Questions and Answers of Financial Accounting For MBA

Debra Company reports the following financial information for the year:Accounts receivable:Based on prior experience the management of Debra Company expects two percent of credit sales to be
1. In an effort to increase collections, Bishop Company offers a 1/10, n/30 discount for early payment. Assume a sale of $$150,000$ made on August Ist. Determine the total sales, the sales
MicroStrategy, Inc., is a software company that sells its services to other companies under multiyear contracts (on average for three years). The contracts call for a minimum fee, paid monthly, and
The materiality concept is a financial statement disclosure guideline used by most businesses to help determine when a particular account balance or economic event should be separately disclosed in a
A well-known poem about accounting was written by H.S. Bailey, Jr. and published in 1975 in Publishers Weekly:Discuss the message that Mr. Bailey was trying to convey through this poem. Though my
Urcarco, Inc., was a publicly held used-car dealer that had defined its market niche as customers with a low or no credit rating. In some years, Urcarco’s repossession rate had run as high as 40
U.S. Airways recognizes revenue from airline ticket sales when a customer takes a flight or not later than one year from the date of sale (flight coupons have a useful life of one year from the date
Total Networks, Inc., reported gross accounts receivable of $$1.2$ billion in 2008 and an allowance for doubtful accounts of $$300$ million. In 2009, the company’s gross accounts receivable
On April 14, 2006, The Wall Street Journal carried an article headlined ‘‘Research in Motion Skeptics Pipe Up.” The article concerned Research in Motion Ltd. (RIM), the manufacturer of the
In early 2006, the Bausch & Lomb Company halted shipments of its ReNu contact lens product and recalled from retailers any unsold containers of its contact lens solution. The contact lens cleaning
Microsoft, Inc., recognizes revenue from its licensed software products at the “time of sale” or “time of installation.” Despite receiving such revenue in cash, Microsoft defers the
In September 2015, Boeing agreed to terms to sell 300 planes to China in one of the largest long-term airline contracts ever signed. With contracts to sell a plane, a company such as Boeing would
Discuss what is meant by the “tone at the top” and why it is important.Further, discuss whether you feel it is ethical to be a whistle-blower.
Consider the following independent situations:1. An international health club sells lifetime memberships costing $$1,500$ which allow the purchaser unlimited use of any of the club’s 300
The Longo Corporation contracted with The Davis Company to manufacture various metal component parts that would be assembled by Longo before resale to Longo’s customers. Longo placed its most
The following information is taken from the annual report of The Lincoln Electric Company.Calculate the ratio of the allowance for uncollectible accounts divided by gross accounts receivable for 2014
The following information is taken from the annual report of the Couche Corporation.Calculate the ratio of the allowance for uncollectible accounts divided by gross accounts receivable. Did this
Charles Smith, Inc., is a manufacturer of small office equipment.Smith transacts most of its business on credit and offers its customers credit terms of 2/10, n/30. On July 1, Smith shipped an order
M. Beall Inc. uses the aging method to estimate the company’s bad debt expense. Mike Beall, the president of the company, collected information about the company’s outstanding accounts receivable
The following information is taken from the annual report of The Coca-Cola Company:Calculate the receivable turnover ratio and the receivable collection period for 2014 and 2015. How much additional
The following information is taken from the annual report of The Mann Corporation:Calculate the receivable turnover ratio and the receivable collection period for 2014 and 2015. How much additional
CA Technologies is a software company that designs, develops, installs, and services business software for manufacturing companies. Typically, CA Technologies provides its services over a multiyear
The Apollo Company is a catalogue-based retailer. The following describes Apollo’s operations in its first two years of business:Required1. Prepare an income statement for each year assuming that
At the beginning of 2016, John Cornell decided to quit his job as a construction company ey supervisor and formed his own residential housing construction company. When he resigned, he had a contract
The Miller Company won a contract to build a shopping center at a price of $$240$ million. The following schedule details the estimated and actual costs of construction and the actual cash
In June 2014, Biltmore Construction Company (BCC) was hired by the City of Phoenix, Arizona, to assist in constructing its new Trade Center complex. The construction agreement called for work to
Wind Technology, Inc., is an independent research laboratory that undertakes contractual research for a variety of corporate and governmental clients. In January 2014, scientists at Wind Technology
The Miller Company’s accounts receivable reveal the following balances by age category:The allowance for uncollectible accounts has an existing positive balance of $$34,200$. The company’s
Kate Miller owns a dance studio in Los Angeles, California. Students can buy access to the dance classes by paying a monthly fee. Unfortunately, many of Kate’s students are struggling actors and
Global Markets, Inc. was experiencing a shortage of cash. Consequently, the President was considering two options to provide an immediate inflow of cash. The first option was to sell $$2$ million
Star Communications designs, manufactures, and sells telecommunication equipment, and provides services associated with their installation, operation, and maintenance in China, India, Korea, and
The 2015 annual report of the Procter & Gamble Company (P&G) is available at www.pginvestor.com. After reviewing P&G’s annual report, respond to the following questions:a. When does P&G recognize
Consider a publicly held company whose products you are familiar with. Some examples might include:Access the company’s public website and search for its most recent annual report. (Some companies
The 2014 financial statements of LVMH Moet Hennessey-Louis Vuitton S.A.LVMH is a Paris-based holding company and one of the world’s largest and best-known luxury goods companies. As a member-nation
Financial statement analysis is a process whereby the basic financial statements are reviewed and evaluated to assess a firm’s financial health and/or performance.Calculating financial ratios is an
Many corporations finance at least a part of their operations and asset purchases using debt, principally because the cost of debt financing is cheaper than equity financing.Moreover, some firms are
When calculating a firm’s return on shareholders’ equity (ROE), some investment professionals modify the ROE ratio by subtracting any dividends paid by the firm to its preferred stock
When calculating a firm’s return on total assets (ROA) ratio, some investment professionals modify the ROA ratio by adding back the interest expense paid by a firm to its creditors, on a
The Manhattan Company has $$265$ million in assets, $$90$ million in current liabilities, $$135$ million in noncurrent liabilities, and $$40$ million in shareholders’ equity. Of the
The Fremont Company has $$465$ million in assets, $$70$ million in current liabilities, $$125$ million in noncurrent liabilities, and $$270$ million in shareholders’ equity.Of the
Presented below are selected financial data (in millions) for Bristol-Myers Squibb, The Coca-Cola Company, and the General Electric Company. Calculate the capital intensity ratio for each of the
Presented below are common-sized income statement data for three well-known companies representing three different industries (pharmaceutical, beverage, and diversified):1. Bristol-Myers Squibb 2.
Presented below are selected financial data for two competitors. Discuss why the return on assets increased for Company A but decreased for Company B. Company A. Company B Return on Assets Return on
Presented below are selected financial data for two competitors. Discuss why the return on’equity decreased for each firm. Company X. Company Y. Return on Equity Return Financial on Sales Asset
Explain why a sell-side analyst might be less objective than a buy-side analyst in his/her research reports. If an analyst is working for Merrill Lynch, where should the analyst’s loyalties
Presented below are summary financial data from the Bristol-Myers Squibb 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following ratios: return on equity, return on
Presented below are summary financial data from the Pfizer, Inc., 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following ratios: return on equity, return on assets
Presented below are summary financial data from the Johnson & Johnson 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following ratios: return on equity, return on
Presented below are summary financial data from the Bristol-Myers Squibb 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following liquidity and solvency ratios:cash
Presented below are summary financial data from The Boeing Company 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following ratios: return on equity, return on assets
Presented below are summary financial data from the General Electric Company 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following liquidity and solvency ratios:
Presented below are summary financial data from the The Coca-Cola Company 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following liquidity and solvency ratios: cash
Presented below are summary financial data from The Boeing Company 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following liquidity and solvency ratios:cash and
Presented below are selected financial data from the Bristol-Myers Squibb 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following ratios:receivable turnover,
Presented below are selected financial data from the The Coca-Cola Company 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following ratios: receivable turnover,
Presented below are selected financial data from The Boeing Company 2015 annual report. Using the ratio definitions from Exhibit 4.6, calculate the following ratios:receivable turnover, receivable
During 2015, The Mann Corporation borrowed $$500,000$ from The Biltmore National Bank. The loan agreement included a debt covenant restricting the company’s level of debt relative to
The following information is taken from Procter & Gamble’s 2015 annual report:Calculate the company’s actual and sustainable rate of growth in sales for 2015 and 2014. How do the two growth
The following information is taken from the Fossil, Inc. 2015 annual report:Calculate Fossil’s actual and sustainable rate of growth in sales. How do the two rates of growth compare?What advice
Presented below are selected financial data from the 2015 annual report of the Bristol-Myers Squibb Company:RequiredUsing the ratio definitions from Exhibit 4.6, calculate the financial ratios for
Presented below are selected financial data from the 2015 annual report of The Boeing Company:RequiredUsing the ratio definitions from Exhibit 4.6, calculate the financial ratios for The Boeing
Presented below is selected financial data for Apple !nc., for the five-year period 2010 to 2014.Required1. Comment on the relationship between the growth in net sales and the growth in net income
Wilmot Real Estate Co. had the following balance sheet at year-end 2015:In early 2016, the company took out a $$200,000$ two-year bank loan to finance new real estate investments. The loan
Presented below are the consolidated balance sheets and income statements for Tesco, PLC, the world’s third largest retailer, for the years 2016 and 2015. Tesco is based in the United
Handy Dan, Inc., operates warehouse-style stores, selling a variety of home building products and lawn and garden supplies. Presented below are Handy Dan’s historical financial statements for 2014
Presented below are profitability ratios for three competitors: Bristol-Myers Squibb (BMY), Pfizer, Inc. (PFE), and Johnson & Johnson (JNJ):RequiredCompare the relative profitability of the three
Presented below are selected financial statement data for three global energy firms:Required1. Compare the three firms in terms of their size and their financing strategy.2. Evaluate the performance
Presented below are summary financial data from the 2017 annual report of Natalie Company. Using the ratio definitions, calculate the following financial ratios: unlevered return on sales, asset
The following information is available for The Philippi Winery Company, Inc.Calculate the company’s cost of equity capital for 2015, 2014, and 2013 using the Capital Asset Pricing Model discussed.
The 2015 annual report of The Procter & Gamble Company (P&G) is available at www.pginvestor.com. After reviewing P&G’s annual report, respond to the following questions:a. Prepare common-size
Consider a publicly held company whose products you are familiar with. Some examples might include:Access the company’s public website and search for its most recent annual report. (Some companies
The following balance sheet and income statement data were taken from the financial records of The Dana Point Company:\RequiredPrepare percentage change and common-sized balance sheets and income
The following balance sheet and income statement data were taken from the financial records of The Dana Point Company:Required1. Calculate the following ratios for The Dana Point Company for 2015 and
The following selected balance sheet and income statement data were taken from the financial records of The Ventura Company:Required1. Use the Dupont Model to compute the 2013 through 2016 return on
The following balance sheet and income statement data were taken from the financial records of The Arcadia Company.Required Prepare an indirect method statement of cash flow for The Arcadia Company
The following data was obtained from the year-end financial statements of The Monrovia Company:Requireda. Compute the following cash flow ratios for The Monrovia Company: (1) Operating funds ratio,
Mary Company had the following outstanding stock securities held by its shareholders during the year:1. 300,000 shares of common stock carrying an average market price during the year of
Describe at least three ways that corporate managers can build shareholder value (increase their firm’s share price). Rank-order the various managerial actions you identified according to their
In early 2006, Merck AG, a global pharmaceutical company, saw its share price decline dramatically after a jury in the United States found the company guilty of failing to warn consumers about safety
In its 2014 annual report, Merck & Co., Inc., reported that its basic earnings per share were $$4.12$ per share while its diluted earnings per share were $$4.07$ per share.Discuss the factors
Although much of the work of an equity analyst involves quantitative analysis, some analysts also engage in various qualitative analyses to help them assess the persistence of a firm’s current
It is common to see share prices of a company increase with the announcement of good news from the company. It is also the case that record earnings qualify as very good news. The behavior of stock
Some members of the financial community allege that corporate managers “manage” their company’s reported accounting results. Discuss the possible motivations behind this behavior.Can you
In 2002, the FASB concluded that the amortization of goodwill should no longer be required, and instead that goodwill be subject to an annual impairment test to verify that its value had not
On September 11, 2001, two American Airlines aircraft were hijacked and destroyed in terrorist attacks on The World Trade Center in New York City and the Pentagon in northern Virginia. As a
In 2002, following its adoption of a new accounting standard issued by the FASB for the impairment of goodwill accounting, AMR Corporation, the parent company of American Airlines, conducted an
Discuss the concepts of book value, intrinsic value, and market capitalization. Using a financial website such as YahooFinance or MSNMoney, identify the market capitalization and book value of The
The chart below summarizes the U.S. exchange traded companies that issued corrections to their financial statements during the years 2001 through 2014. The data was compiled by Audit Analytics and
Earnings management may be used to avoid a technical default of a covenant under a loan agreement. Loan covenants are written into loan agreements in order to protect a lender from various actions
Presented below is a list of accounting events for the Longo Corporation.Classify each of the events as an operating (O) activity event, an investing (I) activity event, a financing (F) activity
Presented below is a list of accounting transactions for the Davis Company. Classify each of the transactions as an operating (O) activity transaction, an investing (1) activity transaction, a
Presented below is cash flow information for two competitors—The Longo Corporation and The Davis Company (amounts in thousands):Describe the cash management strategy of each company by identifying
Presented below is cash flow information for two competitors for 2015_____fizer, Inc., and Johnson & Johnson (amounts in millions):Describe the cash management strategy of each company by
During 2016, Mayfair Company had the following securities outstanding:1. 250,000 shares of common stock with an average market price of $$25$ per share.2. 9.5% convertible preferred, which had been
Little, Inc., reported earnings of $$159,000$ for 2016, and at the end of the year, had the following securities outstanding:1. 60,000 shares of common stock. (The year-end share price was $$25$
Entrust, Inc., is a global provider of security software; it operates in one business segment involving the design, production, and sale of software products for securing son digital identities and
The Miller Find Corporation disclosed the following statement of earnings in its 2016 annual report (amounts in thousands):In addition, the company reported the following data regarding its operating
Harnischfeger Corporation was a mining machinery and equipment company based in Wisconsin. The company voluntarily changed its depreciation accounting policy from the accelerated method to the
Presented below are the financial statements for the Amphlett Corporation, as of year-end 2016 and 2015.The footnotes to the Amphlett Corporation’s financial statements revealed the following
Presented below are the consolidated financial statements of The Mann Corporavane, CHECK tion as of year-end 2016 and 2015.RequiredUsing the above financial data, prepare the statement of cash flow

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