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introductory financial accounting for business

Questions and Answers of Introductory Financial Accounting for Business

20 “Companies with a high dividend-payout ratio are good investments because stockholders get more of their share of earnings in cash.” Do you agree? Explain.
19 Give two ratios that provide information about a company’s dividends, and explain what each means.
18 “Fast-growing companies have high P-E ratios.” Explain.
17 “Financial ratios are important tools for analyzing financial statements, but no ratios are shown on the statements.” Do you agree? Explain.
16 “An accounting entity is always a separate legal organization.” Do you agree? Explain.
15 What do users learn from the statement of stockholders’ equity? What three types of changes are shown on the statement?
14 “Retained earnings is not a pot of gold.” Explain.
13 “Cash dividends are not expenses.” Explain.
12 Why might a manager put pressure on accountants to report higher revenues or lower expenses than accounting standards allow?
11 Give two synonyms for income statement. Why is it important to learn synonyms that are used for various accounting terms?
10 “The income statement is like a moving picture; in contrast, a balance sheet is like a snapshot.” Explain.
9 “Companies acquire goods and services, not expenses per se.” Explain.
8 “Expenses are assets that have been used.” Explain.
7 Distinguish product costs from period costs.
6 Describe two scenarios where revenue is not recognized at the point of sale, one where recognition is delayed because the revenue is not yet earned, and one because it is not yet realized.
5 What are the two criteria for the recognition of revenue?
4 What is the major defect of the cash basis of accounting?
3 “Expenses are negative stockholders’ equity accounts.” Explain.
2 What is the difference between a fiscal year and a calendar year? Why do companies use a fiscal year that differs from a calendar year?
1 How long is a company’s operating cycle?
56 Analyzing Financial Statements Using the Internet: Cisco Locate the Cisco annual report. Do this by searching for “Cisco Systems,” clicking Investor Relations under About Cisco, and opening
55 Analyzing Starbucks’ Financial Statements This problem focuses on the financial statements of Starbucks Corporation. Starbucks is a worldwide retailer of specialty coffees. As you solve each of
54 Financial Statement Research Select the financial statements of any company, and focus on the balance sheet. 1. Identify the amount of cash (including cash equivalents, if any) shown on the most
53 Understanding Transactions Form groups of three to five students each. Each group should choose one of the companies included in the Dow Jones Industrial Average (Exhibit 1), and find its most
52 Accounting and Ethics A 2009 survey by Clemson University researchers examined the ethics concerns of chief executive officers of 300 large- and mid-sized corporations in the United States. Their
51 Board of Directors and Audit Committee Examine the 2011 annual report of General Mills, maker of cereals such as Cheerios, Betty Crocker cake mixes, Progresso soups, and other foods
50 Audit Opinion and IFRS Versus U.S. GAAP Carrefour, the French supermarket company, included the following paragraph from its auditor in its 2011 annual report: In our opinion, the consolidated
49 Presenting Paid-in Capital Honda Motor Company is the largest producer of motorcycles in the world, as well as a major auto manufacturer. Honda included the following items in its 2011 balance
48 Presenting Paid-in Capital Chevron, the petroleum exploration, production, refining, and marketing company, presented the following in its September 30, 2011, balance sheet. Common stock—$.75
47 Presenting Paid-in Capital Consider excerpts from two balance sheets (amounts in millions): Citigroup Common stock ($.01 par value; authorized shares: 60 billion), issued shares 29,224,016,234 at
46 Partnership and Corporation El-Hashem Partners is a partnership started by two brothers, Muhab and Ghassan El-Hashem. Each has an equal share of the total owners’ equity of $90,000. There is
45 Prepare Balance Sheet Macy’s, Inc., headquartered in both Cincinnati and New York, operates more than 840 stores in 45 states under the Macy’s and Bloomingdale’s names. Its balance sheet on
44 Prepare Balance Sheet United Technologies Corporation provides a broad range of high-technology products and support services to the building systems and aerospace industries. Those products
43 Airline Balance Sheet Air France-KLM S.A. is an international airline headquartered in France with stock traded in both Paris and Amsterdam. It has more than 400 aircraft and more than 100,000
42 Bank Balance Sheet Consider the following simplified balance sheet accounts of Wells Fargo & Company as of September 30, 2011 (in billions of $): Assets Liabilities and Stockholders’ Equity Cash
41 Prepare Balance Sheet Jennifer Grant is a realtor. She buys and sells properties on her own account, and she also earns commissions as a real estate agent for buyers and sellers. Her business was
40 Analysis of Transactions Nike, Inc., had the following condensed balance sheet on May 31, 2011 ($ in millions): Assets Liabilities and Stockholders’ Equity Cash $ 1,955 Total liabilities $ 5,155
39 Analysis of Transactions Walgreen Company is a well-known drugstore chain. A condensed balance sheet for August 31, 2011, follows ($ in millions): Assets Liabilities and Stockholders’ Equity
38 Analysis of Transactions Leida Cruz, a recent law school graduate, was penniless on December 25, 20X0. 1. On December 26, Cruz inherited an enormous sum of money. 2. On December 27, she placed
37 Analysis of Transactions Suppose you began a business as a wholesaler of auto parts in Lisbon. The following events have occurred (the symbol € represents the euro, the European currency): 1. On
36 Analysis of Transactions Consider the following January transactions: 1. On January 1, 20X1, three persons, James, Bosh, and Wade, formed JBW Corporation. JBW is a wholesale distributor of
35 Analysis of Transactions Use the format of Exhibit 2 to analyze the following transactions for April of Marymount Services, Inc. Then prepare a balance sheet as of April 30, 20X1. Marymount
34 Sole Proprietorship and Corporation The Mammal Center pet store is owned by Jon Wilson and has been a sole proprietorship with the following condensed balance sheet on June 30, 20X1: Assets
33 Balance Sheet Costco is the third largest retail company in the United States with sales of nearly $90 billion. The company’s balance sheet on August 28, 2011, had total assets of $26,271
32 Prepare Balance Sheet Southampton Company’s balance sheet at November 29, 20X1, contained only the following items (arranged here in random order): Paid-in capital £190,000 Machinery and
31 Prepare Balance Sheet Jacksonville Corporation’s balance sheet at March 30, 20X1, contained only the following items (arranged here in random order): Cash $14,000 Accounts payable $ 8,000 Notes
30 Describing Underlying Transactions The balances of each item in Melbourne Company’s accounting equation are given next for November 1 and for each of the next 7 business days. Cash Computer
29 Describing Underlying Transactions Radloff’s Furniture Company, which was recently formed, is engaging in some preliminary transactions before beginning full-scale operations for retailing
28 The Balance Sheet Equation Laredo Company reported total assets of $7 million and total liabilities of $4 million at the end of 20X0. 1. Construct the balance sheet equation for Laredo Company at
27 The Auditor’s Opinion In reviewing the annual report of a company in which you might invest, you noted that you did not recognize the name of the audit firm that signed the audit opinion. What
26 The Corporation Some historians were arguing over the most important innovation in the history of business. Most thought of things and processes such as the railroad, the automobile, the printing
25 Accountants as Historians Critics sometimes refer to accountants as historians and do not mean it kindly. In what sense are accountants historians, and do you believe this is a compliment or a
24 Double-Entry Accounting The accounting process in use today is typically called “double-entry” bookkeeping. Discuss the meaning and possible importance of this name.
23 “The accounting systems described in this text apply to corporations and are not appropriate for nonprofit organizations.” Do you agree? Explain.
22 Why is understanding accounting important to nonaccountants?
21 What are the most important ethical standards for accountants?
19 What gives value to an audit? 20 What is a CPA, and how does someone become one? What is a CA?
18 “All companies with stock traded on U.S. stock exchanges must issue financial statements that conform to U.S. GAAP.” Do you agree? Explain.
17 How is GAAP set in the United States? How is it set internationally?
16 Explain the relationship between the board of directors and top management of a company.
15 “The idea of par value is insignificant.” Explain.
14 “International companies with Ltd. or S.A. after their name are essentially the same in organizational form as U.S. companies with Corp. after their name.” Do you agree? Explain.
13 Why does this text emphasize the corporation instead of the proprietorship or the partnership?
12 Explain the meaning of limited liability.
11 List three differences between a corporation and a sole proprietorship or a partnership.
10 “Balance sheets for companies in the same industry should look similar except for the overall size of the accounts. That is, if one company’s property, plant, and equipment is 40% of total
9 Explain the difference between a note payable and an account payable.
8 “When a company buys inventory for cash, total assets do not change. However, when it buys inventory on open account, total assets increase.” Explain.
7 “The balance sheet may be out of balance after some transactions, but it is never out of balance at the end of an accounting period.” Do you agree? Explain.
6 Describe the balance sheet equation.
5 Briefly distinguish between financial accounting and management accounting.
4 Give three examples of users of financial statements.
3 Give three examples of decisions where the decision maker is likely to use financial statements.
2 “It’s easier to learn accounting if you avoid real-world examples.” Do you agree? Explain.
1 Describe accounting.
Lord Borrie QC has said8 of the Public Interest Disclosure Bill that came into force in July 1999 that the new law would encourage people to recognise and identify with the wider public interest, not
‘Confidentiality means that an accountant in business has a loyalty to the business which employs him/her which is greater than any commitment to a professional code of ethics.’ Discuss.
Discuss the following:(a) Why an accountant should be involved with designing or monitoring ethical codes.(b) What additional training this would require.(c) How an accountant could become an
The Finance Director has been carrying out some sensitivity analysis and produced figures that show that the return on capital employed could be improved if the company were to downsize, make
An approach has been made to the Board to support a takeover bid where the offer price exceeds the current market capitalisation.(a) Discuss situations where you consider it (i) ethical to recommend
In each of the following scenarios outline the ethical problem and suggest ways in which the organisation may solve the problem and prevent its re-occurrence.(a) A director’s wife uses his company
(a) Obtain an ethical statement from:(i) a commercial organisation;(ii) a charitable organisation.(b) Review each statement for content and style.(c) Compare the two statements and highlight any
Examine the EPA’s website (http://www.epa.gov/epahome/aboutepa.htm) and prepare one of the cases as a presentation to the group showing clearly how environmental accounting was used and the results
Gettry Doffit plc is an international company with worldwide turnover of £26 million. The activities of the company include the breaking down and disposal of noxious chemicals at a specialised plant
(a) You are required to prepare a value added statement to be included in the corporate report of Hythe plc for the year ended 31 December 20X6, including the comparatives for 20X5, using the
David Mark is a sole trader who owns and operates supermarkets in each of three villages near Ousby.He has drafted his own accounts for the year ended 31 May 20X4 for each of the branches. They are
The following information relates to the Plus Factors Group plc for the years to 30 September 20X8 and 20X9:Ordinary dividends were declared as follows:Interim 1.12 pence per share (20X8, l.67p)Final
(a) Obtain the annual reports of companies that claim to be environmentally aware and assess if these reports and accounts reflect the claim. The various oil, chemical and pharmaceutical companies
(a) ‘Accounting should contribute to the protection of the environment.’ Discuss whether this is a proper role for accounting and outline ways in which it could contribute.(b) Outline, with
(a) Examine the recent financial press to identify examples of a failure to meet information needs in respect of an area of public interest.(b) Obtain a set of accounts from a public listed company
(a) ‘Human assets are incapable of being valued.’ Discuss.(b) Football clubs have followed various policies in the way in which they include players within their accounts. For example, some clubs
Why is there a prohibition on auditors owning shares in client companies? Is this prohibition reasonable?Discuss.
The financial statements of Rolls-Royce plc (aero engine manufacturer) for the year ended 31 December 1999 disclose the following matters in relation to the directors:(a) Remuneration committee The
On 31 December 20X0, the Chief Executive of BC, a listed company, was awarded the option to purchase 1,000,000 shares in the company at £4.50 a share on 30 June 20X4. This option was subject to her
The audit fee disclosed for Cable & Wireless plc was £1.7 million in its 1997 accounts.(a) Discuss how many person-days of audit time you think would be reasonable to audit an industrial company
In the modern commercial world, auditors provide numerous other services to complement their audit work.These services include the following:(a) Accountancy and bookkeeping assistance, e.g. in the
The UK Combined Code provides that the audit committee should keep the nature and extent of non-audit services provided by the auditor under review, seeking to balance the maintenance of objectivity
It has been suggested that ‘changes in market capitalisation from period to period should be the subject of comment [and] it would be sensible for investors to be guided on the nature of the market
There has been much criticism of the effectiveness of non-executive directors following failures such as Enron. Some consider that their interests are too close to those of the executive directors
The following is a proposal from a major research report, The Future of Corporate Governance:Insights from the UK, prepared for the Institute of Chartered Accountants of Scotland.26 In order to

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