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financial reporting and analysis

Questions and Answers of Financial Reporting and Analysis

Shown below are several transactions recorded by Beth’s coffee shop, The Bitter Bean (TBB):Required For each transaction, describe the event or activity that occurred. For example:Answer: The firm
Theraux Corporation received its bank statement for the month ended October 31, 1999. Contained in the bank statement were the following items:Check # $ Amount Checks cleared: 1140 $100 1156 400 1159
In the HMO industry, accounts receivable represent one of the major assets.HMOs provide medical services to patients and then bill insurance companies and Medicare/Medicaid agencies.Timely collection
The Center for Inventory Management (CIM) publishes quarterly inventory ratios for manufacturing industry groups.Requireda. How does CIM (www.inventorymanagement.com) compute its inventory ratio?
Locate the latest available set of financial statements for Oncogene Science,Inc., from the 10-K on file in the EDGAR archives.Requireda. In what types of short-term securities does Oncogene invest?
Owens-Corning values its inventories using LIFO.This presents a problem when comparing its current ratio against that of a company using FIFO. Locate the latest financial statements for Owens-Corning
The following balance sheet segments were extracted from the SEC’s EDGAR data base:Consolidated Balance Sheets ELI LILLY AND COMPANY AND SUBSIDIARIES (Dollars in millions)December 31 1997 1996
Sheila Glow sells advertising for KBOL, a local radio station. She receives a small monthly salary plus a commission of 20% of all advertising contracts that she negotiates and that are billed by
Storage Technology Corporation (StorageTek) is a manufacturer of computer storage devices. StorageTek continually modifies its existing products and develops new ones. These improvements permit
Topps Co., Inc., produces sports cards. During two quarters in the same year, Topps’ accounts receivable increased by more than 50%, while sales declined.Such a trend might indicate that Topps is
Financial analysts have computed the following ratios for Firm X and several industries where Firm X has significant operations.Evaluate Firm X’s performance relative to each industry. What factors
Discuss the implications of the following note.How will it affect the company’s liquidity? How will it affect the company’s overall asset management policies?Conry Publishing Company 1999 Annual
Describe the concept of factoring accounts receivable.If necessary,conduct further research in a finance text to determine what functions a factor performs.Consider the following factoring issues:a.
Entertainment Office Group is a leading producer of film (and video) entertainment. Its 1999 and 1998 consolidated balance sheets reported the following assets (dollars in thousands):1999 1998 Cash
Pioneer Resource, Inc., reported the following in its Notes to Consolidated Financial Statements for 1999.Material and Supplies: Inventories of new and reusable material and supplies are stated at
Kesler Inc. is a research-based health care company whose objectives include the application of scientific knowledge to help people enjoy longer, healthier, and more productive lives. Its balance
The manager of Rob’s Shoe Store has been congratulated by her division manager for almost completely eliminating all bad debts. She instituted a policy of conducting extensive credit checks on all
Marketable securities are usually shown on the balance sheet as current assets.Based on what you have learned, under what circumstances might they be shown as noncurrent assets? Why do you think a
Refer to Wendy’s financial statements in Appendix D. Review the financial statements to determine how and where current assets have been reported.Requireda. Did Wendy’s disclose how it calculated
Refer to Reebok’s financial statements in Appendix E.Review the financial statements to determine how and where current assets have been reported.Requireda. Calculate the following accounts
Firefly Beach Cottages, Inc., purchased a three-year fire insurance policy for$4,800.The policy was purchased on July 1, 1999, and financial statements are prepared as of December 31 each
S.Claus Company makes toys and gifts.At the beginning of July,it owned 200 gallons of red paint,which were recorded on the balance sheet at $4.00 per gallon.The following events occurred in the next
The Atlas Tile Company has an accounts receivable balance at December 31 of$376,000. Its allowance for uncollectible accounts, before adjustment, has a balance of $37,000. Credit sales for Atlas, for
S. Claus Company ended the 2000 season with an accounts receivable balance of $375,000, less allowance for uncollectible accounts of $37,500. Use the accounting equation to reflect each of the
Becca’s Finance and Collection Company had the following year-end balances in its financial statements:1999 2000 Accounts receivable $300,000 $500,000 Allowance for uncollectibles (50,000)
Becca’s Finance and Collection Company has had a lot of trouble collecting its receivables recently.Discuss how each of the following circumstances might be reflected in the Allowance for
Two similar companies use different inventory valuation methods. LL Co. uses the LIFO inventory valuation method, and FF Co. uses FIFO. Ignore the effect of income taxes on each company.Income
Two similar companies use different inventory valuation methods. In fact, the companies are identical except for their inventory methods. L Co.uses the LIFO inventory valuation method, and F Co. uses
Pratsky, Inc., had the following account balances:December 31, 1999 Assets Liabilities Cash $12,500 Accounts payable $10,000 Accounts Receivable 22,400 Allowance for Stockholders’
El Puerto Company uses LIFO for its inventories. Information regarding 2000’s beginning inventory and purchases up until December 15,2000 is shown below:Beginning inventory (January 1, 2000)
Jeans R’Us, Inc., reported the following data in its annual financial statements(dollars in thousands):2000 2001 Cost of goods sold—LIFO 31,678 44,690 Cost of goods sold—FIFO 31,089 41,656
Teddie Bower,Inc.,reported the following data in its annual financial statements(dollars in thousands):1999 2000 Sales $333,667 $313,456 Cost of goods sold—LIFO 32,587 44,690 Cost of goods
Tom Hanky, a financial analyst specializing in the toy industry, has provided the following comments concerning the 1999 financial statements of Toys-U-Must:Toys-U-Must began operations in 1999 and
Dolo’s Building Block Company uses LIFO costing and reports the following information in a footnote to its financial statements:“If Dolo had used FIFO costing during 2000, the beginning and
Illusory Products Co.began operations early in 1999 and reported the following items in its financial statements at the ends of 1999 and 2000 (dollars in millions):1999 2000 Ending inventory $18 $22
Ken’s and Den’s Recreational Products,Inc.,reports the following information in its 2000 financial statements:Balance (dollars in millions)January 1, 2000 December 31, 2000 Accounts receivable
Calculate the gross profit percentages for each of the following situations and, based on these results, identify which situations are most preferable:a. Sales of $450,000, cost of goods sold of
Calculate the gross profit percentages for each of the following situations and, based on these results, identify which situations are most preferable:a. Sales of $500,000, cost of goods sold of
Frosty King, Inc., reported the following information in its 2000 financial statements:Years Ended November 30 2000 1999 Net sales $228,542,157 $231,845,632 Accounts receivable, net 21,402,613
DSE is a world leader in the application of information technology.Excerpts from its financial statements disclosed the following information (dollars in millions):Years Ended December 31 1999 1998
Shard Crockery Co. recognized the following events related to customer accounts receivable during 2000.At the start of the year,the firm reported gross accounts receivable of $22,000,000 and an
Spit-Spot Cleaners,Inc.,recognized the following events related to customer accounts receivable during the firm’s first year of operation: 1. Sales on credit totaled $4,000,000 for the year. 2. The
The Simmons Corporation had the following investments at December 31: 1. 1000 shares of Hollings,Inc.,purchased early in the year at $40 per share and held as available-for-sale and with a year-end
Sensor Corporation: $9 per share Requireda. Assuming that these securities are considered available-for-sale, what would be the effect on the financial statements of holding these securities?b.
Traylor Corporation: $12 per share: E-967
Fancy Corporation: $24 per share: E-967
The Amber Corporation purchased three different stocks during the year as follows: E-967• 100 shares of Fancy Corporation, cost $23 per share• 250 shares of Traylor Corporation, cost $15 per
Firm A has an accounts receivable balance of $126,000 and a balance in its allowance for uncollectible accounts of $29,000.Contrast this situation with Firm B, which has corresponding balances of
Identify and discuss any unusual terms.b. Why does Wendy’s separate cash equivalents from notes receivable? Which are reported at market value? Why?c. Discuss how “inventories”may differ from
Refer to Wendy’s financial statements in Appendix D. Review the balance sheet to determine how and where current assets were reported. E-967 Requireda. Read Note
Why does Reebok report cash and cash equivalents?b. What is the gross amount of accounts receivable at the end of 1997 and 1996? Why do you suppose the allowance for doubtful accounts has
Refer to Reebok’s financial statements in Appendix E. Review the balance sheet to determine how and where current assets were reported. E-967 Requireda. Read Note
Examine the financial statements for Wendy’s and Reebok in the appendices.Read Note 1 for each firm.Identify the inventory valuation method used by each.Do these methods seem appropriate for each
Compare and contrast each of the following methods used to value inventories: E-967a. FIFOb. LIFOc. Weighted averaged. Specific identificatione. Lower of cost or market 26 Classify each of the
Which of the following internal control statements is correct?a. Internal control does not ensure that collusion will be detected.b. Internal control design is the responsibility of the outside
To help achieve internal control over the assets of a company:a. Segregate authorization and executionb. Segregate authorization and reviewc. Segregate custody and record keepingd. Segregate custody
Identify the best answer to each of the following multiple-choice questions,and explain why it is the best answer: E-967
Describe the circumstances under which a manager might want to change her firm’s inventory method from FIFO to LIFO. Similarly, describe why a change from LIFO to FIFO might be desirable. E-967
Discuss how and why accountants might use the accounts receivable contra asset account Allowance for Uncollectible Accounts. Does such an account seem useful for managers and analysts? Why? E-967
With regard to accounts receivable, explain how the average sales per day ratio and collection period ratio could be used.As a company relaxes its credit policies, how would the values of these
If a firm purchased a three-year fire insurance policy on July 1,1999,how would this policy be shown on the firm’s balance sheet at December 31, 2000? E-967
Define prepaid expenses and identify examples of two types of prepaid expenses. E-967
Describe five general types of current assets.Why do you think managers and analysts might prefer that firms generally use these categories and definitions for current assets? E-967
Describe how LIFO provides better matching of revenues and expenses than FIFO.Why would such an attribute be desirable for income measurement? E-967
Discuss the relationships between “lower of cost or market” and the various methods that might be used to determine inventory costs, such as FIFO and LIFO.? E-967
What steps can a firm take to protect cash held on its premises? E-967
Discuss the criterion “available-for-sale” as it is used in determining how marketable securities are reported in the firm’s financial statements. E-967
Under what circumstances can accounts receivable be turned into cash, almost“overnight”? E-967
Under what circumstances might cash not be considered a current asset? E-967
Describe two different methods of accounting for marketable securities.Why is one method preferable? E-967
Describe one method that can be used to estimate a firm’s uncollectible accounts expense. E-967
What policies (within the firm) will help determine how quickly a firm collects cash on its credit sales? What customer attributes will also affect cash collections? E-967
Does a firm’s recognition of revenue depend on whether the transaction is a cash sale or a credit sale? Why? E-967
Discuss the typical relationship between inventory and accounts receivable.How are the dollar amounts reported in inventory related to those reported as accounts receivable? Are the dollar amounts
Why would a firm extend credit to its customers? Identify some firms that rarely offer credit terms. How have bank credit cards changed some of these credit practices? Identify some industries where
Explain the relationship between inventory cost flows and the actual flow of goods into and out of the firm’s storeroom. E-967
Describe how market valuations are applied to short-term equity investments. E-967
Under what circumstances could a firm’s cash balance be negative? Why? E-967
Why would a business usually want to have a positive cash balance? What does a firm usually do with cash? Describe how a firm might operate with a cash balance of zero in its accounting records. E-967
What does the term cash,as shown on financial statements,usually include? Discuss cash and cash equivalents separately. E-967
Understand the nature of prepaid expenses. E-967
Analyze a firm’s inventory management practices. E-967
Understand the various inventory cost flow assumptions and the effect that the firm’s choice of inventory method has on its taxes, the quality of information in its financial statements,its
Assess if a firm’s allowance for uncollectible accounts is adequate. E-967
Determine if a firm is properly managing its accounts receivable. E-967
Comprehend the basic accounting for marketable securities and the limitations of generally accepted accounting principles in this area. E-967
Understand the need for cash planning and how firms exercise control over cash. E-967
Identify the items included in cash. E-967
The Limpid Pool Company reports net income of $25 million for 2000. Balance sheets at the beginning and end of the year are shown below.December 31 1999 2000(Dollars in millions)Cash $ 50 $ 70 Other
Income tax payable increased by $9 million.Required Based on the above information, determine the amount of net income reported by Blunt for 2001. E-967
Inventory balances increased by $18 million. E-967
Supplier accounts payable decreased by $8 million. E-967
Noncurrent debt was increased by $35 million. E-967
Depreciation expense was $24 million. E-967
Dividends paid to common shareholders were $20 million. E-967
Customer accounts receivable increased by $6 million. E-967
The Blunt Instrument Company reports cash flow from operations of $65 million for 2001.You are provided the following additional information for the year:
The following financial statements for Swale, LTD are provided:Swale Limited Income Statement For the Year Ended December 31, 2000 Revenues:Sales $97,800 Interest revenue 1,300$99,100 Expenses:Cost
The following are comparative balance sheets for the Paulino Corporation for 2000 and 1999 and the income statement for the year ended December 31, 2000:Paulino Corporation Comparative Balance Sheets
The following condensed information (dollars in thousands) is available from Mary’s Muffins.Assume that all sales are credit sales (accounts receivable) and all purchases are also on credit

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