe two ways that you have already used accounting information in your personal decisions. p-968
The auditor’s report, shown in Exhibit 1,10, contains much useful information.Write a short essay, or form small groups in your class, discussing the kinds of information you think auditors should provide. You may identify specific kinds of information that you think would be helpful to an
At the end of every year, all employers send W-2 forms to their employees. These forms report the employees’ wages and the amount of tax withheld by the employer. These forms are the government’s only record of earned wages. Assume that an employee receives a W-2 form that understates the wages
Some members of the financial community believe that annual reports should not only contain historical financial statements but should also contain forecasts by management of future results. Evaluate this proposal. p-968
Write a short essay describing how information requirements might differ between internal and external users of accounting. p-968
The Homestead Furniture Store has just begun selling a new line of inventory.Management must now decide on an inventory method to use. Method A results in higher net income and higher assets than Method B. Method A is more costly to implement. What advice would you give to the chief executive
Assume that you are employed by a law firm as a staff accountant. The firm has purchased four season tickets for the Colorado Rockies (a baseball franchise).Your boss, one of the partners in the firm, has offered individual tickets to you, but also asked you to pay $10 for each ticket. Since they
Following is the auditor’s opinion expressed on the financial statements of Kleen-ware, Inc.:AN AUDITOR’S REPORT The Board of Directors Kleen-ware, Incorporated and Subsidiaries (the Company)We have audited the accompanying consolidated balance sheets of Kleen-ware, Inc. and subsidiaries (the
Refer to the T-shirt business described at the beginning of this chapter. The owner has decided to expand her business by trying to secure a bank loan. After meeting with the bank loan officer, she asked for your help in answering several questions before proceeding with the loan application.a.
Which of the following transactions or events should be recorded in the firm’s accounting records? Explain your answer.a. Cash is received from a sale previously made on credit.b. A year after obtaining a bank loan, a business owes the bank interest charges.These charges remain unpaid at the end
Write a short essay identifying three measurement criteria that should be followed by accountants. Indicate why each criterion is important. p-968
Some accountants draw an analogy between developing financial statements and cartography (map making). They maintain that just as maps reflect the geographical reality of the area under study, so should financial statements reflect the economic reality of the organization. Critique this position by
A number of situations exists where more than one accounting principle is acceptable. Why is this advisable? p-968
Why do many businesses that are not regulated by the SEC elect to have their financial statements audited? p-968
What is the relationship between the FASB and the SEC? What role does Congress play in setting accounting standards? p-968
What considerations are used by the FASB in setting GAAP? p-968
Is accounting standard setting an art or a science? Why? p-968
Accounting principle selection has economic effects. How might this affect managers’ behavior? p-968
An old joke goes as follows:• Questioner: What is 2 + 2?• Accountant: Whatever you want it to be.What do you think this joke is designed to communicate? p-968
The selection of accounting principles can affect a firm’s manager’s wealth. Describe these effects. p-968
What information do present and potential creditors need to make decisions?How are financial statements helpful? p-968
What decisions do present and future owners of a business need to make? How are financial statements helpful? p-968
Write a short essay describing four different users of accounting reports and indicate their particular interests. p-968
List the three major financial statements. What information do they contain?How are they different? p-968
Describe the financial accounting process. Discuss its relationship to decision makers. p-968
Compare the cash flows of a business to its profits. How do cash flows differ from income or profits? p-968
List the three types (specialty areas) of accounting. Who are the users of each type of accounting? How do the needs of these users differ? p-968
The chapter discussed two general functions of financial accounting. Briefly describe them. p-968
Assess the importance of ethics in accounting. p-968
List the economic consequences of accounting principle choice. p-968
Describe the role of auditing. p-968
Define generally accepted accounting principles and explain how they are determined. p-968
Identify financial statement users and the decisions they make. p-968
List the three primary financial statements and briefly summarize the information contained in each. p-968
Distinguish among the three major types of accounting. p-968
Define accounting and identify its objectives. p-968
(Similar to Problem 2-33) John’s Anti-Mediation League (JAML) engaged in the following transactions in 1999:1. On January 1, JAML borrowed $100,000 at six percent per year with interest due quarterly.2. JAML paid a $1,000 kickback to a good friend who helped obtain the loan.
Describe each of the steps in the accounting process, as shown below:1. Identify transactions and events 2. Analyze transactions and events in terms of the basic accounting equation.3. Translate the transaction analysis into debits and credits.4. Prepare journal entries and post to the general
What are some of the conditions that might cause a trial balance not to be “in balance”? P=59
If a firm never prepared periodic financial statements, would it need to prepare adjusting or closing entries? Why? P=59
Why are closing entries used? P=59
Would a cash-based system have a need for adjusting entries? Why? P=59
Why are adjusting entries used? P=59
Discuss why a firm might use subsidiary ledgers. P=59
Define the term posting. P=59
Draw a diagram reflecting the parts of the accounting cycle, showing how journals, ledgers, and so on, are used to record transactions. P=59
Define the terms debit and credit. P=59
Generate balance sheets and income statements from general ledger accounts. P=59
Prepare and post closing entries. P=59
Prepare and post adjusting entries. P=59
Calculate account balances. P=59
Prepare and post journal entries. P=59
International Dairy Queen’s annual income statement for the year ended November 30, 1994, and its four quarterly income statements are presented below.Annual ending 11/30/94 11/30/94 2/24/95 5/26/95 8/25/95 Net sales $340,833 $76,070 $67,530 $106,150 $115,361 Cost of goods sold 249,985 55,140
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