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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

Bob Soakup and Clare Karr are examining the following statement of cash flows for Baldwin Company for the year ended January 31, 2012.Bob claims that Baldwin’s statement of cash flows is an
Alex Mabry, the owner-president of Computer Services Company, is unfamiliar with the statement of cash flows that you, as his accountant, prepared. He asks for further explanation.Instructions Write
In this chapter, you learned that companies prepare a statement of cash flows in order to keep track of their sources and uses of cash and to help them plan for their future cash needs. Planning for
Explain how the treatment of cash equivalents will probably change in the future.INTERNATIONAL FINANCIAL REPORTING PROBLEM: Zetar plc
The financial statements of Zetar plc are presented in Appendix C. The company’s complete annual report, including the notes to its financial statements, is available at
Cool Stools Corporation has income before taxes of$400,000 and an extraordinary loss of $100,000. If the income tax rate is 25% on all items, the income statement should show income before irregular
Which of the following would be considered an“Other comprehensive income” item?(a) Gain on disposal of discontinued operations.(b) Unrealized loss on available-for-sale securities.(c)
Adams Corporation reported net sales of $300,000,$330,000, and $360,000 in the years 2010, 2011, and 2012, respectively. If 2010 is the base year, what percentage do 2012 sales represent of the
The following schedule is a display of what type of analysis?Amount Percent Current assets $200,000 25%Property, plant, and equipment 600,000 75%Total assets $800,000(a) Horizontal analysis. (c)
Which measure is an evaluation of a company’s ability to pay current liabilities?(a) Current cash debt coverage ratio.(b) Current ratio.(c) Both (a) and (b).(d) None of the above.
Which of these is not a liquidity ratio?(a) Current ratio.(b) Asset turnover ratio.(c) Inventory turnover ratio.(d) Receivables turnover ratio.
Plano Corporation reported net income $24,000; net sales $400,000; and average assets $600,000 for 2012.What is the 2012 profit margin ratio?(a) 6%. (c) 40%.(b) 12%. (d) 200%.Use the following
Compute the days in inventory for 2012.(a)64.4 days. (c) 6 days.(b)60.8 days. (d) 24 days.
Compute the current ratio for 2012.(a)1.26:1. (c)0.80:1.(b)3.0:1. (d)3.75:1.
Compute the profit margin ratio for 2012.(a)17.1%.(b)18.1%. (c)37.9%. (d)5.9%.
Compute the return on common stockholders’ equity for 2012.(a)54.2%. (b)52.5%.(c)61.2%. (d)59.4%.
Compute the times interest earned for 2012.(a)11.2 times. (b)65.3 times. (c)14.0 times.(d)13.0 times.
Which situation below might indicate a company has a low quality of earnings?(a) The same accounting principles are used each year.(b) Revenue is recognized when earned.(c) Maintenance costs are
What is the formula for computing the payout ratio?Do you expect this ratio to be high or low for a growth company?
Selected data taken from a recent year’s financial statements of trading card company Topps Company, Inc. are as follows (in millions).Compute these ratios: (a) current cash debt coverage ratio,
Hendi Company has these comparative balance sheet data:Additional information for 2012:1. Net income was $25,000.2. Sales on account were $375,000. Sales returns and allowances amounted to $25,000.3.
Here is the income statement for Bachus, Inc.Additional information:1. Common stock outstanding January 1, 2012, was 32,000 shares, and 40,000 shares were outstanding at December 31, 2012.2. The
The comparative statements of Lucille Company are presented here.All sales were on account. Net cash provided by operating activities for 2012 was $220,000.Capital expenditures were $136,000, and
Condensed balance sheet and income statement data for Glassgow Corporation are presented here.Additional information:1. The market price of Glassgow’s common stock was $7.00, $7.50, and $8.50 for
Selected financial data of Target and Wal-Mart for 2009 are presented here(in millions).Instructions (a) For each company, compute the following ratios.(1) Current. (8) Return on assets.(2)
The comparative statements of Jetson Company are shown below.All sales were on account. Net cash provided by operating activities was $108,000. Capital expenditures were $47,000, and cash dividends
The condensed balance sheet and income statement data for Finch Corporation are presented below.Additional information:1. The market price of Finch common stock was $5.00, $3.50, and $2.80 for 2010,
Selected financial data for Stanley Black & Decker, Inc. and Snap-On Tools for 2009 are presented here (in millions).Instructions (a) For each company, compute the following ratios.(1) Current
Your parents are considering investing in Tootsie Roll Industries common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Fortunately, excerpts from a recent
The financial statements of The Hershey Company are presented in Appendix B, following the financial statements for Tootsie Roll Industries in Appendix A.Instructions (a) Based on the information in
The April 21, 2008, issue of the Wall Street Journal Online included an article by David Reilly entitled “A Way Charges Stay off Bottom Line.”Instructions Read the article and answer the
The Coca-Cola Company and PepsiCo, Inc. provide refreshments to every corner of the world. Selected data from the 2009 consolidated financial statements for The Coca-Cola Company and for PepsiCo,
Purpose: To employ comparative data and industry data to evaluate a company’s performance and financial position.Address: http://www.moneycentral.msn.com/investor/invsub/results/compare.asp, or go
You are a loan officer for Great Plains Bank of Davenport. David Miller, president of D. Miller Corporation, has just left your office. He is interested in an 8-year loan to expand the company’s
Kevin Halen is the chief executive officer of Brenna Electronics. Halen is an expert engineer but a novice in accounting. Halen asks you, as an accounting student, to explain (a) the bases for
In this chapter, you learned how to use many tools for performing a financial analysis of a company. When making personal investments, however, it is most likely that you won’t be buying stocks and
Parmalane reports the following information:Parmalane should report the following under the two-statement approach using IFRS:(a) net income of $260,000 and comprehensive income of $270,000.(b) net
Assuming the same information as in question 4, Parmalane should report the following using a one-statement approach under IFRS:(a) net income of $260,000 and comprehensive income of $270,000.(b) net
Assume the same information for Chen Company as in IFRS13-1. Prepare the income statement using the two-statement approach.INTERNATIONAL FINANCIAL REPORTING PROBLEM: Zetar plc
Kirk Limited is trying to determine the value of its ending inventory as of February 28, 2012, the company’s year-end. The accountant counted everything that was in the warehouse, as of February
A You are provided with the following transactions that took place during a recent fiscal year.(a) Recorded depreciation expense on the plant assets.(b) Recorded and paid interest expense.(c)
A Retzlaff Company’s income statement contained the condensed information below.Accounts payable pertain to operating expenses.Instructions Prepare the operating activities section of the statement
Classify each item as an operating, investing, or financing activity. Assume all items involve cash unless there is information to the contrary.(a) Purchase of equipment. (d) Depreciation.(b) Sale of
The following information is available for Oscar Corporation for the year ended December 31, 2012.Instructions Prepare a statement of cash flows using the indirect method. Beginning cash balance
The three accounts shown below appear in the general ledger of Jurena Corp.during 2012.Instructions From the postings in the accounts, indicate how the information is reported on a statement of cash
The following information is available for Washington Mills Corp. for 2012.Instructions Prepare a statement of cash flows using the direct method. Cash used to purchase treasury stock Cash dividends
Markel Corporation’s balance sheet at December 31, 2011, is presented below.MARKEL CORPORATION Balance Sheet December 31, 2011 Cash $ 30,000 Accounts payable $ 13,750 Inventory 30,750 Interest
Refer to the financial statements of Tootsie Roll Industries and the Notes to Consolidated Financial Statements in Appendix A.Instructions Answer the following questions.(a) What were Tootsie
The September 1, 2009, edition of CFO.com contains an article by Marie Leone and Tim Reason entitled “Dirty Secrets.” You can access this article at
Hechinger Co. and Home Depot are two home improvement retailers. Compared to Hechinger, founded in the early 1900s, Home Depot is a relative newcomer. But, in recent years, while Home Depot was
Purpose: Bond or debt securities pay a stated rate of interest. This rate of interest is dependent on the risk associated with the investment. Fitch Ratings provides ratings for companies that issue
On January 1, 2010, Gitzel Corporation issued $3,000,000 of 5-year, 8% bonds at 97.The bonds pay interest annually on January 1. By January 1, 2012, the market rate of interest for bonds of risk
James Metallo, president of Zinda, Inc., is considering the issuance of bonds to finance an expansion of his business. He has asked you to do the following: (1) discuss the advantages of bonds over
For most U.S. families, medical costs are substantial and rising. But will medical costs be your most substantial expense over your lifetime? Not likely. Will it be housing or food?Again, not likely.
Stevens Corporation issued 5% convertible bonds with a total face value of $3,000,000 for$3,000,000. If the bonds had not had a conversion feature, they would have sold for $2,600,000.Under IFRS, the
Under IFRS, if preference shares (preferred stock) have a requirement to be redeemed at a specific point in time in the future, they are treated:(a) as a type of asset account.(b) as ordinary shares
The joint projects of the FASB and IASB could potentially:(a) change the definition of liabilities.(b) change the definition of equity.(c) change the definition of assets.(d) All of the above.
Many multinational companies find it beneficial to have their shares listed on stock exchanges in foreign countries. In order to do this, they must comply with the securities laws of those countries.
Which of these is not a major advantage of a corporation?(a) Separate legal existence.(b) Continuous life.(c) Government regulations.(d) Transferable ownership rights.
Which of these statements is false?(a) Ownership of common stock gives the owner a voting right.(b) The stockholders’ equity section begins with paid-in capital.(c) The authorization of capital
ABC Corp. issues 1,000 shares of $10 par value common stock at $12 per share. When the transaction is recorded, credits are made to:(a) Common Stock $10,000 and Paid-in Capital in Excess of Stated
Treasury stock may be repurchased:(a) to reissue the shares to officers and employees under bonus and stock compensation plans.(b) to signal to the stock market that management believes the stock is
Preferred stock may have which of the following features?(a) Dividend preference.(b) Preference to assets in the event of liquidation.(c) Cumulative dividends.(d) All of the above.
U-Bet Corporation has 10,000 shares of 8%, $100 par value, cumulative preferred stock outstanding at December 31, 2012. No dividends were declared in 2010 or 2011. If U-Bet wants to pay $375,000 of
Entries for cash dividends are required on the:(a) declaration date and the record date.(b) record date and the payment date.(c) declaration date, record date, and payment date.(d) declaration date
Jackson Inc. reported net income of $186,000 during 2012 and paid dividends of $26,000 on common stock. It also paid dividends on its 10,000 shares of 6%, $100 par value, noncumulative preferred
On June 1, Rodero Inc. issues 3,000 shares of no-par common stock at a cash price of $7 per share. Journalize the issuance of the shares.
Indicate whether each of the following transactions would increase (+), decrease(-), or not affect (N/A) total assets, total liabilities, and total stockholders’ equity.(a) Declared cash
During its first year of operations, Pele Corporation had these transactions pertaining to its common stock.Instructions (a) Journalize the transactions, assuming that the common stock has a par
Wells Fargo & Company, headquartered in San Francisco, is one of the nation’s largest financial institutions. It reported the following selected accounts (in millions) as of December 31,
The following stockholders’ equity accounts, arranged alphabetically, are in the ledger of Patel Corporation at December 31, 2012.Instructions Prepare the stockholders’ equity section of the
The following accounts appear in the ledger of Sather Inc. after the books are closed at December 31, 2012.Instructions Prepare the stockholders’ equity section at December 31, assuming $100,000 of
A The stockholders’ equity accounts of Omega Corporation on January 1, 2012, were as follows.During 2012, the corporation had the following transactions and events pertaining to its stockholders’
A On December 31, 2011, Stitch Company had 1,300,000 shares of $5 par common stock issued and outstanding. The stockholders’ equity accounts at December 31, 2011, had the balances listed
A The ledger of Zeta Corporation at December 31, 2012, after the books have been closed, contains the following stockholders’ equity accounts.A review of the accounting records reveals this
A Melvina Corporation has been authorized to issue 20,000 shares of $100 par value, 7%, noncumulative preferred stock and 1,000,000 shares of no-par common stock.The corporation assigned a $5 stated
A On January 1, 2012, Neville Inc. had these stockholders’ equity balances.During 2012, the following transactions and events occurred.1. Issued 50,000 shares of $1 par value common stock for $3
B The stockholders’ equity accounts of Nardin Corporation on January 1, 2012, were as follows.During 2012 the corporation had these transactions and events pertaining to its
B On December 31, 2011, Bryant Company had 600,000 shares of $1 par common stock issued and outstanding. The stockholders’ equity accounts at December 31, 2011, had the balances listed
B The post-closing trial balance of Flicka Corporation at December 31, 2012, contains these stockholders’ equity accounts.A review of the accounting records reveals this information:1. Preferred
B The following stockholders’ equity accounts, arranged alphabetically, are in the ledger of Charlotte Corporation at December 31, 2012.Instructions Prepare the stockholders’ equity section of
B On January 1, 2012, Gabriel Inc. had these stockholder equity balances.During 2012, the following transactions and events occurred.1. Issued 70,000 shares of $1 par common stock for $245,000.2.
B On January 1, 2012, Jason Corporation had these stockholders’ equity accounts.Common Stock ($20 par value, 80,000 shares issued and outstanding) $1,600,000 Paid-in Capital in Excess of Par Value
Hampton Corporation’s balance sheet at December 31, 2011, is presented below.During 2012, the following transactions occurred.1. On January 1, 2012, Hampton issued 1,200 shares of $40 par, 7%
The stockholders’ equity section of Tootsie Roll Industries’ balance sheet is shown in the Consolidated Statement of Financial Position in Appendix A. You will also find data relative to this
The financial statements of The Hershey Company are presented in Appendix B, following the financial statements for Tootsie Roll in Appendix A.Instructions (a) Based on the information in these
The March 15, 2010, edition of the Wall Street Journal includes an article by Martin Peers entitled “Media’s Cash Focus is Paying Dividends.”Instructions Read the article and answer the
Marriott Corporation split into two companies: Host Marriott Corporation and Marriott International. Host Marriott retained ownership of the corporation’s vast hotel and other properties, while
Purpose: Use the stockholders’ equity section of an annual report and identify the major components.Address: www.annualreports.com, or go to www.wiley.com/college/kimmel Steps 1. Select a
During a recent period, the fast-food chain Wendy’s International purchased many treasury shares. This caused the number of shares outstanding to fall from 124 million to 105 million.The following
Jim Collins, your uncle, is an inventor who has decided to incorporate. Uncle Jim knows that you are an accounting major at U.N.O. In a recent letter to you, he ends with the question,“I’m
Lesley Corporation has paid 60 consecutive quarterly cash dividends (15 years). The last 6 months have been a real cash drain on the company, however, as profit margins have been greatly narrowed by
In response to the Sarbanes-Oxley Act, many companies have implemented formal ethics codes. Many other organizations also have ethics codes.Instructions Obtain the ethics code from an organization
The term reserves is used under IFRS with reference to all of the following except:(a) gains and losses on revaluation of property, plant, and equipment.(b) capital received in excess of the par
Under IFRS, the amount of capital received in excess of par value on ordinary shares would be credited to:(a) Retained Earnings.(b) Contributed Capital.(c) Share Premium—Ordinary.(d) Par value is
Ingram Corporation has the following accounts at December 31, 2012: Share Capital—Ordinary, C=10 par, 5,000 shares issued, C=50,000; Share Premium—Ordinary C=10,000; Retained Earnings C=45,000;
The January 25, 2005, edition of the Wall Street Journal has an article by Mary Kissel(on p. C1) entitled “Known for Growth, Asian Firms Answer Call of the Dividend.”Instructions Read the article
Which of the following will not be reported in the statement of cash flows?(a) The net change in plant assets during the year.(b) Cash payments for plant assets during the year.(c) Cash receipts from
The statement of cash flows classifies cash receipts and cash payments by these activities:(a) operating and nonoperating.(b) operating, investing, and financing.(c) financing, operating, and
Which of the following is incorrect about the statement of cash flows?(a) The direct method may be used to report cash provided by operating activities.(b) The statement shows the cash provided

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