Questions and Answers of Financial Accounting For MBA

The GAP. Inc., discloses the following schedule to its 2008 10-K report relating to its leasing activities.a. Compute the present value of GAP's operating leases using a $6 \%$ discount rate.b.
Costco Wholesale Corporation discloses the following in footnotes to its $10-\mathrm{K}$ report relating to its leasing activities.Operating leases are not reflected on-balance-sheet. In our
Black \& 1Decker discloses the following pension footnote in its $10-\mathrm{K}$ report.a. How much pension expense does Black \& Decker report in its 2007 income statement?b. Explain, in
YC M! Brands, Inc., discloses the following pension footnote in its $10-\mathrm{K}$ report.a. Explain the terms "service cost" and "interest cost."b. How do actuarial losses arise?c. The fair
YUM! Brands, Inc., discloses the following pension footnote in its $10-\mathrm{K}$ report.a. How does the "actual return on plan assets" of $\$ 93$ million affect YUM!'s reported profits for
Abercrombie \& Fitch discloses the following footnote relating to its retirement plans in its $200810-\mathrm{K}$ report.a. Does Abercrombie have a defined contribution or defined benefit
IDow Chemical Company provided the following footnote in its $200710-\mathrm{K}$ report relating to operating leases.\section*{Required}a. Dow describes all of its leases as "operating." What is
Nike reports the following information relating to its manufacturing activities in footnotes to its fiscal $200810-\mathrm{K}$ report.a. What effect does the use of contract manufacturers have on
Lockheed Martin Corporation discloses the following funded status for its defined benefit pension plans in its $10-\mathrm{K}$ report.Lockheed contributed $\$ 335$ million to its pension plan
Lowe's Companies, Inc., reports the following footnote relating to its leased facilities in its $200710-\mathrm{K}$ report.The future minimum rental payments required under capital and operating
Verizon Communications. Inc., provides the following footnote relating to its leasing activities in its $10-\mathrm{K}$ report.The aggregate minimum rental commitments under noncancelable leases
Staples, Inc., reports the following footnote relating to its capital and operating leases in its $200710-\mathrm{K} \quad$ Staples, Inc. (SPLS) report ( $\$$ thousands).Future minimum lease
YLM! Brands, Inc., reports the following footnote relating to its capital and operating leases in its 2007 10-K report ( $\$$ millions).Future minimum commitments under non-cancelable leases are
TJX Companies reports the following footnote relating to its capital and operating leases in its 2008 $10-\mathrm{K}$ report.Following is a schedule of future minimum lease payments for continuing
General Mills reports the following pension footnote in its $10-\mathrm{K}$ report.Estimated benefit payments, which reflect expected future service, as appropriate, are expected to be paid from
Xerox reports the following pension and retiree health care ("Other") footnote as part of its $10-\mathrm{K}$ report.a. Describe what is meant by service cost and interest cost (the service and
Verizon reports the following pension and health care benefits footnote as part of its $10-\mathrm{K}$ report.a. Describe what is meant by service cost and interest cost.b. What payments did
Harley-Davidson provides the following footnote in its $10-\mathrm{K}$ report relating to the securitization of receivables by its finance subsidiary, Harley-Davidson Financial Services (HDFS).a.
The Abercrombie \& Fitch $10-\mathrm{K}$ report contains the following footnote relating to its leasing activities This is the only information it discloses relating to its leasing
The Best Buy 10-K report has the following footnote related to its leasing activities.\section*{Required}a. What is the balance of the lease liabilities reported on Best Buy's balance sheet?b. What
FedEx reports total assets of $\$ 25,633$ and total liabilities of $\$ 11,107$ for 2008 (\$ millions). Its $10-\mathrm{K}$ FedEx (FDX) report has the following footnote related to its leasing
DulPont's $10-\mathrm{K}$ report has the following disclosures related to its retirement plans ( $\$$ millions).\section*{Required}a. How much pension expense (revenue) does DuPont report in its
Johnson \& Johnson provides the following footnote disclosures in its $10-\mathrm{K}$ report relating to its defined\section*{Required}a. How much pension expense does Johnson \& Johnson
You are the CEO of a company. Your CFO is concerned about certain covenants in your debt agreement that specify a maximum ratio of liabilities to stockholders' equity. He proposes to structure your
Abercrombic \& Fitch reports the following income statements.Abercrombic \& Fitch reports the following income statements.Forecast Abercrombie \& Fitch's 2009 income statement assuming
Best Buy reports the following income statements.Forecast Best Buy's 2009 income statement assuming the following income statement relations; assume no change for all other accounts not listed below.
General Mills reports the following fiscal year income statements (amounts rounded to whole millions).* $\$ 1$ rounding error in subtotal.Forecast General Mills' fiscal year 2009 income statement
Harley-I)avidson reports 2007 net operating working capital of $\$ 4,513$ million and 2007 long-term operating assets of $\$ 1,518$ million.a. Forecast Harley-Davidson's 2008 net operating
Nike reports 2008 net operating working capital of $\$ 5,060$ million and 2008 long-term operating assets of $\$ 2,139$ million.a. Forecast Nike's 2009 net operating working capital assuming
Assume that your initial forecast of a balance sheet yields a negative cash balance.a. What does a forecasted negative cash balance imply?b. Given a negative cash balance, what would be your next
Refer to the (ieneral Mills information in M11-13. Assume the following forecasts of 2009 net sales relations to forecast General Mills' receivables, inventories, and accounts payable as of the end
Campbell Soup Company reports the following footnote to its $200810-\mathrm{K}$.What adjustment(s) might we consider before we forecast Campbell Soup's income for 2009? How would we treat the cash
Following are the income statements and balance sheets of Abercrombie \& Fitch.a. Forecast Abercrombie \& Fitch's 2009 income statement and balance sheet using the following relations; assume
Refer to the Abercrombie \& Fitch financial information in Exercise 11-19. Prepare a forecast of 2009 statement of cash flows.
Following are the income statements and balance sheets of Best Buy Co., Inc.a. Forecast Best Buy's 2009 income statement and balance sheet using the following relations; assume no change for all
Refer to the Best Buy Co.. Inc., financial information from Exercise 11-21. Prepare a forecast of its fiscal year 2009 statement of cash flows.
Following are the income statements and balance sheets of (ieneral Mills, Inc.* Goodwill, other intangible assets, and other assets are combined ${ }^{* *}$ Deferred income taxes and other current
Refer to the (ieneral Mills. Inc., financial information from Exercise 11-23. Forecast General Mills 2009 statement of cash flows.
Southwest Airlines reports total net operating assets of $8.466 million, nonoperating liabilities of $1.525 million, and equity of $6.941 in its 2007 10-K. Footnotes reveal the existence of operating
Abbott LLaboratories, Inc., reports its $50 \%$ joint venture investment in TAP Pharmaceutical Products Inc. using the equity method of accounting. The Abbott balance sheet reports an investment
Following are the income statement and balance sheet of Whole Fouds Market, Inc.a. Forecast Whole Foods Market's 2009 income statement and balance sheet using the following relations; assume no
Refer to the Whole Fonds Market, Inc., financial information from Exercise 11-27. Prepare a forecast of its fiscal year 2009 statement of cash flows.
Following are Intel's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) for its year ended December 31, 2007 ( $\$$ millions).Forecast Intel's sales, NOPAT and NOA for
Following are 3 M's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) for\section*{WebAssign} its fiscal year ended 2007 ( $\$$ millions).Forecast 3M's sales, NOPAT and
Following are fiscal year financial statements of ()racle Corporation.\section*{Required}Forecast Oracle's 2009 income statement, balance sheet, and statement of cash flows; round forecasts to $\$$
Following are the financial statements of Nike, Inc.\section*{Required}Forecast Nike's fiscal year 2009 income statement, balance sheet, and statement of cash flows; round forecasts to one-tenth
Following are the financial statements of Cisco Systems, Inc.\footnotetext{* Gross property and its accumulated depreciation are inserted in the balance sheet; both are taken from footnotes to
\\ Following are the financial statements of Staples, Inc.}The balance sheet combines the following line items from the $10-\mathrm{K}$ filing for brevity:- Deferred income tax asset with Prepaid
Following is the income statement of (1BS Corporation, along with an excerpt from its MD\&A section.}For 2005 , operating expenses of $\$ 8.67$ billion increased slightly over $\$ 8.64$
Why do relatively stable inventory costs across periods reduce the importance of management's choice of an inventory costing method?
If inventory costs are rising, which inventory costing method-first-in, first-out; last-in, first-out; or average cost-yields the (a) lowest ending inventory? (b) lowest net income? (c) largest
Even though it may not reflect their physical flow of goods, why might companies adopt last-in. first-out inventory costing in periods when costs are consistently rising?
At a recent board of directors meeting of Ascot, Inc., one of the directors expressed concern over the allowance for uncollectible accounts appearing in the company's balance sheet. "I don't
Following is the current asset section from the Kraft Iroods. Inc., balance sheet.\footnotetext{a. Compute the gross amount of accounts receivable for both 2007 and 2006. Compute the percentage of
Procter \& (Gamble (PG) and Colgate-Palmolive (CL) report the following sales and accounts receivable balances ( $\$$ millions) for two recent years.a. Compute the current year's accounts
Assume that Gode Company reports the following initial balance and subsequent purchase of inventory.Assume that 1,700 units are sold during 2009. Compute the cost of goods sold for 2009 and the
Bartov Corporation reports the following beginning inventory and inventory purchases.Bartov sells 600 of its inventory units. Compute the cost of goods sold for 2009 and the ending inventory on the
Abercrombie \& Fitch (ANF) and TJX Companies (TJX) report the following information in their respective January $200810-\mathrm{K}$ reports.a. Compute the 2008 inventory turnover for each of
A delivery van costing $\$ 18,000$ is expected to have a $\$ 1,500$ salvage value at the end of its useful life of five years. Assume that the truck was purchased on January 1, 2009. Compute the
A company with a calendar year-end, purchases a machine costing $\$ 145,800$ on May 1, 2009. The machine is expected to be obsolete after three years ( 36 months) and, thereafter, no longer useful
Texas Instruments (TXN) and Intel Corporation (INTC) report the following information.a. Compute the 2007 PPE turnover for both companies. Comment on any difference you observe.b. Discuss ways in
LaFond Company analyzes its accounts receivable at December 31, 2009, and arrives at the aged categories below along with the percentages that are estimated as uncollectible.The unused balance of the
At the beginning of 2009 , Penman Company had the following account balances.During 2009, Penman's credit sales were $\$ 1,173,000$ and collections on accounts receivable were $\$ 1,150,000$. The
Hewlett-Packard Company (HP) reports the following in its $200710-\mathrm{K}$ report.HP's footnotes to its $10-\mathrm{K}$ provide the following additional information relating to its allowance
At December 31, 2009, 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
General Electric Company reports the following footnote in its $10-\mathrm{K}$ report.The company reports its inventories using the LIFO inventory costing method.a. What is the balance in
Stocken Company has the following financial records for the current period. Units Unit Cost Beginning inventory. Purchases: #1..... 100 $46 650 42 #2.... 550 38 #3... 200 36
Sloan Company owns an executive plane that originally cost $\$ 800,000$. It has recorded straight-line depreciation on the plane for six full years, calculated assuming an $\$ 80,000$ expected
On January 2, 2009, Dechow Company purchases a machine that manufactures a part for one of its key products. The machine cost $\$ 218,700$ and is estimated to have a useful life of six years, with
Palepu Company owns and operates a delivery van that originally cost $\$ 27,200$. Palepu has recorded straight-line depreciation on the van for three years, calculated assuming a $\$ 2,000$
The property and equipment footnote from the Deere $\&$ Company balance sheet follows.a. Compute the estimated useful life of Deere's depreciable assets at year-end 2007. (Hint: Exclude land
Intel Corporation reports the following financial statement amounts in its $200710-\mathrm{K}$ report.a. Compute the receivables, inventory, and PPE turnover ratios for both 2006 and 2007.b. What
On July 1, 2005, Zeibart Company purchases equipment for $\$ 225,000$. The equipment has an estimated useful life of 10 years and expected salvage value of $\$ 25,000$. The company uses
Following are asset turnover rates (using year-end account values) for accounts receivable; inventory; and property, plant, and equipment (PPE) for Best Buy (retailer of consumer products), Carnival
Following is the current asset section from the WW Grainger. Inc., balance sheet.Grainger reports the following footnote relating to its receivables.\section*{Required}a. What amount do customers owe
Following is the current asset section from Intuit's balance sheetTotal revenues were $\$ 3,071$ million ( $\$ 1,497$ million in product sales and $\$ 1,574$ million in service revenues and
The current asset section from The Dow Chemical Company's 2007 annual report follows.The Dow Chemical inventory footnote follows.The following table provides a breakdown of inventories:The reserves
The property and equipment section of the Abboft Laboratories 2007 balance sheet follows.The company also provides the following disclosure relating to the useful lives of its depreciable
Following are selected disclosures from the $\mathbb{R}$ ohm and Haas Company (a specialty chemical company) $200710-\mathrm{K}$The principal lives (in years) used in determining depreciation
On January 1 of the current year, Yetman Company purchases $40 \%$ of the common stock of Livnat Company for $\$ 250,000$ cash. This $40 \%$ ownership allows Yetman to exert significant
Finn Company purchases all of the common stock of Murray Company for $\$ 750,000$ when Murray Company has $\$ 300,000$ of common stock and $\$ 450,000$ of retained earnings. If a consolidated
Bradshaw Company owns $100 \%$ of Dee Company. At year-end, Dee owes Bradshaw $\$ 75,000$ arising from a loan made during the year. If a consolidated balance sheet is prepared at year-end, how is
Use the following year-end footnote disclosure from Pfizer's $10-\mathrm{K}$ report to answer parts $a$ and $b$.a. What amount does Pfizer report on its balance sheet as available-for-sale
Abbott Laboratories reports the following disclosure relating to its December 31 comprehensive income. (a) How is Abbott accounting for its investment in marketable equity securities? How do you
Stober Company purchases an investment in Lang Company at a purchase price of $\$ 1$ million cash. representing $30 \%$ of the book value of Lang. During the year, Lang reports net income of \(\$
Kross Company purchases an equity investment in Penno Company at a purchase price of $\$ 5$ million, representing $40 \%$ of the book value of Penno. During the current year, Penno reports net
Merck's $10-\mathrm{K}$ report included the following footnote disclosure:a. At what amount are the equity method investments reported on Merck's balance sheet? Does this amount represent Merck's
Philipich Company purchases $80 \%$ of Hirst Company's common stock for $\$ 600,000$ cash when Hirst Company has $\$ 300,000$ of common stock and $\$ 450,000$ of retained eamings. If a
Benartzi Company purchased a $90 \%$ interest in Liang Company on January 1 of the current year and the purchase price reflected $90 \%$ of Liang's book value of equity. Benartzi Company had \(\$
Weaver Company acquired $80 \%$ of Koonce Company at the beginning of the current year. Weaver paid $\$ 50,000$ more than the book value of Koonce's shareholders' equity and determined that this
a. Use the financial statement effects template to record the following four transactions involving investments in marketable securities classified as trading.(1) Purchased 6.000 common shares of
Use the financial statement effects template to record the accounts and amounts for the following four transactions involving investments in marketable securities:(1) Ohlson Co. purchases 5,000
Berkshire Hathaway reports the following footnotes with its $10-\mathrm{K}$ report.a. At what amount does Berkshire Hathaway report its equity securities investment portfolio on its balance sheet?
CNA Financial Corporation provides the following footnote to its $200710-\mathrm{K}$ report.Valuation of investments CNA classifies its fixed maturity securities (bonds and redeemable preferred
Use the financial statement effects template (with amounts and accounts) to record the following transactions involving investments in marketable securities accounted for using the equity method:a.
Use the financial statement effects template (with amounts and accounts) to record the following transactions involving investments in marketable securities accounted for using the equity method:a.
On January 1, Ball Corporation purchased shares of Leftwich Company common stock.a. Assume that the stock acquired by Ball represents $15 \%$ of Leftwich's voting stock and that Bal classifies the
DuPont's $200710-\mathrm{K}$ report includes information relating to the company's equity method investments ( $\$$ millions). The following footnote reports summary balance sheets for affiliated
Caterpillar, Inc. (CAT) reports investments in affiliated companies, consisting mainly of its $50 \%$ ownership of Shin Caterpillar Mitsubishi. Ltd. Caterpillar reports those investments on its
AT&T reports the following footnote to its 2005 10-K report ($ millions).Equity Method Investments We account for our nationwide wireless joint venture, Cingular, and our investments in equity

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