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principles financial accounting

Questions and Answers of Principles Financial Accounting

Apply horizontal analysis and vertical analysis. LO15
Analyze a company’s performance using ratio analysis. LO15
In horizontal analysis, each item is expressed as a percentage of the:(a) net income amount. LO15(b) stockholders’ equity amount.(c) total assets amount.(d) base-year amount.
In vertical analysis, the base amount for depreciation expense is generally:(a) net sales.(b) depreciation expense in a previous year.(c) gross profi t.(d) fi xed assets. LO15
Plano Corporation reported net income $24,000, net LO15 sales $400,000, and average assets $600,000 for 2017.What is the 2017 profi t margin?(a) 6%. (c) 40%.(b) 12%. (d) 200%.Use the following fi
Compute the current ratio for 2017. LO15(a) 1.26:1. (c) 0.80:1.(b) 3.0:1. (d) 3.75:1.
Compute the profi t margin for 2017.(a) 17.1%. (c) 37.9%.(b) 18.1%. (d) 5.9%. LO15
Compute the return on common stockholders’ equity LO15 for 2017.(a) 54.2%. (c) 61.2%.(b) 52.5%. (d) 59.4%.
Rondo Corporation’s comparative balance sheets are presented below.RONDO CORPORATION Balance Sheets LO15 December 31 2017 2016 Cash $ 5,300 $ 3,700 Accounts receivable 21,200 23,400 Inventory 9,000
Explain sustainable income. What relationship does this concept have to the treatment of discontinued operations on the income statement? LO15
Moosier Inc. has been in operation for 3 years and uses the FIFO method of pricing inventory. During the fourth year, Moosier changes to the average-cost LO15 method for all its inventory. How will
What amount did Apple report as “Other comprehensive earnings” in its consolidated statement of comprehensive income ending September 27, 2014? By LO15 what percentage did Apple’s
(a) Distinguish among the following bases of comparison:intracompany, intercompany, and industry averages.(b) Give the principal value of using each of the three LO15 bases of comparison.
What does each type of ratio measure?(a) Liquidity ratios.(b) Solvency ratios. LO15(c) Profi tability ratios.
What is the difference between the current ratio and working capital? LO15
What is the formula for computing the payout ratio?Do you expect this ratio to be high or low for a growth LO15 company?
Holding all other factors constant, indicate whether each of the following changes generally signals good or bad news about a company.(a) Increase in profi t margin.(b) Decrease in inventory
On January 1, 2017, Bryce Inc. changed from the LIFO method of inventory pricing to the FIFO method. Explain how this change in accounting principle should be treated LO15 in the company’s fi
Using these data from the comparative balance sheet of Rollaird Company, perform horizontal analysis.December 31, 2017 December 31, 2016 LO15 Accounts receivable $ 460,000 $ 400,000 Inventory 780,000
Using the data presented in BE13-4 for Rollaird Company, perform vertical analysis. LO15
Net income was $500,000 in 2015, $485,000 in 2016, and $518,400 in 2017. What is the percentage of change from (a) 2015 to 2016, and (b) from 2016 to 2017? Is the change an increase or a decrease?
Suppose these selected condensed data are taken from recent balance sheets of LO15 Bob Evans Farms (in thousands).2017 2016 Cash $ 13,606 $ 7,669 Accounts receivable 23,045 19,951 Inventory 31,087
Hollie Company has stockholders’ equity of $400,000 and net income of $72,000.It has a payout ratio of 18% and a return on assets of 20%. How much did Hollie pay in cash dividends, and what were
Selected data taken from a recent year’s fi nancial statements of trading card company Topps Company, Inc. are as follows (in millions).Net sales $326.7 Current liabilities, beginning of year 41.1
The condensed fi nancial statements of Murawski Company for the years 2016 and 2017 are presented as follows. (Amounts in thousands.)MURAWSKI COMPANY LO15 Balance Sheets December 31 2017 2016 Current
Lendell Company has these comparative balance sheet data:LENDELL COMPANY Balance Sheets LO15 December 31 2017 2016 Cash $ 15,000 $ 30,000 Accounts receivable (net) 70,000 60,000 Inventory 60,000
Suppose selected comparative statement data for the giant bookseller Barnes &Noble are presented here. All balance sheet data are as of the end of the fi scal year (in millions).2017 2016 Net sales
Panza Corporation experienced a fi re on December 31, 2017, in which its fi nancial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following
The condensed fi nancial statements of Ness Company for the years 2016 and 2017 are presented below.NESS COMPANY Balance Sheets December 31 (in thousands)2017 2016 Current assets Cash and cash
Here are comparative statement data for Duke Company and Lord Company, two competitors. All balance sheet data are as of December 31, 2017, and December 31, 2016.Duke Company Lord Company 2017 2016
The comparative statements of Wahlberg Company are presented here.WAHLBERG COMPANY Income Statements For the Years Ended December 31 2017 2016 Net sales $1,890,540 $1,750,500 Cost of goods sold
The following fi nancial information is for Priscoll Company.PRISCOLL COMPANY Balance Sheets December 31 LO15 Assets 2017 2016 Cash $ 70,000 $ 65,000 Debt investments (short-term) 55,000 40,000
The fi nancial statements of Columbia Sportswear Company are presented in Appendix B. Financial statements of VF Corporation are presented in Appendix C.Instructions(a) Based on the information in
The fi nancial statements of Amazon.com, Inc. are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E.Instructions(a) Based on the information in the fi
You are a loan offi cer for White Sands Bank of Taos. Paul Jason, president of P. Jason Corporation, has just left your offi ce. He is interested in an 8-year loan to expand the company’s
The fi nancial statements of Louis Vuitton are presented in Appendix F. Instructions for accessing and using the company’s complete annual report, including the notes LO15 to its fi nancial
Discuss the usefulness and format of the statement of cash fl ows. LO11
Prepare a statement of cash fl ows using the indirect method. LO11
Use the statement of cash fl ows to evaluate a company. LO11 1 Discuss the usefulness and format of the statement of cash fl ows.2 Prepare a statement of cash fl ows using the indirect method.3 Use
Use the T-account approach to prepare a statement of cash fl ows. LO11
Which is an example of a cash fl ow from an operating activity? LO11(a) Payment of cash to lenders for interest.(b) Receipt of cash from the sale of common stock.(c) Payment of cash dividends to the
Cash dividends paid to stockholders are classifi ed on the statement of cash fl ows as: LO11(a) operating activities.(b) investing activities.(c) a combination of (a) and (b).(d) fi nancing
Which is an example of a cash fl ow from a fi nancing activity? LO11(a) Receipt of cash from sale of land.(b) Issuance of debt for cash.(c) Purchase of equipment for cash.(d) None of the above
The following data are available for Retique! LO11 Increase in accounts payable $ 40,000 Increase in bonds payable 100,000 Sale of investment 50,000 Issuance of common stock 60,000 Payment of cash
Free cash fl ow provides an indication of a company’s ability to: LO11(a) manage inventory.(b) generate cash to pay dividends.(c) generate cash to invest in new capital expenditures.(d) Both (b)
During the introductory phase of a company’s life cycle, one would normally expect to see: LO11(a) negative cash from operations, negative cash from investing, and positive cash from fi nancing.(b)
The beginning balance in accounts receivable is$44,000, the ending balance is $42,000, and sales during the period are $129,000. What are cash receipts from customers? LO11(a) $127,000. (c)
Which of the following items is reported on a statement of cash fl ows prepared by the direct method? LO11(a) Loss on disposal of building.(b) Increase in accounts receivable.(c) Depreciation
Strong Corporation’s comparative balance sheets are presented below. LO11 2017 2016 Cash $ 28,200 $ 17,700 Accounts receivable 24,200 22,300 Investments 23,000 16,000 Equipment 60,000 70,000
The income statement for Kosinski Manufacturing Company contains the following condensed information. LO11 KOSINSKI MANUFACTURING COMPANY Income Statement For the Year Ended December 31, 2017 Sales
(a) What is a statement of cash fl ows? LO11(b) Pat Marx maintains that the statement of cash fl ows is an optional fi nancial statement. Do you agree? Explain.
What questions about cash are answered by the statement of cash fl ows? LO11
(a) What are the sources (infl ows) of cash in a statement of cash fl ows? LO11(b) What are the uses (outfl ows) of cash?
Why is it necessary to use comparative balance sheets, a current income statement, and certain transaction data in preparing a statement of cash fl ows? LO11
When the total cash infl ows exceed the total cash outfl ows in the statement of cash fl ows, how and where is this excess identifi ed? LO11
Describe the indirect method for determining net cash provided (used) by operating activities. LO11
The president of Murquery Company is puzzled. During the last year, the company experienced a net loss of $800,000, yet its cash increased$300,000 during the same period of time. Explain to the
Identify fi ve items that are adjustments to convert net income to net cash provided by operating activities under the indirect method. LO11
Why and how is depreciation expense reported in a statement of cash fl ows prepared using the indirect method? LO11
During 2017, Slivowitz Company exchanged$1,700,000 of its common stock for land. Indicate how the transaction would be reported on a statement of cash fl ows, if at all. LO11
(a) What are the phases of the corporate life cycle?(b) What effect does each phase have on the amounts reported in a statement of cash fl ows? LO11
Classify each item as an operating, investing, or fi nancing activity. Assume all items involve cash unless there is information to the contrary. LO11(a) Purchase of equipment. (d) Cash received from
The T-accounts for Equipment and the related Accumulated Depreciation—Equipment for Goldstone Company at the end of 2017 are shown here. LO11 Equipment Accum. Depr.—Equipment Beg. bal. 80,000
(a) Why is net cash provided by operating activities likely to be lower than reported net income during the growth phase? LO11(b) Why is net cash from investing activities often positive during the
Suppose during 2017 that Cypress Semiconductor Corporation reported net cash provided by operating activities of $89,303,000, cash used in investing of $43,126,000, and cash used in fi nancing of
Suppose Canwest Global Communications Corp. reported net cash used by operating activities of $104,539,000 and sales revenue of $2,867,459,000 during 2017. Cash spent on plant asset additions during
Alex Company reported the following information for 2017. LO11 ALEX COMPANY Comparative Balance Sheets December 31 Change Assets 2017 2016 Increase/Decrease Cash $ 59,000 $ 36,000 $ 23,000 Increase
Moskow Corporation issued the following statement of cash fl ows for 2017. LO11 MOSKOW CORPORATION Statement of Cash Flows—Indirect Method For the Year Ended December 31, 2017 Cash fl ows from
An analysis of comparative balance sheets, the current year’s income statement, and the general ledger accounts of Hailey Corp. uncovered the following items. Assume all items involve cash unless
The following are comparative balance sheets for Mitch Company. LO11 MITCH COMPANY Comparative Balance Sheets December 31 Assets 2017 2016 Cash $ 68,000 $ 22,000 Accounts receivable 88,000 76,000
The information in the table is from the statement of cash flows for a company at four different points in time (M, N, O, and P). Negative values are presented in parentheses. LO11 Point in Time M N
Suppose the following is 2017 information for PepsiCo, Inc. and The Coca-Cola Company. LO11($ in millions) PepsiCo Coca-Cola Net cash provided by operating activities $ 6,796 $ 8,186 Average current
Information for two companies in the same industry, Merrill Corporation and Wingate Corporation, is presented here. LO11 Merrill Wingate Corporation Corporation Net cash provided by operating
You are provided with the following information regarding events that occurred at Moore Corporation during 2017 or changes in account balances as of December 31, 2017.(1) (2) LO11 Statement If
Rewe Company’s income statement contained the condensed information below. LO11 REWE COMPANY Income Statement For the Year Ended December 31, 2017 Service revenue $970,000 Operating expenses,
Data for Rewe Company are presented in P12-5A. LO11 Instructions Prepare the operating activities section of the statement of cash flows using the direct method.
You are provided with the following transactions that took place during the year. LO11 Free Cash Transactions Flow ($125,000)(a) Recorded credit sales $2,500.(b) Collected $1,900 owed by
Columbia Sportswear Company’s fi nancial statements are presented in Appendix B.Financial statements of VF Corporation are presented in Appendix C. LO11 Instructions(a) Based on the information
Amazon.com, Inc.’s fi nancial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. LO11 Instructions(a) Based on the information
Pete Kent and Maria Robles are examining the following statement of cash fl ows for Sullivan Company for the year ended January 31, 2017. LO11 SULLIVAN COMPANY Statement of Cash Flows For the Year
Walt Jax, the owner-president of Computer Services Company, is unfamiliar with the statement of cash fl ows that you, as his accountant, prepared. He asks for further explanation. LO11 Instructions
In this chapter, you learned that companies prepare a statement of cash fl ows in order to keep track of their sources and uses of cash and to help them plan for their future cash needs. Planning for
Under IFRS, interest paid can be reported as: LO11(a) only a financing activity.(b) a financing activity or an investing activity.(c) a financing activity or an operating activity.(d) only an
In the future, it appears likely that: LO11(a) the income statement and balance sheet will have headings of operating, investing, and financing activities, much like the statement of cash flows.(b)
Under IFRS: LO11(a) taxes are always treated as an operating activity.(b) the income statement uses the headings operating, investing, and financing activities.(c) dividends received can be either an
Which of the following is correct? LO11(a) Under IFRS, the statement of cash flows is optional.(b) IFRS requires use of the direct approach in preparing the statement of cash flows.(c) The majority
Discuss the differences that exist in the treatment of bank overdrafts under GAAP and IFRS. LO11
Describe the treatment of each of the following items under IFRS versus GAAP. LO11(a) Interest paid. (c) Dividends paid.(b) Interest received. (d) Dividends received.
The financial statements of Louis Vuitton are presented in Appendix F. Instructions for accessing and using the company’s complete annual report, including the notes to its financial statements,
Discuss the major characteristics of a corporation. LO6
Explain how to account for the issuance of common and preferred stock, and the purchase of treasury stock. LO6
Explain how to account for cash dividends and describe the effect of stock dividends and stock splits. LO6
Discuss how stockholders’ equity is reported and analyzed. LO6
Prepare entries for stock dividends. LO6
Which of these is not a major advantage of a corporation? LO6(a) Separate legal existence.(b) Continuous life.(c) Government regulations.(d) Transferable ownership rights.
Preferred stock may have priority over common stock except in: LO6(a) dividend preference.(b) preference to assets in the event of liquidation.(c) cumulative dividends.(d) voting.
Nona Jaymes believes a corporation must be incorporated in the state in which its headquarters offi ce is located. Is Nona correct? Explain. LO6
What are the basic ownership rights of common stockholders in the absence of restrictive provisions? LO6
A corporation has been defi ned as an entity separate and distinct from its owners. In what ways is a corporation a separate legal entity? LO6
What are the two principal components of stockholders’equity? LO6

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