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Financial Reporting And Analysis Using Financial Accounting Information 11th Edition Charles H. Gibson - Solutions
The following relate to the income statement of Growth Company for the year ended 2008. What is the beginning inventory?Purchases $180,000 Purchase returns 5,000 Sales 240,000 Cost of goods sold 210,000 Ending inventory 30,000 1. $6,000 2. $65,000 3. $50,000 4. $55,000 5. $70,000
Which of the following is a recurring item?1. Error of a prior period 2. Equity in earnings of nonconsolidated subsidiaries 3. Extraordinary loss 4. Cumulative effect of change in accounting principle 5. Discontinued operations
Which of the following items would be classified as operating revenue or expense on an income statement of a manufacturing firm?1. Interest expense 2. Advertising expense 3. Equity income 4. Dividend income 5. Cumulative effect of change in accounting principle
The following information for Gaffney Corporation covers the year ended December 31, 2008:Requireda. Will net income or comprehensive income tend to be more volatile? Comment.b. Which income figure will be used to compute earnings per share?c. What is the total tax expense reported?d. Will the
Each of the following statements represents a decision made by the accountant of Growth Industries:a. A tornado destroyed $200,000 in uninsured inventory. This loss is included in the cost of goods sold.b. Land was purchased 10 years ago for $50,000. The accountant adjusts the land account to
Uranium Mining Company, founded in 1980 to mine and market uranium, purchased a mine in 1981 for$900 million. It estimated that the uranium had a market value of $150 per ounce. By 2008, the market value had increased to $300 per ounce. Records for 2008 indicate the following:Production 200,000
The income statement of Jones Company for the year ended December 31, 2008, follows.Requireda. Compute the net earnings remaining after removing nonrecurring items.b. Determine the earnings (loss) from the nonconsolidated subsidiary.c. Determine the total tax amount. Revenue from sales Cost of
The income statement of Tawls Company for the year ended December 31, 2008, shows the following:Revenue from sales $ 980,000 Cost of products sold 510,000 Gross profit 470,000 Operating expenses:Selling expenses $110,000 General expenses 140,000 250,000 Operating income 220,000 Equity on earnings
List where each of the following items may appear. Choose from (A) income statement, (B) balance sheet, or (C) reconciliation of retained earnings.a. Dividends paid k. Unrealized exchange gains and lossesb. Notes payable l. Equity in net income of affiliatesc. Minority share of earnings m.
List the statement on which each of the following items may appear. Choose from (A) income statement,(B) balance sheet, or (C) neither.a. Net income l. Interest payableb. Cost of goods sold m. Loss from floodc. Gross profit n. Landd. Retained earnings o. Taxes payablee. Paid-in capital in excess of
You were recently hired as the assistant treasurer for Victor, Inc. Yesterday, the treasurer was injured in a bicycle accident and is now hospitalized, unconscious. Your boss, Mr. Fernandes, just informed you that the financial statements are due today. Searching through the treasurer’s desk, you
The following information applies to Bowling Green Metals Corporation for the year ended December 31, 2008:Total revenues from regular operations $832,000 Total expenses from regular operations 776,000 Extraordinary gain, net of applicable income taxes 30,000 Dividends paid 20,000 Number of shares
At the end of 2008, vandals destroyed your financial records. Fortunately, the controller had kept certain statistical data related to the income statement, as follows:a. Cost of goods sold was $2,000,000.b. Administrative expenses were 20% of the cost of sales but only 10% of sales.c. Selling
The income statement of Rawl Company for the year ended December 31, 2008, shows the following:Net sales $360,000 Cost of sales 190,000 Gross profit 170,000 Selling, general, and administrative expense 80,000 Income before unusual write-offs 90,000 Provision for unusual write-offs 50,000 Earnings
The following items are from Taperline Corporation on December 31, 2008. Assume a flat 40% corporate tax rate on all items, including the casualty loss.Sales $670,000 Rental income 3,600 Gain on the sale of fixed assets 3,000 General and administrative expenses 110,000 Selling expenses 97,000
The accounts of Consolidated Can contain the following amounts at December 31, 2008:Cost of products sold $410,000 Dividends 3,000 Extraordinary gain (net of tax) 1,000 Income taxes 9,300 Interest expense 8,700 Other income 1,600 Retained earnings, 1/1 270,000 Sales 480,000 Selling and
The following information for Lesky Corporation covers the year ended December 31, 2008:Required Change this statement to a multiple-step format, as illustrated in this chapter. Revenue: Revenues from sales Rental income LESKY CORPORATION Income Statement For the Year Ended December 31, 2008
The following information for Decher Automotives covers the year ended 2008:Administrative expense $ 62,000 Dividend income 10,000 Income taxes 100,000 Interest expense 20,000 Merchandise inventory, 1/1 650,000 Merchandise inventory, 12/31 440,000 Flood loss (net of tax) 30,000 Purchases 460,000
Shaw Communications Inc.∗ included Note 21, “United States Accounting Principles,” in its 2004 annual report.Requireda. In your opinion, is there a material difference between shareholders’ equity at the end of 2004 using Canadian GAAP vs. U.S. GAAP? Comment.b. The disclosure indicates
Presented below is an outline of a balance sheet that conforms to IFRSs at December 31, 2006.a. Construct the balance sheet similar to a balance sheet presented under U.S. GAAP.b. Does the IFRS balance sheet emphasize liquidity? Assets: Non-current assets Current assets Total assets Consolidated
Big Car Company did substantial advertising in late December. The company’s year-end date was December 31. The president of the firm was concerned that this advertising campaign would reduce profits.Requireda. Define an asset.b. Would the advertising represent an asset? Comment.
The September 1, 1993, issue of Financial World estimated that the brand value of Intel was$178 billion. Financial World arrived at this estimate using a valuation method developed by London-based Interbrand Group.Requireda. Define an asset.b. In your opinion, do brands represent a valuable asset?
Dana’s foundation businesses are: axles, drive shafts, structures, brake and chassis products, fluid systems, filtration products, and bearing and sealing products.These products hold strong market positions—number one or two in the markets they serve. They provide value-added manufacturing,
a. Describe the following accounts:1. Shareholders' Equity 2. Common Stock, $.10 par value 3. Additional Paid-In Capital 4. Minority Interests (balance sheet account)b. Determine the number of shares of:1. Common stock authorized at March 3, 2007.2. Common stock issued and outstanding at March 3,
A summary of the significant accounting policies used in the preparation of the accompanying consolidated financial statements follows:Principles of Consolidation The consolidated financial statements include the accounts of all majority-owned subsidiaries in which no substantive participating
We are a leading U.S. manufacturer of motor homes, self-contained RVs used primarily in leisure travel and outdoor recreation activities. The RV market is highly competitive, both as to price and quality of the product. We believe our principal competitive advantages are our brand name recognition,
Treasury stock is best classified as a 1. Current liability. 4. Contra asset.2. Current asset. 5. Contra liability.3. Reduction of stockholders’ equity.
Which of the following is a current liability?1. Unearned rent income 4. Common stock 2. Prepaid interest 5. None of the above 3. Land
Which of the following is not a typical current liability?1. Accounts payable 4. Pension liabilities 2. Wages payable 5. Taxes payable 3. Interest payable
The Current Assets section of the balance sheet should include 1. Inventory. 4. Patents.2. Taxes Payable. 5. Bonds Payable.3. Land.
Growth Company had total assets of $100,000 and total liabilities of $60,000. What is the balance of the stockholders’ equity?1. $0 4. $100,000 2. $40,000 5. None of the above 3. $60,000
Which of the following is not true relating to intangibles?1. Research and development usually represents a significant intangible on the financial statements.2. Goodwill arises from the acquisition of a business for a sum greater than the physical asset value.3. Purchased goodwill is not amortized
Which of the following accounts would not be classified as an intangible?1. Goodwill 2. Patent 3. Accounts Receivable 4. Trademarks 5. Franchises
For the issuing firm, redeemable preferred stock should be classified where for analysis purposes?1. Marketable security 2. Long-term investment 3. Intangible 4. Liabilities 5. Shareholders’ equity
Which of the following accounts would not usually be classified as a current liability?1. Accounts Payable 2. Wages Payable 3. Unearned Rent Income 4. Bonds Payable 5. Taxes Payable
Inventories are the balance of goods on hand. In a manufacturing firm, they include all but which of the following?1. Raw materials 2. Work in process 3. Finished goods 4. Supplies 5. Construction in process
The Current Liabilities section of the balance sheet should include 1. Land.2. Cash Surrender Value of Life Insurance.3. Accounts Payable.4. Bonds Payable.5. Preferred Stock.
Current assets typically include all but which of the following assets?1. Cash restricted for the retirement of bonds 2. Unrestricted cash 3. Marketable securities 4. Receivables 5. Inventories
Which of the following accounts would not appear on a conventional balance sheet?1. Accounts Receivable 2. Accounts Payable 3. Patents 4. Gain from Sale of Land 5. Common Stock
An item of equipment acquired on January 1 at a cost of $50,000 has an estimated life of five years and an estimated salvage of $10,000.Requireda. From a management perspective, from among the straight-line method, declining-balance method, and sum-of-the-years’-digits method of depreciation,
An item of equipment acquired on January 1 at a cost of $60,000 has an estimated use of 25,000 hours.During the first three years, the equipment was used 5,000 hours, 6,000 hours, and 4,000 hours, respectively.The estimated salvage value of the equipment is $10,000.Required Determine the
An item of equipment acquired on January 1 at a cost of $100,000 has an estimated life of 10 years.Required Assuming that the equipment will have a salvage value of $10,000, determine the depreciation for each of the first three years by the:a. Straight-line methodb. Declining-balance methodc.
Rosewell Company has had 5,000 shares of 9%, $100 par-value preferred stock and 10,000 shares of $10 par-value common stock outstanding for the last two years. During the most recent year, dividends paid totaled $65,000; in the prior year, dividends paid totaled $40,000.Required Compute the amount
Aggarwal Company has had 10,000 shares of 10%, $100 par-value preferred stock and 80,000 shares of$5 stated-value common stock outstanding for the last three years. During that period, dividends paid totaled $0, $200,000, and $220,000 for each year, respectively.Required Compute the amount of
Corvallis Corporation owns 80% of the stock of Little Harrisburg, Inc. At December 31, 2008, Little Harrisburg had the following summarized balance sheet:The earnings of Little Harrisburg, Inc., for 2008 were $50,000 after tax.Requireda. What would be the amount of minority interest on the balance
You have just started as a staff auditor for a small CPA firm. During the course of the audit, you discover the following items related to a single client firm:a. During the year, the firm declared and paid $10,000 in dividends.b. Your client has been named defendant in a legal suit involving a
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 criticized.P 3-6. The following is the balance sheet of McDonald Company:Required Indicate your criticisms of the balance sheet and
The following information was obtained from the accounts of Alleg, Inc., as of December 31, 2008. It is presented in scrambled order.Common stock, authorized 21,000 shares at $1 par value, issued 10,000 shares $ 10,000 Additional paid-in capital 38,000 Cash 13,000 Marketable securities 17,000
The following information was obtained from the accounts of Lukes, Inc., as of December 31, 2008. It is presented in scrambled order.Common stock, no par value, 10,000 shares authorized, 5,724 shares issued $ 3,180 Retained earnings 129,950 Deferred income tax liability (long term) 24,000 Long-term
The following information was obtained from the accounts of Airlines International dated December 31, 2008. It is presented in alphabetical order.Accounts payable $ 77,916 Accounts receivable 67,551 Accrued expenses 23,952 Accumulated depreciation 220,541 Allowance for doubtful accounts 248 Capital
Go to the SEC Web site (http://www.sec.gov).Under “Filings & Forms (EDGAR),” click on“Search for Company Filings.” Click on“Companies & Other Filers.” Under Company Name, enter “Hershey Food” (or under Ticker Symbol, enter “HSY”). Select the 10-K filed February 23, 2007.a. Note
Go to the SEC Web site (http://www.sec.gov).Under “Filings & Forms (EDGAR),” click on“Search for Company Filings.” Click on“Companies & Other Filers.” Under Company Name, enter “McDonalds” (or under Ticker Symbol, enter “MCD”). Select the 10-K filed February 26, 2007.a. What is
Go to the SEC Web site (http://www.sec.gov).Under “Filings & Forms (EDGAR),” click on“Search for Company Filings.” Click on“Companies & Other Filers.” Under Company Name, enter “Gateway Inc” (or under Ticker Symbol, enter “GTW”). Select the 10-K filed February 26, 2007.a. What
Go to the SEC Web site (http://www.sec.gov).Under “Filings & Forms (EDGAR),” click on “Search for Company Filings.” Click on “Companies &Other Filers.” Under Company Name, enter“Boeing Co” (or under Ticker Symbol, enter “BA”).Select the 10-K filed February 16, 2007.a. What is
Go to the SEC Web site (http://www.sec.gov).Under “Filings & Forms (EDGAR),” click on “Search for Company Filings.” Click on “Companies &Other Filers.” Under Company Name, enter“Yahoo” (or under Ticker Symbol, enter “YHOO”).Select the 10-K filed February 23, 2007.a. What is the
Go to the SEC Web site (http://www.sec.gov).Under “Filings & Forms (EDGAR),” click on“Search for Company Filings.” Click on“Companies & Other Filers.” Under Company Name, enter “Cooper Tire” (or under Ticker Symbol, enter “CTB”). Select the 10-K filed March 1, 2007.a. What is
“This matter involves Hewlett-Packard’s failure to disclose the circumstances surrounding a board member’s resignation amidst the company’s controversial investigation into boardroom leaks. On May 18, 2006, HP’s Board of Directors learned the findings of the company’s leak investigation
Washington, D.C., Oct. 13, 2004—The Securities and Exchange Commission today announced the filing of enforcement actions alleging fraud and other violations against Royal Ahold(Koninklijke Ahold N.V.) (Ahold) and three former top executives: Cees van der Hoeven, former CEO and chairman of
Information reported in some Canadian companies’ 2006 annual reports follows:1. Enbridge Inc.2. Baytex Energy Trust 3. Algoma Steel Inc.1. Enbridge Inc.Corporate Head Office 3000, 425—1st Street S.W.Calgary, Alberta, Canada T2P3L8 Exchange Listing Enbridge common shares trade on the Toronto
Washington, DC, May 24, 2005—The Public Company Accounting Oversight Board today revoked the registration of a public accounting firm and barred the firm’s managing partner from association with a registered accounting firm after finding that they concealed information from the Board and
In 1995, Congress passed the Private Securities Litigation Reform Act (the Act). The principal provisions of the Act are intended to curb abusive litigation and improve the quality of information available to investors through the creation of a safe harbor for forwardlooking
Management is responsible for the integrity and objectivity of the financial information included in this report. The financial statements have been prepared in accordance with accounting principles generally accepted in the Unites States of America. Where necessary, the financial statements
The FASB and the IASB have made progress towards convergence. The IFRS standards are considered to be more principles based than the U.S. rules-based GAAP. As of 2007, the IFRSs filled approximately 2,000 pages of accounting regulations.∗ When an IFRS or interpretation does not exist, then
In the early 1980s, airlines introduced frequent-flier awards to develop passenger loyalty to a single airline. Free tickets and possibly other awards were made available to passengers when they accumulated a certain number of miles or flights on a particular air carrier. These programs were
Occasionally, the morals and ethics executives use to manage their businesses are examined and discussed. Unfortunately, the morals that guide the timing of nonoperating events and choices of accounting policies largely have been ignored.The ethical framework used by managers in reporting
Dan Murphy awoke at 5:45 A.M., just like he did every workday morning. No matter that he went to sleep only four hours ago. The Orange Bowl game had gone late into the evening, and the New Year’s Day party was so good, no one wanted to leave. At least Dan could awake easily this morning. Some of
A company prepares financial statements in order to summarize financial information. Below is a list of financial statements and a list of descriptions.Financial Statementsa. Balance sheetb. Income statementc. Statement of cash flowsd. Statement of stockholders’ equity Descriptions 1. Details the
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 describing the opinions.Classifications of Audit Opinionsa. Unqualified
The following are selected accounts of Laura Gibson Company on December 31:Required In the space provided:1. Indicate if the account is a permanent (P) or temporary (T) account.2. Indicate the normal balance in terms of debit (Dr.) or credit (Cr.). Cash Accounts Receivable Equipment Accounts
Domestic accounting standards developed to meet the needs of domestic environments. Which of these factors did not influence accounting standards locally?1. A litigious environment in the United States that led to a demand for more detailed standards in many cases 2. High rates of inflation in some
Which of the following statements is true?1. Financial statements of legally separate entities may be issued to show financial position, income, and cash flow as they would appear if the companies were a single entity (consolidated).2. Consolidated statements reflect a legal, rather than an
This item need not be provided with a complete set of financial statements:1. A 20-year summary of operations 2. Note disclosure of such items as accounting policies 3. Balance sheet 4. Income statement 5. Statement of cash flows
Which of the following statements is true?1. You are likely to regard an adverse opinion as an immaterial issue as to the reliability of the financial statements.2. A disclaimer of opinion indicates that you should look to the auditor’s report as an indication of the reliability of the
Which of the following is a type of audit opinion that a firm would usually prefer?1. Unqualified opinion 2. Qualified opinion 3. Adverse opinion 4. Clear opinion 5. None of the above
Which party has the primary responsibility for the financial statements?1. Bookkeeper 2. Auditor 3. Management 4. Cost accountant 5. None of the above
The Form 10-K is submitted to the:1. American Institute of Certified Public Accountants 2. Securities and Exchange Commission 3. Internal Revenue Service 4. American Accounting Association 5. Emerging Issues Task Force
Which of these organizations has not played a role in the harmonization of international accounting standards?1. United Nations 2. Internal Revenue Service 3. International Accounting Standards Board 4. Financial Accounting Standards Board 5. European Economic Community
Which of these is not a suggested problem caused by lack of harmonization of international accounting standards?1. Positive effect on the international trade of accounting practice and services 2. A need for employment of key personnel in multinational companies to bridge the “gap” in
In addition to the company’s principal financial statements, the Form 10-K and shareholder annual reports must include all but one of the following:1. Information on the market for holders of common stock and related securities, including high and low sales price, frequency and amount of
If an accountant performs a compilation and becomes aware of deficiencies in the statements, the accountant’s report characterizes the deficiencies by all but one of the following:1. Omission of substantially all disclosures 2. Omission of statement of cash flows 3. Accounting principles not
Which one of the following statements is false?1. The reliance that can be placed on financial statements that have been reviewed is substantially less than for those that have been audited.2. An accountant’s report described as a compilation presents only financial information as provided by
From the point of view of analysis, which classification of an audit opinion indicates that the financial statements carry the highest degree of reliability?1. Unqualified opinion 2. All-purpose 3. Disclaimer of opinion 4. Qualified opinion 5. Adverse opinion
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 opinion
In terms of debits and credits, which accounts have the same normal balances?1. Dividends, retained earnings, liabilities 2. Capital stock, liabilities, expenses 3. Revenues, capital stock, expenses 4. Expenses, assets, dividends 5. Dividends, assets, liabilities
Which is a temporary account?1. Cash 2. Accounts Receivable 3. Insurance Expense 4. Accounts Payable 5. Notes Payable
Which is a permanent account?1. Revenue 2. Advertising Expense 3. Accounts Receivable 4. Dividends 5. Insurance Expense
If assets are $100,000 and liabilities are $40,000, how much is stockholders’ equity?1. $40,000 2. $50,000 3. $60,000 4. $30,000 5. $140,000
If assets are $40,000 and stockholders’ equity is $10,000, how much are liabilities?1. $30,000 2. $50,000 3. $20,000 4. $60,000 5. $10,000
a. The balance sheet equation can be defined as which of the following?1. Assets + Stockholders’ Equity = Liabilities 2. Assets + Liabilities = Stockholders’ Equity 3. Assets = Liabilities – Stockholders’ Equity 4. Assets – Liabilities = Stockholders’ Equity 5. None of the above
DeCort Company had these adjusting entry situations at the end of December:1. On May 1, 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
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 period July 1 through June 30. The transaction was recorded as prepaid insurance and a reduction in cash.2. On September 10,
Darlene Cook Company engaged in the following transactions during the month of July:July 1 Acquired land for $10,000. The company paid cash.8 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
P 2-1. 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 $6,000 for
The U.S. Securities and Exchange Commission (SEC) chartered the Advisory Committee on Smaller Public Companies on March 23, 2005. The charter provided an objective of assessing the regulatory system for smaller companies under the securities laws of the United States, and makes recommendations for
Public Law 107-204—July 30, 2002 Section 1. Short title. This Act may be cited as the “Sarbanes-Oxley Act of 2002”TITLE I—Public Company Accounting Oversight Board Sec.101. Establishment; Administrative Provisions(a) Establishment of Board—There is established the Public Company
“Economics and accountancy are two disciplines which draw their raw material from much the same mines. From these raw materials, however, they seem to fashion remarkably different products. They both study the operations of firms; they both are concerned with such concepts as income, expenditure,
Annual report to the United States Securities and Exchange Commission For the fiscal year ended December 31, 2006 Part I (in Part)ITEM 1. BUSINESS (in Part)General Where you can find more information. We file annual, quarterly and other reports, proxy statements and other information with the
Real Estate Sales Revenue Recognition: Sales are recorded when the risks and benefits of ownership have passed to the buyers (generally on closing dates), adequate down payments have been received, and collection of remaining balances is reasonably assured.Real Estate Leasing Revenue Recognition:
Contract accounting—Contract accounting is used for development and production activities predominately by the Aircraft and Weapons Systems (A&WS), Network Systems, Support Systems, and Launch and Orbital Systems (L&OS) segments within Integrated Defense Systems (IDS). These activities include
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 reporting.SEC. 4 Stock Option Compensation.Section 14 of the Securities Exchange Act of 1934 (15 U.S.C.
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