The following cash flow information pertains to the 2017 operations of Matterhorn, Inc., a maker of ski equipment: Cash collections from customers ……………………………………$ 16,670 Cash payments to suppliers……………………………………19,428 Cash payments for various operating expenses …………………7,148 Cash payments for current income taxes …………………200 Cash provided (used) by operating activities ………………… (10,106) The following additional information comes from Matterhorn’s 2017 income statement: Net income ………………………………………………………$ 609 Depreciation of equipment ……………………………………2,256 Amortization of patents ……………………………………399 Loss on sale of equipment ……………………………………169 The following additional information comes from Matterhorn’s 2016 and 2017 comparative balance sheets (decreases are in parentheses): Change in accounts receivable ……………………………………$ 3,630 Change in inventory ………………………………………………………3,250 Change in accounts payable ………………… ………………… (3,998) Change in accrued operating expenses ………………… (2,788) Change in deferred tax liability ……………………………………127 Required: 1. Use the preceding information to derive Matterhorn’s 2017 income statement. 2. Use the same information to compute Matterhorn’s 2017 cash flow from operating activities under the indirect method (that is, derive cash flow from operating activities by making the necessary adjustments to net income). 3. Provide a brief explanation for the difference observed between net income and cash provided by operating activities.
> Consider the notion of “transaction utility.” How does this concept apply to Group on’s business strategy?
> Discuss the psychological aspects associated with how Groupon’s board and executives analyzed whether or not they should accept Google’s offer.
> Excel has a function, BINOM.DIST, for the binomial probability distribution. This function computes the probability of drawing x successes in n independent trials when the probability of drawing a success is p. Do you see a role for the binomial distribu
> Imagine a decision task in which you are to choose between two alternatives that involve blindly drawing a single chip from one of two urns, labeled A and B respectively. Both urns contain colored balls. The proportion of the different colors is describe
> The following data were taken from the financial records of Glum Corporation for 2017: Sales ………………………………………………………$3,600,000 Bond interest expense ……………………………………120,000 Income taxes………………………………………………………600,000 Net income ………………………………………………………800,000 How
> Dunnsmore Company reported cost of goods sold of $318,450 on its 2017 income statement. Other information for Dunnsmore is as follows: Prepare a schedule showing the amount of cash Dunnsmore paid to suppliers in 2017. 1/1/2017 12/31/2017 Inventorie
> The following information is from the 2017 annual report of Weber Corporation, a company that supplies manufactured parts to the household appliance industry. Average total assets ………………………………………………………$24,500,000 Average interest-bearing debt …………………………
> Diana Gomez Corporation, a manufacturer of cowboy boots, provided the following information from its accounting records for the year ended December 31, 2017. Inventory at December 31, 2017 (based on a physical count …â€&br
> Consider the following transactions pertaining to Retail Traders Company. Amounts in parentheses indicate a decrease in the account. Required: 1. Based on this information, prepare an income statement and statement of cash flows. 2. Provide an intuit
> Utica Company’s net accounts receivable was $250,000 at December 31, 2016, and $300,000 at December 31, 2017. Net cash sales for 2017 were $100,000. The accounts receivable turnover for 2017 was 5.0, which was computed from net credit sales for the year
> The following balance sheet, which has some weaknesses in terminology and classification, has been prepared by an inexperienced accountant and submitted to you for review: Prepare a classified balance sheet in proper form. Make any necessary correction
> Ricky Corporation had the following alphabetical account balance listing at December 31, 2017 (in thousands of dollars). Prepare a balance sheet for Ricky Corporation at December 31, 2017. Debit Credit Accounts payable Accounts receivable $9,224 $
> Holmes Company reported the following balance sheets at December 31, 2017 and 2018: Its income statement for 2018 was as follows: Additional information: During 2018, Holmes had the following transactions: a. Declared and paid a common dividend of $5
> An income statement for the first year of operations for Patti Company appears below: Sales ……………………………………$ 390,000 Dividend revenue …………………39,000 Interest revenue …………………24,050 Cost of goods sold………………… (208,000) Salary expense ………………… (26,000) Deprecia
> On January 1, 2017, River Company’s inventory was $400,000. During 2017, the company purchased $1,900,000 of additional inventory, and on December 31, 2017, its inventory was $500,000. What is the inventory turnover for 2017?
> Selected data of Islander Company follow: Required: 1. What is the accounts receivable turnover for 2017? 2. What is the inventory turnover for 2017? As of December 31, Balance Sheet Data 2017 2016 Accounts receivable $500,000 (25,000) $470,000 Al
> The following information was taken from the 2017 financial statements of Planet Corporation: Accounts receivable, January 1, 2017…………………$ 21,600 Accounts receivable, December 31, 2017 …………………30,400 Sales on accounts and cash sales …………………438,000 Determi
> Watsontown Yacht Sales has been selling large power cruisers for 25 years. On January 1, 2017, the company had $5,950,000 in inventory (based on a FIFO valuation). While the number of yachts in Watsontown Yacht Sales’ inventory remained fairly constant t
> Swiss Valley Veterinary Products distributes animal health care products to commercial livestock producers throughout the United States and Europe. Its terms of sale require cash payment within 30 days, and most customers take full advantage of this paym
> As shown in equation (6.10), the price equation for a firm with positive growth opportunities is equity capital, and NPVGO is the net present value of future growth opportunities. Recent values of P0, X0, and re for several companies are: Required: 1
> Bank. It will use the money to expand its warehouse and to upgrade its assembly line. Randall supplied the following cash flow forecasts as part of the loan application. The forecasts assume that the loan is granted at the beginning of 2017 and that $2
> Margaret Magee has served both as an outside director to Maxcor Manufacturing since 2010 and as a member of the company’s compensation committee since 2014. Margaret has been reviewing Maxcor’s 2017 preliminary earning
> Neville Company decides at the beginning of 2017 to adopt the FIFO method of inventory valuation. It had used the LIFO method for financial reporting since its inception on January 1, 2015, and had maintained records that are sufficient to retrospectivel
> In August 2003, Krispy Kreme’s common stock was trading at $44 per share. Several analysts and investors believed at the time that its shares were worth considerably less. They appear to have been right because by November 2007, the stock was trading bel
> Colonel Electric Company is one of the largest and most diversified industrial corporations in the world. From the time of its incorporation in 1892, the company has engaged in developing, manufacturing, and marketing a wide variety of products for the g
> In mid-2000, Enron Corporation and Blockbuster (a division of Viacom) set up a pilot project, streaming videos to a few dozen apartments in Portland, Oregon, from servers set up in the basement of the building. With that tiny beginning, Enron opened up a
> Describes the key financial ratios Standard & Poor’s analysts use to assess credit risk and assign credit ratings to industrial companies. Those same financial ratios for a single company over time follow. The company was assigned a
> On July 10, 2012, Advanced Micro Devices (AMD) announced that it expected its revenues for the second quarter to be about $1.4 billion. At the time of the announcement, financial analysts expected AMD’s second quarter revenue to be about $1.6 billion. 1.
> Ashley Stores, Inc., sells gift cards for use at its stores. The following data pertains to 2019, 2020, and 2021, the company’s first three years of operation: As of December 31, 2019, Ashley estimates that 1.0% of its gift cards will
> The following table shows four ratios derived from the financial statements of three real companies, labeled A, B, and C in the table. (They are not listed in the table in any particular order.) The real companies are: a. Brunswick Corporation, a leader
> Electronic Arts develops, markets, publishes, and distributes interactive software games. The “lease commitments” section of the Commitments and Contingencies note from the company’s annual report for the year ended March 31, 2015, includes the following
> Lennox International Inc. makes air conditioning, heating, and fireplace systems for residential and commercial uses, as well as commercial refrigeration equipment. Tecumseh Products Company manufactures air conditioning and refrigeration compressors, co
> Danaher Corporation manufactures a variety of products, including electronic measurement instruments and network communications products, water quality measurement systems, and medical and dental instruments. Selected financial statement data and related
> Packaging Corporation of America produces containerboard and white papers. KapStone Paper and Packaging Corporation manufactures unbleached kraft paper products and corrugated products. Financial statement data for these two companies follow: Required:
> Microsoft develops, manufactures, licenses, sells, and supports a wide range of software products for personal computers (PCs) and servers; business and consumer productivity applications; software development tools; and content such as MSN (the Microsof
> The following table provides ROA and ROCE for Best Buy, a retailer of consumer electronics. Required: 1. How did Best Buy’s performance change over the period shown? 2. What is the most likely reason the change in ROCE was so much gre
> AK Steel Holding Corporation is a fully integrated producer of steel. It produces cold-rolled and hot-rolled steel products as well as specialty stainless and electrical steels that are sold to the domestic automotive, appliance, industrial machinery and
> The following table reports the operating cycle, cash conversion cycle, and current ratio for three apparel retailers all having year-ends at January 31, 2015. Aeropostale, which was originally owned by Macy’s, is a specialty retailer o
> Margaret O’Flaherty, a portfolio manager for MCF Investments, is considering investing in Alpine Chemical 7% bonds, which mature in 10 years. She asks you to analyze the company to determine the riskiness of the bonds. Required: 1. U
> Cassidy Oil Change is a chain of fast oil change centers. Oil changes sell for $30 each. Alternatively, customers can join the Cassidy Club for $105 and receive five oil changes over three years. Experience has shown that 10% of oil changes paid for thro
> Griffin and Lasky, Inc. (G&L), supplies industrial automation equipment and machine tools to the automotive industry. G&L uses the percentage of completion method for recognizing revenue on its long-term contracts. Customer orders have long lead
> Audit engagement partners were comparing notes about changes in clients’ financial statement ratios or amounts from the prior year’s figures. Here is what the partners had discovered. Client 1. Inventory turnover increased substantially from the prior ye
> Daley, Inc., is consistently profitable. Its normal financial statement relationships are as follows: Current ratio ………………………………………………………3 to 1 Inventory turnover ………………………………………………………4 times Long-term debt/total assets ratio ……………………………………0.5 to 1 Req
> At the end of 2009, Blockbuster Inc. operated more than 5,000 stores and franchisees operated another 1,300. Nine months later the company filed for bankruptcy protection. By the end of 2010, Blockbuster had closed nearly 1,000 company-operated and 300 f
> Tiffany & Company is a luxury jeweler and specialty retailer that sells timepieces, sterling silverware, china, crystal, fragrances, and accessories through its retail stores worldwide. Signet Jewelers Ltd. operates a number of well-known retail stor
> Nucor Corporation produces steel and steel products at its eight mills and is a major recycler of scrap metal. The following data relate to Nucor for four years. Required: 1. Calculate Nucor’s ROA for 2012, 2013, and 2014. Decompose
> Sunny Day Stores operates convenience stores throughout much of the United States. The industry is highly competitive, with low profit margins. The company’s competition includes national, regional, and local supermarkets; oil companies
> The following table presents ROA calculations for three companies in the retail grocery industry using earnings before interest (EBI) and balance sheet data for each company. The Kroger Company operates more than 2,600 supermarkets and multi-department s
> The following cash flow information pertains to the 2017 operations of Fishmaster, Inc., a maker of fishing equipment. Cash collections from customers ……………………………………$79,533 Cash payments to suppliers…………………………………… 64,097 Cash payments for selling and adm
> The balance sheet and income statement for Bertha’s Bridal Boutique are presented along with some additional information about the accounts. You are to answer the questions that follow concerning cash flows for the period. a. All
> The following data have been extracted from the financial statements of Prentiss, Inc., a calendar-year merchandising corporation: a. Total sales for 2018 were $1,200,000 and for 2017 were $1,100,000. Cash sales were 20% of total sales each year. b. Co
> Karr, Inc., reported net income of $300,000 for 2017. Changes occurred in several balance sheet accounts as follows: Equipmentv…………………$25,000 increase Inventories …………………$20,000 decrease Accumulated depreciation ….40,000 increase Accounts receivable …
> The common-size balance sheets from five companies follow: Alcoa, a major producer of aluminum products; Delta Air Lines, a major airline; Duke Energy, a leading energy company focused on electric power and gas distribution; JCPenney, a national retailer
> A December 31, 2017, postclosing trial balance for Short Erin Company follows. Additional information about Short Erin’s account balances: Required: 1. Cash includes $12,000 in U.S. treasury bills purchased on December 21, 2017, that
> Kay Wing, Inc., prepared the following balance sheet at December 31, 2016. The following occurred during 2017. 1. $15,000 in cash and a $35,000 note payable were exchanged for land valued at $50,000. 2. Bonds payable (maturing in 2021) in the amount of
> Sell Corp. has a primary business model of buying and selling merchandise inventory. The balances in Sell Corporation’s balance sheet accounts at December 31, 2017 are as follows: During 2018, Sell Corp. has the following transactions
> Lend Corp. has a primary business model of borrowing funds at low interest rates and lending them out at higher interest rates. The balances in Lend Corporation’s balance sheet accounts at December 31, 2017 are as follows: During 2018
> As described in the chapter, the abnormal earnings approach for estimating common share value is where V0 is the total value of all outstanding shares, BV0 is the current book value of stockholders’ equity, BVt−1 i
> Vanguard Corporation is a distributor of food products. The corporation has approximately 1,000 stockholders, and its stock, which is traded “over-the-counter,” is sold throughout 2017 at about $7 a share with little f
> The statement of cash flows for the year ended December 31, 2017, and other data for Bradley Corporation are shown below: Additional data: a. Bradley’s Dividends receivable account decreased by $2,000 during the year. b. The Machinery
> On October 1, 2018, Bullseye Company sold 250,000 gallons of diesel fuel to Schmidt Co. at $3 per gallon. On November 8, 2018, 150,000 gallons were delivered; on December 27, 2018. another 50,000 gallons were delivered; and on January 15, 2019, the remai
> The following information is taken from the operating section of the statement of cash flows (direct method) of Battery Builders, Inc.: Collections from customers ……………………………………$ 28,000 Payments to suppliers for purchases ………………… ………………… (13,000) Paymen
> Zahava Corporation sells equipment to Ari Company for $700,000. Ari does not need the equipment until December 31, 2021, but agrees to pay $600,000 immediately on December 31, 2019, in order to assist Zahava with its finances. The remaining $100,000 is d
> Zahava Corporation sells equipment to Ari Company for $700,000 on December 31, 2019. The two companies agree that Ari will pay $100,000 upon delivery (December 31, 2019), with the remaining $600,000 due on December 31, 2021. Zahava is confident that Ari
> Ladd Corporation sells construction equipment to a customer for $200,000. The equipment comes with a standard 10-year warranty covering all maintenance and repairs during that time. Initially, Ladd estimates that it will incur $10,000 in costs over the l
> On January 1, 2019, Quenneville Corporation sold equipment to Wirtz, Inc., for $500,000. The equipment had cost $300,000 to manufacture. The contract with Wirtz requires Quenneville to provide complete maintenance and repair services on the equipment for
> Panarin Company entered into two contracts on the same date with Hjalmarsson Corporation. Panarin has provided the following analysis of price and cost for the contracts: Hjalmarsson, the customer, may cancel both contracts if either of them is not ful
> Teuvo Company entered into two contracts on the same date with Rundblad Corporation. Teuvo has provided the following analysis of price and cost for the contracts: You inquired about why Teuvo would have agreed to make a sale at a loss. The company&aci
> MSK Construction Company contracted to construct a factory building for $525,000. Construction started during 2019 and was completed in 2020. Information relating to the contract follows: 1. Record the preceding transactions in MSK’s
> It’s late Tuesday evening, and you’ve just received a phone call from Dennis Whiting, your boss at GE Capital. Dennis wants to know your reaction to the Argenti loan request before tomorrow’s loan com
> Cornwell Construction Company has been operating in Pennsylvania for a number of years. During 2019, the firm contracted with the Borough of Lewisburg to build a domed sports complex. Cornwell estimated that it would take three years to complete the faci
> In 2019, its first year of operations, Regal Department Store sells $250,000 of gift certificates redeemable for store merchandise that expire one year after their issuance. With a high degree of certainty, Regal believes 10% of the gift certificates wil
> Maffett Ticket Brokers is a reseller of tickets to sporting events and concerts. During 2019, Maffett sold gift cards totaling $250,000. Based on past experience, Maffett expects that 1% of the gift card purchases will not be redeemed by the time they ex
> Gallemore Corporation entered into a contract to sell a machine to Christiansen Corporation for $2 million. Christiansen pays for the equipment, but asks Gallemore to delay shipment under a “bill-and-hold” arrangement. Gallemore agrees. Under each of the
> Under a single contract, Sapra Corporation sold two machines to Gao Company in 2019. One of the machines typically sells for $300,000 and the other for $150,000. Because Gao purchased the machines together, Sapra agreed to a price of $425,000 for both ma
> Berger Company had sales in 2019 of $200,000. The goods sold cost Berger $125,000. The goods were sold with the right of return. By the end of 2019, goods having a total selling price of $10,000 had been returned. As of December 31, 2019, Berger expected
> Online Auction Company (OAC) provides a platform for its users to buy and sell goods. Sellers post goods for sale and other users bid on them. They high bidder wins the auction and purchases the goods. After each auction, the seller pays OAC a 10% fee an
> Foremost Company owns a royalty interest in an oil well. The contract stipulates that Foremost will receive royalty payments semiannually on January 31 and July 31. The January 31 payment will be for 30% of the oil sold to jobbers between the previous Ju
> Ball Data Corporation provides stock market data to investors. On January 1, 2019, it sells a customer access to its real-time database for two years at a price of $600,000. The customer has the right to access Ball’s database any time, 24 hours per day,
> On January 1, 2019, Skinner Equipment Company leased equipment used in mineral extraction operations to Erickson Corporation. The monthly base rental fee was $250,000. In addition, at the end of the year, Erickson must pay Skinner a bonus of one month’s
> On July 1, 2019, Grams Construction, Inc. agreed to construct a factory for a customer. The contract called for payments to Grams totaling $2 million. Grams has correctly determined that it is appropriate to recognize revenue over time, and it uses its c
> Crocs designs, develops, and manufactures consumer products from specialty resins. The company’s primary product line is Crocs-branded footwear for men, women, and children. It sells its products through traditional retail channels, inc
> Wellington International Airport Limited is a for-profit company domiciled in New Zealand that manages the Wellington Airport and files its financial statements in compliance with IFRS. For the period ending September 30, 2012, Wellington reported the fo
> Fox Photography Corporation charges $3,000 to photograph a wedding. Customers may print the images elsewhere or have them printed by Fox. Each wedding couple receives a coupon for $250 off the purchase of prints from Fox. History indicates that 60% of th
> Posa Hotels, Inc., has a sixth night free policy. Every sixth night a guest stays at the hotel is free. Because not all guests stay enough nights to earn a free stay, on average the number of free nights redeemed is 70% of the maximum possible number of
> Barrios Communications is a provider of satellite television services. It will install a satellite dish free of charge for any customer that agrees to a one-year service contract at a price of $50 per month. Installation costs Barrios $150. Customers typ
> In 2017, the new CEO of Watsontown Electric Supply became concerned about the company’s apparently deteriorating financial position. Wishing to make certain that the grim monthly reports he was receiving from the company’s bookkeeper were accurate, the C
> KEW Enterprises began operations in January 2015 to manufacture a hand sanitizer that promised to be more effective and gentler on the skin than existing products. Family members, one of whom was delegated to be the office manager and bookkeeper, staffed
> Holman Electronics manufactures audio equipment, selling it through various distributors. Holman’s days sales outstanding (Accounts receivable / Average daily credit sales) figures increased steadily in 2017 and then spiked dramatically in 2018, peaking
> In its 2012 annual report, UPS, a global package delivery company, reported the following performance data: the end of 2011 and the end of 2012 is due to fundamental changes in business operations or the business environment. At the beginning of 2012,
> During the fourth quarter of 2017, ABBA Fabrics, Inc., elected to change its method of valuing inventory to the weighted average cost (“WAC”) method, whereas in all prior years’ inventory was valued u
> Barden, Inc., operates a retail chain that specializes in baby clothes and accessories that are made to its specifications by a number of overseas manufacturers. Barden began operations in 2008 and has always employed the FIFO method to value its invento
> For 2017, Silvertip Construction, Inc., reported income from continuing operations (after tax) of $1,650,000. On November 15, 2017, the company adopted a plan to dispose of a component of the business. This component qualifies for discontinued operations
> JDW Corporation reported the following for 2017: net sales $2,929,500; cost of goods sold $1,786,995; selling and administrative expenses $585,900; an unrealized holding loss on available-for-sale securities $22,000; a positive foreign currency translati
> McDonald’s Corporation franchises and operates more than 36,000 fast-service restaurants around the world. Buffalo Wild Wings franchises and operates more than 1,000 restaurants in North America. Buffalo Wild Wings features chicken wing
> The following condensed statement of income of Helen Corporation, a diversified company, is presented for the two years ended December 31, 2017 and 2016: On January 1, 2017, Helen entered into an agreement to sell for $3,200,000 the assets and produc
> Bob’s Chocolate Chips and More, a bakery specializing in gourmet pizza and chocolate chip cookies, started business October 1, 2017. The following transactions occurred during the month of October. a. Common stock of $90,000 was sold at par to start the
> During August 2017, Packer Manufacturing had the following cash receipts and disbursements: Cash received from customers ………………. $319
> The following is selected information from Bob Touret, Inc.’s financial statements. Solve for the missing amounts for each of the five years. You may have to use some numbers from the year before or the year after to solve for certain c
> On June 30, 2017, a tornado damaged Jensen Corporation’s warehouse and factory, completely destroying the work-in-process inventory. Neither the raw materials nor finished goods inventories were damaged. A physical inventory taken after the tornado revea
