/ Required Determine the absolute change and the percentage for these items.
> The Bishop Company has a balance in the warranty obligation account of $400,000. An analysis of the products sold under warranty indicates that a balance of $900,000 should be adequate for this year-end. The president of Bishop Company directs that the b
> Answer the following multiple-choice questions: a. Which of the following is not considered to be a nonrecurring item? 1. Discontinued operations 2. Extraordinary items 3. Cumulative effect of change in accounting principle 4. Interest expense 5. N
> Consecutive five-year balance sheets and income statements of Mary Lou Szabo Corporation are as follows: Required: a. Compute the following for the years ended December 31, 2009–2011: 1. Net profit margin 2. Total asset turnover 3.
> Transactions affect various financial statement amounts. Required: Indicate the effects of the previous transactions on each of the following: net profit, retained earnings, total stockholders’ equity. Use + to indicate an increase,
> Dexall Company recently had a fire in its store. Management must determine the inventory loss for the insurance company. Since the firm did not have perpetual inventory records, the insurance company has suggested that it might accept an estimate using t
> The following financial information is for A. Galler Company for 2011, 2010, and 2009: Required: a. For 2011, 2010, and 2009, determine the following: 1. Return on assets (using end-of-year total assets) 2. Return on investment (using end-of-year long
> Consecutive five-year balance sheets and income statements of Laura Gibson Corporation are shown below and on the following page. Required: a. Compute the following for the years ended December 31, 2007–2011: 1. Times interest earned 2.
> Allen Company and Barker Company are competitors in the same industry. Selected financial data from their 2011 statements follow. Required: a. Compute the following ratios for each company: 1. Times interest earned 2. Debt ratio 3. Debt/equity ratio
> The following items are from Taperline Corporation on December 31, 2012. Assume a flat 40% corporate tax rate on all items, including the casualty loss. Sales …………………………………………. $670,000 Rentalincome……………………………………..3,600 Gain on the sale of fixed assets……
> For the year ended June 30, 2011, A.E.G. Enterprises presented the financial statements below. Early in the new fiscal year, the officers of the firm formalized a substantial expansion plan. The plan will increase fixed assets by $190 million. In additio
> Mr. Parks has asked you to advise him on the long-term debt-paying ability of Arodex Company. He provides you with the following ratios: Required: a. Give the implications and the limitations of each item separately and then the collective influence that
> Individual transactions often have a significant impact on ratios. This problem will consider the direction of such an impact. Required: Indicate the effect of each of the transactions on the ratios listed. Use + to indicate an increase, âˆ&
> Kaufman Company’s balance sheet follows: Required a. Compute the debt ratio. b. Compute the debt/equity ratio. c. Compute the ratio of total debt to tangible net worth. d. Comment on the amount of debt that Kaufman Company has As
> Sherwill’s statement of consolidated income is as follows: Note: Depreciation expense totals $200; operating lease payments total $150; and preferred dividends total $50. Assume that one-third of operating lease payments is for interest
> Jones Petro Company reports the following consolidated statement of income: Required: a. Compute the times interest earned. b. Compute the fixed charge coverage. $2,989 Operating revenues Costs and expenses: Cost of rentals and royalties Cost of sa
> Consider the following operating figures: Required: a. Compute the times interest earned. b. Compute the cash basis times interest earned. Net sales $1,079,143 Cost and deductions: Cost of sales 792,755 264,566 4,311 5,059 1,066,691 $ Selling and
> Answer the following multiple-choice questions: a. Which of the following ratios can be used as a guide to a firm’s ability to carry debt from an income perspective? 1. Debt ratio 2. Debt to tangible net worth 3. Debt/equity 4. Times interest earned
> The inventory and sales data for this year for G. Rabbit Company are as follows: Required: Using the above data from G. Rabbit Company, compute the following: a. The accounts receivable turnover in days b. The inventory turnover in days c. The opera
> D. Szabo Company had an average inventory of $280,000 and a cost of goods sold of $1,250,000. Required : Compute the following: a. The inventory turnover in days b. The inventory turnover
> The Kelly Services, Inc., and Subsidiaries balance sheets from its 2010 annual report are presented in Exhibit 5-4. Required a. Using the balance sheets, prepare a vertical common-size analysis for 2010 and 2009. Use total assets as a base. b. Using th
> J. Shaffer Company has an ending inventory of $360,500 and a cost of goods sold for the year of $2,100,000. It has used LIFO inventory for a number of years because of persistent inflation. Required: a. Compute the days’ sales in inventory. b. Is J. Sha
> P 6-5 a P. Gibson Company has computed its accounts receivable turnover in days to be 36. Required Compute the accounts receivable turnover per year. P 6-5 b P. Gibson Company has computed its accounts receivable turnover per year to be 12. Required Comp
> L. Solomon Company would like to compare its days’ sales in receivables with that of a competitor, L. Konrath Company. Both companies have had similar sales results in the past, but L. Konrath Company has had better profit results. L. S
> Mr. Williams, the owner of Williams Produce, wants to maintain control over accounts receivable. He understands that days’ sales in receivables and accounts receivable turnover will give a good indication of how well receivables are being managed. Willia
> Hawk Company wants to determine the liquidity of its receivables. It has supplied you with the following data regarding selected accounts for December 31, 2011, and 2010: Required:a. Compute the number of days’ sales in receivables a
> In this problem, compute the acid-test ratio as follows: Required Determine the cost of sales of a firm with the following financial data. Current ratio …………â€&br
> The following data apply to items (a) and (b). Mr. Sparks, the owner of School Supplies, Inc., wants to maintain control over accounts receivable. He understands that accounts receivable turnover will give a good indication of how well receivables are be
> Information from Greg Company’s balance sheet follows: Required : Answer the following multiple-choice questions: a. What is the acid-test ratio for Greg Company? 1. 1.60 2. 1.76 3. 1.90 4. 2.20 b. What is the effect of the collect
> Depoole Company manufactures industrial products and employs a calendar year for financial reporting purposes. Items (a) through (e) present several of Depoole’s transactions during 2011. The total of cash equivalents, marketable securities, and net rece
> Appliance Company has supplied you with the following data regarding working capital and sales for the years 2011, 2010, and 2009. Required: a. Compute the sales to working capital ratio for each year. b. Comment on the sales to working capital ratio fo
> The accounts of Consolidated Can contain the following amounts at December 31, 2012: Cost of products sold …………………………………..$410,000 Dividends…………………………………………………………3,000 Extraordinary gain (net of tax)…………………………..1,000 Income taxes……………………………………………………9,300
> The following data relate to inventory for the year ended December 31, 2011. A physical inventory on December 31, 2011, indicates that 600 units are on hand and that they came from the July 1 purchase. Required : Compute the cost of goods sold for the ye
> The following data relate to inventory for the year ended December 31, 2011: A physical inventory on December 31, 2011, indicates that 400 units are on hand and that they came from the March 1 purchase. Required: Compute the cost of goods sold for the y
> Anne Elizabeth Corporation is engaged in the business of making toys. A high percentage of its products are sold to consumers during November and December. Therefore, retailers need to have the toys in stock prior to November. The corporation produces on
> The following financial data were taken from the annual financial statements of Smith Corporation. Required: a. Based on these data, calculate the following for 2010 and 2011: 1. Working capital 2. Current ratio 3. Acid-test ratio 4. Accounts recei
> Current assets and current liabilities for companies R and T are summarized as follows. Required: Evaluate the relative solvency of companies R and T. Company R Company T Current assets $400,000 200,000 $200,000 $800,000 400,000 $400,000 Current lia
> Current assets and current liabilities for companies D and E are summarized as follows: Required Evaluate the relative solvency of companies D and E. Company D Company E Current assets $400,000 200,000 $200,000 $900,000 700,000 $200,000 Current liab
> Individual transactions often have a significant impact on ratios. This problem will consider the direction of such an impact. Required: Indicate the effects of the previous transactions on each of the following: total current assets, total current liab
> A partial balance sheet and income statement for King Corporation follow: Required: Compute the following: a. Working capital b. Current ratio c. Acid-test ratio d. Cash ratio e. Days’ sales in receivables f. Accounts receivable
> Accounts Receivable—Note Receivable—Ethics Eric Page, the CEO of Marvick Enterprises, has been concerned with the firm’s days’ sales in receivables, which are running substantially higher than the past. He directs the CFO to get on top of the situation a
> To aid in determining the balance for the allowance for uncollectible accounts, an aging schedule is often prepared. The Arrow Company prepared the following aging schedule for December 31, 2011. The current balance in allowance for uncollectible account
> Best Buy Co., Inc.’s consolidated statements of earnings from its 2011 annual report are presented in Exhibit 5-3. Required a. Using the statement of earnings, prepare a vertical common-size analysis for 2011, 2010, and 2009. Use reven
> Consecutive five-year balance sheets and income statements of Anne Gibson Corporation follow: Required: a. Using year-end balance sheet figures, compute the following for the maximum number of years, based on the available data: 1. Daysâ€&
> Laura Badora Company has been using LIFO inventory. The company is required to disclose the replacement cost of its inventory and the replacement cost of its cost of goods sold on its annual statements. Selected data for the year ended 2011 are as follow
> Answer the following multiple-choice questions: a. A company’s current ratio is 2.2 to 1 and quick (acid-test) ratio is 1.0 to 1 at the beginning of the year. At the end of the year, the company has a current ratio of 2.5 to 1 and a quick ratio of 0.8 t
> Anna Banana Company would like to estimate how long it will take to realize cash from its ending inventory. For this purpose, the following data are submitted: Required : Estimate how long it will take to realize cash from the ending inventory Accoun
> Items (a) through (d) are based on the following information: Required: Answer the following multiple-choice questions: a. Sharkey’s acid-test ratio as of December 31, 2011, is 1. 0.63. 2. 0.70. 3. 0.89. 4. 0.99. b. Sharkeyâ
> Required Answer the following multiple-choice questions: a. Which of the following statements is incorrect? 1. Ratios are fractions expressed in percent or times per year. 2. A ratio can be computed from any pair of numbers. 3. A very long list of me
> Required a. Complete the increase (decrease) in dollars and percent. b. Comment on trends. Rapid Retail Comparative Statements of Income December 31 Increase (Decrease) (In thousands of dollars) 2011 2010 Dollars Percent Net sales $30,000 20,000 10,0
> / Required Determine the absolute change and the percentage for these items.
> The Kelly Services, Inc., and Subsidiaries statements of earnings from its 2010 annual report are presented in Exhibit 5-4. Required a. Using the statements of earnings, prepare a vertical common-size analysis for 2010, 2009, and 2008. Use revenues as t
> The following information for Lesky Corporation covers the year ended December 31, 2012: / Required Change this statement to a multiple-step format, as illustrated in this chapter.
> Answer the following multiple-choice questions: a. The following relate to Owens data in 2012. What is the ending inventory? Purchases …………………………..$580,000 Beginning inventory……………. 80,000 Purchase returns ………………….8,000 Sales …………………………………..900,000 Cost
> Answer the following multiple-choice questions: a. Which of the following items would be classified as operating revenue or expense on an income statement of a manufacturing firm? 1. Interest expense 2. Advertising expense 3. Equity income 4. Divide
> The following information for Gaffney Corporation covers the year ended December 31, 2012: Required a. Will net income or comprehensive income tend to be more volatile? Comment. b. Which income figure will be used to compute earnings per share? c. What
> Each of the following statements represents a decision made by the accountant of Growth Industries: a. A tornado destroyed $200,000 in uninsured inventory. This loss is included in the cost of goods sold. b. Land was purchased 10 years ago for $50,000.
> Uranium Mining Company, founded in 1982 to mine and market uranium, purchased a mine in 1983 for $900 million. It estimated that the uranium had a market value of $150 per ounce. By 2012, the market value had increased to $300 per ounce. Records for 2012
> The income statement of Jones Company for the year ended December 31, 2012, follows. Required a. Compute the net earnings remaining after removing nonrecurring items. b. Determine the earnings (loss) from the nonconsolidated subsidiary. c. Determine the
> The income statement of Tawls Company for the year ended December 31, 2012, shows the following: / Required a. Compute the net earnings remaining after removing nonrecurring items. b. Determine the earnings from the nonconsolidated subsidiary. c. For th
> List where each of the following items may appear. Choose from (A) income statement, (B) balance sheet, or (C) reconciliation of retained earnings. a. Dividends paid b. Notes payable c. Income from noncontrolling interest d. Accrued payrolls e. Loss
> List the statement on which each of the following items may appear. Choose from (A) income statement, (B) balance sheet, or (C) neither. a. Net income b. Cost of goods sold c. Gross profit d. Retained earnings e. Paid-in capital in excess of par f.
> You were recently hired as the assistant treasurer for Victor, Inc. Yesterday, the treasurer was injured in a bicycle accident and is now hospitalized, unconscious. Your boss, Mr. Fernandez, just informed you that the financial statements are due today.
> Best Buy Co., Inc.’s consolidated balance sheets from its 2011 annual report are presented in Exhibit 5-3. Required a. Using the balance sheets, prepare a vertical common-size analysis for 2011 and 2010. Use total assets as a base b. Us
> How might the inflationary flashpoint affect policy decisions? How would you represent the flashpoint on the Phillips curve?
> How would the volume and timing of capital investments be affected by (a) a permanent cut in the capital gains tax and (b) a temporary 10 percent tax credit?
> How does each of the following infrastructure items affect aggregate supply? (a) highways, (b) schools, (c) sewage systems, and (d) courts and prisons.
> What did Ms. Weir mean when she said the proposed toy regulation “goes too far” (News, p. 357)? How far is enough?
> OSHA predicted that its proposed ergonomics rules (text, p. 356) would have cut repetitive stress injuries by 50 percent. Was Congress correct in repealing those rules?
> How is the aggregate supply curve affected by (a) minimum wage laws and (b) Social Security payroll taxes and retirement benefits?
> Which of the following groups are likely to have the highest tax elasticity of labor supply: (a) college students, (b) single parents, (c) primary earners in two-parent families, and (d) secondary earners in two-parent families? Why are there diffe
> How did the 2011 tsunami affect Japan’s potential output ?
> Why might prices rise when aggregate demand increases? What factors might influence the extent of price inflation?
> If mortgage rates fell to 0 percent (“free money”), why might consumers still hesitate to borrow money to buy a home?
> How many people are employed by your local or state government? What do they produce? What is the opportunity cost of that output?
> Why did the stock market “surge” when the Fed announced it intended to buy $1.2 trillion of bonds ?
> Could long-term interest rates rise when short-term rates are falling? What would cause such a pattern?
> When prices started doubling (see News, p. 329), why didn’t the Continental Congress print even more money so Washington’s army could continue to buy supplies? What brings an end to such “inflation financing”?
> How might the existence of multiplier effects increase the risk of inflation when interest rates are cut?
> Can there be any inflation without an increase in the money supply? How?
> If the Federal Reserve banks mailed everyone a brand-new $100 bill, what would happen to prices, output, and income? Illustrate your answer by using the equation of exchange.
> Why do high interest rates so adversely affect the demand for housing and yet have so little influence on the demand for pizzas?
> What proportions of your money balance are held for transactions, precautionary, and speculative purposes? Can you think of any other purposes for holding money?
> If bondholders expect the Fed to raise interest rates, what action might they take? How would this affect the Fed’s goal?
> In 2008 the Fed reduced both the discount and federal fund rates dramatically. But bank loan volume didn’t increase. What considerations might have constrained the market’s response to Fed policy?
> Is the relative decline in U.S. farming and manufacturing (Figure 2.2) a good thing or a bad thing? 100 Services 80 60 80% 40 Agriculture Manufacturing mining, and construction 20 19% 1% 1800 1840 1880 1920 1960 2000 PERCENTAGE OF EMPLOYMENT
> In early 2009, short-term bond yields in the United States fell to less than 0.5 percent. Yet relatively few people moved their assets out of bonds into banks. How might this failure of open market operations be explained?
> Why did bond prices decline at the February 2009 auction?
> Why do people hold bonds rather than larger savings account or checking account balances? Under what circumstances might they change their portfolios, moving their funds out of bonds and into bank accounts?
> Why do banks want to maintain as little excess reserves as possible? Under what circumstances might banks want to hold excess reserves?
> How does federal deposit insurance encourage greater risk taking by banks? Could the banking system function without government deposit insurance? How?
> If people never withdrew cash from banks, how much money could the banking system potentially create? Could this really happen? What might limit deposit creation in this case?
> Does the fact that your bank keeps only a fraction of your account balance in reserve make you uncomfortable? Why don’t people rush to the bank and retrieve their money? What would happen if they did?
> What percentage of your monthly bills do you pay with (a) cash, (b) check, (c) credit card, and (d) automatic transfers? How do you pay off the credit card balance? How does your use of cash compare with the composition of the money supply (Figure
> How are an economy’s production possibilities affected when workers are paid in goods rather than in cash?
> Why are checking account balances, but not credit cards, regarded as “money”?
> The U.S. farm population has shrunk by over 25 million people since 1900. Where did all the people go? Why did they move?
> Which of the following options do you favor for resolving future Social Security deficits? What are the advantages and disadvantages of each option? (a) cutting Social Security benefits, (b) raising payroll taxes, (c) cutting non–Social Security prog
> How long would it take to pay off the national debt? How would the economy be affected?
> A constitutional amendment has been proposed that would require Congress to balance the budget each year. Is it possible to balance the budget every year? Is it desirable?
> If deficit spending "crowds out" some private investment, could future generations be worse off? If external financing eliminates crowding out, are future generations thereby protected?
