Question: A family friend has asked your help

> Segment reporting facilitates the financial statement analysis of diversified companies. What determines whether an operating segment is a reportable segment for this purpose?

> The usefulness of the balance sheet is enhanced when assets and liabilities are grouped according to common characteristics. The broad distinction made in the balance sheet is the current versus long-term classification of both assets and liabilities. R

> Describe at least two differences between U.S. GAAP and IFRS in balance sheet presentation.

> A common problem facing any business entity is the debt versus equity decision. When funds are required to obtain assets, should debt or equity financing be used? This decision also is faced when a company is initially formed. What will be the mix of deb

> Enron Corporation was a darling in the energy-provider arena, and in January 2001 its stock price rose above $100 per share. A collapse of investor confidence in 2001 and revelations of accounting fraud led to one of the largest bankruptcies in U.S. hist

> Show the calculation of the following solvency ratios: (1) the debt to equity ratio, and (2) the times interest earned ratio.

> Air France-KLM (AF), a Franco-Dutch company, prepares its financial statements according to International Financial Reporting Standards. AF’s financial statements and disclosure notes for the year ended December 31, 2015, are provided in Connect. This ma

> Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended January 30, 2016, are provided in available in Connect. This material is also available under the Investor

> The following information is taken from the balance sheet of Raineer Plumbing: cash and cash equivalents, $40,000; accounts receivable, $120,000; inventories,?; total current assets, $235,000; property, plant, and equipment (net), ?; total assets, $400,0

> The auditors’ report provides the analyst with an independent and professional opinion about the fairness of the representations in the financial statements. What are the four main types of opinion an auditor of a public company might issue? Describe eac

> You recently joined the auditing staff of Best, Best, and Krug, CPAs. You have been assigned to the audit of Clearview, Inc., and have been asked by the audit senior to examine the balance sheet prepared by Clearview’s accountant. Requi

> Explain the difference(s) between investments in equity securities classified as current assets versus those classified as long-term (noncurrent) assets.

> Refer to Exhibit 14–4. Is the return on this investment proposal exactly 14%, more than 14%, or less than 14%? Explain. Exhibit 14-4: Sales revenues Less cost of goods sold. Less out-of-pocket costs for salaries, advertising, etc.

> Explain how the cost of capital serves as a screening tool when using (a) the net present value method and (b) the internal rate of return method

> A business executive once stated, “Depreciation is one of our biggest sources of cash.” Doyou agree that depreciation is a source of cash? Explain.

> If a stock’s market value exceeds its book value, then the stock is overpriced. Do you agree? Explain.

> The president of a plastics company was quoted in a business journal as stating, “We haven’t had a dollar of interest-paying debt in over 10 years. Not many companies can say that.” As a stockholder in this company, how would you feel about its policy of

> What is meant by the term financial leverage?

> What is meant by the dividend yield on a common stock investment?

> Would you expect a company in a rapidly growing technological industry to have a high or low dividend payout ratio?

> What is the basic purpose for examining trends in a company’s financial ratios and other data? What other kinds of comparisons might an analyst make?

> Distinguish between horizontal and vertical analysis of financial statement data.

> A company seeking a line of credit at a bank was turned down. Among other things, the bank stated that the company’s 2 to 1 current ratio was not adequate. Give reasons why a 2 to 1 current ratio might not be adequate.

> Would a sale of equipment for cash be considered a financing activity or an investing activity?Why?

> What is the major criticism of the payback and simple rate of return methods of making capital budgeting decisions?

> What is meant by the term payback period? How is the payback period determined? How can the payback method be useful?

> How is the project profitability index computed, and what does it measure?

> Assume that two companies in the same industry have equal earnings. Why might these companies have different price-earnings ratios? If a company has a price-earnings ratio of 20 and reports earnings per share for the current year of $4, at what price wou

> As the discount rate increases, the present value of a given future cash flow also increases.Do you agree? Explain.

> Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow (in millions of yen, denoted by ¥): Required: 1. For each division, compute the return on investment (RO

> For many years Futura Company has purchased the starters that it installs in its standard line of farmtractors. Due to a reduction in output, the company has idle capacity that could be used to producethe starters. The chief engineer has recommended agai

> Mason Paper Company (MPC) manufactures commodity grade papers for use in computer printers and photocopiers. MPC has reported net operating losses for the last two years due to intense price pressure from much larger competitors. The MPC management team—

> Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of £600,000on sales of £3,000,000. The company’s average operating assets for the

> Why aren’t common costs allocated to segments under the contribution approach?

> Explain how the segment margin differs from the contribution margin.

> Selected information relating to Yost Company’s operations for the most recent year is given below: The company applies overhead cost to products on the basis of standard machine-hours. Required: 1. What were the standard machine-hour

> “I know headquarters wants us to add that new product line,” said Dell Havasi, manager of Billings Company’s Office Products Division. “But I want to see the numbers before I make any move. Ourdivision’s return on investment (ROI) has led the company for

> Comparative data on three companies in the same service industry are given below: Required: 1. What advantages are there to breaking down the ROI computation into two separate elements,margin and turnover? 2. Fill in the missing information above, and c

> Imperial Jewelers is considering a special order for 20 handcrafted gold bracelets to be given asgifts to members of a wedding party. The normal selling price of a gold bracelet is $189.95 and itsunit product cost is $149.00 as shown below: Direct mater

> Provide the missing data in the following table for a distributor of martial arts products: Division Alpha Bravo Charlie $ ? $ ? Sales... $ ? $11,500,000 $ 920,000 Net operating income Average operating assets Margin.. $210,000 $800,000 ? $ ? 4% ? 7%

> Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below (the currency is the Australian dollar, denoted here as $): Required: 1. Compute the rate of return for each division using the return on investment (ROI) f

> There is often more than one way to improve a performance measure. Unfortunately, some of the actions taken by managers to make their performance look better may actually harm the organization. For example, suppose the marketing department is held respon

> Royal Lawncare Company produces and sells two packaged products, Weedban and Greengrow. Revenue and cost information relating to the products follow: Common fixed expenses in the company total $33,000 annually. Last year the company produced and sold 15,

> Posters.com is a small Internet retailer of high-quality posters. The company has $1,000,000 in operating assets and fixed expenses of $150,000 per year. With this level of operating assets and fixed expenses, the company can support sales of up to $3,00

> The standard cost card for the single product manufactured by Cutter, Inc., is given below: Manufacturing overhead is applied to production on the basis of standard direct labor-hours. During the year, the company worked 37,000 hours and manufactured 9,

> Wingate Company, a wholesale distributor of videotapes, has been experiencing losses for sometime, as shown by its most recent monthly contribution format income statement, which follows: Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> Refer to the data in Exercise 12–13. Data from Exercise 12-13: Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical anddental clinics. The firm has two offices—one in Chi

> Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor

> Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical anddental clinics. The firm has two offices—one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting job

> Bed & Bath, a retailing company, has two departments, Hardware and Linens. The company’smost recent monthly contribution format income statement follows: A study indicates that $340,000 of the fixed expenses being charged to Linens

> Ariel Tax Services prepares tax returns for individual and corporate clients. As the company has gradually expanded to 10 offices, the founder Max Jacobs has begun to feel as though he is losing controlof operations. In response to this concern, he has d

> CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below: Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,000,000 Net opera

> Pecs Alley is a regional chain of health clubs. The managers of the clubs, who have authority tomake investments as needed, are evaluated based largely on return on investment (ROI). TheSpringfield Club reported the following results for the past year: S

> Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Comp

> Haglund Department Store is located in the downtown area of a small city. While the store had been profitable for many years, it is facing increasing competition from large national chains that have set up stores on the outskirts of the city. Recently th

> Music Teachers, Inc., is an educational association for music teachers that has 20,000 members. Theassociation operates from a central headquarters but has local membership chapters throughout theUnited States. Monthly meetings are held by the local chap

> Selected operating information on three different companies for a recent year is given below: Required: For each company, state whether the company would have a favorable or unfavorable volume variance and why. Company A в Full-capacity machine-hour

> Tasman Products, Ltd., of Australia has a Maintenance Department that services the equipment inthe company’s Forming Department and Assembly Department. The cost of this servicing ischarged to the operating departments on the basis of m

> The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, anda racing bike. Data on sales and expenses for the past quarter follow: Management is concerned about the continued losses shown by the racing

> Sharp Motor Company has two operating divisions—an Auto Division and a Truck Division. The company has a cafeteria that serves the employees of both divisions. The costs of operating the cafeteria are budgeted at $40,000 per month plus $3 per meal served

> Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $2 per standard direct labor-hour and fixed manufacturing

> Korvanis Corporation operates a Medical Services Department for its employees. Charges to thecompany’s operating departments for the variable costs of the Medical Services Department arebased on the actual number of employees in each de

> Konig Enterprises, Ltd., owns and operates three restaurants in Vancouver, B.C. The company allocates its fixed administrative expenses to the three restaurants on the basis of sales dollars. During 2008, the fixed administrative expenses totaled $2,000,

> Hannibal Steel Company has a Transport Services Department that provides trucks to haul ore from the company’s mine to its two steel mills—the Northern Plant and the Southern Plant. Budgeted costs for the Transport Services Department total $350,000 per

> If variable manufacturing overhead is applied to production on the basis of direct labor hours and the direct labor efficiency variance is unfavorable, will the variable overhead efficiency variance be favorable or unfavorable, or could it be either? Exp

> “Our workers are all under labor contracts; therefore, our labor rate variance is bound to be zero.” Discuss.

> The materials price variance can be computed at what two different points in time? Which point is better? Why?

> What is the difference between delivery cycle time and throughput time? What four elements make up throughput time? Into what two classes can these four elements be placed?

> Why can undue emphasis on labor efficiency variances lead to excess work in process inventories?

> Norwall Company’s variable manufacturing overhead should be $3.00 per standard machine-hour and its fixed manufacturing overhead should be $300,000 per period. The following information is available for a recent period: a. The denominat

> A number of costs are listed below that may be relevant in decisions faced by the management of Svahn, AB, a Swedish manufacturer of sailing yachts: Required: Copy the information above onto your answer sheet and place an X in the appropriate column toi

> Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company’s normal activity level of 60,000 units per year is: Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . $5.10 Dir

> What is a statistical control chart, and how is it used?

> Miller Toy Company manufactures a plastic swimming pool at its Westwood Plant. The plant has been experiencing problems as shown by its June contribution format income statement below: Janet Dunn, who has just been appointed general manager of the Westw

> DataSpan, Inc., automated its plant at the start of the current year and installed a flexible manufacturing system. The company is also evaluating its suppliers and moving toward Lean Production. Many adjustment problems have been encountered, including

> Becton Labs, Inc., produces various chemical compounds for industrial use. One compound, called Fludex, is prepared using an elaborate distilling process. The company has developed standard costs for one unit of Fludex, as follows: During November, the

> ColdKing Company is a small producer of fruit-flavored frozen desserts. For many years, Cold- King’s products have had strong regional sales on the basis of brand recognition; however, other companies have begun marketing similar products in the area, an

> Sharp Company manufactures a product for which the following standards have been set: During March, the company purchased direct materials at a cost of $55,650, all of which were used in the production of 3,200 units of product. In addition, 4,900 hours

> Marvel Parts, Inc., manufactures auto accessories. One of the company’s products is a set of seat covers that can be adjusted to fi t nearly any small car. The company has a standard cost system in use for all of its products. According

> Tombro Industries is in the process of automating one of its plants and developing a flexible manufacturing system. The company is finding it necessary to make many changes in operating procedures. Progress has been slow, particularly in trying to develo

> Danson Company is a chemical manufacturer that supplies various products to industrial users. The company plans to introduce a new chemical solution, called Nysap, for which it needs to develop a standard product cost. The following information is availa

> John Fleming, chief administrator for Valley View Hospital, is concerned about the costs for tests in the hospital’s lab. Charges for lab tests are consistently higher at Valley View than at other hospitals and have resulted in many complaints. Also, bec

> Benoit Company produces three products, A, B, and C. Data concerning the three products follow(per unit): Demand for the company’s products is very strong, with far more orders each month than the companycan produce with the available

> The Walton Toy Company manufactures a line of dolls and a doll dress sewing kit. Demand for thedolls is increasing, and management requests assistance from you in determining an economicalsales and production mix for the coming year. The company has prov

> Operating at a normal level of 30,000 direct labor-hours, Lasser Company produces 10,000 units of product each period. The direct labor wage rate is $12 per hour. Two and one-half yards of direct materials go into each unit of product; the material costs

> Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data wer

> Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solution

> SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 4,000 of these meals us

> Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 35,000 helmets,

> Martin Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a raw material called Echol. Information concerning the purchase and use of Echol follows: Purchase of Echol Echol is purchased in 15-gallon containers at a co

> The auto repair shop of Quality Motor Company uses standards to control the labor time and labor cost in the shop. The standard labor cost for a motor tune-up is given below: The record showing the time spent in the shop last week on motor tune-ups has

> Erie Company manufactures a small CD player called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate CD player are as follows: During August, 5,750 hours of direct labor time w

> Refer to the data in Exercise 11–8. Assume that instead of producing 4,000 units during the month, the company produced only 3,000 units, using 14,750 pounds of material. (The rest of the material purchased remained in raw materials inventory.) Data fro

> Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $60,000 per ton, one-fourth of which is allocated to product X15. Seven thousand units of product X15 are produced from each ton

> Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below: During the most recent month, the following activity was recorded: a. Twenty thousand pounds of ma

> Come-Clean Corporation produces a variety of cleaning compounds and solutions for both industrialand household use. While most of its products are processed independently, a few are related, such as the company’s Grit 337 and its Sparkle silver polish.

> Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy: During July, the company produced 3,000 Maze toys. Product

> Primara Corporation has a standard cost system in which it applies overhead to products based on the standard direct labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: Required: 1. Compute the fix

> Victoria Chocolates, Ltd., makes premium handcrafted chocolate confections in London. The owner of the company is setting up a standard cost system and has collected the following data for one of the company’s products, the Empire Truff

> You have recently accepted a position with Vitex, Inc., the manufacturer of a popular consumer product. During your first week on the job, the vice president has been favorably impressed with your work. She has been so impressed, in fact, that yesterday