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financial statement analysis
Questions and Answers of
Financial Statement Analysis
Interpreting Footnote Disclosure on Convertible Debentures Alloy Inc. reports the following footnote related to its convertible debentures in its 2007 10-K ($ thousands).????n August 2003, Alloy
Analyzing and Interpreting Equity Accounts and Accumulated Other Comprehensive Income Following is the stockholders’ equity section of Beam Inc. balance sheet and its statement of
Analyzing and Interpreting Equity Accounts and Comprehensive Income Following is the shareholders’ equity section of the 2016 balance sheet for Procter & Gamble Company and its statement of
Identifying and Analyzing Financial Statement Effects of Stock Transactions Following is the stockholders’ equity of Herrera Corporation at December 31, 2016.8% preferred stock, $50 par value,
????????-5????. Identifying and ????naly????ing ????inancial ????tatement ????ffects of ????tock ????ransactions The stockholders’ equity of Verrecchia Company at December 31, 2016, follows.Common
????????-5????. Identifying and ????naly????ing ????inancial ????tatement ????ffects of ????tock-????ased Compensation The stockholders’ equity of Fowler Company at December 31, 2016, follows.7%
Analyzing Stockholders’ Equity Including AOCI and Convertible Securities Under Armour reported the following stockholders’ equity section of the balance sheet for the fiscal year ended December
Identifying and Analyzing Financial Statement Effects of Stock Transactions The stockholders’ equity section of Medina Company at December 31, 2016, follows.???????? preferred stock, ????????????
Analyzing and Computing Issue Price, Treasury Stock Cost, and Shares Outstanding Following is the stockholders’ equity section of the 2015 Merck & Co. Inc. balance sheet.Stockholders’ Equity ($
Analyzing Convertible Preferred Stock Xerox Corp. reports the following stockholders’ equity information in its 10-K report.Shareholders’ Equity(in millions, except par value)December 31 2015
Analyzing and Computing Issue Price, Treasury Stock Cost, and Shares Outstanding Following is the stockholders’ equity section of the 2015 Caterpillar Inc. balance sheet.Stockholders’ Equity ($
Identifying, Analyzing and Explaining the Effects of a Stock Split On March 1 of the current year, Lackey Company has 500,000 shares of $20 par value common stock that are issued and outstanding. Its
Identifying and Analyzing Financial Statement Effects of Cash and Stock Dividends The stockholders’ equity of Hammel Company at December 31, 2016, is shown below.5% preferred stock, $100 par value,
Identifying and Analyzing Financial Statement Effects of Cash and Stock Dividends The stockholders’ equity of Rondon Company at December 31, 2016, appears below.Common stock, $10 par value, 200,000
Identifying and Analyzing Financial Statement Effects of Cash and Stock Dividends Baez Company has outstanding 25,000 shares of $10 par value common stock. It also has $514,000 of retained earnings.
Analyzing Cash Dividends on Preferred and Common Stock Warren Company began business on June 30, 2015. At that time, it issued 25,000 shares of $40 par value, 8% cumulative preferred stock and
Analyzing and Computing Issue Price, Treasury Stock Cost, and Shares Outstanding Following is the stockholders’ equity section from Altria Group Inc.’s 2015 balance sheet.December 31 ($ millions,
Return on Equity in Presence of Large Treasury Stock Balance NJ Simpson Inc. reported the following equity accounts in its 2017 balance sheet. Stock prices for the past three year-ends of 2017, 2016,
Analyzing Cash Dividends on Preferred and Common Stock Everett Company has outstanding 30,000 shares of $50 par value, 6% preferred stock and 70,000 shares of$1 par value common stock. During its
Analyzing Stock-Based Compensation Howell Company began business on March 1, 2017. At that time, it granted 250,000 options, with a strike price of $5, to computer engineers in lieu of signing
Analyzing and Computing Average Issue Price and Treasury Stock Cost Following is the stockholders’ equity section from the Campbell Soup Company balance sheet. (Note:Campbell’s uses
Identifying Various Equity Transactions Perry Corp. reports the following transactions relating to its stock accounts in the current year.Feb. 3 Issued 40,000 shares of $5 par value common stock at
Identifying and Analyzing Financial Statement Effects of Stock Transactions Orson Company reports the following transactions relating to its stock accounts in the current year.Mar. 2 Issued 10,000
Analyzing Financial Statement Effects of Convertible Securities JetBlue Airways Corporation reports the following footnote to its 2015 10-K.In June 2009, we completed a public offering for an
Interpreting Comprehensive Income and AOCI Indicate whether each of the following statements is true or false. If false, indicate how to correct the statement.a. The amount reported for accumulated
Determining Effects of Stock Splits Oracle Corp has had the following stock splits since its inception.Effective Date ????plit ????mount October 12, 2000 . . . . . . . . . 2 for 1 January 18, 2000 .
Calculating and Recording Cash Dividends On January 27, 2016, McDonald’s Board of Directors declared a quarterly cash dividend of $0.89 per share of common stock payable on March 15, 2016, to
Calculating and Interpreting EPS Information Wells Fargo reports the following information in its 2015 Form 10-K.????n millions 2015 2014 Wells Fargo net income . . . . . . . . . . . . . . . . . . .
Reconciling Retained Earnings Use the following data to reconcile the 2017 retained earnings for Emerald Company (that is, explain the change in retained earnings during the year).Total retained
Determining Cash Dividends to Preferred and Common Shareholders Hobson Company has outstanding 40,000 shares of $50 par value, 6% cumulative preferred stock and 100,000 shares of $10 par value common
Identifying, Analyzing and Explaining the Effects of a Stock Split On September 1, Weiss Company has 300,000 shares of $9 par value ($148 market value) common stock that are issued and outstanding.
Estimating Stock-Based Compensation Expense Rainier Corp. has several types of stock-based compensation plans including a stock purchase plan that allows employees to buy shares at a 15% discount.
Equity Attributable to Company Stockholders Boeing Company reported the following items on its 2015 form 10-K. Which equity number should be used to calculate return on equity for 2015 and for
Distinguishing Between Common Stock and Additional Paid-in Capital Following is the 2016 stockholders’ equity section from the Cisco Systems Inc. balance sheet.Shareholders’ ????quity (in
Understanding EPS Calculations On its Form 10-K for the year ended December 31, 2015, Bank of America Corp. reported information related to basic earnings per share. Fill in the missing information.$
Analyzing and Identifying Financial Statement Effects of Stock Issuances During the current year, Bryant Company, (a) issues 8,000 shares of $50 par value preferred stock at $84 cash per share and
Describe the accounting for a convertible bond. Can the conversion ever result in the recognition of a gain in the income statement?
What are three common forms of stock-based compensation and why do companies use such forms of compensation?
What items are typically reported under the stockholders’ equity category of accumulated other comprehensive income (AOCI)?
What information is reported in a statement of stockholders’ equity?
Employee stock options potentially dilute earnings per share (EPS). What can companies do to offset these dilutive effects and how might this action affect the balance sheet?
What is the difference between the accounting for a small stock dividend and the accounting for a large stock dividend?
What is a stock dividend? How does a common stock dividend distributed to common stockholders affect their respective ownership interests?
Describe the difference between contributed capital and earned capital. Specifically, how can earned capital be considered as an investment by the company’s stockholders?
What are the basic differences between preferred stock and common stock? That is, what are the typical features of preferred stock?
Analyzing Debt Footnotes Headquartered in Montreal, Canada, Valeant Pharmaceuticals International Inc. is a multinational specialty pharmaceutical company that develops and markets prescription and
Analyzing Contingent Liabilities: Warranty Reserves Headquartered in Montreal, Quebec, Canada, Bombardier Inc. is a multinational aerospace and transportation company, founded in 1941. The company
Analyzing Debt Terms, Yields, Prices, and Credit Ratings Statoil ASA, headquartered in Stavanger, Norway, is a fully integrated petroleum company. The company uses IFRS to prepare its financial
Interpreting Bond Footnote Disclosures and Computing Effective Interest Rate In October 2012, French real estate company Foncière des Régions issued bonds with a total face value of€500 million.
Interpreting a Contingent Liability Footnote BP operates off-shore drilling rigs including rigs in the Gulf of Mexico. On April 20, 2010, explosions and fire on the Deepwater Horizon rig led to the
Analyzing Debt Terms, Yields, Prices, and Credit Ratings Reproduced below is the debt footnote from the 2016 10-K report of Oracle Corporation.$ millions May 31, 2016 May 31, 2015 Revolving credit
Interpreting Debt Footnotes on Interest Rates and Interest Expense CVS Health Corporation discloses the following as part of its long-term debt footnote in its 2015
Interpreting and Analyzing Debt Footnotes PepsiCo Inc. reports $32,322 million of long-term debt outstanding as of December 2015 in the following schedule to its 10-K report.Debt Obligations and
Reformulating Financial Statements for Warranty Expense Ford Motor Company reported the following information in its 2016 financial statements. Use these data to answer the requirements.Warranty
Applying Time Value of Money Concepts Manchester Corporation takes a 20-year mortgage of $15 million. The annual interest rate on the mortgage is 7% and payments are due at the end of each year.a.
Applying Time Value of Money Concepts Fulton Corporation purchases new manufacturing facilities and assumes a 10-year mortgage of $4 million.The annual interest rate on the mortgage is 5.5% and
Calculating Ratios and Estimating Credit Rating The following data are from Kellogg’s 10-K report dated January 2, 2016 ($ millions).Revenue . . . . . . . . . . . . . . . . . . . $13,525 Earnings
Calculating Ratios and Estimating Credit Rating The following data are from Under Armour’s 2015 10-K report ($ thousands).Revenue . . . . . . . . . . . . . . $3,963,313 Earnings from continuing
Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1, 2017, Sparta Company issued $550,000 of 5-year, 12% bonds for $592,470, yielding a market (yield) rate of 10%.
Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1, 2017, Arbor Corporation issued $800,000 of 20-year, 11% bonds for $739,815, yielding a market (yield) rate of
Computing Present Values of Single Amounts and Annuities Refer to Tables 1 and 2 in Appendix A near the end of the book to compute the present value for each of the following amounts.a. $120,000
Determining Bond Prices, Interest Rates, and Financial Statement Effects Deere & Company’s 2015 10-K reports the following footnote relating to long-term debt for its equipment operations
Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1, 2017, Shields Inc. issued $1,000,000 of 9%, 20-year bonds for $1,098,964, yielding a market(yield) rate of 8%.
Analyzing and Reporting Financial Statement Effects of Bond Transactions On January 1, 2017, Banek Inc. issued $350,000 of 8%, 9-year bonds for $309,086, which implies a market (yield) rate of 10%.
Analyzing and Reporting Financial Statement Effects of Bond Transactions Winston Inc. reports financial statements each December 31 and issues $400,000 of 9%, 15-year bonds dated May 1, 2017, with
Assessing the Effects of Bond Credit Rating Changes Ford Motor Co. reports the following information from the Risk Factors and the ????anagement Discussion and Analysis sections of its 2015 10-????
Analyzing and Reporting Financial Statement Effects of Mortgages On ????anuary 1, Patterson Inc. borrowed $1,000,000 on a 10%, 15-year mortgage note payable. The note is to be repaid in equal
Analyzing and Reporting Financial Statement Effects of Bond Transactions On ????anuary 1, Remington Corp. issued $500,000 of 15-year, 10% bonds payable for $5????6,460 yielding an effective interest
Reformulating Financial Statements For Warranty Expense Income statement data for Whirlpool Industries from the company’s 2016 financial statements follow. Use these data to reformulate the income
Analyzing and Computing Accrued Wages Liability and Expense Demski Company pays its employees on the 1st and 15th of each month. It is ????arch 31 and Demski is preparing financial statements for
Recording and Analyzing Warranty Accrual and Payment Refer to the discussion of and excerpt from the Harley-Davidson Inc. warranty reserve on page 7-6 to answer the following questions.a. Using the
Analyzing Contingent and Other Liabilities The following independent situations represent various types of liabilities. Analyze each situation and indicate which of the following is the proper
Analyzing and Computing Accrued Warranty Liability and Expense Canton Company sells a motor that carries a 60-day unconditional warranty against product failure. From prior years’ experience,
Reformulating Financial Statements For Warranty Expense Over the past four years, Hashwari Corporation reported sales revenue and warranty expense as follows.2014 2015 2016 2017 Sales revenue. . . .
Calculating Gains and Losses on Early Retirement of Debt The data below pertain to bonds outstanding at 2016 year end. For each of the following outstanding bonds, determine whether the company would
Applying Time Value of Money Concepts Ozona Minerals issued bonds that mature in 10 years. As is typical for bonds, Ozona Minerals must pay interest only on the $250 million face value. As part of
Applying Time Value of Money Concepts Complete the missing information in the table below. Assume that all bonds pay interest semiannually.Annual Yield Years to Maturity Coupon Rate Face Value Issue
Determining Credit Ratings The chart below shows financial ratios for three companies. Use the data, along with Exhibit 7.6 to determine a bond rating for each of the three companies
Computing Bond Issue Price and Preparing an Amortization Table in Excel On January 1, 2017, Springfield Inc. issues $400,000 of 8% bonds that pay interest semiannually and mature in 10 years
Determining the Financial Statement Effects of Accounts Payable Transactions Hobson Company had the following transactions relating to its accounts payable.a. Purchases $1,260 of inventory on
Computing Issue Price for Zero Coupon Bonds Underwood Inc. issues $350,000 of zero coupon bonds that mature in 10 years. Compute the bond issue price assuming that the bonds’ market rate is:a. 8%
Computing Bond Issue Price Abbington Inc. issues $700,000 of 9% bonds that pay interest semiannually and mature in 10 years. Compute the bond issue price assuming that the prevailing market rate of
Interpreting Credit Ratings Cummins Inc. reports the following information in the Management Discussion & Analysis section of its 2015 10-K report.Credit Ratings Our ratings and outlook from each of
Analyzing and Computing Accrued Interest on Notes Compute any interest accrued for each of the following notes payable owed by Penman Inc. as of December 31, 2017 (assume a 365-day year).Lender
Analyzing Financial Statement Effects of Bond Redemption Camden Inc. issued $450,000 of 8%, 15-year bonds at 96 on July 1, 2012. Interest is payable semiannually on December 31 and June 30. Through
Analyzing Financial Statement Effects of Bond Redemption Weiss Corporation issued $600,000 of 10%, 20-year bonds at 106 on January 1, 2012. Interest is payable semiannually on June 30 and December
Interpreting Bond Footnote Disclosures Comcast Corporation reports the following information from the Management Discussion and Analysis section of its 2012 10-K.We, NBCUniversal and CCCL Parent are
Classifying Liability-Related Accounts into Balance Sheet or Income Statement Indicate the proper financial statement classification (balance sheet or income statement) for each of the following
Interpreting Bond Footnote Disclosures Bristol-Myers Squibb Co. reports the following long-term debt as part of its MD&A in its 2015 10-K.($ millions)Maturity Date Obligations Expiring by Period
Determining Gain or Loss on Bond Redemption On April 30, one year before maturity, Middleton Company retired $200,000 of its 9% bonds payable at the current market price of 101 (101% of the bond face
Interpreting Relations among Bond Price, Coupon, Yield, and Credit Rating The following appeared in Yahoo! Finance (finance.yahoo.com) regarding outstanding bonds issued by Citigroup Inc.Price Coupon
Analyzing and Determining Liability Amounts For each of the following situations, indicate the liability amount, if any, that is reported on the balance sheet of Bloomington Inc. at December 31,
Analyzing and Computing Financial Statement Effects of Interest Leahy Inc. signed a 90-day, 8% note payable for $13,800 on December 16. Use the financial statement effects template to illustrate the
Interpreting a Contingent Liability Footnote NCI Building Systems reports the following footnote to one of its recent 10-Ks related to its manufacturing of metal coil coatings and metal building
What is the difference between a bond’s coupon rate and its market interest rate (yield)?
D6-49. Managing Operating Asset Reduction Return on net operating assets (RNOA ???? NOPAT/Average NOA, see Module 4) is commonly used to evaluate financial performance. If managers cannot increase
Analyzing and Interpreting Operating Asset Ratios Canadian Tire Corporation, Limited operates retail stores in Canada that sell general merchandise, clothing, and sporting goods. The company offers
Estimating Useful Life, Percent Used Up, and Gain or Loss on Disposal Husky Energy is one of Canada’s largest integrated energy companies. Based in Calgary, Alberta, Husky is publicly traded on the
Computing and Evaluating Inventory Turnover for Two Companies European car makers, Volkswagen Group (headquartered in Wolfsburg, Germany) and Daimler AG(headquartered in Stuttgart, Germany) report
Reformulating Balance Sheet and Income Statement Items for Restructuring Intel Corporation reported the following information pertaining to its recent restructuring program.Use this information to
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