Questions and Answers of Fundamental Managerial Accounting Concepts 10th

Statement of Cash Flows (Direct Method)By analyzing the information in E 13-33, prepare a statement of cash flows. Use the direct method to report cash flows from operating activities.
Cash Flow Patterns Below are recent financial statement data for the following companies:• Amazon.com• Coca-Cola• ExxonMobil• Microsoft Use the financial statement data to match each company
Analyzing Cash Flows Study the comparative cash flow statements for Wal-Mart in Appendix A. What observations do you have about Wal-Mart’s cash flow position? From a liquidity standpoint, is the
Transaction Analysis Klein Corporation reports the following summary data for the current year:a. Sales revenue totaled $125,750.b. Interest revenue for the period was $1,100.c. Interest expense for
Analysis of the Cash Account The following information, in T-account format, is provided for Mars Company for the year 2009:Additional information:a. Sales revenue for the period was $164,000.
Analyzing Cash Flows The following information was provided by the treasurer of Surety, Inc., for the year 2009:a. Cash sales for the year were $50,000; sales on account totaled $60,000.b. Cost of
Cash Flows from Operations (Indirect Method)Gardner Enterprises reported a net loss of $40,000 for the year just ended. Relevant data for the company follow.Required:1. Using the indirect method,
Cash Flows from Operations (Direct Method)Saturday Shoppers, Inc., shows the following information in its accounting records at year-end:Selected balance sheet data are as follows:Required:1. Using
Cash Flows from Operations (Indirect and Direct Methods)The following combined income and retained earnings statement, along with selected balance sheet data, are provided for McDuffie
Computation of Net Income from Cash Flows from Operations (Direct Method)The following partially completed work sheet is provided for ATM Corporation, which uses the direct method in computing net
Income Statement from Cash Flow Data Parker Corporation computed the amount of cash flows from operations using both the direct and indirect methods, as follows:Required:Using the data provided,
Statement of Cash Flows (Indirect Method)JEM Company’s comparative balance sheets for 2008 and 2009 are provided.The following additional information is available:a. Net income for the year 2009
Statement of Cash Flows (Direct Method)Financial statement data for Bankhead, Inc., are provided. (All numbers are shown rounded to the nearest thousand, with 000’s omitted.)Required:1. Compute the
Statement of Cash Flows (Indirect Method)1. Using the data from P 13-46, prepare a statement of cash flows. Use the indirect method to report cash flows from operating activities.2. Interpretive
Unifying Concepts: Analysis of Operating, Investing, and Financing Activities Jonathan Beecher is the manager and one of three brothers who own the Mile High Sporting Goods Company in Denver,
Should We Make the Loan?Save More, Inc., a discount department store, has applied to its bankers for a loan. Although the company has been profitable, it is short of cash. The loan application
Analyzing the Cash Position of Good Time, Inc.The following data show the account balances of Good Time, Inc., at the beginning and end of the company’s fiscal year:The following information
Analyzing Cash Flow Patterns Paula Dalton is a security analyst for DJM, Inc. She claims that she can tell a great deal about companies by analyzing their cash flow patterns. Specifically, she looks
You Decide: Which method is better at reporting information on the statement of cash flows—the indirect or direct method?Your finance professor said that the indirect method is a better way to
You Decide: Ignoring all other factors, will a company that is generating negative cash flows from operating activities be a good or bad investment?When evaluating a company, you notice the following
Wal-Mart The 2006 Form 10-K for Wal-Mart appears in Appendix A. Locate that Form 10-K and consider the following questions:1. Does Wal-Mart present the three cash flow statement
The Coca-Cola Company The 2005 statement of cash flows for The Coca-Cola Company is given on page 662. Use the statement to answer the following questions:1. Compute Coca-Cola’s “Net cash
GlaxoSmithKline GlaxoSmithKline, a British company, is one of the largest pharmaceutical firms in the world. The name “Glaxo” comes from the company’s first major product line, baby food
Manipulating the Federal Budget Deficit Assume that you are the paymaster in charge of all U.S. Department of Defense (DOD) payroll matters. The total amount that you disburse in payroll checks in
Convincing the Old-Timers of the Need for Cash Flow Data You are the chief accountant for Harry Monst Company. The president of the company is a former accountant who worked her way up through the
Preparing New Forecasts This spreadsheet assignment is a continuation of the spreadsheet assignments given in earlier chapters. If you completed those spreadsheets, you have a head start on this
Classifying Cash Flows Anna Dimetros is the bookkeeper for Russia Imports, Inc. (RII), a New York City–based company. Anna has collected the following cash flow information about RII for the most
Preparing a Statement of Cash Flows Snow Corporation produces clock radios. Comparative income statements and balance sheets for the years ended December 31, 2009 and 2008, are presented.The
What Is a Financial Ratio?Choose the letter of the correct answer. A financial ratio is aa. key source of external financing for most publicly-traded companies.b. relationship between financial
Usefulness of Financial Ratios Choose the letter of the correct answer. The usefulness of financial ratios is greatly enhanced when the values area. computed by the SEC.b. compared to values for
Financial Ratios Defined Write the formula for computing each of the following financial ratios.a. Debt ratiob. Current ratioc. Return on salesd. Asset turnovere. Return on equityf. Price-earnings
Debt Ratio Using the following data, compute the debt ratio. Accounts Payable Accounts Receivable Building Cash Capital Stock Inventory Land. Long-Term Notes Payable Market Value of Equity $ 2,400
Current Ratio Refer to the data in PE 14-4. Compute the current ratio.
Return on Sales Refer to the data in PE 14-4. Compute return on sales.
Asset Turnover Refer to the data in PE 14-4. Compute asset turnover.
Return on Equity Refer to the data in PE 14-4. Compute return on equity.
Price-Earnings Ratio Refer to the data in PE 14-4. Compute the price-earnings ratio.
Common-Size Income Statement Using the following data, prepare a common-size income statement. Sales Cost of goods sold Gross profit Operating expenses: Sales and marketing General and administrative
Comparative Common-Size Income Statements Using the following data, (1) prepare comparative common-size income statements for Years 1 and 2 and (2) briefly outline why return on sales is lower in
Common-Size Balance Sheet Using the following data, prepare a common-size balance sheet. Sales for the year were$75,000. Assets Current assets: Cash... Accounts receivable Inventory Total current
Common-Size Balance Sheet Standardized Using Total Assets Refer to the data in PE 14-12. Prepare a common-size balance sheet using total assets to standardize each amount instead of using total sales.
Comparative Common-Size Balance Sheets Using the following data, (1) prepare comparative common-size balance sheets for Years 1 and 2 (standardized by sales) and (2) briefly outline any significant
DuPont Framework Defined(1) List the three ratios that combine to form the DuPont framework. Also list the formulas used to compute each ratio. (2) Give a brief intuitive explanation of the
Computation of Return on Equity Using the DuPont Framework Using the following DuPont framework ratios, compute return on equity for Year 1, Year 2, and Year 3. Year 3 Year 2 Year 1 Return on sales
Analysis of Return on Equity Using the DuPont Framework Refer to the data in PE 14-16. Briefly explain why the company’s return on equity increased from Year 1 to Year 3.
DuPont Framework Computations Using the following data, compute return on equity, return on sales, asset turnover, and the assets-to-equity ratio. Total assets Interest expense Total stockholders'
DuPont Framework Computations Using the following data, compute return on equity, return on sales, asset turnover, and the assets-to-equity ratio. Sales $450,000 Cash flow from operating activities
DuPont Framework Intuition Test Return on equity can be computed by dividing net income by stockholders’ equity. It can also be computed by multiplying return on sales, asset turnover, and the
Average Collection Period Refer to the data in PE 14-21. Calculate the company’s average collection period.
Inventory Turnover Using the following data, compute inventory turnover. Inventory, December 31, year 1 Cost of goods sold Sales Inventory, January 1, year 1 $ 82,000 342,000 694,000 74,000
Number of Days’ Sales in Inventory Refer to the data in PE 14-23. Compute number of days’ sales in inventory.
Debt-to-Equity Ratio Refer to the data in PE 14-26. Compute the debt-to-equity ratio.
Times Interest Earned Ratio Refer to the data in PE 14-26. Compute the times interest earned ratio.
When Operating Cash Flow Information Is Particularly Valuable Which one of the following is not a situation in which cash flow data can provide a better picture of a company’s economic performance
Cash Flow-to-Net Income Ratio Using the following data, compute the cash flow-to-net income ratio. Total revenues $225,000 Cash expenses. 98,000 Noncash expenses 111,000 Cash paid for capital
Cash Flow Adequacy Ratio Refer to the data in PE 14-30. Compute the cash flow adequacy ratio.
Potential Pitfalls of Financial Statement Analysis Which one of the following statements is true with respect to financial statement analysis?a. All aspects of a business can be summarized neatly
Computation of Ratios The balance sheet for Tony Corporation is as followsIn addition, the following information for 2009 has been assembled:Compute the following ratios:1. Debt ratio 2. Current
Ratios and Computing Missing Values The balance sheet for Rodman Company is as follows:In addition, the following information for 2009 has been assembled:Compute the missing values (a) through (i).
Computations Using Ratios The following information for Chong Lai Company for 2009 has been assembled:Compute the following:1. Total assets 2. Sales 3. Net income 4. Price-earnings ratio Market value
Common-Size Income Statement Comparative income statements for King Engineering Company for 2009 and 2008 are given below.1. Prepare common-size income statements for King Engineering Company for
Common-Size Balance Sheet The following data are taken from the comparative balance sheet prepared for Warren Road Company:Sales for 2009 were $1,000,000. Sales for 2008 were $800,000.1. Prepare the
Common-Size Balance Sheet The following data are taken from the comparative balance sheet prepared for Elison Company:Sales for 2009 were $2,000,000. Sales for 2008 were $1,600,000.1. Prepare the
Common-Size Income Statement Comparative income statements for Callister Company for 2009 and 2008 are given below.1. Prepare common-size income statements for Callister Company for 2009 and 2008.2.
Income Statement Analysis You have obtained the following data for Lindsey Garns Company:Based on the above data, determine the following:1. Cost of goods sold 2. Net income 3. Operating expenses 4.
Income Statement and Balance Sheet Analysis Answer each of the following independent questions:1. Nicholas Toy Company had a net income for the year ended December 31, 2009, of $72,000. Its total
DuPont Framework The following information is for Calle Concordia Company:For the years 2007, 2008, and 2009, compute:1. Return on equity 2. Return on sales 3. Asset turnover 4. Assets-to-equity
DuPont Framework The numbers below are for Iffy Company and Model Company for the year 2009:1. Compute return on equity, return on sales, asset turnover, and the assets-to-equity ratio for both Iffy
DuPont Framework The numbers for Faulty Company and Benchmark Company for the year 2009 are as follows:1. Compute return on equity, return on sales, asset turnover, and the assets-to-equity ratio for
DuPont Framework The following information is for Ina Company:For the years 2007, 2008, and 2009, compute:1. Return on equity 2. Profit margin 3. Asset turnover 4. Assets-to-equity ratio 2009 2008
DuPont Framework for Analyzing Financial Statements The income statement and balance sheet for Rollins Company are provided below. Using the DuPont framework, compute the profit margin, asset
DuPont Framework for Analyzing Financial Statements Using the income statement and balance sheet for Kau and Sons Company, compute the three components of return on equity—profitability,
DuPont Framework DuPont framework data for four industries are presented below.For the four industries, compute:1. Return on assets 2. Return on equity Assets-to- Equity Asset Return Ratio Turnover
Financial Statement Analysis You have obtained the following data for the Jacob Company for the year ended December 31, 2009. (Some income statement items are missing.)Answer each of the following
Accounts Receivable Efficiency The following are summary financial data for Parker Enterprises, Inc., and Boulder, Inc., for three recent years:1. Using the above data, compute the accounts
Inventory Ratios The following data are available for 2009, regarding the inventory of two companies:Compute inventory turnover and number of days’ sales in inventory for both companies.Which
Cash Flow Ratios Below are data extracted from the financial statements for Pagoda Company.Compute the following for both 2008 and 2009:1. Cash flow-to-net income ratio 2. Cash flow adequacy ratio
Computing and Using Common Ratios The following information is for the year 2009 for Millard Company and Grantsville Company, which are in the same industry:Required:Compute the following:1. Current
Financial Ratios The following information for SuperStar Company is provided:Required:1. Compute the current ratio, debt ratio, return on sales, return on equity, asset turnover, and price-earnings
Working Backwards Using Common Ratios The following information for Steven Benjamin Company for 2009 has been assembled:Required:Compute the following:1. Return on equity 4. Return on sales 2. Total
Common-Size Income Statement Operations for Janelle Company for 2008 and 2009 are summarized below.Required:1. Prepare common-size income statements for 2009 and 2008.2. What caused Janelle’s
Common-Size Financial Statements Below are financial statement data for Wong Shek Company for the years 2008 and 2009.Required:1. Prepare common-size financial statements for Wong Shek for 2008 and
Common-Size Financial Statements The comparative income statements and balance sheets for Clarksville Corporation for the years 2007, 2008, and 2009 are given below.Required:1. Prepare common-size
DuPont Analysis Financial information (in thousands of dollars) relating to three different companies follows.Required:1. Compute the following ratios:a. Return on salesb. Asset turnoverc.
DuPont Analysis Refer to the financial statement information in P 14-60 for Clarksville Corporation.Required:For the years 2007, 2008, and 2009, compute the following ratios:1. Return on sales 2.
Ratio Analysis The following financial data are taken from the records of Big Brother Company.Required:1. Compute the following ratios for 2008 and 2009:a. Current ratiob. Debt ratioc. Asset
Ratio Analysis The following data are taken from the records of John Spencer Corporation.Required:1. Compute the following ratios for 2008 and 2009:a. Current ratiob. Debt ratioc. Asset turnoverd.
Analysis of Accounts Receivable Management The following accounts receivable information is for Rouge Company:Required:Is there any cause for alarm in the accounts receivable data for 2009? Explain.
Cash Flow Analysis Below are data extracted from the financial statements for Mushu Company.Required:1. Compute the following for 2008 and 2009:a. Return on salesb. Return on equityc. Cash
Analyzing Earnings Roger Donahoe owns two businesses: a drug store and a retail department store.Which business is more profitable? Which business is more efficient? Overall, which business would you
Can a Ratio Be Too Good?Tony Christopher is analyzing the financial statements of Shaycole Company and has computed the following ratios:Andy Martinez, Tony’s colleague, tells Tony that Shaycole
Evaluating Alternative Investments Judy Snow is considering investing $10,000 and wishes to know which of two companies offers the better alternative.The Hoffman Company earned net income of $63,000
You Decide: Could we see Enron coming?Sherron Watkins, the whistle-blower at Enron, made the following statement at a conference that one of the authors attended: “If anyone would have been
You Decide: Ratios and debt covenants XYZ Company has some leases on buildings that are structured so they do not have to be reported on the balance sheet as assets and liabilities (synthetic
Wal-Mart Using Wal-Mart’s 2006 Form 10-K contained in Appendix A, answer the following questions:1. Compute the following ratios for Wal-Mart for 2005 and compare those results to the 2006
DuPont In this chapter, you were introduced to the DuPont framework. Let us take a moment and apply that framework to the DuPont Company. DuPont is a company made up of many business segments and has
The Walt Disney Company Information from the 2005 financial statements of The Walt Disney Company is listed below. This information reports Disney’s performance, by geographic area.1. Disney
Which Is the Stronger Partner in the Merger?In May 1998, Daimler-Benz and Chrysler announced their intention to merge. Daimler-Benz was the largest industrial company in Europe, and Chrysler was
Does the Bonus Plan Reward the Right Thing?Roaring Springs Booksellers is an Internet book company. Customers choose their purchases from an online catalog and make their orders online. Roaring
Who Should Get a Holiday Loan?You are head of the loan department at Wilshire National Bank and have been approached by two firms in the retail toy business. Each firm is requesting a nine-month term

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