Question: Ramesh Company has prepared preliminary financial

> When treasury stock is purchased with cash, what is the impact on the balance sheet equation? a. No change: The reduction of the asset cash is offset with the addition of the asset treasury stock. b. Assets decrease and stockholders’ equity increases. c.

> Which statement regarding dividends is false? a. Dividends represent a distribution of corporate profits to owners. b. Both stock and cash dividends reduce retained earnings. c. Cash dividends paid to stockholders reduce net income. d. None of the above

> A company has net income of $225,000 and declares and pays dividends in the amount of $75,000. What is the net impact on retained earnings? a. Increase of $225,000 c. Increase of $150,000 b. Decrease of $75,000 d. Decrease of $150,000

> Which of the following dates does not require a journal entry? a. Date of declaration. c. Date of payment. b. Date of record. d. A journal entry is recorded on all of these dates.

> A company issued 100,000 shares of common stock with a par value of $1 per share. The stock sold for $20 per share. By what amount will stockholders’ equity increase? a. $100,000 c. $2,000

> Which order best describes the largest number of shares to the smallest number of shares? a. Shares authorized, shares issued, shares outstanding. b. Shares issued, shares outstanding, shares authorized. c. Shares outstanding, shares issued, shares autho

> Which of the following statements about stock dividends is true? a. Stock dividends are reported on the statement of cash flows. b. Stock dividends are reported on the statement of stockholders’ equity. c. Stock dividends increase total equity. d. Stock

> Which statement regarding treasury stock is false? a. Treasury stock is considered to be issued but not outstanding. b. Treasury stock has no voting, dividend, or liquidation rights. c. Treasury stock reduces total equity on the balance sheet. d. None of

> Katz Corporation has issued 400,000 shares of common stock and holds 20,000 shares in treasury. The charter authorized the issuance of 500,000 shares. The company has declared and paid a dividend of $1 per share of common stock. What is the total amount

> You are the president of a very successful Internet company that has had a remarkably profitable year. You have determined that the company has more than $10 million in cash generated by operating activities not needed in the business. You are thinking a

> Assume current assets totaled $120,000 and the current ratio was 1.5 before the following independent transactions: (1) Purchased merchandise for $40,000 on short-term credit. (2) Purchased a delivery truck for $25,000. Paid $3,000 cash and signed a two-

> Refer to the financial statements of Urban Outfitters in Appendix C at the end of this book Financial statements of Urban Outfitters: Required: 1. What is the balance in short-term and long-term marketable securities reported by the company on January

> Luther Company obtained a charter from the state in January of this year. The charter authorized 1,000,000 shares of common stock with a par value of $5. During the year, the company earned $429,000. Also during the year, the following selected transacti

> When one company acquires control of another, how are the acquired company’s assets and liabilities recorded?

> Under the fair value method, when and how does the investor company measure revenue?

> Explain how bonds held to maturity are reported on the balance sheet.

> Match the following. Answers may be used more than once: Measurement Method A. Amortized cost 1. Less than 20 percent ownership. B. Equity method C. Acquisition method and consolidation D. Fair value method 2. Current fair value. 3. More than 50 perc

> Company W purchases 10 percent of Company Z and Company W intends to hold the stock for at least five years. At the end of the current year, how would Company W’s investment in Company Z be reported on Company W’s December 31 (year-end) balance sheet? a.

> Company X owns 40 percent of Company Y and exercises significant influence over the management of Company Y. Therefore, Company X uses what method of accounting for reporting its ownership of stock in Company Y? a. The amortized cost method. b. The equit

> Lamichael Company purchased 100 percent of the outstanding voting shares of Darrell Corporation in the open market for $230,000 cash and Darrell was merged into Lamichael Company. On the date of acquisition, the fair value of Darrell Corporation’s proper

> Which of the following is true regarding the economic return from investing ratio? a. This ratio is used to evaluate how efficiently a company manages its total assets. b. This ratio is used to evaluate the efficiency of a company given the capital contr

> Bott Company acquired 500 shares of stock of Barus Company at $53 per share as a long-term investment. This represents 40 percent of the outstanding voting shares of Barus. During the year, Barus paid stockholders $3 per share in dividends. At year-end,

> Match each ratio or percentage with its computation. Ratios or Percentages Definitions 1. Net profit margin 2. Inventory turnover ratio A. Net Income + Net Sales Revenue 3. Average days to collect receivables 4. Dividend yield ratio 5. Return on equi

> Bott Company acquired 500 shares of stock of Barus Company at $53 per share as a long-term investment. This represents 10 percent of the outstanding voting shares of Barus. During the year, Barus paid stockholders $3 per share in dividends. At year-end,

> When using the equity method of accounting, when is revenue recorded on the books of the investor company? a. When a dividend is received from the affiliate. b. When the fair value of the affiliate stock increases. c. When the affiliate company reports n

> When recording dividends received from a stock investment accounted for using the equity method, which of the following statements is true? a. Total assets are increased and net income is increased. b. Total assets are increased and total stockholders’ e

> Realized gains and losses are recorded on the income statement for which of the following transactions in trading securities and available-for-sale securities? a. When adjusting a trading security to its fair value. b. Only when recording the sale of a t

> Dividends received from stock that is reported as an available-for-sale security in the long-term assets section of the balance sheet are reported as which of the following? a. An increase to cash and a decrease to the investment in stock account. b. An

> You have the opportunity to invest $10,000 in one of two companies from a single industry. The only information you have is below. Which company would you select? Justify your choice. Industry Average Ratios for Current Year Company A Company B Curre

> Working together as a team, select an industry to analyze. Yahoo Finance provides lists of industries at biz.yahoo.com/p/industries.html. Click on an industry for a list of companies in that industry. Alternatively, go to Google Finance at www.google.com

> Explain how a company’s accounting policy choices can affect its ratios

> What do market ratios focus on? What is an example of a market ratio and how is it computed?

> What do solvency ratios focus on? What is an example of a solvency ratio and how is it computed? Exhibit 13.3:

> Compute the component percentages for Lowe’s income statement below. Discuss any trends you observe. LOWE'S COMPANIES, INC. Consolidated Statements of Earnings (in millions, except per share and percentage data) Fiscal Years Ended o

> What do liquidity ratios focus on? What is an example of a liquidity ratio and how is it computed?

> What do turnover ratios focus on? What is an example of a turnover ratio and how is it computed?

> What do profitability ratios focus on? What is an example of a profitability ratio and how is it computed?

> What are component percentages? Why are they useful?

> Explain why rapid growth in total sales might not necessarily be a good thing for a company.

> Company A uses the FIFO method to account for inventory and Company B uses the LIFO method. The two companies are exactly alike except for the difference in inventory cost flow assumptions. Costs of inventory items for both companies have been rising ste

> Use the data in Problem 5 for Prince Company. Assume that the stock price per share is $28 and that dividends in the amount of $3.50 per share were paid during Year 2. Compute the following ratios: · Earnings per share · Current ratio

> Use the data given in Problem 5 for Prince Company. Data from Problem 5: The comparative financial statements for Prince Company are below: Required: 1. Compute component percentages for Year 2. 2. Compute the ratios in the DuPont model for Year 2.

> The comparative financial statements for Prince Company are below: Required: 1. Complete the following columns for each item in the preceding comparative financial statements: INCREASE (DECREASE) from Year 1 to Year 2 Amount Percent 2. By what amoun

> The current year financial statements for Blue Water Company and Prime Fish Company are presented below. Both companies are in the fish catching and manufacturing business. Both have been in business approximately 10 years, and each has had steady growth

> The following selected financial data pertain to four unidentified companies: The above financial information pertains to the following companies: a. Full-line department store b. Wholesale fish company c. Automobile dealer (low-priced used cars) d. Rest

> Using the financial information presented in Exhibit 13.1, calculate the following ratios for The Home Depot: · Return on equity · Return on assets · Total asset turnover · Inventory turnover · Current ratio · Quick ratio · Cash coverage ratio · Debt-to-

> You have the opportunity to invest $10,000 in one of two companies from a single industry. The only information you have is below. Which company would you select? Justify your choice. Ratios for Current Year Company A Company B Industry Average Curre

> Company X and Company Y are two giants of the retail industry. Both offer full lines of moderately priced merchandise. In the last fiscal year, annual sales for Company X totaled $53 billion and annual sales for Company Y totaled $20 billion. Compare the

> California Pizza Kitchen opened its first restaurant in Beverly Hills in 1985. Almost immediately after the first location opened, it expanded from California to more than 250 locations in more than 30 states and 11 countries. California Pizza Kitchen co

> Youngstown Corporation is considering changing its inventory method from FIFO to LIFO. Assume that inventory prices have been increasing. All else equal, what impact would you expect the change to have on the following ratios: net profit margin, fixed as

> Compute the component percentages for Lowe’s income statement below. Discuss any trends you observe. LOWE'S COMPANIES, INC. Consolidated Statements of Earnings (in millions, except per share and percentage data) Fiscal Years Ended o

> The following selected financial data pertain to four unidentified companies: The above financial information pertains to the following companies: a. Full-line department store b. Wholesale fish company c. Automobile dealer (low-priced used cars) d. Res

> The following selected financial data pertain to four unidentified companies: The above financial information pertains to the following companies: a. Cable TV company b. Grocery store c. Accounting firm d. High-end jewelry store Required: Match each co

> The following selected financial data pertain to four unidentified companies: The above financial information pertains to the following companies: a. Travel agency b. Hotel c. Meat processing company d. Drug company Required: Match each company with it

> The following selected financial data pertain to four unidentified companies: The above financial information pertains to the following companies: a. Cable TV company b. Grocery store c. Accounting firm d. High-end jewelry store Required: Match each co

> The following selected financial data pertain to four unidentified companies: The above financial information pertains to the following companies: a. High-end clothing store b. Advertising agency c. Wholesale candy company d. Car manufacturer Required:

> Dollar General Corporation operates general merchandise stores that feature quality merchandise at low prices. All stores are located in the United States, predominantly in small towns in 24 mid western and southeastern states. In the current year, the c

> Assume current assets totaled $120,000 and the current ratio was 1.5 before the following independent transactions: (1) Purchased merchandise for $40,000 on short-term credit. (2) Purchased a delivery truck for $25,000. Paid $3,000 cash and signed a two-

> Match each ratio or percentage with its computation. Ratios or Percentages Definitions 1. Net profit margin 2. Inventory turnover ratio A. Net Income + Net Sales Revenue 3. Average days to collect receivables 4. Dividend yield ratio 5. Return on equi

> From DuPont model. Using that framework, find the missing amount in each of the following cases: Case 1: ROE is 10 percent; net income is $200,000; the total asset turnover ratio is 5; and net sales are $1,000,000. What is the amount of average stockhold

> In this chapter, we discussed the importance of analyzing financial results based on an understanding of the company’s business strategy. Using the DuPont model, we illustrated how different strategies could earn high returns for investors. Assume that t

> Barton Company requested a large loan from First Federal Bank to acquire a tract of land for future expansion. Barton reported current assets of $1,900,000 ($430,000 in cash) and current liabilities of $1,075,000. First Federal denied the loan request fo

> Refer to the financial statements of American Eagle (Appendix B) and Urban Outfitters (Appendix C) and the Industry Ratio Report (Appendix D) at the end of this book. Compute the following ratios for fiscal 2014: return on equity, basic earnings per shar

> The following selected financial data pertain to four unidentified companies: The above financial information pertains to the following companies: a. Travel agency b. Hotel c. Meat processing company d. Drug company Required: Match each company with it

> Refer to the financial statements of Urban Outfitters given in Appendix C at the end of this book. Compute the following ratios for fiscal 2014: return on equity, basic earnings per share, net profit margin, inventory turnover, current ratio, debt-to-equ

> Refer to the financial statements of American Eagle Outfitters given in Appendix B at the end of this book. Compute the following ratios for fiscal 2014: return on equity, basic earnings per share, net profit margin, inventory turnover, current ratio, de

> The comparative financial statements for Summer Corporation are below: Required: 1. Complete the following columns for each item in the preceding comparative financial statements: INCREASE (DECREASE) from Year 1 to Year 2 Amount Percent 2. By what am

> Tabor Company has just prepared the following comparative annual financial statements for the current year: Required: 1. For the current year, compute the turnover, liquidity, and solvency ratios in Exhibit 13.3. Assume cash flows from operating activit

> Using the financial information presented in Exhibit 13.1, calculate the following ratios for The Home Depot: · Net profit margin · Earnings quality · Receivable turnover · Cash ratio Â&middot

> Coke and Pepsi are well-known international brands. Coca-Cola sells more than $46 billion worth of products each year while annual sales of PepsiCo products exceed $67 billion. Compare the two companies as a potential investment based on the following ra

> Use the data given in Alternate Problem 5 for Summer Corporation. Data given in Alternate Problem 5: The comparative financial statements for Prince Company are below: Required: 1. Compute component percentages for Year 2. 2. Compute the ratios in the

> What are noncash investing and financing activities? Give two examples. How are they reported on the statement of cash flows?

> Compare the two methods of reporting cash flows from operating activities in the statement of cash flows.

> Explain why a $50,000 increase in inventory during the year must be included in developing cash flows from operating activities under both the direct and indirect methods.

> The following selected financial data pertain to four unidentified companies: The above financial information pertains to the following companies: a. High-end clothing store b. Advertising agency c. Wholesale candy company d. Car manufacturer Required:

> Explain why cash payments during the period for purchases and for salaries are not specifically reported as cash outflows on the statement of cash flows, under the indirect method.

> What are the major categories of business activities reported on the statement of cash flows? Define each of these activities.

> What are cash equivalents? How are purchases and sales of cash equivalents reported on the statement of cash flows?

> What information does the statement of cash flows report that is not reported on the other required financial statements?

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

> How is the sale of equipment reported on the statement of cash flows under the indirect method?

> Sharp Screen Films, Inc., is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as foll

> Hanks Company is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized as follows: Additio

> XS Supply Company is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized: Additional Dat

> Omega Company’s accountants have just completed the income statement and balance sheet for the year and have provided the following information (dollars in thousands): Other Data: The company issued $30,000, 8 percent bonds payable at p

> Cintas designs and manufactures uniforms for corporations throughout the United States and Canada. The company’s stock is traded on the NASDAQ. Selected information from the company’s financial statements follows. Req

> Use the information concerning Sharp Screen Films, Inc., provided in Problem 1 to fulfill the following requirements. Data from Problem 1: Sharp Screen Films, Inc., is developing its annual financial statements at December 31, current year. The statemen

> BG Wholesalers is developing its annual financial statements at December 31, current year. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized: Additional Data:

> Refer to the following summarized income statement and additional selected information for Trumansburg, Inc.: Income Statement Revenues ………………………………………….$150,800 Cost of sales ………………………………………….55,500 Gross margin ………………………………………..95,300 Salary expense ……

> Refer to the information for Rodriguez Company in Exercise 8. Data given in Exercise 8: Rodriguez Company completed its income statement and comparative balance sheet for the current year and provided the following information: In addition, Rodriguez bo

> Refer to the information for Peak Heights Company in Exercise 7. Data from Exercise 7: The following information pertains to Peak Heights Company: Required: Present the operating activities section of the statement of cash flows for Peak Heights Compan

> An analysis of Courtney Corporation’s operational asset accounts provided the following information: a. Acquired a large machine that cost $36,000. Courtney paid for it by giving a $15,000, 12 percent interest-bearing note due at the end of two years and

> Gibraltar Industries is a Buffalo, New York–based manufacturer of high-value-added steel products. In a recent year, it reported the following activities: Acquisitions (investments in other companies) …………….…………….$(109,248) Increase in inventories ………………

> Computer Service and Repair was started five years ago by two college roommates. The company’s comparative balance sheets and income statement are presented below, along with additional information. Additional Data: a. Prepaid expenses

> Shallow Waters Company was started several years ago by two diving instructors. The company’s comparative balance sheets and income statement are presented below, along with additional information. Additional Data: a. Prepaid expenses r

> Oering’s Furniture Corporation is a Virginia-based manufacturer of furniture. In a recent year, it reported the following activities: Net income …………………………………………………………………….$ 5,135 Purchase of property, plant, and equipment ……………………….1,071 Borrowings unde

> Answer the questions below. Treat each case as being independent from the other cases. Case A: The charter for Rogers, Incorporated, authorized the following stock: Common stock, $10 par value, 103,000 shares authorized Preferred stock, 9 percent, $8 par

> A recent annual report for PepsiCo contained the following information for the period (dollars in millions): Net income …………………………………………………………….$6,462 Depreciation and amortization …………………………………...2,737 Increase in accounts receivable ……………………………………666 I

> During the period, Sanchez Company sold some excess equipment at a loss. The following information was collected from the company’s accounting records: From the Income Statement Depreciation expense …………………………….$ 1,500 Loss on sale of equipment ………………………

> During two recent years Perez Construction, Inc., disposed of the following plant and equipment: Required: 1. Determine the cash flow from the sale of property for each year that would be reported in the investing activities section of the cash flow sta