Question: Describe three ways in which liabilities are

> (Supplement 12A) How is the sale of equipment reported on the statement of cash flows using the indirect method?

> What are noncash investing and financing activities? Give one example. How are noncash investing and financing activities reported on the statement of cash flows?

> What are the typical cash inflows from financing activities? What are the typical cash outflows from financing activities?

> What are the typical cash inflows from investing activities? What are the typical cash outflows from investing activities?

> As a junior analyst, you are evaluating the financial performance of Digilog Corporation. Impressed by this year’s growth in sales (20% increase), receivables (40% increase), and inventories (50% increase), you plan to report a favorable evaluation of th

> Loan covenants require that E-Gadget Corporation (EGC) generate $200,000 cash from operating activities each year. Without intervening during the last month of the current year, EGC will generate only $180,000 cash from operations. What are the pros and

> Compare the purposes of the income statement, the balance sheet, and the statement of cash flows

> In what ways might accounting frauds be similar to cases of academic dishonesty?

> Brothers Harry and Herman Hausyerday began operations of their machine shop (H & H Tool, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2018, follows (the amounts are rounded to thousands of do

> What is treasury stock? Why do corporations acquire their own stock to hold in treasury?

> What items are included in Accumulated Other Comprehensive Income (Loss)?

> What are the usual characteristics of preferred stock?

> What is the distinction between par value and no-par value capital stock?

> What are the differences between common stock and preferred stock?

> Explain each of the following terms: (a) authorized common stock, (b) issued common stock, and (c) outstanding common stock.

> Just prior to filing for bankruptcy protection in 2009, General Motors asked its bondholders to exchange their investment in GM’s bonds for GM stock. The bondholders rejected this proposal. Why might GM have proposed this exchange? Why might the bondhold

> You work for a public company that has relied heavily on debt financing in the past and is now considering a preferred stock issuance to reduce its debt-to-assets ratio. Debtto-assets is one of the key ratios in your company’s loan covenants. Should the

> What are the relative advantages of equity versus debt financing?

> What is one interpretation of a high P/E ratio?

> Briefly define what an ethical dilemma is and describe the steps to consider when evaluating ethical dilemmas.

> How do stock repurchases affect the EPS and ROE ratios?

> Why is the EPS number so popular? What are its limitations?

> Identify and explain four important dates with respect to dividends.

> Your company has been very profitable and expects continued financial success. Its stock price has reached a point where the company needs to make it more affordable. Would you recommend a stock dividend or a stock split? Why?

> What are the primary reasons for issuing a stock dividend?

> What is a stock dividend? How does a stock dividend differ from a cash dividend?

> What is the difference between cumulative and noncumulative preferred stock?

> What are the two financial requirements to support the declaration of a cash dividend? What are the effects of a cash dividend on assets and stockholders’ equity?

> How is treasury stock reported on the balance sheet? How is the “gain or loss” on reissued treasury stock reported on the financial statements?

> Identify the primary advantages of the corporate form of business.

> What is the main goal for accounting rules in the United States and around the world? What characteristics must financial information possess to reach that goal?

> What are the reasons that some bonds are issued at a discount and others are issued at a premium?

> If a company has a long-term loan that has only two years remaining until it matures, how is it reported on the balance sheet (a) this year and (b) next year?

> Your company plans to hire an employee at a yearly salary of $70,000. Someone in your company says the actual cost will be lower because of payroll deductions. Someone else says it will be higher. Who is right? What is likely to be the total cost to the

> Why are payroll taxes and sales taxes considered liabilities?

> Why is Deferred Revenue considered a liability?

> Define accrued liability. Give an example of a typical accrued liability.

> What three factors influence the dollar amount reported for liabilities?

> Define liability. What’s the difference between a current liability and a long-term liability?

> Over the period to maturity, why does yearly interest expense decrease on an installment note?

> How is interest expense calculated using the simplified approach to the effective-interest method for a bond issued at (a) a discount and (b) a premium?

> Briefly describe the organization responsible for developing accounting measurement rules (generally accepted accounting principles) in the United States.

> How is interest expense calculated using the effective-interest method of amortization for a bond issued at (a) a discount and (b) a premium?

> How is interest expense calculated using the straight-line method of amortization for a bond issued at (a) a discount and (b) a premium?

> What is a contingent liability? How is a contingent liability reported under GAAP? How does this differ under IFRS?

> What is the difference between a secured bond and a debenture? Which type carries more risk for the lender?

> What is the carrying value of a bond payable?

> Will the stated interest rate be higher than the market interest rate or will the market interest rate be higher than the stated interest rate when a bond is issued at (a) face value, (b) a discount, and (c) a premium?

> What is the difference between the stated interest rate and the market interest rate on a bond?

> What type of depreciation expense pattern is used under each of the following methods and when is its use appropriate? a. The straight-line method. b. The units-of-production method. c. The double-declining-balance method.

> In computing depreciation, three values must be known or estimated. Identify and describe each.

> Describe the equation that provides the structure for the statement of cash flows. Explain the three major types of activities reported on the statement.

> Describe the relationship between the expense recognition (“matching”) principle and accounting for long-lived assets

> Describe the relationship between the expense recognition (“matching”) principle and accounting for long-lived assets

> Distinguish between ordinary repairs and extraordinary repairs. How is each accounted for?

> Waste Management, Inc., regularly incurs costs (e.g., salaries, legal fees, travel) to find new locations for landfill sites. What reasons support capitalizing these costs? What reasons support expensing these costs?

> What is the term for recording costs as assets rather than as expenses? Describe how the decision to record costs as assets, rather than expenses, affects the balance sheet and income statement

> Over what period should an addition to an existing long-lived asset be depreciated? Explain.

> Under the cost principle, what amounts should be recorded as a cost of a long-lived asset?

> How does depletion affect the balance sheet and income statement? Why is depletion accounted for in a manner that differs from depreciation and amortization?

> Johnson & Johnson, the maker of Tylenol, uses GAAP. Bayer, the maker of aspirin, uses IFRS. Explain what complications might arise when comparing the long-lived assets of these two companies.

> How is the fixed asset turnover ratio computed? Explain its meaning.

> Describe the equation that provides the structure for the statement of retained earnings. Explain the four major items reported on the statement of retained earnings

> FedEx Corporation reports the cost of its aircraft in a single category called Flight Equipment. What impact would adopting IFRS have on this aspect of FedEx’s accounting?

> Define goodwill. When is it appropriate to record goodwill as an intangible asset? When is its value decreased?

> Distinguish between depreciation and amortization.

> What is book value? When equipment is sold for more than book value, how is the transaction recorded? How is it recorded when the selling price is less than book value?

> What is an asset impairment? How is it accounted for?

> A local politician claimed, “to reduce the government’s deficit, it’s time we require companies to start paying their deferred income tax liabilities.” Explain to the politician what deferred income taxes represent and why they should not be viewed as ac

> After merging with Northwest Airlines, Delta Airlines increased the estimated useful life and increased the estimated residual value of its flight equipment. All else equal, how will each of these changes affect Delta’s Depreciation Expense and Net Incom

> Define long-lived assets. What are the two common categories of long-lived assets? Describe each.

> What are the three components of the interest formula? Explain how this formula adjusts for interest periods that are less than a full year.

> What is the primary difference between accounts receivable and notes receivable

> Describe the equation that provides the structure for the income statement. Explain the three major items reported on the income statement.

> A local phone company had a customer who rang up $300 in charges during September 2018 but did not pay. Despite reminding the customer of this balance, the company was unable to collect in October, November, or December. In March 2019, the company finall

> How does the use of calculated estimates differ between the aging of accounts receivable method and the percentage of credit sales method?

> What is the effect of the write-off of uncollectible accounts (using the allowance method) on (a) net income and (b) net accounts receivable?

> Using the allowance method, is Bad Debt Expense recognized in the period in which (a) sales related to the uncollectible account were made or (b) the seller learns that the customer is unable to pay?

> Which basic accounting principles does the allowance method of accounting for bad debts satisfy?

> In March 2015, Target Corporation decided to discontinue its Target credit card operations. What factors would this company have considered prior to making this decision?

> Refer to question 7. What amounts would be reported if the direct write-off method were used? Which method (allowance or direct write-off) more accurately reports the financial results?

> Describe how (and when) the direct write-off method accounts for uncollectible accounts. What are the disadvantages of this method?

> When customers experience economic difficulties, companies consider extending longer credit periods. What are the possible consequences of longer credit periods on Sales, Accounts Receivable, Allowance for Doubtful Accounts, Net Income, and the receivabl

> What two approaches discussed in this chapter can managers take to speed up sluggish collections of receivables? List one advantage and disadvantage for each approach.

> Describe the basic accounting equation that provides the structure for the balance sheet. Define the three major components reported on the balance sheet

> Does an increase in the receivables turnover ratio generally indicate faster or slower collection of receivables? Explain.

> As of May 1, 2016, Krispy Kreme Doughnuts had $1,170,000 of Notes Receivable due within one year, $29,039,000 of Accounts Receivable, and $346,000 in its Allowance for Doubtful Accounts (assume all related to accounts receivable). How should these accoun

> What are the advantages and disadvantages of extending credit to customers?

> Explain briefly the application of the LCM/NRV rule to ending inventory. Describe its effect on the balance sheet and income statement when inventory value is lower than cost.

> Several managers in your company are experiencing personal financial problems and have asked that your company switch from LIFO to FIFO so that they can receive bigger bonuses, which are tied to the company’s net income. How would you respond to this req

> Contrast the income statement effect of LIFO versus FIFO (on Cost of Goods Sold and Gross Profit) when (a) costs are rising and (b) costs are falling.

> Contrast the effects of LIFO versus FIFO on ending inventory when (a) costs are rising and (b) costs are falliv

> Where possible, the inventory costing method should mimic actual product flows.” Do you agree? Explain.

> Which inventory cost flow method is most similar to the flow of products involving (a) a gumball machine, (b) bricks off a stack, and (c) gasoline out of a tank?v

> The chapter discussed four inventory costing methods. List the four methods and briefly explain each.

> Briefly explain the difference between net income and net loss.

> Describe the specific types of inventory reported by merchandisers and manufacturers.

> Explain why an error in ending inventory in one period affects the following period

> Distinguish perpetual inventory systems from periodic inventory systems by describing when and how cost of goods sold is calculated when using LIFO.

> You work for a made-to-order clothing company, whose reputation is based on its fast turnaround from order to delivery. The owner of your company is considering outsourcing much of the clothing production because she thinks this will improve inventory tu