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Principles Of Accounting Volume 2 Chapters 12-25 1st Edition Robert Libby, Patricia Libby, Fred Phillips, Stacey Whitecotton - Solutions
CP16-4 Making Ethical Decisions: A Mini Case Assume you serve on the board of a local golf and country club. In preparation for renegotiating the club’s bank loans, the president indicates that the club needs to increase its operating cash flows before the end of the current year. With a wink and
CP16-3 Examining an Annual Report: Internet-Based Team Research As a team, select an industry to analyze. Using your Web browser, each team member should acquire the annual report or 10-K for one publicly traded company in the industry, with each member selecting a different company. (See CP1-3 in
CP16-2 Comparing Financial Information Refer to the financial statements of The Home Depot in Appendix A and Lowe’s in Appendix B at the end of this book, or download the annual reports from the Cases section of the text’s Web site at www.mhhe.com/LLPW1e. Required: 1. Which of the two basic
CP16-1 Finding Financial Information Refer to the financial statements of The Home Depot in Appendix A at the end of this book, or download the annual report from the Cases section of the text’s Web site at www.mhhe.com/LLPW1e . Required: 1. Which of the two basic reporting approaches for the
PB16-6 (Supplement A) Preparing and Interpreting a Statement of Cash Flows (Direct Method) Refer to PB16-4. Required: Complete requirements 1 and 2 using the direct method.
PB16-5 (Supplement A) Computing Cash Flows from Operating Activities (Direct Method) Refer to the information in PB16-2. Required: Prepare the Cash Flows from Operating Activities section of the 2011 statement of cash flows using the direct method.
PB16-4 Preparing and Interpreting a Statement of Cash Flows (Indirect Method) Dive In Company was started several years ago by two diving instructors. The company’s comparative balance sheets and income statement with additional information follow. 2012 2011 Balance sheet at December 31 Cash $
PB16-3 Preparing a Statement of Cash Flows (Indirect Method) Audio City, Inc., is developing its annual financial statements at December 31, 2011. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized: 2011
PB16-2 Computing Cash Flows from Operating Activities (Indirect Method) The income statement and selected balance sheet information for Calendars Incorporated for the year ended December 31, 2011, follow.Income Statement Sales revenue $49,600 Expenses Cost of goods sold 21,000 Depreciation expense
PB16-1 Determining Cash Flow Statement Effects of Transactions Fantatech Inc. designs, develops, and produces high-tech entertainment products, including VirtuaSports, that allow novice players to experience hazardous and difficult real-life sports in virtual reality. The company also produces a 4D
PA16-6 (Supplement A) Preparing and Interpreting a Statement of Cash Flows (Direct Method) Refer to PA16-4. Required: Complete requirements 1 and 2 using the direct method.
PA16-5 (Supplement A) Computing Cash Flows from Operating Activities (Direct Method) Refer to the information in PA16-2. Required: Prepare the cash flows from the operating activities section of the 2011 statement of cash flows using the direct method.
PA16-4 Preparing and Interpreting a Statement of Cash Flows (Indirect Method) Heads Up Company was started several years ago by two hockey instructors. The company’s comparative balance sheets and income statement with additional information follow. 2012 2011 Balance sheet at December 31 Cash $
PA16-3 Preparing a Statement of Cash Flows (Indirect Method) XS Supply Company is developing its annual financial statements at December 31, 2011. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized:2011
PA16-1 Determining Cash Flow Statement Effects of Transactions Motif Furniture is an Austin-based furniture company. For each of the following first-quarter transactions, indicate whether operating (O), investing (I), or financing activities (F) are affected and whether the effect is a cash inflow
E16-18 (Supplement B) Preparing a Statement of Cash Flows, Indirect Method: Complete Spreadsheet To prepare a statement of cash flows for Golf Champion Store, you examined the company’s accounts, noting the following transactions:a. Purchased equipment, $20,000, and issued a promissory note in
E16-17 (Supplement A) Reporting and Interpreting Cash Flows from Operating Activities from an Analyst’s Perspective (Direct Method) Refer to the information given for E16-5 plus the following summarized income statement for Sizzler, Inc.: Revenues $136,500 Cost of sales 45,500 Gross margin 91,000
E16-16 (Supplement A) Reporting and Interpreting Cash Flows from Operating Activities from an Analyst’s Perspective (Direct Method) Refer to the information for New Vision Company in E16-4. Required: 1. Present the operating activities section of the statement of cash flows for New Vision Company
E16-15 Calculating and Interpreting the Quality of Income Ratio Refer to the information about the Disney Company in E16-14. Required: 1. Calculate to one decimal place the quality of income ratio for each year. 2. Interpret the results of your calculations in requirement 1. Given what you know
E16-14 Calculating and Interpreting Free Cash Flow The Disney Company reported the following in its 2007 annual report. 2007 2006 2005 Net income $4,687 $3,374 $2,533 Net cash provided by operating activities 5,421 6,058 4,269 Purchase of parks, resorts, and other property (1,566) (1,299) (1,823)
E16-13 Reporting and Interpreting Cash Flows from Investing and Financing Activities with Discussion of Management Strategy Gibraltar Steel Corporation is a Buffalo, New York–based manufacturer of steel products. In a recent year, it reported the following activities: Net income $ 5,213 Purchase
E16-12 Reporting Cash Flows from Investing and Financing Activities Randell Furniture Corporation is a North Carolina–based manufacturer of furniture. In a recent quarter, it reported the following activities: Net income $ 4,135 Purchase of property, plant, and equipment 871 Borrowings under line
E16-11 Calculating and Understanding Operating Cash Flows Relating to Inventory Purchases (Indirect Method) The following information was reported by three companies. When completing the requirements, assume that any and all purchases on account are for inventory. Aztec Corporation Bikes Unlimited
E16-10 Analyzing Cash Flows from Operating Activities (Indirect Method) and Calculating and Interpreting the Quality of Income Ratio A recent annual report for PepsiCo contained the following information for the period (in millions): Net income $4,078 Cash dividends paid 1,642 Depreciation 1,308
E16-9 Inferring Balance Sheet Changes from the Cash Flow Statement (Indirect Method) The statement of cash flows for Apple for the six-month period ended April 1 of a recent year contained the following information (in millions):Operating Activities Net income $975 Depreciation 102 Changes in
E16-8 Inferring Balance Sheet Changes from the Cash Flow Statement (Indirect Method) Colgate-Palmolive was founded in 1806. Its statement of cash flows for the first quarter of a recent year reported the following information (in millions): Operating Activities Net income $ 952.2 Depreciation 243.5
E16-7 Determining Cash Flows from the Sale of Property (Indirect Method) The Gymboree Corporation, a specialty retailer, offers apparel, accessories, and play programs for children in the United States and Canada. During the prior year, the company sold property for $18,823,000 cash and recorded a
E16-6 Determining Cash Flows from the Sale of Property (Indirect Method) The first in the theatre industry to introduce a customer loyalty program (like frequent flyer miles for movie watchers) was AMC Theatres. During the prior year, the company sold property for $5,494,000 cash and recorded a
E16-5 Reporting and Interpreting Cash Flows from Operating Activities from an Analyst’s Perspective (Indirect Method) Sizzler, Inc., operates 700 family restaurants around the world. The company’s annual report contained the following information (in thousands): Operating Activities Net loss
E16-4 Reporting and Interpreting Cash Flows from Operating Activities from an Analyst’s Perspective (Indirect Method) New Vision Company completed its income statement and balance sheet for 2010 and provided the following information: Service revenue $66,000 Expenses Salaries $42,000 Depreciation
E16-3 Reporting Cash Flows from Operating Activities (Indirect Method) The following information pertains to Guy’s Gear Company for 2010: Sales $80,000 Expenses Cost of goods sold $50,000 Depreciation expense 6,000 Salaries expense 12,000 68,000 Net income $12,000 artial Balance Sheet 2010 2009
E16-2 Comparing the Direct and Indirect Methods To compare statement of cash flows reporting under the direct and indirect methods, enter check marks to indicate which line items are reported on the statement of cash flows with each method.Statement of Cash Flows Method Cash Flows (and Related
E16-1 Matching Items Reported to Cash Flow Statement Categories (Indirect Method) Nike, Inc., is the best-known sports shoe, apparel, and equipment company in the world because of its association with sports stars such as LeBron James. Some of the items included in its recent statement of cash
M16-14 (Supplement A) Computing Cash Flows from Operating Activities (Direct Method) Refer to the two cases presented in M16-5, and show the Cash Flow from Operating Activities section of the 2011 statement of cash flows using the direct method.
M16-13 (Supplement A) Computing Cash Flows from Operating Activities (Direct Method) For each of the following independent cases, compute cash flows from operating activities using the direct method. Assume the following list includes all items relevant to operating activities. Case A Case B Sales
M16-12 (Supplement A) Matching Items Reported to Cash Flow Statement Categories (Direct Method) Prestige Manufacturing Corporation reports the following items in its 2011 statement of cash flows presented using the direct method. Indicate whether each item is disclosed in the operating activities
M16-11 Calculating and Interpreting the Quality of Income Ratio Dan’s Products, Inc., reported net income of $80,000, depreciation expense of $2,000, and cash flow from operations of $60,000. Compute the quality of income ratio. What does the ratio tell you about the company’s accrual of
M16-10 Calculating and Interpreting Free Cash Flow Capital Corporation reported the following information in its statement of cash flows: 2010 2011 2012 Net cash flow from operating activities $35,000 $32,000 $23,000 Dividends paid 2,000 3,000 2,500 Income taxes paid 9,000 8,500 6,500 Purchases of
M16-9 Interpreting Cash Flows from Operating, Investing, and Financing Activities Quantum Dots, Inc., is a nanotechnology company that manufactures “quantum dots,” which are tiny pieces of silicon consisting of 100 or more molecules. Quantum dots can be used to illuminate very small objects,
M16-8 Reporting Noncash Investing and Financing Activities Which of the following transactions would be considered noncash investing and financing activities? _______ 1. Additional borrowing from bank. _______ 2. Purchase of equipment with investments. _______ 3. Dividends paid in cash. _______ 4.
M16-7 Computing Cash Flows from Financing Activities Based on the following information, compute cash flows from financing activities. Purchase of investments $ 250 Dividends paid 800 Interest paid 400 Additional short-term borrowing from bank 2,000
M16-6 Computing Cash Flows from Investing Activities Based on the following information, compute cash flows from investing activities. Cash collections from customers $800 Purchase of used equipment 850 Depreciation expense 200 Proceeds from sale of investments 300
M16-5 Computing Cash Flows from Operating Activities (Indirect Method) For the following two independent cases, show the Cash Flows from Operating Activities section of the 2011 statement of cash flows using the indirect method. CASE A CASE B 2011 2010 2011 2010 Sales revenue $ 10,000 $ 9,000 $
M16-4 Computing Cash Flows from Operating Activities (Indirect Method) For each of the following independent cases, compute cash flows from operating activities. Assume the following list includes all balance sheet accounts related to operating activities. Case A Case B Net income $ 200,000 $
M16-3 Determining the Effects of Account Changes on Cash Flows from Operating Activities (Indirect Method) Indicate whether each item would be added (+) or subtracted (−) in the computation of cash flow from operating activities using the indirect method. _______ 1. Depreciation. _______ 2.
M16-2 Matching Items Reported to Cash Flow Statement Categories (Indirect Method) The Buckle, Inc., operates more than 330 stores in 38 states, selling brand name apparel such as Lucky Jeans and Fossil belts and watches. Some of the items included in its recent statement of cash flows presented
M16-1 Identifying Companies from Cash Flow Patterns Based on the cash flows shown, classify each of the following cases as a growing start-up company (S), a healthy established company (E), or an established company facing financial difficulties (F). Case 1 Case 2 Case 3 Cash provided by (used for)
10. Which of the following is a ratio or amount used to assess whether cash flows from operations are sufficiently large to pay for replacing current property, plant, and equipment and to pay dividends to stockholders?a. Free cash flow.b. Fixed asset turnover ratio.c. Cash coverage ratio.d. Quality
9. The total change in cash as shown near the bottom of the statement of cash flows for the year should agree with which of the following?a. The difference in retained earnings when reviewing the comparative balance sheet.b. Net income or net loss as found on the income statement.c. The difference
8. If a company engages in a material transaction that is noncash, which of the following is required?a. The company must include an explanatory narrative or schedule accompanying the statement of cash flows.b. No disclosure is necessary.c. The company must include an explanatory narrative or
7. Which of the following is not added when computing cash flows from operations using the indirect method?a. The net increase in Accounts Payable.b. The net decrease in Accounts Receivable.c. The net decrease in Inventory.d. None of the above.
6. Which of the following items would not appear in the financing section of the statement of cash flows?a. The issuance of the company’s own stock.b. The repayment of debt.c. The payment of dividends.d. All of the above would appear in the financing section of the statement of cash flows.
5. Which of the following would not appear in the investing section of the statement of cash flows?a. Purchase of inventory.b. Sale of investments.c. Purchase of land.d. All of the above would appear in the investing section of the statement of cash flows.
4. If the balance in Prepaid Expenses increased during the year, what action should be taken on the statement of cash flows when following the indirect method, and why?a. The change in the account balance should be subtracted from net income because the net increase in Prepaid Expenses did not
3. Total cash inflow in the operating section of the statement of cash flows should include which of the following?a. Cash received from customers at the point of sale.b. Cash collections from customer accounts receivable.c. Cash received in advance of revenue recognition (unearned revenue).d. All
2. In what order do the three sections of the statement of cash flows appear when reading from top to bottom?a. Financing, investing, operating.b. Investing, operating, financing.c. Operating, financing, investing.d. Operating, investing, financing.
1. Where is the change in cash shown in the statement of cash flows?a. In the top part, before the operating activities section.b. In one of the operating, investing, or financing activities sections.c. In the bottom part, following the financing activities section.d. None of the above.
12. What are noncash investing and financing activities? Give one example. How are noncash investing and financing activities reported on the statement of cash flows?
11. What are the typical cash inflows from financing activities? What are the typical cash outflows from financing activities?
10. What are the typical cash inflows from investing activities? What are the typical cash outflows from investing activities?
9. Explain why a $50,000 increase in inventory during the year must be included in computing cash flows from operating activities under the indirect method.
8. Explain why cash outflows during the period for purchases and salaries are not specifically reported on a statement of cash flows prepared using the indirect method.
7. Under the indirect method, depreciation expense is added to net income to report cash flows from operating activities. Does depreciation cause an inflow of cash?
6. Describe the types of items used to compute cash flows from operating activities under the two alternative methods of reporting.
5. What are the typical cash inflows from operating activities? What are the typical cash outflows from operating activities?
4. What are the major categories of business activities reported on the statement of cash flows? Define each of these activities.
3. What are cash equivalents? How are they reported on the statement of cash flows?
2. What information does the statement of cash flows report that is not reported on the other required financial statements?
1. Compare the purposes of the income statement, the balance sheet, and the statement of cash flows.
CP15-5 Evaluating an Acquisition from the Standpoint of a Financial Analyst Assume you are a financial analyst for a large investment banking firm. You are responsible for analyzing companies in the retail sales industry. You have just learned that a large West Coast retailer has acquired a large
CP15-4 Evaluating an Ethical Dilemma: Using Inside Information Assume you are on the board of directors of a company that has decided to buy 80 percent of the outstanding stock of another company within the next three or four months. The discussions have convinced you that this company is an
CP15-3 Examining an Annual Report: Internet-Based Team Research Project As a team, select an industry to analyze. Using your Web browser, each team member should acquire the annual report or 10-K for one publicly traded company in the industry with each member selecting a different company.
CP15-2 Comparing Financial Information Refer to the financial statements of The Home Depot in Appendix A and Lowe’s in Appendix B at the end of this book, or download the annual reports from the Cases section of the text’s Web site at www.mhhe.com/LLPW1e. Required: 1. What was the balance in
CP15-1 Finding Financial Information Refer to the financial statements of The Home Depot in Appendix A at the end of this book, or download the annual report from the Cases section of the text’s Web site at www.mhhe.com/LLPW1e. Required: 1. What was the balance in short-term investments reported
PB15-8 Interpreting the Return on Assets Ratio Marriott International, Inc., is a global leader in the hospitality industry operating or franchising more than 2,800 lodging units and 2,000 furnished corporate housing units around the world. The following information was reported in the company’s
PB15-7 Comparing Methods for Sales of Securities Using the data in PB15–6, assume that Packer Company’s management sold 20,000 shares of its investment in Boston Corporation stock on January 10, 2010, at $16 per share. This problem involves two separate cases. Required: 1. For each case, what
PB15-6 Comparing the Market Value and Equity Methods Boston Corporation had outstanding 200,000 shares of common stock. On October 1, 2009, Packer Company purchased a block of these shares in the open market at $15 per share for long-term investment purposes. At the end of 2009, Boston reported net
PB15-5 Comparing Methods to Account for Various Levels of Ownership of Voting Stock Zeta Company had outstanding 100,000 shares of common stock, par-value $5 per share. On January 1, 2010, Beta Company purchased some of these shares as a long-term investment at $15 per share. At the end of 2010,
PB15-4 Recording Passive Investments and Investments for Significant Influence On March 1, 2010, St. Denis Corporation purchased 10,000 shares of Carey Company for $520,000. The following information applies to the stock price of Carey Company: Price 12/31/2010 $54 12/31/2011 49 12/31/2012 40 Carey
PB15-3 Reporting Passive Investments During January 2009, Stevie’s Bike Shop purchased the following shares as a long-term investment: Stock Number of Shares Outstanding Purchase Cost per Share Chrome Corporation Common (no par) 100,000 15,000 $ 25 Leather Company Preferred, nonvoting (par $10)
PB15-2 Recording Passive Investments On September 15, 2010, James Media Corporation purchased 5,000 shares of Community Broadcasting Company for $32 per share. The following information applies to the stock price of Community Broadcasting: Price 12/31/2010 $34 12/31/2011 25 12/31/2012 21 Required:
PB15-1 Determining Financial Statement Effects for Bonds Held to Maturity Sonic Corporation operates and franchises a chain of quick-service drive-in restaurants in most of the United States and in Mexico. Customers drive up to a canopied parking space and order food through an intercom speaker
PA15-8 Interpreting the Return on Assets Ratio The Cheesecake Factory Incorporated operates more than 120 upscale casual dining restaurants. The following information was reported in the company’s 10-K annual report dated January 2, 2007: (in thousands) 2006 2005 2004 2003 Net income $ 81,282 $
PA15-7 Comparing Methods for Sales of Securities Using the data in PA15-6, assume that Shore Company management sold 10,000 shares of its investment in Ship Corporation stock on January 10, 2012, at $19 per share. This problem involves two separate cases. Required: 1. For each case, what level of
PA15-6 Comparing the Market Value and Equity Methods Ship Corporation had outstanding 100,000 shares of no-par common stock. On January 10, 2011, Shore Company purchased a block of these shares in the open market at $20 per share for long-term investment purposes. At the end of 2011, Ship reported
PA15-6 Comparing the Market Value and Equity Methods Ship Corporation had outstanding 100,000 shares of no-par common stock. On January 10, 2011, Shore Company purchased a block of these shares in the open market at $20 per share for long-term investment purposes. At the end of 2011, Ship reported
PA15-5 Comparing Methods to Account for Various Levels of Ownership of Voting Stock Company Chi had outstanding 30,000 shares of common stock, par value $10 per share. On January 1, 2009, Company Delta purchased some of these shares as a long-term investment at $25 per share. At the end of 2009,
PA15-4 Recording Passive Investments and Investments for Significant Influence On August 4, 2009, Coffman Corporation purchased 1,000 shares of Dittman Company for $45,000. The following information applies to the stock price of Dittman Company: Price 12/31/2009 $52 12/31/2010 47 12/31/2011 38
PA15-3 Reporting Passive Investments During January 2010, Nash Glass Company purchased the following shares as a long-term investment: Stock Number of Shares Outstanding Purchase Cost per Share Q Corporation Common (no par) 90,000 12,600 $ 5 R Corporation Preferred, nonvoting (par $10) 20,000
PA15-2 Recording Passive Investments On March 1, 2009, HiTech Industries purchased 10,000 shares of Integrated Services Company for $20 per share. The following information applies to the stock price of Integrated Services: Price 12/31/2009 $17 12/31/2010 24 12/31/2011 31 Required: 1. Prepare
PA15-1 Determining Financial Statement Effects for Bonds Held to Maturity Starbucks is a rapidly expanding company that provides high-quality coffee products. Assume as part of its expansion strategy, Starbucks plans to open numerous new stores in Mexico in five years. The company has $5 million to
E15-9 Analyzing and Interpreting the Return on Assets Ratio The Timberland Company is a leading designer of shoes and clothing. In a recent year, it reported the following (in thousands of dollars):Required: 1. Determine the return on assets ratio for the current year. 2. Explain the meaning of the
E15-8 Determining the Appropriate Accounting Treatment for an Acquisition The notes of Colgate-Palmolive’s recent financial statements contained the following information:How would Colgate-Palmolive report the acquisition? Explain why. Note 3 Acquisitions On May 1, 2006, the Company completed the
E15-7 Recording and Reporting an Equity Method Investment Felicia Company acquired some of the 60,000 shares of outstanding common stock (no par) of Nueces Corporation during 2010 as a long-term investment. The annual accounting period for both companies ends December 31. The following transactions
E15-6 Recording Transactions in the Available-for-Sale Portfolio Using the data in E15-5, assume General Solutions’ management purchased the MicroTech stock for the available-for-sale portfolio instead of the trading securities portfolio. Prepare any journal entries required by the facts
E15-5 Recording Transactions in the Trading Securities Portfolio On March 10, 2009, General Solutions, Inc., purchased 5,000 shares of MicroTech stock for $50 per share. Management purchased the stock for speculative purposes and recorded it in the trading securities portfolio. The following
E15-4 Recording Transactions in the Available-for-Sale Portfolio Using the data in E15-3, assume MetroMedia’s management purchased the Mitek stock for the availablefor-sale portfolio instead of the trading securities portfolio. Prepare any journal entries required by the facts presented in the
E15-3 Recording Transactions in the Trading Securities Portfolio On June 30, 2009, MetroMedia, Inc., purchased 10,000 shares of Mitek stock for $20 per share. Management purchased the stock for speculative purposes and recorded the stock in the trading securities portfolio. The following
E15-2 Comparing Market Value and Equity Methods Company A purchased a certain number of Company B’s outstanding voting shares at $19 per share as a long-term investment. Company B had outstanding 20,000 shares of $10 par value stock. Required: Complete the following matrix relating to the
E15-1 Explaining Investing Decisions and Recording Bonds Held to Maturity Macy’s, Inc. (formerly Federated Department Stores, Inc.) operates more than 880 department and furniture stores under the names of Macy’s and Bloomingdales. The company does more than $20 billion in sales each year.
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