Questions and Answers of Fundamental Financial Accounting Concepts 11th Edition

Accounting for bonds in a troubled debt restructuring. On January 1, 1985. First National Bank (FNB) acquired $10 million of face value bonds issued on that date by Occidental Oceanic Power Systems
Discounting warranty obligations. GAAP require long-term monetary liabilities to appear at the present value of the future cash flows discounted at the market rate of interest appropriate to the
Ethical issues. Several years ago, the firm issued bonds with an annual coupon rate of 5 percent. In today's market, those bonds yield 1 1 percent. The market value of the bonds had declined below
Explain why the following question is important for lease accounting: "Who enjoys the potential rewards and bears the risks of an asset?"
Distinguish between the lessee's accounting for a capital lease and for the purchase of equipment using the proceeds of a loan repayable in installments.
In what sense is the total expense from a lease independent of the lessee's method of accounting for it?
"The rationale for deferred tax accounting rests on the matching convention." Explain.
"One might view deferred income taxes as an interest-free loan from the government." Do you agree? Why or why not?
How should an analyst wanting to study the debt-equity ratio (= total liabilities/total equities.or total sources of financing) of a business treat the deferred income tax liability?
Under what circumstances will a firm report a deferred tax asset on the balance sheet? Under what circumstances will a firm report a defened tax liability on the balance sheet?
Most firms report income tax expense at a percentage of pretax book income that differs from the statutory federal income tax rate. What might cause this difference?
"The principal accounting issues involving deferred compensation plans relate to the matching convention in accounting." Explain.
Suggest reasons why the total assets and total liabilities of a pension plan do not appear, but their net amount does appear, on the employer's balance sheet.
What are the economic and accounting differences between a derined-benefit pension plan and a delined-contribution plan?
Under what circumstances will a firm report a pension fund asset on its balance sheet? a pension fund liability?SHORT EXERCISES
Preparing lessor's journal entries for an operating lease and a capital lease. Sun Microsystems manufactures an engineering workstation for $7,200 and sells it for $12,000.Although the workstation
Preparing journal entries for income tax expense. The income tax note to the financial statements of Ingersoll-Rand for three recent years shows the following (amounts in millions):Year 9 Year 10
Computations and journal entries for income taxes with both temporary and permanent differences. Sung Company reported the following amounts for book and tax purposes for its first three years of
Deriving permanent and temporary differences from financial statement disclosures.Pownall Company reports the following information for a year:Book Income before Income Taxes $318,000 Income Tax
Applying the capital lease criteria. Boeing manufactures a jet aircraft at a cost of $50 million. The usual selling price for this aircraft is $60 million, and its typical useful life is 25 years.
Preparing journal entries for income tax expense. The income tax note to the financial statements of L.A. Gear for three recent years reports the amounts on the next page(amounts in thousands). The
Reconstructing information about income taxes. Lilly Company reports the following information about its financial statements and tax return for a year:Depreciation Expense from Financial Statements
Effects of leases on statement of cash flows. Refer to the simplified statement of cash flows in Exhibit 4.12. Eleven of the lines m the statement are numbered. Ignore the unnumbered lines in
Effects of income taxes on statement of cash flows. Refer to the instructions in the preceding exercise. For each of the following transactions, indicate which of the numbered lines of the statement
Financial statement effects of operating and capital leases. Excerpts from the notes to the financial statements of Wal-Mart Stores for the year ending January 31. Year 9. appear below (amounts in
Financial statement effects of operating and capital leases. Excerpts from the notes to the financial statements of American Airlines for a recent year reveal the following (amounts in
Comparison of borrow/buy with operating and capital leases. Carom Sports Collectibles Shop plans to acquire, as of January 1. Year 1. a computerized cash register s_wem that costs$100,000 and ha> a
Accounting for lease by lessor and lessee. IBM manufactures a particular computer for$6,()(K) and sells it for $ 1 (),()()(). Adair Corporation needs this computer in its operations and contemplates
Financial statement effects of capitalizing operating leases. Selected data (in millions) for three U.S. airlines appear below.American Delta United Long-term Debt on Balance Sheet, End of Year
Behavior of deferred income tax account when a firm acquires new assets every year.Equilibrium Company has adopted a program of purchasing a new machine each year. It uses MACRS on its income tax
Attempts to achieve off-balance-sheet financing. (Adapted from materials by R. Dieter. D.Landsittel. J. Stewart, and A. Wyatt.) Shiraz Company wants to raise $50 million cash but, for various
Bundled leases and related earnings quality and ethical issues for Xerox Corporation.Assume that Xerox enters into a seven-year lease with Ford Motor Company for a constellation of copying equipment.
Describe several factors that might limit the comparability of a firm's financial statement ratios over several periods.
Describe several factors that might limit the comparability of one firm's financial statement ratios with those of another firm in the same industry.
Illustrate with amounts how a decrease in the amount of working capital (that is. current assets minus current liabilities) can accompany an increase in the current ratio.
Calculating and disaggregating the rate of return on assets. Recent annual reports of Cracker Barrel Old Country Store (Cracker Barrel) and Outback Steakhouse (Outback) reveal the following for Year
Profitability analysis for two types of retailers. Information taken from recent annual reports of two retailers appears as follows (amounts in thousands). One of these companies is Family Dollar
Analyzing accounts receivable for two companies. The annual reports of Dell Computer and Sun Microsystems, two manufacturers of computers, reveal the information below for the current year (amounts
Analyzing inventories over three years. The following information relates to the activities of Mattel, a manufacturer of toys (amounts in millions): m Year 11 Year 12 Year 13 Sales Cost of Goods Sold
Analyzing fixed asset turnover over three years. The following information relates to The Walt Disney Company (Disney), an entertainment company (amounts in millions):Year 11 Year 12 Year 13 Sales
Calculating and disaggregating rate of return on common shareholders' equity. Informa- tion taken from the annual reports of Exxon Mobil, a petroleum company, for three recent years appears below
Profitability analysis for two companies. The following data show five items from the financial statements of two companies for a recent year (amounts in millions):Company A Company B For Year
Relating profitability to financial leverage.a. Compute the rate of return on common shareholders' equity in each of the following independent cases.b. In which cases is financial leverage working to
Calculating and interpreting short-term liquidity ratios. Data taken from the financial statements of Nike, a designer and manufacturer of athletic footwear and apparel, appear as follows (amounts in
Calculating and interpreting short-term liquidity ratios. Data taken from the financial statements of Nokia, a cellular phone manufacturer, appear as follows (amounts in millions of euros):For the
Calculating and interpreting long-term liquidity ratios. Data taken from the financial statement of Ericsson, a Swedish manufacturer of cellular phone and related infrastructure equipment, appear
Calculating and interpreting long-term liquidity ratios. Data taken from the financial state- ments of Nucor, a steel manufacturer, appear below (amounts in millions):For the Year Year 11 Year 12
Effect of various transactions on financial statement ratios. Indicate the effects (increase, decrease, no effect) of the following independent transactions on ( 1 ) earnings per share. (2)working
Calculating and interpreting profitability and risk ratios in a time series setting. Target Corporation operates retails chains under two store concepts:(1) Target and Target Superstores: Target
Profitability and risk analysis in a cross-sectional setting. The chapter presents profitability and risk ratios for Wal-Mart for Year 12, Year 13, and Year 14. Problem 27 presents or requires
Profitability and risk analysis in a cross section setting. This problem compares the profitability and risk ratios of three leading discount chains: Carrefour. Metro AG. and Wal-Mart.Carrefour.
Calculating and interpreting profitability and risk ratios. The GAP and Limited Brands maintain leading market positions in the specialty apparel retailing market. The products of The GAP (jeans,
Preparing pro forma financial statements (requires Appendix 5.1). Problem 27 presents financial statements for Target Corporation for Year 1 2. Year 1 3, and Year 14, as well as financial statement
Ethical issues involving financial statement ratios. Discuss any ethical issues raised by each of the following actions.a. Firm A is subject to a constraint in its short-term lending agreement with a
"The accrual basis of accounting creates the need for a statement of cash Hows." Explain.
The sale of equipment for an amount of cash greater than the book value of the equipment results in a cash receipt equal to the book value of the equipment plus the gain on the sale.which appears in
Derive sales revenue from data in the statement of cash flows and balance sheet. Microsoft Corporation reported a balance of $5,196 million in accounts receivable at the beginning of Year 14 and
Derive cost of goods sold from data in the statement of cash flows. The section showing cash flow from operations, using the indirect method, for General Electric Companj reported an increase in
Derive cost of goods sold from data in the statement of cash flows. The section show ing cash flow from operations, using the indirect method, for Ann Taylor Stores reported an increase in
Derive wages and salaries expense from data in the statement of cash flows. AMR. the parent company of American Airlines, reported in its reconciliation o\ net income to cash flow from operations a
Derive cash disbursements for dividends. Johnson & Johnson, a pharmaceutical and medical products company, reported a balance in retained earnings of $26,571 million at the beginning of Year 13 and
Effect of borrowing and interest on statement of cash flows. Gillette borrowed $250 million on October I, Year 12. The debt carries an annual interest rate of 6 percent and is payable in two
Effect of income taxes on statement of cash flows. Radio Shack reported a balance in Income Taxes Payable of $78.1 million at the beginning of Year 13. $60.1 million at the end of Year 13, and income
Effect of rent transactions on statement of cash flows. A firm reported a balance in its Prepaid Rent (Advances to Landlords) account of $1,200 on January 1, Year 12, for use of the building for the
Calculating components of cash flow from operations. Exhibit 4.19 provides items from the financial statements of Information Technologies, a systems engineering firm, for Year 2.How much cash did
Calculating components of cash flow from operations. Refer to Exhibit 4.19. which provides items from the financial statements of Information Technologies. How much cash did Information Technologies
Calculating components of cash flow from operations. Refer to Exhibit 4.19. which provides items from the financial statements of Information Technologies. How much cash did Information Technologies
Calculating and interpreting cash flows. Amazon. cum sells books over the Internet. The changes in its balance sheet accounts for two recent years appear below (amounts in thousands):Year 4 Year 5
Calculating and interpreting cash flows. Yahoo. Inc.. is an Internet service provider. The changes in its balance sheet accounts for two recent years appear below (amounts in thousands):Year 8 Year 9
Preparing a columnar work sheet for a statement of cash flows from changes in balance sheet accounts. The balance sheets of GreeTi Mountain Coffee Roasters allow the following computation of changes
Calculating and interpreting cash flow from operations. Selected data for Nokia, a Finnish cellular phone manufacturer, appear below (amounts in millions of Euros):X Year 8 Year 9 Year 10 Year 11 Net
Calculating and interpreting cash flows. Omnicom Group is a marketing services firm.Omnicom Group creates advertising copy for clients and places the advertising in television, magazines, and other
Effects of gains and losses from sales of equipment on cash flows. The text does not present material that show s how to answer these questions. You w ill need to think the answers through for
Effect of various transactions on the statement of cash flows. Exhibit 4.12 shows a simplified statement of cash flows for a period. Numbers appear on eleven of the lines in the statement. Other
Preparing and interpreting the statement of cash flows using a columnar work sheet.The accounting records of The GAP, a clothing retailer, for Year 6 and Year 7 indicate the following changes in its
Preparing and interpreting the statement of cash flows using a columnar work sheet.The accounting records of Circuit City for ""tear 7 and Year 8 indicate the following changes in balance sheet
Inferring cash flows from trial balance data. Exhibit 4.21 presents data from the financial statements for Heidi's Hide-Out. a bar and video-game club, with private rooms for rent for parties.
Preparing and interpreting a statement of cash flows using a columnar work sheet.Kxhihit 4.24 presents a comparative balance sheet for Swan Corporation as of the beginning and the end of the current
Preparing a statement of cash flows with disposal of long-term assets. Condensed financial statement data for Hale Company for the current year appear in Exhibits 4.25 and 4.26.During the current
Preparing and interpreting a statement of cash flows using a columnar work sheet. GTI.Inc. manufactures parts, components, and processing equipment for electronics and semiconductor applications in
Working backward through the statement of cash flows. Quinta Company presents the balance sheet shown in Exhibit 4.29 and the statement of cash flows shown in Exhibit 4.30 for Year 5. The firm sold
Analog for direct and indirect methods for preparing the statement of cash flows. John earns $1,000 and spends $700. Mary earns $1,200 and spends $650. The following statement shows earnings,
Interpreting the statement of cash flow relations. Exhibit 4.33 presents statements oi cash flow for eight companies for a recent year:a. American Airlines (airline transportation)b. American Home
Northrop Grumman Corporation; interpreting direct and indirect methods.a. Refer to Exhibit 4.34 for Northrop Grumman, which shows excerpts from its Statements of Cash Flows, with cash flow from
Ethical issues in manipulating cash flows from operations. Top financial management wants to increase cash flow from operations. It asks you to implement the following strategies.Which of these, if
Why does the stock market value Wal-Mart's common stock at $210.1 billion when the balance sheet reports total shareholders* equity of only $43.6 billion?
Why do current liabilities comprise 60 percent of total financing ( = total liabilities plus shareholders" equity) of Interpublic Group, a marketing services firm, whereas they comprise only 24
Why does long-term debt comprise 41 percent of total financing of American Airlines, whereas it comprises only 10 percent of total financing for Merck, a pharmaceutical company?
Why can savings and loan associations (S&L) face financial difficulties when their assets comprise loans receivable for residential housing and their financing included savings accounts and
Which resources does a firm recognize as assets?
What valuations does it place on these assets, that is, what number appears on the balance sheet for the asset?
How does it classify, or group, assets within the balance sheet?
Which claims against a firm's assets appear on the balance sheet as liabilities?
What valuations does a firm place on these liabilities?
How does a firm classify liabilities within the balance sheet?
What valuation does a firm place on shareholders' equity?
How does it disclose the shareholders' equity within the balance sheet and what is the economic significance, if any, of the differences among the various components of shareholders' equity?
A group of investors owns an office building that it rents unfurnished to tenants. It purchased the building five years previously from a construction company. At that time, it expected the building
Some of the assets of one firm correspond to the liabilities of another firm. For example, an account receivable on the seller's balance sheet is an account payable on the buyer's balance sheet. For
Asset and liability recognition and valuation. The San Francisco Giants sign Barry Bonds to a five-year contract beginning next year. The contract calls for payments of $50 million each year for next

Showing 200 - 300 of 587