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accounting

Questions and Answers of Accounting

J. Shaffer Company has an ending inventory of $360,500 and a cost of goods sold for the year of $2,100,000. It has used LIFO inventory for a number of years because of persistent inflation.Requireda.
Szabo Company had an average inventory of $280,000 and a cost of goods sold of $1,250,000.RequiredCompute the following:a. The inventory turnover in daysb. The inventory turnover
The inventory and sales data for this year for G. Rabbit Company are as follows:RequiredUsing the above data from G. Rabbit Company, compute the following:a. The accounts receivable turnover in
Anna Banana Company would like to estimate how long it will take to realize cash from its ending inventory. For this purpose, the following data are submitted:Accounts receivable, less allowance for
Laura Badora Company has been using LIFO inventory. The company is required to disclose the replacement cost of its inventory and the replacement cost of its cost of goods sold on its annual
A partial balance sheet and income statement for King Corporation follow:KING CORPORATIONPartial Balance SheetDecember 31, 2009AssetsCurrent assets:Cash .........................$ 33,493Marketable
Individual transactions often have a significant impact on ratios. This problem will consider the direction of such an impact.Required Indicate the effects of the previous transactions on each of the
Current assets and current liabilities for companies D and E are summarized as follows:Required Evaluate the relative solvency of companies D andE.
Current assets and current liabilities for companies R and T are summarized as follows.Required Evaluate the relative solvency of companies R andT.
The following financial data were taken from the annual financial statements of Smith Corporation:Requireda. Based on these data, calculate the following for 2008 and 2009:1. Working capital2.
Anne Elizabeth Corporation is engaged in the business of making toys. A high percentage of its products are sold to consumers during November and December. Therefore, retailers need to have the toys
The following data relate to inventory for the year ended December 31, 2009:A physical inventory on December 31, 2009, indicates that 400 units are on hand and that they came from the March 1
The following data relate to inventory for the year ended December 31, 2009. A physical inventory on December 31, 2009, indicates that 600 units are on hand and that they came from the July 1
J.A. Appliance Company has supplied you with the following data regarding working capital and sales for the years 2009, 2008, and 2007.Requireda. Compute the sales to working capital ratio for each
Depoole Company manufactures industrial products and employs a calendar year for financial reporting purposes. Items (a) through (e) present several of Depoole’s transactions during 2009. The total
Information from Greg Company’s balance sheet follows:Current assets:Cash ....................$ 2,100,000Marketable securities ............. 7,200,000Accounts receivable ...............
The following data apply to items (a) and (b). Mr. Sparks, the owner of School Supplies, Inc., wants to maintain control over accounts receivable. He understands that accounts receivable turnover
Items (a) through (d) are based on the following information:RequiredAnswer the following multiple-choice questions:a. Sharkey's acid-test ratio as of December 31, 2009, is1. 0.63.2. 0.70.3. 0.89.4.
Multiple-Choice questions:a. A company’s current ratio is 2.2 to 1 and quick (acid-test) ratio is 1.0 to 1 at the beginning of the year. At the end of the year, the company has a current ratio of
Consecutive five-year balance sheets and income statements of Anne Gibson Corporation follow:Requireda. Using year-end balance sheet figures, compute the following for the maximum number of years,
Allowance for Uncollectible Accounts'Ethics vs. Conservatism To aid in determining the balance for the allowance for uncollectible accounts, an aging schedule is often prepared. The Arrow Company
a. What is the working capital at the end of 2008?b. What is the balance in the LIFO reserve account at the end of 2008? Describe this account.c. If the LIFO reserve account was added to the
The following information was taken directly from the annual report of a firm that wishes to remain anonymous. (The dates have been changed.)Requireda. The corporation indicates that earnings can be
a. Based on these data, calculate the following for 2008 and 2007:1. Days' sales in receivables (use trade receivables)2. Accounts receivable turnover (use gross trade receivables at year-end)3.
a. Based on these data, calculate the following for 2008 and 2007:1. Days' sales in receivables2. Accounts receivable turnover (gross receivables at year-end)3. Days' sales in inventory4. Inventory
The Grand retail firm reported the following financial data for the past several years:The Grand retail firm had a decentralized credit operation allowing each store to administer its credit
a. Based on these data, calculate the following for 2009 and 2008:1. Days' sales in receivables2. Accounts receivable turnover (gross receivables at year-end)3. Days' sales in inventory4. Inventory
With this case, we review the liquidity of several specialty retail stores. The companies reviewed and the year-end dates are as follows:1. Abercrombie & Fitch Co.(January 31, 2009'52-week; February
With this case, we review the liquidity of several restaurant companies. The restaurant companies reviewed and the year-end dates are as follows:1. Yum Brands, Inc. (December 27, 2008; December 29,
Is profitability important to a firm’s long-term debt-paying ability? Discuss.
List the two approaches to examining a firm’s long-term debt-paying ability. Discuss why each of these approaches gives an important view of a firm’s ability to carry debt.
Would you expect an auto manufacturer to finance a relatively high proportion of its long-term funds from debt? Discuss.
Would you expect a telephone company to have a high debt ratio? Discuss.
Discuss how noncash charges for depreciation, depletion, and amortization can be used to obtain a short-run view of times interest earned.
Is it feasible to get a precise measurement of the funds that could be available from long-term assets to pay long-term debts? Discuss.
One of the ratios used to indicate long-term debt-paying ability compares total liabilities to total assets. What is the intent of this ratio? How precise is this ratio in achieving its intent?
For a given firm, would you expect the debt ratio to be as high as the debt/equity ratio? Explain.
Explain how the debt/equity ratio indicates the same relative long-term debt-paying ability as does the debt ratio, only in a different form.
Why is it important to compare long-term debt ratios of a given firm with industry averages?
How should lessees account for operating leases? Capital leases? Include both income statement and balance sheet accounts.
A firm with substantial leased assets that have not been capitalized may be overstating its long-term debt-paying ability. Explain.
Why is the vesting provision an important provision of a pension plan? How has the Employee Retirement Income Security Act influenced vesting periods?
Indicate the risk to a company if it withdraws from a multiemployer pension plan or if the multiemployer pension plan is terminated.
Operating leases are not reflected on the balance sheet, but they are reflected on the income statement in the rent expense. Comment on why an interest expense figure that relates to long-term
What portion of net worth can the federal government require a company to use to pay for pension obligations?
Consider the debt ratio. Explain a position for including short-term liabilities in the debt ratio. Explain a position for excluding short-term liabilities from the debt ratio. Which of these
Consider the accounts of bonds payable and reserve for rebuilding furnaces. Explain how one of these accounts could be considered a firm liability and the other could be considered a soft liability.
Explain why deferred taxes that are disclosed as long-term liabilities may not result in actual cash outlays in the future.
A firm has a high current debt/net worth ratio in relation to prior years, competitors, and the industry. Comment on what this tentatively indicates.
Comment on the implications of relying on a greater proportion of short-term debt in relation to long-term debt.
When a firm guarantees a bank loan for a joint venture in which it participates and the joint venture is handled as an investment, then the overall potential debt position will not be obvious from
When examining financial statements, a note that describes contingencies should be reviewed closely for possible significant liabilities that are not disclosed on the face of the balance sheet.
There is a chance that a company may be in a position to have large sums transferred from the pension fund to the company. Comment.
Indicate why comparing firms for postretirement benefits other than pensions can be difficult.
Speculate on why the disclosure of the concentrations of credit risk is potentially important to the users of financial reports.
Comment on the significance of disclosing the off-balance-sheet risk of accounting loss.
Consider the following operating figures:Net sales ................ $1,079,143Cost and deductions:Cost of sales ............. 792,755Selling and administration ......... 264,566Interest
Jones Petro Company reports the following consolidated statement of income:Operating revenues ....................$2,989Costs and expenses:Cost of rentals and royalties ................ 543Cost of
Sherwill’s statement of consolidated income is as follows:Net sales ..................... $658Other income .................... 8 666Costs and expenses:Cost of products sold
Kaufman Company’s balance sheet follows.AssetsCurrent assetsCash ........................... $ 13,445Short-term investments—at cost (approximate market) ...... 5,239Trade accounts
Individual transactions often have a significant impact on ratios. This problem will consider the direction of such an impact.RequiredIndicate the effect of each of the transactions on the ratios
Mr. Parks has asked you to advise him on the long-term debt-paying ability of Arodex Company. He provides you with the following ratios:Requireda. Give the implications and the limitations of each
For the year ended June 30, 2009, A.E.G. Enterprises presented the financial statements shown below. Early in the new fiscal year, the officers of the firm formalized a substantial expansion plan.
The consolidated statement of earnings of Anonymous Corporation for the year endedDecember 31, 2009, is as follows:Net sales .................... $1,550,010,000Other income, net
Allen Company and Barker Company are competitors in the same industry. Selected financial data from their 2009 statements follow.Requireda. Compute the following ratios for each company:1. Times
Consecutive five-year balance sheets and income statements of Laura Gibson Corporation are shown below.Operating lease payments were as follows: 2009, $30,000; 2008, $27,000; 2007, $28,500; 2006,
Multiple-choice questions:a. Which of the following ratios can be used as a guide to a firm’s ability to carry debt from an income perspective?1. Debt ratio2. Debt to tangible net worth3.
a. What is the gross interest expense for 2008 and 2007?b. What is the interest reported on the income statement for 2008, 2007, and 2006?c. What was the interest added to property and equipment
a. Compute the following for 2009 and 2008:1. Times interest earned2. Fixed charge coverage3. Debt ratio4. Debt/equity ratiob. Compute the debt ratio for 2009, considering operating leases.c. Give
a. Observe that accumulated amortization is deducted from property under capital lease. Why is this described as amortization instead of depreciation?b. Why do the assets under capital leases not
The Celtics Basketball Holdings, L.P. and Subsidiary included the following note in its 1998 annual report:Note G—Commitments and Contingencies (in Part) National Basketball Association
Safeway participates in various multiemployer retirement plans, covering substantially all Company employees not covered under the Company’s noncontributory retirement plans, pursuant to agreements
The Retirement Restoration Plan provides death benefits and supplemental income payments for senior executives after retirement. The Company recognized expense of $4.9 million in 2008, $4.8 million
a. For the defined benefit, noncontributory retirement plans, compare pension expense (cost) with operating revenue for 2008, 2007, and 2006. Comment.b. For the defined benefit, noncontributory
On April 1, 1997, we established the TransAct Technologies Retirement Savings Plan (the €œ401(k) Plan€), a defined contribution plan under Section 401(k) of the Internal Revenue
At December 31, 2007 and 2008, our financial instruments included cash and cash equivalents, trade receivables, marketable securities and accounts payable. Our subordinated notes outstanding at
In this case, we review the debt of several specialty retail stores. The companies reviewed and the year-end dates are as follows:1. Abercrombie & Fitch Co.(January 31, 2009—52-week; February 2,
In this case, we review the debt of several restaurant companies. The restaurant companies reviewed and the year-end dates are as follows:1. Yum Brands, Inc. (December 30, 2008; December 30,
Dividends on preferred stock total $5,000 for the current year. How would these dividends influence earnings per share?
The denominator of the earnings per share computation includes the weighted average number of common shares outstanding. Why use the weighted average instead of the year-end common shares outstanding?
Preferred dividends decreased this year because some preferred stock was retired. How would this influence the earnings per share computation this year?
Retroactive recognition is given to stock dividends and stock splits on common stock when computing earnings per share. Why?
Define financial leverage. What is its effect on earnings? When is the use of financial leverage advantageous and disadvantageous?
Given a set level of earnings before interest and tax, how will a rise in interest rates affect the degree of financial leverage?
Why does a relatively new firm often have a low dividend payout ratio? Why does a firm with a substantial growth record and/or substantial growth prospects often have a low dividend payout ratio?
Why would an investor ever buy stock in a firm with a low dividend yield?
Why can a relatively small number of stock appreciation rights prove to be a material drain on future earnings and cash of a company?
Explain how outstanding stock appreciation rights could increase reported income in a particular year.
McDonald Company shows the following condensed income statement information for the current year:Required Calculate the degree of financialleverage.
A firm has earnings before interest and tax of $1,000,000, interest of $200,000, and net income of $400,000 in Year 1.Requireda. Calculate the degree of financial leverage in base Year 1.b. If
The following information was in the annual report of Rover Company:Requireda. Based on these data, compute the following for 2009, 2008, and 2007:1. Percentage of earnings retained2. Price/earnings
The following data relate to Edger Company:The stock was selling at 120.5%, 108.0%, and 105.0% of book value in 2009, 2008, and 2007, respectively.Requireda. Compute the following for 2009, 2008, and
Dicker Company has the following pattern of financial data for Years 1 and 2:Required Calculate earnings per share and comment on thetrend.
Assume the following facts for the current year:Common shares outstanding on January 1: 50,000 sharesJuly 1: 2-for-1 stock splitOctober 1: a stock issue of 10,000 sharesRequired Compute the
XYZ Corporation reported earnings per share of $2.00 in 2008. In 2009, XYZ Corporation reported earnings per share of $1.50. On July 1, 2009, and December 31, 2009, 2-for-1 stock splits were
Cook Company shows the following condensed income statement information for the year ended December 31, 2009:Income before extraordinary gain ..........$30,000Plus: Extraordinary gain, net of tax
Assume the following facts for the current year:Net income ........................$200,000Common dividends .....................$ 20,000Preferred dividends (The preferred stock is not convertible.)
Smith and Jones, Inc. is primarily engaged in the worldwide production, processing, distribution, and marketing of food products. The following information is from its 2009 annual report:Requireda.
On December 31, 2009, Farley Camera, Inc., issues 5,000 stock appreciation rights to its president to entitle her to receive cash for the difference between the market price of its stock and a
a. A company has only common stock outstanding.RequiredAnswer the following multiple-choice question. Total stockholders’ equity minus preferred stock equity divided by the number of shares

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