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business
understanding financial accounting

Questions and Answers of Understanding Financial Accounting

Use the following information to calculate the balance in the future income tax account for a building owned by the entity: Cost of the machine when it was purchased $2,500,000 Total amount of CCA
For the fiscal year ended November 30, 2014, Vibank Ltd. (Vibank) has income before taxes of $1,700,000. Vibank’s tax return shows taxable income of $1,850,000 for that year. The tax basis of
For the fiscal year ended December 31, 2014, Rossland Ltd. (Rossland) has income before taxes of $325,000. Rossland’s tax return shows taxable income of $275,000 for that year. The accounting basis
Caycuse Inc. (Caycuse) has just completed its first year of operations on December 31, 2014. The company owns a single asset that cost $150,000. For tax purposes Caycuse can deduct $22,500 in CCA in
Using the following data from the comparative balance sheet of All-State Company, illustrate horizontal analysis: Accounts receivable Inventory Total assets December 31, 1997 $ 600,000 $ 780,000
Using the same data presented above in BE15-1 for All-State Company, illustrate vertical analysis.
Net income was \(\$ 500,000\) in \(1995, \$ 420,000\) in 1996 , and \(\$ 504,000\) in 1997. What is the percentage of change from (1) 1995 to 1996 and (2) 1996 to 1997? Is the change an increase or a
If Cavalier Company had net income of \(\$ 672,300\) in 1997 and it experienced a \(25 \%\) increase in net income over 1996, what was its 1996 net income?
Vertical analysis (common size) percentages for Waubons Company's sales, cost of goods sold, and expenses are shown below:Did Waubons's net income as a percent of sales increase, decrease, or remain
Horizontal analysis (trend analysis) percentages for Tilden Company's sales, cost of goods sold, and expenses are shown below:Did Tilden's net income increase, decrease, or remain unchanged over the
Selected condensed data taken from a recent balance sheet of Bob Evans Farms are as follows:What are the (1) working capital, (2) current, and (3) acid-test ratios? Cash Marketable securities
Boston Patriots Corporation has net income of \(\$ 15\) million and net revenue of \(\$ 100\) million in 1996. Its assets were \(\$ 12\) million at the beginning of the year and \(\$ 14\) million at
The following data are taken from the financial statements of Diet-Mite Company:Compute for each year (1) the receivables turnover and (2) the average collection period. What conclusions about the
The following data were taken from the income statements of Linda Shumway Company:\(\square\) Compute for each year (1) the inventory turnover ratio and (2) the average days to sell the inventory.
Haymark Products Company has owners' equity of \(\$ 400,000\) and net income of \(\$ 50,000\). It has a payout ratio of \(20 \%\) and a rate of return on assets of \(16 \%\). How much did Haymark
On June 30, the Osborn Corporation discontinued its operations in Mexico. During the year, the operating loss was \(\$ 400,000\) before taxes. On September 1, Osborn disposed of the Mexico facility
An inexperienced accountant for the Lima Corporation showed the following in Lima's income statement: Income before income taxes, \(\$ 300,000\); Income tax expense, \(\$ 72,000\); Extraordinary loss
On January 1, 1995, Shirli, Inc. changed from the straight-line method of depreciation to the declining-balance method. The cumulative effect of the change was to increase prior years' depreciation
Selected data taken from the 1996 financial statements of Shirley Denison Manufacturing Company are as follows: Net sales for 1996 $6,860,000 Current liabilities, January 1, 1996 180,000 Current
Financial information for Merchandise Inc. is presented below:\section*{Instructions}Prepare a schedule showing a horizontal analysis for 1996 using 1995 as the base year. December 31, 1996 December
Operating data for Fleetwood Corporation are presented below:\section*{Instructions}Prepare a schedule showing a vertical analysis for 1997 and 1996. 1997 1996 Sales $800,000 $600,000 Cost of goods
The comparative balance sheets of Oklahoma Corporation are presented below:\section*{Instructions}(a) Prepare a horizontal analysis of the balance sheet data for Oklahoma Corporation using 1996 as a
The comparative income statements of Olympic Corporation are shown below:\section*{Instructions}(a) Prepare a horizontal analysis of the income statement data for Olympic Corporation using 1996 as a
Nordstrom, Inc., operates department stores in numerous states. Selected financial statement data in millions of dollars for a recent year are as follows:For the year, net sales were \(\$ 3,894\) and
Firpo Incorporated had the following transactions occur involving current assets and Perform current and acid-test current liabilities during February 1996: ratio analysis.Feb. 3 Accounts receivable
Georgette Company has the following comparative balance sheet data:\section*{Additional information for 1996:}1. Net income was \(\$ 25,000\)2. Sales on account were \(\$ 420,000\). Sales returns and
Selected comparative statement data for Mighty Products Company are presented Compute selected ratios below. All balance sheet data are as of December 31 1996 1995 Net sales Cost of goods sold
The Davis Company has income from continuing operations of \(\$ 240,000\) for the year ended December 31, 1995. It also has the following items (before considering income taxes): (1) an extraordinary
The Wall Street Journal routinely publishes summaries of corporate quarterly and annual earnings reports in a feature called the "Earnings Digest." A typical "digest" report takes the following
Comparative statement data for Chen Company and Couric Company, two competitors, appear below. All balance sheet data are as of December 31, 1996, and December 31, 1995.\section*{Instructions}(a)
The comparative statements of Magic Johnson Company are presented below:On April 1, 1996, 4,000 shares were repurchased and canceled. All sales were on account. Net cash provided by operating
Condensed balance sheet and income statement data for Pitka Corporation appear Perform ratio analysis. below:Additional information:1. The market price of Pitka's common stock was \(\$ 4.00, \$
Financial information for Caroline Company is presented below:Additional information:1. Inventory at the beginning of 1995 was \(\$ 115,000\).2. Receivables at the beginning of 1995 were \(\$
Selected financial data of two intense competitors in a recent year are presented below in millions of dollars.\section*{Instructions}(a) For each company, compute the following ratios:(1) Current
The comparative statements of Ultra Vision Company are presented below:Additional data:The common stock recently sold at \(\$ 19.50\) per share.\section*{Instructions}Compute the following ratios for
Presented below is an incomplete income statement and an incomplete comparative balance sheet of Vienna Corporation:Additional information:1. The receivables turnover for 1996 is 10 times.2. All
Find or determine the following from the information provided about Rogers:a. What amount of property, plant, and equipment does Rogers report on its December 31, 2008 balance sheet?b. What amount of
What was Rogers’ net income for fiscal 2008? What was its cash from operations (CFO)? How do you explain the large difference between the net loss and CFO? Based on your assessment of net income
What amount of property, plant, and equipment does Rogers report on its December 31, 2008 balance sheet? What does the amount on the balance sheet represent (how would you explain what the amount
What was the cost and carrying amount (net book value) of Rogers’ leasehold improvements on December 31, 2008? How does Rogers depreciate its leasehold improvements? Why do you think it depreciates
One of Rogers’ businesses is video rental in its Rogers Video stores and by mail. Read Note 2k to Rogers’ financial statements. How does Rogers account for the DVDs and games it rents? Why do you
How much goodwill did Rogers report on December 31, 2008? How did the goodwill arise? How does Rogers amortize its goodwill? By how much did Rogers write down its goodwill in 2008? Why was the
What are intangible assets? How much of intangible assets did Rogers report on its December 31, 2008 balance sheet? What are the largest categories of Rogers’ intangible assets? How are these
What is the cost and carrying amount (net book value) of the brand names Rogers reports in its financial statements? How are Rogers’ brand names amortized? Why do you think Rogers amortizes its
How does Rogers account for its property, plant, and equipment? How does it account for expenditures on repairs and maintenance? Why do you think it accounts for these expenditures this way?Rogers
How much cash did Rogers spend on property, plant, and equipment during 2008?Why is the amount spent not necessarily the same amount as additions to the property, plant, and equipment account? How
What was Rogers’ return on assets for the year ended December 31, 2008 and 20072. Assume Rogers’ total assets on December 31, 2008 were $14,105,000,000?Rogers Communications Inc. (Rogers) is a
A restaurant purchases some used kitchen equipment. For each of the following, explain whether the expenditure would be capitalized or expensed:a. The equipment cost $58,000, plus $2,900 in GST.
Roxana Inc. (Roxana) recently purchased a new stamping machine for its workshop. The cost of the machine included cost,$225,000; taxes, $28,000; delivery, $12,000; installation, $5,000; and testing,
Examine the information provide in E8-2 and respond to parts (a), (b), and (c) assuming Roxanna will use declining balance depreciation at a rate of 40 percent for the stamping machine.
In early 2014, Jupitagon Ltd. (Jupitagon) purchased new computer equipment. Jupitagon does cutting-edge graphic design work and requires highly sophisticated computer hardware and software. The new
Examine the information provide in E8-4 and respond to parts (a), (b), and (c) assuming that Jupitagon Ltd. will use straight-line depreciation for the computer equipment.
Grindstone Corp. (Grindstone) produces fad toys for children. In 2014, Grindstone purchased a new stamping machine to produce the latest fad toy. The machine cost $100,000 plus taxes of $13,000, and
Examine the information provide in E8-6 and respond assuming that Grindstone will use straight-line depreciation for the machine.
Examine the information provide in E8-6 and respond assuming that Grindstone will use declining balance depreciation at a rate of 50 percent for the machine. Evaluate the appropriateness of the rate
In January 2015, Bath Inc. (Bath) purchased an office building on a one hectare piece of land in Saskatoon for $6,000,000.An appraiser valued the land at $1,375,000. The building is eight years old
In 2010 Chin Corp. purchased a piece of land for $4,500,000. In 2015 the land was sold for $3,000,000.Required:Prepare the journal entries necessary to record the purchase and sale of Chin Corp’s
For each of the following situations, calculate any gain or loss that would arise on the sale of the asset and prepare the journal entries that would be required at the time of the sale. Assume that
Indicate whether the following assets would be considered tangible or intangible. Explain your reason for the classification.a. Exclusive licence to use a professional sport’s team’s logo on
On December 31, 2015, Resolute Inc. (Resolute) purchased 100 percent of the common shares of Uno Ltd. (Uno) for $32,000,000. At the time of the purchase, Resolute’s management made the following
On April 15, 2014, Cashtown Inc.(Cashtown) purchased 100 percent of the common shares of Shakespeare Ltd.(Shakespeare) for $48,000,000. At the time of the purchase, Cashtown’s management made the
On July 4, 2013, Vroomanton Inc. (Vroomanton) purchased new equipment for its print shop.Vroomanton’s accountant determined that the capital cost of the equipment was$240,000. The accountant also
In July 2014, Savory Inc. (Savory) purchased new equipment for $450,000. Savory’s management estimates that the equipment’s useful life will be five years and that its residual value will be
For each of the following inde- pendent items, indicate whether the expenditure should be capitalized or expensed. Provide your reasoning.a. An apartment building improves the insulation in the roof
Wandby Inc. (Wandby) owns a building on land it leases from a local municipality. The 28-year land lease was part of an arrangement signed in 1999 that allowed Wandby to operate a business that
The Smooth Rock Falls Resort (Smooth)is a luxury hotel and spa in Atlantic Canada. Recently, Smooth built a new restaurant on its grounds. The new restaurant is an expansion of the existing main
In 2010, Triangle Corporation purchased a piece of heavy equipment for $725,000. The equipment was estimated to have an eight-year life and it was depreciated on a straight-line basis.In 2014 (after
For each of the following items, indicate whether it would appear on the cash flow statement as cash from operations, an investing cash flow, or a financing cash flow, or that it would not have an
On January 3, 2014, Goglin Inc. (Goglin)purchased a corporate aircraft to transport executive to the company’s construction projects across the county. The aircraft cost $2,225,000, which was
Maniwaki Ltd. (Maniwaki) is a small public company located in eastern Canada. Maniwaki’s management has decided to report its land and building at market as allowed by IFRS for its December 31,
Mr. Bogan operates a dairy farm in Québec. Recently, one of his cows gave birth to a female calf that will eventually join the dairy herd that produces the milk Mr. Bogan sells. When the calf was
In March 2010, Hazlet Inc. (Hazlet) purchased a storage building for \($760,000.\) The building was estimated to have a useful life of 10 years and no residual value. In April 2016, Hazlet paid
Use the following information and determine the carrying amount of the property, plant, and equipment of June Inc. (June)on September 30, 2015, the company’s year-end. (An accounting equation
Use the following information and determine the carrying amount of the property, plant, and equipment of Ziska Ltd. (Ziska)on July 1, 2014, the first day of its 2015 fiscal year. (An accounting
Utopia Inc.(Utopia) is a biotechnology company located in Montréal. Utopia has successfully marketed a number of products since it went public three years ago. Biotechnology is a highly competitive
Florze Software Inc.(Florze) is a software development company located in Kanata, Ontario. Software is a highly competitive industry and the life of a software product is usually quite short.To
Early in 2013, Mr. Peribonka purchased a machine for $100,000 to produce a new gadget he designed. Mr. Peribonka invested $70,000 of his own money to buy the machine and borrowed the remainder from
In January 2010, Coaticook Inc. (Coaticook) purchased a patent for a pharmaceutical designed to help bald people to grow hair. The drug behind the patent was considered revolutionary at the time and
In 2011, Zumbro Ltd. (Zumbro) purchased a forklift for $28,000. In error, Zumbro’s bookkeeper recorded the purchase as an expense rather than classifying it as an asset. The error went unnoticed
Sifton Financial Ltd. (Sifton) is a small financial institution operating in western Canada.In 2014, Sifton purchased a new computer system for its head office for $1,120,000(including installation),
Judge Ltd. Judge) operates a small chain of auto supply shops. The company has been in business for many years and for most of that time it was owned and operated by the Judge family. In recent years
Togo Ltd. (Togo) and Fairfax Inc.(Fairfax) are small property development companies. Ms. Bessnerdium owns 60 percent of the shares of each company and the rest are owned by separate consortiums of
Quabbin Corp. (Quabbin) is a small manufacturing company in Regina. It’s owned by five shareholders, two of whom manage the company.The other three are silent investors who invested when the
In July 2013, Yreka Platinum Mines Inc. (Yreka), a public company, began operation of its new platinum mine. Geologists estimate that the mine contains about 825,000 ounces of platinum. Yreka
Barkway Inc. (Barkway) is in the process of finalizing its cash flow statement for 2014.The statement has been completely prepared except for the new product development costs that the controller
Juskatla Ltd. (Juskatla) is in the process of finalizing its cash flow statement for 2015.The statement has been completely prepared except for some costs that the controller isn’t sure whether to
Albanel Ltd. (Albanel) is a manufacturing company. On December 31, 2013, Albanel reported property, plant, and equipment, net of accumulated depreciation, of $4,750,000. Below is Albanel’s cash
Mildmay Ltd.(ML) is a public company that manufactures machine parts. In its most recent financial statements, ML wrote down $131,000,000 of its assets, which it will continue to use. The new
(a) Tia Kim believes that the analysis of financial statements is directed at two characteristics of a company: liquidity and profitability. Is Tia correct? Explain.(b) Are short-term creditors,
(a) If Roe Company had net income of \(\$ 540,000\) in 1996 and it experienced a \(24.5 \%\) increase in net income for 1997, what is its net income for 1997?(b) If six cents of every dollar of Roe's
Tony Robins is puzzled. His company had a profit margin of \(10 \%\) in 1996. He feels that this is an indication that the company is doing well. Joan Graham, his accountant, says that more
Gerry Bullock Company, a retail store, has a receivables turnover ratio of 4.5 times. The industry average is 12.5 times. Does Bullock have a collection problem with its receivables?
The price-earnings ratio of McDonnell Douglas (aircraft builder) was 5 , and the price-earnings ratio of Microsoft (computer software) was 43 . Which company did the stock market favor? Explain.
Holding all other factors constant, indicate whether each of the following changes generally signals good or bad news about a company:(a) Increase in profit margin.(b) Decrease in inventory
The return on total assets for Windsor Corporation is \(7.6 \%\). During the same year Windsor's return on common stockholders' equity is \(12.8 \%\). What is the explanation for the difference in
Khris Inc. has net income of \(\$ 270,000\), weighted average shares of common stock outstanding of 50,000 , and preferred dividends for the period of \(\$ 40,000\). What is Khris's earnings per
Identify five limitations of financial analysis.
Explain how the choice of one of the following accounting methods over the other raises or lowers a company's net income during a period of continuing inflation:(a) Use of FIFO instead of LIFO for
Explain "earning power." What relationship does this concept have to the treatment of irregular items on the income statement?
Indicate which of the following items would be reported as an extraordinary item on Fine \& Fancy Food Corporation's income statement?(a) Loss from damages caused by a volcano eruption.(b) Loss from

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