Questions and Answers of International Financial Reporting And Analysis

The Mike Szabo Company engaged in the following transactions during the month of December:December 2 Made credit sales of $4,000 (accepted accounts receivable).6 Made cash sales of $2,500.10 Paid
Describe the pooling of interests method and the purchase method of accounting for a business combination.
Why review footnotes to financial statements?
Why are footnotes to statements necessary?
Which of the following events, occurring subsequent to the balance sheet date, would require a footnote?a. Major fire in one of the firm’s plantsd. Introduction of newb. Increase in competitor’s
Required Answer the following multiple-choice questions:a. Which of the following is a characteristic of information provided by external financial reports?1. The information is exact and not subject
Some industry practices lead to accounting reports that do not conform to the general theory that underlies accounting. Comment.
The same generally accepted accounting principles apply to all companies. Comment.
It is proper to handle immaterial items in the most economical, expedient manner possible. In other words, generally accepted accounting principles do not apply. Comment, including a concept that
Inventory that has a market value below the historical cost should be written down in order to recognize a loss. Comment.
No estimates or subjectivity is allowed in the preparation of financial statements. Discuss.
Zebra Company has incurred substantial financial losses in recent years. Because of its financial condition, the ability of the company to keep operating is in question.Management prepares a set of
A corporation like General Motors has many owners (stockholders). Which concept enables the accountant to account for transactions of General Motors, separate and distinct from the personal
Identify the accounting principle(s) applicable to each of the following situations:a. Tim Roberts owns a bar and a rental apartment and operates a consulting service. He has separate financial
An entity may choose between the use of the accrual basis of accounting and the cash basis. Comment.
Generally accepted accounting principles have substantial authoritative support. Indicate the problem with determining substantial authoritative support.
The only accurate way to account for the success or failure of an entity is to accumulate all transactions from the opening of business until the business eventually liquidates.Comment on whether
Required Answer the following multiple-choice questions:a. Which of the following does the Financial Accounting Standards Board not issue?1. Statements of Position (SOPs)2. Statements of Financial
Certain underlying considerations have had an important impact on the development of generally accepted accounting principles. Below is a list of these underlying considerations, as well as a list of
FASB Statement of Concepts No. 2 indicates several qualitative characteristics of useful accounting information. Below is a list of some of these qualities, as well as a list of statements and
Go to the SEC site (www.sec.gov). Click on the Edgar database. Click on Search the Edgar Database, and then click on Quick Forms Lookup. Select a form. Enter the name of a company of your choice. Use
Go to the FASB web site (www.fasb.org).a. Click on Financial Accounting Standards Board. Then click on Site Map. Click on FASB Facts. Determine the precepts that the FASB follows in the conduct of
According to Concepts Statement No. 2, relevance and reliability are the two primary qualities that make accounting information useful for decision making. Comment on what is meant by relevance and
Briefly describe the following:a. Committee on Accounting Proceduresc. Accounting Principles Boardb. Committee on Accounting Terminologyd. Financial Accounting Standards Board
Give an example of why a review of bank assets may indicate risk or opportunity you were not aware of.
The following statistics relate to Michgate, an electric utility:2001 2000 1999(In thousands of dollars, except per share)Operating expenses $ 850,600 $ 820,200 $ 780,000 Operating revenues 1,080,500
Local Airways had the following results in the last two years:2001 2000 Operating revenues $ 624,000 $ 618,000 Operating expenses 625,000 617,000 Operating property 365,000 360,000 Long-term debt
Chihi Airways had the following results for the last three years:2001 2000 1999(In thousands of dollars)Operating expenses $1,550,000 $1,520,000 $1,480,000 Operating revenues 1,840,000 1,670,400
Give examples of disclosure in footnotes with personal financial statements.
For Bob and Carl, the assets and liabilities and the effective income tax rates at December 31, 2001, follow:Excess of Estimated EffecCurrent tive Amount of Estimated Values Income Estimated Current
For Mary Lou and Ernie, the assets and liabilities and the effective income tax rates at December 31, 2001, follow:Excess of Estimated EffecCurrent tive Amount of Estimated Values Income Estimated
Super Power Company reported the statistics in its statements of income shown at the top of the next page.Requireda. Calculate the operating ratio and comment on the results.b. Calculate the times
The following are statistics from the annual report of Dover Bank:2001 2000 1999 Average earning assets $50,000,000 $45,000,000 $43,000,000 Average total assets 58,823,529 54,216,867 52,000,000
Why review the footnote that describes commitments and contingent liabilities for a bank?
Utilities are very highly leveraged. How is it that they are able to carry such high levels of debt?
Why are plant and equipment listed first for utilities?
Are current liabilities presented first in utility reporting? Comment.
For a utility, why review the account construction work in progress?
For a utility, describe the income statement accounts, allowance for equity funds used during construction, and allowance for borrowed funds used during construction.
If a transportation firm shows a rise in revenue per passenger mile, what does this rise imply?
Annual reports filed with state insurance departments are in accordance with what accounting standards?
The following are statistics from the annual report of McEttrick National Bank:2001 2000 Average loans $16,000,000 $13,200,000 Average total assets 26,000,000 22,000,000 Average total deposits
For Bob and Sue, the changes in net worth for the year ended December 31, 2001, follow:Realized increases in net worth:Salary $ 60,000 Dividend income 2,500 Interest income 2,000 Gain on sale of
For Jim and Carl, the changes in net worth for the year ended December 31, 2001, follow:Realized increases in net worth:Salary $ 50,000 Interest income 6,000 Realized decreases in net worth:Income
Income statement data for Starr Canning Corporation are as follows:2001 2000 Sales $1,400,000 $1,200,000 Cost of goods sold 850,000 730,000 Selling expenses 205,000 240,000 General expenses 140,000
Ahl Enterprise lists the following data for 2001 and 2000:2001 2000 Net income $ 52,500 $ 40,000 Net sales 1,050,000 1,000,000 Average total assets 230,000 200,000 Average common equity 170,000
What is return on investment? What are some of the types of measures for return on investment? Why is the following ratio preferred?Net Income Before Minority Share of Earnings and Nonrecurring Items
What is DuPont analysis, and how does it aid in financial analysis?
Profits might be compared to sales, assets, or stockholders’ equity. Why might all three bases be used? Will trends in these ratios always move in the same direction?
Consecutive five-year balance sheets and income statements of the Laura Gibson Corporation are shown on the next page.Requireda. Compute the following for the years ended December 31, 1997-2001:1.
The Allen Company and the Barker Company are competitors in the same industry.Selected financial data from their 2001 statements are shown below.Balance Sheet December 31, 2001 Allen Barker Company
For the year ended June 30, 2001, A.E.G. Enterprises presented the financial statements shown on the next page.Early in the new fiscal year, the officers of the firm formalized a substantial
Mr. Parks has asked you to advise him on the long-term debt-paying ability of the Arodex Company. He provides you with the following ratios:2001 2000 1999 Times interest earned 8.2 6.0 5.5 Debt ratio
Revenue and expense data for Vent Molded Plastics and for the plastics industry as a whole are as shown on the next page.Required Convert the dollar figures for Vent Molded Plastics into percentages
Use Exhibit 13-4, City of Toledo, Ohio, Combined Statement of Revenues, Expenditures, and Changes in Fund Balances—All Governmental Fund Types and Expendable Trust Funds.Requireda. Prepare a
Use Exhibit 13-6, City of Toledo, Ohio, Income Tax Revenues.Requireda. Prepare a horizontal common-size analysis of taxes collected. Use 1988 as the base.b. Comment on significant trends indicated in
Use Exhibit 13-7, City of Toledo, Ohio, Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita.Requireda. How much has assessed value increased from 1988 to 1997?b. How
Transactions affect various financial statement amounts.Total Retained Stockholders’Net Profit Earnings Equitya. A stock dividend is declared and paid. ______ ______ ______b. Merchandise is
The following financial information is for the A. Galler Company for 2001, 2000, and 1999:2001 2000 1999 Income before interest $4,400,000 $4,000,000 $3,300,000 Interest expense 800,000 600,000
The D. H. Muller Company presented the income statement in its 2001 annual report shown on the next page.Requireda. Based on these data, compute the following for 2001, 2000, and 1999:1. Net profit
Selected financial data for Squid Company are as follows:2001 2000 1999 Summary of operations:Net sales $1,002,100 $980,500 $900,000 Cost of products sold 520,500 514,762 477,000 Selling,
Dorex, Inc. presented the following comparative income statements for 2001, 2000, and 1999:For the Years Ended 2001 2000 1999 Net sales $1,600,000 $1,300,000 $1,200,000 Other income 22,100 21,500
Day Ko Incorporated presented the following comparative income statements for 2001 and 2000:For the Years Ended 2001 2000 Net sales $1,589,150 $1,294,966 Other income 22,334 20,822 1,611,484
Individual transactions often have a significant impact on ratios. This problem will consider the direction of such an impact.Times Debt/ Debt Ratio Interest Debt Equity to Tangible Transaction
Consecutive five-year balance sheets and income statements of the Mary Lou Szabo Corporation are as follows:MARY LOU SZABO CORPORATION Balance Sheets December 31, 1997, through December 31,
Using the descriptions of assets, liabilities, and stockholders’ equity, summarize the changes to these accounts for cash inflows and changes to these accounts for cash outflows.
The Aerco Company acquired equipment in exchange for $50,000 in common stock.Should this transaction be on the statement of cash flows?
The Hornet Company had operating cash flow of $60,000 during a year in which it paid dividends of $11,000. What does this indicate about Hornet’s dividend-paying ability?
The following material relates to the Darrow Company:Cash Flows Classification Noncash Operating Investing Financing Effect on Cash TransData Activity Activity Activity Increase Decrease actionsa.
The BBB Company balance sheet and income statement follow:BBB COMPANY Balance Sheet December 31, 2002 and 2001 December 31 2002 2001 Assets Cash $ 4,500 $ 4,000 Marketable securities 2,500 2,000
The income statement and other selected data for the Frish Company are shown below:FRISH COMPANY Income Statement For Year Ended December 31, 2002 Net sales $640,000 Expenses:Cost of goods sold
The income statement and other selected data for the Boyer Company are shown below:BOYER COMPANY Income Statement For Year Ended December 31, 2002 Sales $19,000 Operating expenses:Depreciation
Sampson Company’s balance sheet for December 31, 2002, as well as the income statement for the year ended December 31, 2002, are on the following page.Requireda. Prepare the statement of cash flows
The Arrowbell Company is a growing company. Two years ago, it decided to expand in order to increase its production capacity. The company anticipates that the expansion program can be completed in
The balance sheet for December 31, 2002, income statement for the year ended December 31, 2002, and the statement of cash flows for the year ended December 31, 2002, of the Bernett Company are on the
Consecutive five-year balance sheets and income statements of the Donna Szabo Corporation are as follows:Donna Szabo Corporation Balance Sheets December 31, 1996 through December 31, 2000(Dollars in
On December 31, 2000, Farley Camera, Inc. issues 5,000 stock appreciation rights to its president to entitle her to receive cash for the difference between the market price of its stock and a
Assume that the corporation is a nonpublic company. Comment on the requirement for this firm to disclose earnings per share.
Why should an investor read the footnote concerning stock options? How might stock options affect profitability?
McDonald Company shows the following condensed income statement information for the current year:Revenue from sales $3,500,000 Cost of products sold (1,700,000)Gross profit 1,800,000 Operating
The following information was in the annual report of the Rover Company:2000 1999 1998 Earnings per share $ 1.12 $ 1.20 $ 1.27 Cash dividends per share(common) $ .90 $ .85 $ .82 Market price per
The following data relate to the Edger Company:2000 1999 1998 Earnings per share $ 2.30 $ 3.40 $ 4.54 Dividends per share $ 1.90 $ 1.90 $ 1.90 Market price, end of year $ 41.25 $ 35.00 $ 29.00 Net
The Dicker Company has the following pattern of financial data for Years 1 and 2:Year 1 Year 2 Net income $ 40,000 $ 42,000 Preferred stock (5%) $450,000 $550,000 Weighted average number of common
The XYZ Corporation reported earnings per share of $2.00 in 1999. In 2000, the XYZ Corporation reported earnings per share of $1.50. On July 1, 2000, and December 31, 2000, 2-for-1 stock splits were
Smith and Jones, Inc. is primarily engaged in the worldwide production, processing, distribution, and marketing of food products. The following information is from its 2000 annual report:2000 1999
The Zaro Company’s balance sheet for December 31, 2002, income statement for the year ended December 31, 2002, and the statement of cash flows for the year ended December 31, 2002, are shown below
The Ladies Store presented the statement of cash flows for the year ended December 31, 2002, shown below.THE LADIES STORE Statement of Cash Flows For Year Ended December 31, 2002 Cash received:From
L. Konrath Company is considering extending credit to D. Hawk Company. Konrath estimated that sales to D. Hawk Company would amount to $2,000,000 each year. L. Konrath Company, a wholesaler, sells
Your company is considering the possible acquisition of Growth Inc. Financial statements of Growth Inc. are shown below and on the following page.GROWTH INC.Balance Sheet December 31, 2001 and 2000
Argo Sales Corporation has in recent prior years maintained the following relationships among the data on its financial statements:Gross profit rate on net sales 40%Net profit rate on net sales
Warford Corporation was formed five years ago through a public subscription of common stock. Lucinda Street, who owns 15% of the common stock, was one of the organizers of Warford and is its current
The following data apply to items (a) through (g):JOHANSON COMPANY Statement of Financial Position December 31, 2000 and 2001(In thousands) 2000 2001 Assets Current assets:Cash and temporary
The statement of financial position for Paragon Corporation at November 30, 2001, the end of its current fiscal year, is presented below. The market price of the company’s common stock was $4 per
The Calcor Company has been a wholesale distributor of automobile parts for domestic automakers for 20 years. Calcor has suffered through the recent slump in the domestic auto industry, and its
The following data are for the A, B, and C Companies.Company Variables A B C Current assets $150,000 $170,000 $180,000 Current liabilities $ 60,000 $ 50,000 $ 30,000 Total assets $300,000 $280,000
The General Company financial statements for 2001 follow:GENERAL COMPANY Statement of Income Years Ended December 31 2001 2000 1999 Net sales $860,000 $770,000 $690,000 Cost and expenses:Cost of
LIFO reserves: Rhodes Company Reported year for analysis, 2001 2001 net income as reported $90,200,000 2001 inventory reserve 50,000,000 2000 inventory reserve 46,000,000 2001 income taxes 55,000,000
The Thorpe Company is a wholesale distributor of professional equipment and supplies.The company’s sales have averaged about $900,000 annually for the three-year period 1999-2001. The firm’s
CFAs gave liquidity ratios a high significance rating. Comment.P 11-1.Required Answer the following multiple-choice questions:a.Footnotes to financial statements are beneficial in meeting the
Answer the following multiple-choice questions:a. Which of the following could lead to cash flow problems?1. Tightening of credit by suppliers 2. Easing of credit by suppliers 3. Reduction of

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