Question: The financial statements of ABC Corporation, a
The financial statements of ABC Corporation, a retail chain, reveal the information for income taxes shown in Exhibit 2.11. REQUIRED a. Assuming that ABC had no significant permanent differences between book income and taxable income, did income before taxes for financial reporting exceed or fall short of taxable income for 2020? Explain. b. Did income before taxes for financial reporting exceed or fall short of taxable income for 2021? Explain 
c. Will the adjustment to net income for deferred taxes to compute cash flow from operations in the statement of cash flows result in an addition or a subtraction for 2020? For 2021? d. ABC does not contract with an insurance agency for property and liability insurance; instead, it self-insures. ABC recognizes an expense and a liability each year for financial reporting to reflect its average expected long-term property and liability losses. When it experiences an actual loss, it charges that loss against the liability. The income tax law permits self-insured firms to deduct such losses only in the year sustained. Why are deferred taxes related to self-insurance disclosed as a deferred tax asset instead of a deferred tax liability? Suggest reasons for the direction of the change in amounts for this deferred tax asset between 2019 and 2021. e. ABC treats certain storage and other inventory costs as expenses in the year incurred for financial reporting but must include these in inventory for tax reporting. Why are deferred taxes related to inventory disclosed as a deferred tax asset? Suggest reasons for the direction of the change in amounts for this deferred tax asset between 2019 and 2021. f. Firms must recognize expenses related to postretirement health care and pension obligations as employees provide services, but claim an income tax deduction only when they make cash payments under the benefit plan. Why are deferred taxes related to health care obligations disclosed as a deferred tax asset? Why are deferred taxes related to pensions disclosed as a deferred tax liability? Suggest reasons for the direction of the change in amounts for these deferred tax items between 2019 and 2021. g. Firms must recognize expenses related to uncollectible accounts when they recognize sales revenues, but firms claim an income tax deduction when they deem a particular customer’s accounts uncollectible. Why are deferred taxes related to this item disclosed as a deferred tax asset? Suggest reasons for the direction of the change in amounts for this deferred tax asset between 2019 and 2021. h. ABC uses the straight-line depreciation method for financial reporting and accelerated depreciation methods for income tax purposes. Why are deferred taxes related to depreciation disclosed as a deferred tax liability? Suggest reasons for the direction of the change in amounts for this deferred tax liability between 2019 and 2021
> Propose three applications for each of the seven management and planning tools discussed in the chapter. You might consider some applications around school, such as in the classroom, studying for exams, and so on
> A Conference Board study found that CEOs identified the top global challenges they face as (1) improving human capital within their organizations, (2) improving operational excellence, and (3) enhancing innovation. Suggest some strategies that a typical
> Contrast the following vision statements in terms of their usefulness to an organization. a. To become the industry leader and achieve superior growth and market share. b. To become the best-managed electric utility in the United States and an excellen
> Try to match the following companies with their actual mission statement in question 2. Could you think of more appropriate mission statements for any of these organizations? a. Volvo b. AT&T c. The International Red Cross d. Caterpillar e. DHL World
> Examine the following mission statements. Do you think they have a true purpose or are they merely cosmetic devices because someone felt that no major organization can be seen without one?22 a. Our single focus will continue to be helping customers all
> The Johnson & Johnson credo was written in 1943 by its chairman Robert Wood Johnson: “We believe our first responsibility is to the doctors, nurses, and patients, to mothers and fathers, and all others who use our products and services. In meeting their
> The Six Sigma philosophy seeks to develop technical leadership through “Belt” training, then use it in team-based projects designed to improve processes. To what extent are these two concepts (technical experts versus team experts) at odds? What must be
> How can lean concepts be applied in a classroom?
> Discuss what would be the most appropriate tool to use to attack each of these problems: a. A copy machine suffers frequent paper jams and users are often confused as to how to fix the problem. b. The publication team for an engineering department want
> Jerome, his wife Sandy, and their two daughters were vacationing and visited a popular restaurant, Captain Mark’s Seafood Shack, that has several locations in the eastern United States. The hostess was friendly, and their table location was removed from
> Discuss how DMAIC might be used in your personal life. For example, how could you use it if you wanted to lose weight or improve a skill such as playing a musical instrument?
> List some of the common processes that a student performs. How can these processes be improved using a process improvement approach?
> “Resistance to change” is a common theme in the behavioral sciences. What part do you believe that resistance to change plays in management’s fostering of successful versus unsuccessful adoptions of Six Sigma approaches? What impact does workers’ resista
> Suggest a set of CTQs that might influence overall service satisfaction for service at an automobile dealership.
> Some of the key processes associated with business activities for a typical company include sales and marketing, supply chain management, managing information technology, and managing human resources. What types of Six Sigma projects might be considered
> A consultant told the story of two Six Sigma teams that made separate presentations on how they would improve processes in their own areas. At the end of the second presentation, the consultant asked a basic question that stopped both Black Belt team lea
> In 1995, Jack Welch, who was then CEO of General Electric, sent a memo to his senior managers telling them that they would have to require every employee to have started Six Sigma training to be promoted. Furthermore, 40 percent of the managers’ bonuses
> How can a manager effectively balance the key components of a Six Sigma implementation design related to who, what, where, when, why, and how it could be done?
> How might a Six Sigma project be done to improve a registration process in a university? An admission process?
> The January 22, 2001, issue of Fortune contained an article “Why You Can Safely Ignore Six Sigma,” that was highly critical of Six Sigma. Here are some of the criticisms levied against Six Sigma: a. the results often don’t have any noticeable impact on
> Jessica shopped at two different retail clothing stores in a shopping mall. At store A, she was greeted by a girl on a ladder working on changing the promotions for the next day who did not ask if she needed help with anything. She walked to the back to
> Skilled Care Pharmacy, located in Mason, Ohio, is a $25 million privately held regional provider of pharmaceutical products delivered within the long-term care, assisted living, hospice, and group home environments. The following products are included wi
> Provide examples of costs to create computer software for internal use. Should firms capitalize or expense these costs?
> Go to the website of the International Accounting Standards Board (www.ifrs.org). Search for the International Financial Reporting Standards (IFRS) summaries. Identify the most recently issued international financial reporting standard and summarize brie
> Go to the website of the Financial Accounting Standards Board (www.fasb.org). Identify the most recently issued financial reporting standard and summarize briefly (in one paragraph) its principal provisions. Also search under Project Activities to identi
> Bookman Co. develops digital accounting systems and provides accounting-related consulting services. a. On January 1, Year 1, Bookman signs a contract with Brock Florists to install a system and provide consulting services over a two-year period ending
> Use the following hypothetical data for Walgreens in 2021 and 2022 to project revenues, cost of goods sold, and inventory for Year 11. Assume that Year 11 revenue growth rate, gross profit margin growth rate, and inventory turnover will be identical to 2
> The notes to a firm’s financial statements reveal that the obligations for postretirement health care benefits at the balance sheet date total $2.1 billion. The fair value of plan assets for these benefits at the same date is reported at zero, with an un
> Using the following key, identify the effects of the following transactions or conditions on the various financial statement elements: I 5 increases; D 5 decreases; NE 5 no effect.
> Exhibits 1.19–1.23 of Integrative Case 1.1 (Chapter 1) present the financial statements for Walmart for 2017 to 2020. In addition, the website for this text (www.cengagebrain.com) contains Walmart’s January 31, 2021, F
> Given the following information, compute December 31, Year 1, projected benefit obligation (PBO) and fair market value (FMV) of plan assets for Lee Company. What amount of asset or liability will be reported on the balance sheet at December 31, Year 1?
> Choosing the functional currency is a key decision for translating the financial statements of foreign entities of U.S. firms into U.S. dollars. Qing Corporation, a U.S. firm that sells car batteries, formed a wholly owned subsidiary in Mexico to manufac
> U.S. GAAP requires firms to account for equity investments in which ownership is between 20% and 50% using the equity method. Ace Corporation owns 35% of Spear Corporation. Spear Corporation reported net income of $100.4 million and declared and paid div
> Firms invest in marketable securities for a variety of reasons, one of the most common being the need to temporarily invest excess cash. Describe how to account for these investments on the balance sheet and in comprehensive income assuming that they are
> Assume Swift Company acquires a machine with a fair value of $100,000 on January 1 of Year 1 by signing a five-year lease. Swift must make payments of $16,275 each December 31. The appropriate interest rate on the lease is 10%. Compute the following assu
> Rock of Ages, Inc., a large North American integrated granite quarrier, manufacturer, and retailer of finished granite memorials, reported a Year 4 net loss of $3.2 million. In that year, the firm reported a pretax litigation settlement loss of $6.5 mill
> Checkpoint Systems, a leading provider of source tagging, handheld labeling systems, retail merchandising systems, and bar-code labeling systems, stated the following in a press release: GAAP reported net loss for the fourth quarter of Year 4 was $29.3 m
> A firm’s income tax return shows income taxes for 2020 of $35,000. The firm reports deferred tax assets before any valuation allowance of $24,600 at the beginning of 2020 and $27,200 at the end of 2020. It reports deferred tax liabilities of $18,900 at t
> A firm’s income tax return shows $50,000 of income taxes owed for 2020. For financial reporting, the firm reports deferred tax assets of $42,900 at the beginning of 2020 and $38,700 at the end of 2020. It reports deferred tax liabilities of $28,600 at th
> Fair Value Measurement and Other Comprehensive Income For its fiscal year ended February 1, 2020, Zumiez, Inc. shows a line item for $1.059 million labeled “Net change in unrealized gain on available-for-sale debt securities” as part of other comprehensi
> Massachusetts Stove Company manufactures wood-burning stoves for the heating of homes and businesses. The company has approached you, as chief lending officer for the Massachusetts Regional Bank, seeking to increase its loan from the current level of $93
> Using the following key, identify the effects of the following transactions or conditions on the various financial statement elements: I 5 increases; D 5 decreases; NE 5 no effect.
> Sony Corporation manufactures and markets consumer electronics products. Assume the following are selected income statement data for 2021 and 2022 (amounts in billions of yen): Required: a. Estimate the variable cost as a percentage of sales for the cos
> The data in Exhibit 11.3 on industry median betas suggest that firms in the following three sets of related industries have different degrees of systematic risk. REQUIRED: a. For each matched pair of industries, describe factors that characterize a typ
> Intel is a global leader in manufacturing microprocessors, which is very capital-intensive. The production processes in microprocessor manufacturing require sophisticated technology, and the technology changes rapidly, particularly with each new generati
> The Home Depot is a leading specialty retailer of hardware and home improvement products and is the second-largest retail store chain in the United States. It operates large warehouse-style stores. Assume in 2021 and 2022, The Home Depot invested in five
> Gap Inc. Operates chains of retail clothing stores under the names of Gap, Banana Republic, and Old Navy. Exhibit 3.19 presents the statement of cash flows for Gap for Year 0 to Year 4 REQUIRED: Discuss the relations between net income and cash flow fro
> Tesla Motors Manufactures high-performance electric vehicles that are extremely slick looking. Exhibit 3.18 presents the statement of cash flows for Tesla Motors for Year 1 through Year 3. REQUIRED Discuss the relations among net income, cash flows fro
> Refer to the financial statement data for Abercrombie & Fitch in Problem 4.25 in Chapter 4. Exhibit 5.15 presents risk ratios for Abercrombie & Fitch for fiscal Year 3 and Year 4. Data from Problem 4.25 in Chapter 4: Abercrombie & Fitch sell
> Refer to the financial statement data for Hasbro in Problem 4.24 in Chapter 4. Exhibit 5.14 presents risk ratios for Hasbro for Year 2 and Year 3. LO 5-3, LO 5-4 LO 5-6 LO 5-7 LO 5-6 LO 5-3, LO 5-4 Data from Problem 4.24 in Chapter 4: Hasbro is a leadin
> Exhibit 5.26 presents risk ratios for Walmart for 2019 and 2018. Exhibits 1.19, 1.20, and 1.21 in Chapter 1 present the financial statements for Walmart. REQUIRED a. Compute the values of each of the ratios in Exhibit 5.26 for Walmart for 2020. Walmar
> ALFA Romeo incurs direct cash costs of $30,000 in manufacturing a red convertible automobile during 2018. Assume that it incurs all of these costs in cash. Alfa Romeo sells this automobile to you on January 1, 2019, for $45,000. You pay $5,000 immediatel
> Assume Southern Copper Corporation (SCCO) acquired mining equipment for $100,000 cash on January 1, 2018. The equipment had an expected useful life of four years and zero salvage value. SCCO calculates depreciation using the straight-line method over the
> Refer to Problem 2.13. Assume that Walmart has accounted for the value of the land at acquisition cost and sells the land on December 31, 2020, for a two-year note receivable with a present value of $180,000 instead of for cash. The note bears interest a
> Assume Walmart acquires a tract of land on January 1, 2018, for $100,000 cash. On December 31, 2018, the current market value of the land is $150,000. On December 31, 2019, the current market value of the land is $120,000. The firm sells the land on Dece
> In this chapter, we evaluated shares of common equity in Clorox using the value-to-book approach, market multiples, and reverse engineering. The Coca-Cola Company is also a company that sells well-known brand name consumer goods (although the two compan
> The Coca-Cola Company is a global soft-drink beverage company. The data in Chapter 12, Exhibits 12.14 through 12.16, include the actual amounts for 2020 and projected amounts for Year 11 to Year 16 for the income statements, balance sheets, and statement
> The Coca-Cola Company is a global soft drink beverage company (ticker: KO). The data in Chapter 12’s Exhibits 12.14, 12.15, and 12.16 (pages 712–715) include the actual amounts for 2020 and projected amounts for Year 11 to Year 16 for the income statemen
> Suppose the following hypothetical data represent total assets, book value, and market value of common shareholders’ equity (dollar amounts in millions) for Microsoft, Intel, and Dell, three firms involved in different aspects of the co
> The Coca-Cola Company is a global soft drink beverage company (ticker symbol = KO). The data in Exhibits 12.14 to 12.16 include the actual amounts for fiscal 2020 and projected amounts for Year +1 to Year +6 for the income statements, balance sheets, and
> The 3M Company is a global diversified technology company active in the following product markets: consumer and office; display and graphics; electronics and communications; health care; industrial; safety, security, and protection services; and transpor
> Walmart Stores (Walmart) is the world’s largest retailer. It employs an “everyday low price” strategy and operates stores as three business segments: Walmart U.S., International, and Samâ€&
> The Coca-Cola Company is a global soft drink beverage company (ticker: KO). The following data for Coca-Cola include the actual amounts for Year 0 and the projected amounts for Years 11 through 15 for comprehensive income and common shareholdersâ&#
> Barnes & Noble sells books, magazines, music, and videos through retail stores and online. For a retailer like Barnes & Noble, inventory is a critical element of the business, and it is necessary to carry a wide array of titles. Inventories constitute th
> Hasbro designs, manufactures, and markets toys and games for children and adults in the United States and in international markets. Hasbro’s portfolio of brands and products contains some of the most well-known toys and games under famous brands such as
> The following is an excerpt from Note 13 (Pensions and Other Post-Employment Benefits) to the 2020 Consolidated Financial Statements of Coca-Cola Company (Coca-Cola): REQUIRED: a. Write a memorandum explaining the change in the net pension liability in
> The following are excerpts from Note 14 (Income Taxes) to the 2020 Consolidated Financial Statements of Coca-Cola Company (Coca-Cola): A reconciliation of the statutory U.S. federal tax rate and our effective tax rate is as follows: REQUIRED: a. Does Co
> Kentucky Gold (KG) holds 10,000 gallons of whis key in inventory on October 31, Year 1, that costs $225 per gallon. KG contemplates selling the whiskey on March 31, Year 2, when it completes the aging process. Uncertainty about the selling price of whisk
> Lynn Construction enters into a firm purchase commitment for equipment to be delivered on June 30, Year 1, for a price of £10,000. It simultaneously signs a forward foreign exchange contract for £10,000. The forward rate on June 30, Year 1, for settlemen
> Following information relates to a firm’s pension plan. REQUIRED: a. Compute the December 31, Year 1, PBO and FMV of pension assets. b. Compute Year 1 pension expense. c. Use the financial statements effects template to show the eff
> A large manufacturer of truck and car tires recently changed its cost-flow assumption method for inventories at the beginning of Year 2. The manufacturer has been in operation for almost 40 years, and for the last decade it has reported moderate growth i
> Deere & Company manufactures agricultural and industrial equipment and provides financing services for its independent dealers and their retail customers. In Note 2 to its October 31, Year 12, Form 10-K, Deere discloses the following revenue recognition
> Prime Contractors (Prime) is a privately owned company that contracts with the U.S. government to provide various services under multiyear (usually five-year) contracts. Its principal services are as follows: Refuse: Picks up and disposes of refuse from
> On January 1, Year 1, assume that Turner Construction Company agreed to construct an observatory for Dartmouth College for $120 million. Dartmouth College must pay $60 million upon signing and $30 million in Year 2 and Year 3. Expected construction costs
> Foreign Sub is a wholly owned subsidiary of U.S. Domestic Corporation. U.S. Domestic Corporation acquired the subsidiary several years ago. The financial statements for Foreign Sub for Year 2 in its own currency appear in Exhibit 8.31. LO 8-6 December 31
> Exhibit 8.28 presents the separate financial statements at December 31, Year 2, of Prestige Resorts and its 80%-owned subsidiary Booking, Inc. Two years earlier on January 1, Year 1, Prestige acquired 80% of the common shares of B
> On December 31, Year 1, Pace Co. paid $3,000,000 to Sanders Corp. shareholders to acquire 100% of the net assets of Sanders Corp. Pace Co. also agreed to pay former Sanders shareholders $200,000 in cash if certain earnings projections were achieved over
> Ormond Co. acquired all of the outstanding common stock of Daytona Co. on January 1, Year 1. Ormond Co. gave shares of its common stock with a fair value of $312 million in exchange for 100% of the Daytona Co. common stock. Daytona Co. will remain a lega
> Lexington Corporation acquired all of the outstanding common stock of Chalfont, Inc., on January 1, Year 1. Lexington gave shares of its no par common stock with a market value of $504 million in exchange for the Chalfont common stock. Chalfont will rema
> Bed and Breakfast (B&B), an Italian company operating in the Tuscany region, follows IFRS and has made the choice to premeasure long-lived assets at fair value. B&B purchased land in Year 1 for €150,000. At December 31 of the next four years, the land is
> Floral Delivery, Inc. (FD) acquired a fleet of vans on January 1, 2021, by issuing a $500,000, four-year, 4% fixed rate note, with interest payable annually on December 3. FD has the option to repay the note prior to maturity at the note’s fair value. FD
> Exhibits 7.14 and 7.15 provide footnote excerpts to the financial reports of The Coca-Cola Company and Eli Lilly and Company that discuss the stock option grants given to the employees of the two firms. Each firm uses options extensively to reward employ
> Eli Lilly and Company Produces pharmaceutical products for humans and animals. Exhibit 7.15 includes a footnote excerpt from the annual report of Lilly for the period ending December 31, Year 4. REQUIRED: Review Exhibits 7.15 and answer the following qu
> Refer to financial statements for Walmart in Exhibit 1.19 (Balance Sheets), Exhibit 1.20 (Statements of Income), and Exhibit 1.22 (Statement of Cash Flows). Exhibit 1.19: Exhibit 1.20: Exhibit 1.22: REQUIRED a. Explain why depreciation and amortiza
> Exhibit 7.14 includes a footnote excerpt from the annual report of The Coca-Cola Company for Year 4. The beverage company offers stock options to key employees under plans approved by stockholders. REQUIRED: Review Exhibit 7.14 and answer the followin
> On January 1 of Year 1, Baylor Company needs to acquire an industrial drilling machine that has a five-year life. Baylor could borrow funds and buy the machine outright for $50,000 or it could lease it from Gonzaga Financial by making annual end-of-the-y
> Exhibits 6.17–6.19 present the December 31, 2019, Consolidated Statements of Income, Statements of Comprehensive Income, Consolidated Statements of Cash Flows for Chipotle Mexican Grill, Inc. Notes 5 and 6 to the financial statements pr
> Socket Mobile develops and deploys bar-code-enabled mobile apps, cordless bar-code scanners, and contactless reading and writing devices to enable data capture. Its primary revenue source is the servicing of firms in the specialty retailer, field service
> Exhibit 6.16 presents the Consolidated Statements for Income of Harley-Davidson, Inc., and Note 3 describes restructuring expenses. NOTE: 3 Accompanying HARLEY-DAVIDSON, INC. December 31, 2019, Consolidated Financial Statements 3. Restructuring Expense
> Diviney Company wants to raise $50 million cash but for various reasons does not want to do so in a way that results in a newly recorded liability. The firm is sufficiently solvent and profitable, so its bank is willing to lend up to $50 million at the p
> Delta Air Lines, Inc., is one of the largest airlines in the United States. It has operated on the verge of bankruptcy for several years. Exhibit 5.17 presents selected financial data for Delta Air Lines for each of the five years ending December 31, 200
> Exhibit 5.16 presents risk ratios for Coca-Cola for Year 1 through Year 3. REQUIRED a. Assess the changes in the short-term liquidity risk of Coca-Cola between Year 1 and Year 3. b. Assess the changes in the long-term solvency risk of Coca-Cola betwe
> Abercrombie & Fitch sells casual apparel and personal care products for men, women, and children through retail stores located primarily in shopping malls. Its fiscal year ends January 31 of each year. Financial statements for Abercrombie & Fitch
> The following are summary financial data for three well-known companies—American Airlines, Amazon, and The Home Depot. Based on your awareness of these companies and the economic events surrounding the COVID-19 pandemic that
> Exhibits 1.19–1.22 of Integrative Case 1.1 (Chapter 1) present the financial statements for Walmart for 2019–2021. In addition, the website for this text contains Walmart’s January 31, 2021, Form 10-K
> Analyzing the profitability of restaurants requires consideration of their strategies with respect to ownership of restaurants versus franchising. Firms that own and operate their restaurants report the assets and financing of those restaurants on their
> Selected data for General Mills for Year 1, Year 2, and Year 3 appear below (amounts in millions). REQUIRED a. Compute the rate of ROCE for Year 1, Year 2, and Year 3. b. Compute basic EPS for Year 1, Year 2, and Year 3. c. Interpret the changes in RO
> Sirius XM Radio Inc. is a satellite radio company, formed from the merger of Sirius and XM in 2008. Exhibit 3.20 presents a statement of cash flows for Sirius XM Radio for 2006, 2007, and 2008. Sirius XM and its predecessor, Sirius, realized revenue grow
> Aer Lingus is an international airline based in Ireland. Exhibit 3.24 provides the statement of cash flows for Year 1 and Year 2, which includes a footnote from the financial statements. Year 2 was characterized by weakening consumer demand for air trave
> The Apollo Group is one of the largest providers of private education and runs numerous programs and services, including the University of Phoenix. Exhibit 3.23 provides statements of cash flows for Year 1 through Year 3. REQUIRED Discuss the relation
