Accounting Principles A Business Perspective Financial Accounting Chapters 9 To 18 1st Edition Bill Buxton, Amy Sibiga - Solutions

Exercise E From the following partial income statement, calculate the inventory turnover for the period.Net sales $2,028,000 Cost of goods sold:Beginning inventory $ 234,000 Purchases 1,236,000 Cost of goods available for sale $1,560,000 Less: Ending inventory 265,200 Cost of goods sold 1,294,800
Exercise D Columbia Corporation had the following selected financial data for 2009 December 31: Net cash provided by operating activities Net sales $1,800,000 Cost of goods sold 1,080,000 Operating expenses 315,000 Net income 195,000 Total assets 1,000,000 Net cash provided by operating activities
Exercise C A company has sales of USD 3,680,000 per year. Its average net accounts receivable balance is USD 920,000.a. What is the average number of days accounts receivable are outstanding?b. By how much would the capital invested in accounts receivable be reduced if the turnover could be
Exercise B A company engaged in the following three independent transactions:• Merchandise purchased on account, USD 2,400,000.• Machinery purchased for cash, USD 2,400,000.• Capital stock issued for cash, USD 2,400,000.a. Compute the current ratio after each of these transactions assuming
Exercise A Income statement data for Boston Company for 2009 and 2010 follow:2009 2010 Net sales $2,610,000 $1,936,000 Cost of goods sold 1,829,600 1,256,400 Selling expenses 396,800 350,000 Administrative expenses 234,800 198,400 Federal income taxes 57,600 54,000 Prepare a horizontal and vertical
➢ Real world question From the financial statements of The Limited in the Annual report appendix, determine the 2003 cash flow margin.
➢ Real world question From the financial statements of The Limited in the Annual report appendix, determine the 2003 cash dividends per common share.
➢ Real world question From the Consolidated Statements of Income of The Limited in the Annual report appendix, determine the 2003 net income per common share.
➢ Real world question From the Consolidated Statements of Income of The Limited in the Annual report appendix, determine the percentage change in operating income from 2002 to 2003.
➢ Cite some of the possible deficiencies in accounting information, especially regarding its use in analyzing a particular company over a 10-year period.
➢ How is the rate of return on operating assets determined? Is it possible for two companies with operating margins of 5 percent and 1 percent, respectively, to both have a rate of return of 20 percent on operating assets? How?
➢ Indicate which of the relationships illustrated in the chapter would be best to judge:➢ The short-term debt-paying ability of the firm.➢ The overall efficiency of the firm without regard to the sources of assets.➢ The return to owners (stockholders) of a corporation.➢ The safety of
➢ Through the use of turnover rates, explain why a firm might seek to increase the volume of its sales even though such an increase can be secured only at reduced prices.
➢ Before the Marvin Company issued USD 20,000 of long-term notes(due more than a year from the date of issue) in exchange for a like amount of accounts payable, its current ratio was 2:1 and its acid-test ratio was 1:1. Will this transaction increase, decrease, or have no effect on the current
➢ Can you think of a situation where the current ratio is very misleading as an indicator of short-term, debt-paying ability? Does the acid-test ratio offer a remedy to the situation you have described? Describe a situation where the acid-test ratio does not suffice either.
➢ The higher the accounts receivable turnover rate, the better off the company is. Do you agree? Why?
➢ What are the major sources of financial information for publicly owned corporations?
The times interest earned ratio is:a. 4.75 times per year.b. 3.75 times per year.c. 2 times per year.d. 3 times per year.
The inventory turnover is:a. 5 times per year.b. 4.8125 times per year.c. 3.5 times per year.d. 4 times per year.
Benson Company shows the following data on its 2011 financial statements (use for the rest of the questions ):Accounts receivable, January 1 $720,000 Accounts receivable, December 31 960,000 Merchandise inventory, January 1 900,000 Merchandise inventory, December 31 1,020,000 Gross sales 4,800,000
The acid-test ratio is:a. 1:2.b. 2:1.c. 1.2:1.d. 3:1.
The following data were abstracted from the 2007 December 31, balance sheet of Andrews Company (use for the first two questions questions):Cash $136,000 Marketable securities 64,000 Accounts and notes receivable, net 184,000 Merchandise inventory 244,000 Prepaid expenses 12,000 Accounts and notes
Financial statement analysts must be sure that comparable data are used among companies to make the comparisons valid.true or false.
A company that is quite profitable may find it difficult to pay its accounts payable.true or false.
Liquidity ratios show a company's capacity to pay maturing current liabilities.true or false.
Common-size statements provide information about changes in dollar amounts relative to the previous periods.true or false.
Vertical analysis helps detect changes in a company's performance over several periods and highlights trends.true or false.
An objective of financial statement analysis is to provide information about the company's past performance and current financial position.true or false.
• Describe the considerations used in financial statement analysis.
• Perform ratio analysis on financial statements using liquidity ratios, long-term solvency ratios, profitability tests, and market tests.
• Calculate and explain changes in financial statements using horizontal analysis, vertical analysis, and trend analysis.
• Describe the sources of information for financial statement analysis.
• Describe and explain the objectives of financial statement analysis.
Group project G In a group of one or two other students, go to the library and locate Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows", published by the Financial Accounting Standards Board. Write a report to your instructor covering the following points:Describe the
Group project F In a group of one or two other students, go to the library and locate Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows", published by the Financial Accounting Standards Board. Write a report to your instructor answering the following questions:Why did the
Group project E In groups of two or three students write a two-page, doublespaced paper on one of the following topics:Which Is Better, the Direct or Indirect Method (of calculating net cash provided by operating activities)?Analysis of the Johnson & Johnson Cash Flow Statement (shown in "A broader
Annual report analysis D Refer to "A broader perspective: Johnson &Johnson" and answer the following questions:a. Over the last three years from which major activities (operations, investing, financing) has Johnson & Johnson received net cash inflows and on which major activities have they spent
Alternate problem D Founded in 1901, The Gillette Company is the world leader in male grooming products, a category that includes blades and razors, shaving preparations and electric shavers. Gillette also holds the number one position worldwide in selected female grooming products, such as wet
Alternate problem C Drexler, Inc., is an independent service organization that markets and services electronic credit card authorization and payment systems to small retail, wholesale, and professional businesses located throughout the United States. Prior to installing the company's electronic
Alternate problem B The following information relates to Dunwoody Nursery& Garden Center, Inc. The company leases a building adjacent to its land.Dunwoody Nursery & Garden Center, Inc.Comparative Balance Sheets 2011 December 31 and 2010 2011 2010 Assets Cash $44,500 $ 52,000 Accounts receivable,
Alternate problem A The following income statement and other data are for Kennesaw Auto Glass Specialists, Inc..Kennesaw auto glass specialists, Inc.Income Statement For the year ended 2010 December 31 Sales $450,000 Cost of goods sold 125,000 Gross margin $325,000 Operating expenses (other than
Problem E The following comparative balance sheets and other data are for Dayton Tent & Awning Sales, Inc.:Dayton Tent & Awning Sales, Inc.Comparative Balance Sheets 2011 June 30 and 2010 2011 2010 Assets Cash $ 441,800 $ 332,600 Accounts receivable, net 750,750 432,900 Merchandise inventory
Problem D Mechan Company develops, manufactures, markets, installs and supports a wide range of standards-based LAN and WAN connectivity hardware and software products. The company's statements of cash flow for the years 2008-2010 follow. Then the relevant portion of Management's Discussion and
Problem C Computer Associates International, Inc., is leading business software company. The company was founded in 1977 with four employees and has grown to 18,200 employees and about 4.2 billion in revenues.The company's statements of cash flows for the years 2002 through 2004 follow.Then the
Problem B The following comparative balance sheets and other data are for Cellular Telephone Sales, Inc.:Cellular Telephone Sales, Inc. Comparative balance sheets 2011 December 31 and 2010 2011 2010 Assets Cash $76,105 $51,000 Accounts receivable, net 26,075 24,250 Merchandise inventory 30,000
Problem A The income statement and other data of Dunbar Carpet Outlet, Inc., follow:Dunbar Carpet Outlet, Inc.Income statement For the Year Ended 2010 December 31 Sales $920,000 Cost of goods sold 380,000 Gross margin $540,000 Operating expenses (other than depreciation) $140,000 Depreciation
Exercise I The following data are from a company's Automobile and the Accumulated Depreciation—Automobile accounts:Date Automobile Debit Credit Balance Jan. 1 Balance brought forward 16,000 July 1 Traded for new auto 16,000 -0-New auto 31,000 Accumulated depreciation - Automobile Jan. 1 Balance
Exercise H Use the data in the previous exercise. Assume the net income for 2011 was USD 24,000, depreciation was USD 15,000, and dividends declared and paid were USD 6,000. The company paid interest of USD 2,000 and income taxes of USD 14,000. Prepare a statement of cash flows—indirect method.
Exercise G Following are balance sheet data for Quality Merchandise, Inc.:December 31 2011 2010 Cash $ 47,000 $ 26,000 Accounts receivable, net 141,000 134,000 Merchandise inventory 83,000 102,000 Prepaid expenses 9,000 11,000 Plant assets (net of accumulated depreciation) 235,000 230,000 Accounts
Exercise F Dividends payable increased by USD 20,000 during a year in which total dividends declared were USD 120,000. What amount appears for dividends paid in the statement of cash flows?
Exercise E The operating expenses and taxes (including USD 80,000 of depreciation) of a company for a given year were USD 600,000. Net income was USD 350,000. Prepaid insurance decreased from USD 18,000 to USD 14,000 during the year, while wages payable increased from USD 22,000 to USD 36,000
Exercise D The income statement of a company shows net income of USD 200,000; merchandise inventory on January 1 was USD 76,500 and on December 31 was USD 94,500; accounts payable for merchandise purchases were USD 57,000 on January 1 and USD 68,000 on December 31. Compute the cash flows from
Exercise C Fill in the following chart, showing how increases and decreases in these accounts affect the conversion of accrual basis income to cash basis income:Add Deduct Accounts receivable Merchandise inventory Prepaid expenses Accounts payable Accrued liabilities payable
Exercise B Cost of goods sold in the income statement for the year ended 2010 was USD 260,000. The balances in Merchandise Inventory and Accounts Payable were:2010 January 1 2010 December 31 Merchandise inventory $160,000 $180,000 Accounts payable 44,000 36,000 Calculate the amount of cash paid for
Exercise A Indicate how the following data should be reported in a statement of cash flows. A company paid USD 500,000 cash for land. A building was acquired for USD 2,500,000 by assuming a mortgage on the building.
➢ Real world question Refer to The Limited in the Annual report appendix. Does it use the direct method or indirect method of reporting cash flows from operating activities?
➢ Was the positive cash flow from operating activities large enough to pay the cash dividends?
➢ Was there a net negative or positive cash flow from investing activities?
➢ What was the major investing activity in 2003?
➢ Indicate the type of activity each of the following transactions represents (operating, investing, or financing) and whether it is an inflow or an outflow.➢ Sold goods.➢ Purchased building.➢ Issued capital stock.➢ Received cash dividends.➢ Paid cash dividends.➢ Purchased treasury
➢ Why might a company have positive cash flows from operating activities even though operating at a net loss?
➢ If the net income for a given period is USD 25,000, does this mean there is an increase in cash of the same amount? Why or why not?
➢ Why is it unlikely that cash flows from operating activities will be equal to net income for the same period?
➢ Depreciation is sometimes referred to as a source of cash. Is it a source of cash? Explain.
➢ Describe the treatment of a gain on the sale of equipment in preparing a statement of cash flows under the indirect method.
➢ What are noncash expenses? How are they treated in computing cash flows from operating activities?
➢ Explain the difference between the direct and indirect methods for computing cash flows from operating activities.
➢ Where should significant investing and financing activities that do not involve cash flows be reported?
➢ Which activities are included in financing activities?
➢ Which activities are included in investing activities?
➢ Which activities are generally included in operating activities?
➢ What information is contained in the statement of cash flows?
➢ What are some of the uses of the statement of cash flows?
➢ What are the purposes of the statement of cash flows?
Assume net income was USD 200,000, depreciation expense was USD 10,000, accounts receivable increased by USD 15,000, and accounts payable increased by USD 5,000. The amount of cash flows from operating activities is:a. USD 200,000.b. USD 180,000.c. USD 210,000.d. USD 190,000.
Assume cost of goods sold on an accrual basis is USD 300,000, accounts payable increased by USD 20,000, and inventory increased by USD 50,000. Cash paid for merchandise is:a. USD 370,000.b. USD 230,000.c. USD 270,000.d. USD 330,000.
If sales on an accrual basis are USD 500,000 and accounts receivable increased by USD 30,000, the cash received from customers would be:a. USD 500,000.b. USD 470,000.c. USD 530,000.d. Cannot be determined.
Investing activities include all of the following except:a. Payment of debt.b. Collection of loans.c. Making of loans.d. Sale of available-for-sale and held-to-maturity securities.
Which of the following statements is true?a. The direct method of calculating cash flows from operations starts with net income and adjusts for noncash revenues and expenses and changes in current assets and current liabilities.b. The indirect method of calculating cash flows from operations
Issuance of capital stock and the subsequent reacquisition of some of those shares would both be financing activities.true or false.
The direct method of calculating cash flows from operations is encouraged by the FASB and is the predominant method used.true or false.
Investing activities are transactions with creditors and owners.true or false.
The statement of cash flows is one of the major financial statements.true or false.
The requirement for a statement of cash flows was preceded by the requirement for the statement of changes in financial position.true or false.
• Use working paper to prepare a statement of cash flows (appendix).
• Analyze and use the financial results–cash flow per share of common stock, cash flow margin, and cash flow liquidity ratios.
• Analyze a statement of cash flows of a real company.
• Prepare a statement of cash flows, under both the direct and indirect methods, showing cash flows from operating activities, investing activities, and financing activities.
• Describe how to calculate cash flows from operating activities under both the direct and indirect methods.
• Describe the content of the statement of cash flows and where certain items would appear on the statement.
• Explain the purposes and uses of the statement of cash flows.
Group project I With one or two other students, locate the annual reports of three companies with bonds outstanding as part of their long-term debt. You should read the notes to the financial statements to determine the composition of the longterm debt. Identify the bonds (e.g. debentures, serial),
Group project H In a small group of students, locate Accounting Principles Board Opinion No. 21 (from a faculty member or from the library) relating to the amortization of premiums and discounts on bonds. Investigate why the Board recommended the effective interest rate method over the
Group project G In groups of two or three students, write a two-page, doublespaced paper on one of the following topics:The Use of Junk Bonds in the 1980s Why Market Rates of Interest and Prices of Bonds Are Inversely Related How a Company Can Force Conversion of Callable, Convertible Bonds How
Ethics case – Writing experience F Refer to "An ethical perspective:Rawlings furniture company”. Write out the answers to the following questions:a. What motivates the brothers to pursue this new strategy?b. Are the brothers the only ones assuming the risks?c. How will workers, the city, the
Annual report analysis E A recent annual report of Emhart Corporation contained the following paragraph in its notes to the financial statements:The 6 3/4 percent convertible subordinated debentures may be converted into shares of common stock at a price of USD 26.50 per share at any time prior to
Annual report analysis D Refer to the Annual report appendix and determine the times interest earned ratio for 2003 for The Limited. Use "operating income" to represent IBIT. Prepare written comments on the results of your analysis.
Business decision case C The Wall Street Journal contained a table showing yield comparisons for groups of corporate bonds. The following data have been adapted from the table:Yield Percentage As of 52-week 4/28 4/27 High Low Risk category 1-10 year maturities:High quality 7.08% 6.94% 7.16%
Business decision case B An annual report of a company contained the following paragraph in the notes to the financial statements:The 9 7/8 percent Senior Subordinated Debentures are redeemable at the option of [the company] at 103.635 percent of the principal amount plus accrued interest if
• Finance two-thirds with bonds, one-third with additional stock. The bonds would have a 20-year life, bear interest at 10 percent, and sell at face value. The issue price of the stock would be USD 80 per share.Should the investment be made? If so, explain which financing plan you would

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Accounting Principles A Business Perspective Financial Accounting Chapters 9 To 18 1st Edition Bill Buxton, Amy Sibiga - Solutions

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