Questions and Answers of Financial Accounting 6th Edition

The comparative balance sheets of Sloan Company reveal that accounts receivable (before deducting allowances) increased by $15,000 in 2019. During the same time period, the allowance for
Following is the current asset section from the Ralph Lauren Corporation balance sheet:The 2018 allowance consists of $202.5 for returns and $19.7 for uncollectible accounts. The amounts tor 2017
In 2019, Grant Corporation recorded credit sales of $3,200,000 and bad debts expense of $42,000. Write-offs of uncollectible accounts totaled $39,000 and one account, worth$ 12,000, that had been
The Procter & Gamble Company and Colgate-Palmolive Company report the following sales and accounts receivable balances($ millions):a. Compute' accounts receivable turnover and average collection
Finn Publishing Corp. produces a monthly publication aimed at competitive swimmers, with articles profiling current stars of the sport, advice from coaches, and advertising by swimwear companies,
Commtech, Inc., designs and sells cellular phones. The company creates the technical specifications and the software for its products, though it outsources the production of the phones to an overseas
Verdi Co. builds and sells PC computers to customers. The company sells most of its products for immediate payment but also extends credit to some customers. The industry is competitive and in the
Discuss and justify when each of the following businesses should recognize revenues:a. A clothing retailer like L Brands, Inc.b. A contractor like The Boeing Company that performs work under
Haskins, Inc. has reached an agreement with a customer, Skaife Corporation, to deliver 200 units of a customized product. The standard billing price per unit is $1,000, and there are no discounts, so
Assume that General Electric Company agreed in February 2019 to construct an electricity generating facility for Eversource Energy, a utility serving the Boston area. The contract price of $500
Floyd Corporation is a large engineering and construction company that designs and builds office buildings, apartment buildings, distribution warehouses and other structures for its customers.
Amazon.com, Inc. provides the following description of its revenue recognition policies in its second quarter of 2018 10-Q report.Revenue:Revenue is measured based on the amount of consideration that
LVMH Moet Hennessy Louis Vuitton SE (LVMH) is a French multinational luxury goods conglomerate headquartered in Paris. The following information is selected from their 2017 annual report.LVMH has an
Simpyl Technologies, Inc., manufactures electronic equipment used to facilitate control of production processes and tracking of assets using RFID and other technologies. Since its initial public
Lafond Company analyzes its accounts receivable at December 31, 20 19, and arrives at the aged categories below along with the percentages that are estimated as uncollectible.At the beginning of the
Steelcase, Inc. reported the following amounts in its 2018 and 2017 10-K reports (years ended February 23, 2018. and February 24, 2017).a. Prepare the journal entry to record accounts receivable
At the beginning of 2019, Penman Company had the following (normal) account balances in its financial records:Accounts receivable .................................................
At December 3 I, 2019, Sunil Company had a balance of $375,000 in its accounts receivable and an unused balance of $4,200 in its allowance for uncollectible accounts. The company then aged its
Harris Corporation pays senior management an annual bonus from a bonus pool. The size of the bonus pool is determined as follows.REQUIRED:a. Assume that senior management expects current earnings to
Following is the balance sheet for Target Corporation. Prepare Target's common-size balance sheets as of February 3, 2018 and January 28, 2017. February 3, 2018 January 28, ($ millions) 2017 Assets
The following table presents selected 2019 financial information for Sunder Company.a. Compute Sunder's ROE, ROA and ROFL for 2019.b. Use the DuPont analysis described in the Business Insight on page
Identify at least two factors that limit the usefulness of ratio analysis.
Barth Company, which has been in business for three years, makes all of its sales on credit and does not offer cash discounts. Its credit sales, customer collections, and write offs of uncollectible
Hewlett-Packard Company reports that its "operations are organized into three segments for financial reporting purposes: Personal Systems, Printing and Corporate Investments" with the last segment
The Metropolitan Opera Association, Inc., was founded in 1883 and is widely regarded as one of the world's greatest opera companies. The Metropolitan's performances run from September to May, and the
BJ's Wholesale Club Holdings, Inc. provides the following description of its revenue recognition policies for membership fees and its reward program.Performance Obligations:The Company identifies
Philbrick Company signed a three-year contract to develop custom sales training materials and provide training to the employees of Elliot Company. The contract price is $1,200 per employee and the
Mattel, Inc. designs, manufactures, and markets a broad variety of toy products worldwide which are sold to its customers and directly to consumers. The company's brands include American Girl,
In its income statement for the first quarter of fiscal year 2018, The Gap, Inc., reported net sales of $3,783 million and cost of goods sold and occupancy expenses of $2,356 million, resulting in a
Take-Two Interactive Software, Inc. (TTWO) is a developer, marketer, publisher, and distributor of video game software and content to be played on a variety of platforms. There is an increasing
From the first quarter 2018 I 0-Q of Groupon, Inc.: Groupon operates online local commerce marketplaces throughout the world that connect merchants to consumers by offering goods and services,
A Wall Street Journal article dated October 31, 2007, reported that an internal investigation at Dell Inc. had uncovered evidence of earnings management. The article states: An internal investigation
John Wiley and Sons, Inc. publishes books, periodicals, software, and other digital content. Its April 30, 2018, balance sheet reported the following amounts for accounts receivable($
The following is from the most recent I 0-K report of 3M Company for the year ended December 31, 2017.In its footnotes, 3M provided the following information about the gain on sale of businesses in
Refer to the financial information of Target Corporation in MS-15 and MS-I6 to answer the following.a. Compute Target's current ratio and quick ratio for February 2018 and January 2017. Comment on
Refer to the financial information for Target Corporation, presented in MS-I5 and MS-16.a. Compute its return on assets (ROA) for the fiscal year ending February 3, 2018. Compute two ROA measures,
Following is the income statement for Target Corporation. Prepare Target's common-size income statement for the fiscal year ended February 3, 2018. Fiscal year ended February 3, 2018 ($ millions)
Explain the concept of liquidity and why it is crucial to company survival. Explain the concept of liquidity and why it is crucial to company survival.
What insights do we gain from the graphical relation between profit margin and asset turnover?
Why is it important to disaggregate ROA into profit margin (PM) and asset turnover (AD?
What is meant by the term "net" in net operating assets (NOA)?
How does a firm go about increasing its AT ratio? What strategies are likely to be most effective?
What are common-size financial statements? What role do they play in financial statement analysis?
Gross profit margin [(Sales revenue - Cost of goods sold)/Sales revenue] is an important determinant of profit margin. Identify two factors that can cause gross profit margin to decline. Is a
Explain what it means when a company's ROE exceeds its ROA.
Describe the concept of asset turnover. What does the concept mean and why is it so important to understanding and interpreting financial performance?
Explain how a reduction in operating expenses as a percentage of sales can produce a short-term gain at the cost of long-term performance.
(a) Explain how an increase in financial leverage can increase a company's ROE. (b) Given the potentially positive relation between financial leverage and ROE, why don't we see companies with
Explain in general terms the concept of return on investment. Why is this concept important in the analysis of financial performance?
The statement of cash flows for Daimler AG follows:REQUIRED:a. Daimler begins its cash flow statement with before-tax income of €14,301 million, then adds €5,676 million for depreciation and
Lundholm Company's comparative balance sheets, income statement, and statement of cash flows for July are presented below:REQUIRED:a. Set up T-accounts and enter beginning and ending balances for
Refer to the data for Rainbow Company in Problem 4-52.Data from 4-52:REQUIRED:a. Compute the change in cash that occurred in 2018.b. Prepare a 2018 statement of cash flows using the direct
The president and CFO of Lambert Co. will be meeting with their bankers next week to discuss the short-term financing needs of the company for the next six months. Lambert's controller has provided a
Amazin, Inc. is a specialty online wholesaler that has just completed initial financing and acquired the physical facilities to support its operation. The management team is optimistic about the
The table below provides the balance sheets for Golden Enterprises, Inc. for the fiscal years ended June 3, 2016, and May 29, 2015.Additional information:1. Net income for the year ended June 3,
The 2017 cash flow statement for Apple Inc. is presented below (all $ amounts in millions):REQUIRED:a. Did Apple's accounts receivable go up or down in 2017? Apple reported net sales of $229,234 in
Rainbow Company's income statement and comparative balance sheets follow. During 2018, the following transactions and events occurred:1. Sold long-term investments costing $57,000 for $60,000
How is the operating cash flow to current liabilities ratio calculated? Explain its use.
Arctic Company's income statement and comparative balance sheets follow.During 2018, Arctic sold land for $70,000 cash that had originally cost $45,000. Arctic also purchased equipment for cash,
For this question, refer to the information in Exhibits 4.1 and 4.7.a. Based on the information presented in its statement of cash flows, what amount of revenues should CVS Health report in its 2017
Dair Company's income statement and comparative balance sheets follow.During 2018, the company sold for $17,000 cash old equipment that had cost $36,000 and had $19,000 accumulated depreciation. Also
Wolff Company's income statement and comparative balance sheets follow.Cash dividends of $29,000 were declared and paid during 2018. Also in 2018, plant assets were purchased for cash, and bonds
Petroni Company reports the following selected results for its calendar year 2018.Net income .................................................................... $135,000Depreciation expense
Carter Company's income statement and cash flow from operating activities (indirect method) are provided as follows ($ thousands):a. For each of the four statements below, determine whether the
The following financial statements were issued by Hoskins Corporation for the fiscal year ended December 31, 2018. All amounts are in millions of U.S. dollars.Additional information:1. During fiscal
Calculate the cash flow for each of the following cases.a. Cash paid for advertising:Advertising expense ...................................................... $62,000Prepaid advertising,
The following table presents selected items from the 2016 and 2015 balance sheets and 2016 in come statement of Golden Enterprises, Inc.Golden Enterprises reported expenditures for property and
Kasznik Ltd. had the following balances for its property, plant, and equipment accounts (in millions of pounds):During 2018, Kasznik Ltd. paid £28 million in cash to acquire property and equipment,
During 2018, Paxon Corporation's long-term investments account (at cost) increased $ 15,000, which was the net result of purchasing stocks costing $80,000 and selling stocks costing $65,000 at a
The following table presents selected items from the 2017 and 2016 balance sheets and 2017 income statement of Walgreens Boots Alliance, Inc.a. Compute the cash paid for merchandise inventories in
Meubles Fischer SA had the following balances for its property, plant, and equipment accounts (in thousands of euros):During fiscal year 2018, Meubles Fischer acquired €100 thousand in property by
Lincoln Company owns no plant assets and reported the following income statement for the current year:Additional balance sheet information about the company follows:Use the information toa. calculate
Use the following information about the 2018 cash flows of Mason Corporation to prepare a statement of cash flows under the direct method. Refer to Exhibit 4.3 for the appropriate format.Cash
Consider the following data for several firms from 2017 ($ millions):a. Compute the operating cash flow to current liabilities (OCFCL) ratio for each firm.b. Compute the free cash flow for each
Consider the following 2017 data for several pharmaceutical firms ($ mill ions). (None of the firms reported the proceeds from disposals of property, plant, and equipment.)a. Compute the operating
Calculate the cash flow for each of the following cases.a. Cash paid for rent:b. Cash received as interest:c. Cash paid for merchandise purchased: Rent expense. Prepaid rent, beginning year Prepaid
Chakravarthy Company's current year income statement reports the following:Chakravarthy's comparative balance sheets show the following (accounts payable relate to merchandise purchases):Compute
The following table presents selected items from a recent cash flow statement of Nordstrom, Inc.a. For each item, determine whether the amount would be disclosed in the cash flow statement under
Weber Company had a $21,000 net loss from operations for 2018. Depreciation expense for 2018 was $8,600 and a 2018 cash dividend of $6,000 was declared and paid. Balances of the current asset and
For liscal year 2018. Riffe Enterprises had the following summary information concerning its operating activities. The company had no investing or financing activities this year.REQUIRED:a. Enter the
The following information was obtained from Galena Company's comparative balance sheets. Assume that Galena Company's 2018 income statement showed depreciation expense of $8,000. again on sale of
For fiscal year 2018. Beyer GmbH had the following summary information available concerning its operating activities. The company had no investing or financing activities this year.REQUIRED:a. Enter
For each of the items below. indicate whether it is (1) A cash flow from an operating activity. (2) A cash flow from an investing activity. (3) A cash flow from a financing
The following table presents selected items from a recent cash flow statement of General Mills, Inc . For each item, determine whether the amount would be disclosed in the cash flow statement under
For each of the items below, indicate whether the cash flow relates to an operating activity, an investing activity, or a financing activity.a. Cash receipts from customers for services rendered.b.
The following account information was presented as adjustments to net income in a recent statement of cash flows for Target Corporation. Determine whether each item would be a positive adjustment or
How is the operating cash flow to capital expenditures ratio calculated? Explain its use.
What separate disclosures are required for a company that reports a statement of cash flows using the direct method?
Rusk Company sold equipment for $5,100 cash that had cost $35,000 and had $29,000 of accumulated depreciation. How is this event reported in a statement of cash flows using the direct method?
A firm reports $43,000 advertising expense in its income statement. If beginning and ending prepaid advertising are $6,000 and $7,600, respectively, what is the amount of cash paid for advertising?
A firm reports $86,000 wages expense in its income statement. If beginning and ending wages payable are $3,900 and $2,800, respectively, what is the amount of cash paid to employees?
A firm is converting its accrual revenues to corresponding cash amounts using the direct method. Sales on the income statement are $925,000. Beginning and ending accounts receivable on the balance
If a business had a net loss for the year, under what circumstances would the statement of cash flows show a positive net cash flow from operating activities?
What separate disclosures are required for a company that reports a statement of cash flows using the indirect method?
Vista Company sold for $98,000 cash land originally costing $70,000. The company recorded a gain on the sale of $28,000. How is this event reported in a statement of cash flows using the indirect
In determining net cash flow from operating activities using the indirect method, why must we add depreciation back to net income? Give an example of another item that is added back to net income
What is the difference between the direct method and the indirect method of presenting net cash flow from operating activities?
Why are noncash investing and financing transactions disclosed as supplemental information to a statement of cash flows?
Why is a statement of cash flows a useful financial statement?
Traverse Company acquired a $3,000,000 building by issuing $3,000,000 worth of bonds payable. In terms of cash flow reporting, what type of transaction is this? What special disclosure requirements

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