What two choices must companies make when reporting comprehensive income?
> When can a liability be classified as current?
> What items are included in cash and cash equivalents? How would financial statement preparers report these items on the balance sheet?
> What are the four major components of stockholders’ equity? Explain each component.
> What does a firm’s solvency measure?
> Explain the five different types of auditor’s opinions.
> What does it mean when an auditor issues an adverse opinion on the financial statements?
> What do auditors attest to in an audit report?
> Identify and compute the cash flow related to each item on the following income statement. Use the direct method.
> What information is provided in the Management’s Discussion and Analysis section of the financial statements?
> How does the role of the FASB differ from that of the Securities and Exchange Commission with regard to the establishment of accounting standards?
> What is a related-party transaction? Why does the FASB require disclosure of related parties?
> Over what period must management assess the entity’s ability to continue as a going concern under IFRS?
> Over what period must management assess the entity’s ability to continue as a going concern under U.S. GAAP?
> How do firms report a material subsequent event on the financial statements?
> What does a firm’s liquidity measure?
> What is a subsequent event under IFRS?
> What is a subsequent event?
> What is included in the summary of significant accounting policies disclosure?
> Match each annual report section with its description. Annual report sections: a. Management’s discussion and analysis b. Auditors’ report c. Management’s responsibility for the financial statement
> Why are the notes to the financial statements an integral part of the financial statements?
> How is net income closed? Is the closing entry the same for other comprehensive income? Explain.
> What is financial statement articulation?
> What are the two formatting options for reporting the operating activities section of the statement of cash flows? Explain both formats.
> What is the purpose of the cash flow statement?
> Why is the cash flow statement useful to the users of the financial statements?
> What are the two main balance sheet formats? Explain both formats.
> What are the limitations of the balance sheet?
> Is it useful to compare working capital among companies in the same industry to determine relative liquidity? Explain.
> What does a high current ratio indicate about a company?
> Green Grasshopper Incorporated is interested in assessing the following scenarios on its indicators of profitability. Solve each scenario independently. a. Green Grasshopper has taken significant steps to decrease expenses and expects its net income to i
> What does the debt-to-equity ratio measure for a company?
> What are the two key measures of liquidity? Explain each measure.
> What is the difference between liquidity and solvency?
> Who is responsible for designing and implementing a company’s system of internal controls? Where is this policy stated?
> What information is included in the annual report letter written by managers of publicly traded companies?
> What is management’s responsibility for the financial statements?
> Where do auditors include their report on the effectiveness of a firm’s internal controls? Explain.
> How is a company’s profit margin calculated?
> Explain the difference between return on equity and return on assets.
> What defines a company’s profitability?
> Complete the following vertical analyses of Dragonfly Corporation’s income statement. What line item is the largest percent of sales in 2019? How has it changed from 2018 to 2019?
> What is the difference between vertical and horizontal analysis?
> What are comparative financial statements and why are they useful?
> Do auditors use financial statement analysis techniques? Explain.
> What is financial statement analysis?
> What accounts are summarized on the statement of stockholders’ equity?
> Are companies reporting under U.S. GAAP required to prepare a statement of stockholders’ equity? Explain.
> Can entities report other comprehensive income in the statement of stockholders’ equity? Explain.
> Is the presentation of comprehensive income identical under IFRS and U.S. GAAP? Explain Answer: U.S. GAAP and IFRS both allow the one statement or two consecutive statement approaches of reporting other comprehensive income. In the one-statement approa
> Are items of other comprehensive income included in the computation of net income? Explain.
> Complete the following horizontal analyses of Dragonfly Corporation’s income statement. What was the largest percentage increase in expenses? What was the largest percentage decrease in expenses? What would explain the changes?
> Match the description with the advantages and disadvantages of the income statements.
> What items are included in net income?
> If Procter & Gamble sells its Fabric Care and Home Care business segment, would it account for the sale as a discontinued operation? Explain.
> Does a business segment qualify as a discontinued operation? Explain.
> Explain why operating income is an important measure of financial performance.
> What are the six key items to be reported on the statement of net income under IFRS? Must a company report operating income under IFRS?
> Is the presentation of the statement of net income under IFRS and U.S. GAAP identical? Explain.
> Explain the difference between a single-step and multiple-step income statement. Which statement is more transparent?
> Can entities combine cost of goods sold, payroll costs, and administrative expenses when aggregating and summarizing expenses by function on the income statement? Explain.
> Do entities report revenues, expenses, gains, and losses in net income or other comprehensive income? Explain.
> What is the difference between permanent and transitory earnings?
> Using the information from BE5-17 what is the balance in the accumulated other comprehensive income account at the end of the year? Ignore taxes. Data From BE5-17: It reported the following information for the current year:
> What management behavior does the term earnings management describe?
> What is meant by the term earnings quality?
> IFRS. Cardinal Manufacturing, Ltd., an IFRS reporter, provided the following information from its current-year trial balance. Required: Prepare a statement of net income and additional disclosure that would meet IFRS presentation requirements. Indicate
> Right Angle Manufacturing Company provided the following information for the year ended December 31 for the current year. Required: a. Prepare a single-step income statement for the current year. The tax rate is 40%. b. Prepare a multiple-step income st
> Using the information from P5-1, prepare a condensed, multiple-step income statement with all supporting disclosures. Data from P5-1:
> Bluebird Products, Inc. provided the following information from its current-year trial balance. Required: a. Prepare a single-step income statement for the year ended December 31. The tax rate is 40%. b. Prepare a multiple-step income statement for the
> Carfly Barbers decides to lease a second barbershop. The barbershop has a cash price of $200,000. If Carfly borrowed money to purchase the shop, it would incur a 9% interest rate compounded annually. Answer the following questions: a. What are the lease
> Norton Dog Care Co. wants to finance a new animal shelter by making eight annual deposits into a fund earning 7% compounded annually. The first four deposits are to be $20,000 each and will be paid at the beginning of the next four years. The last four d
> Norton Dog Care Co. wants to finance a new animal shelter by making eight annual deposits into a fund earning 7% compounded annually. The first four deposits are $20,000 each and will be paid at the end of the next four years. The last four deposits are
> Assuming the same facts as P7-5, how would the employee’s decision change if all retirement payments are received at the end of the year? Data from P7-5: A 50-year-old employee of IQ Entertainment was asked to select one of three potential early retirem
> Using the information from BE5-17 what is the amount of Taxi Cabs’ contributed capital at the end of the year? Data From BE5-17: It reported the following information for the current year:
> A 50-year-old employee of IQ Entertainment was asked to select one of three potential early retirement packages. Package A: $60,000 received today. Package B: $10,000 to be received each year for the next eight years. Package C: $40,000 received today a
> Answer the following independent questions: a. You borrowed $15,000 from a friend and promised to repay the loan in seven equal annual installments. Installments begin at the end of the first year. What are the annual payments required to pay back your f
> Charlie Sheen hits the $500,000 jackpot at the Palms Casino in Las Vegas. The casino gives him two options for collecting his winnings: Option A: Sheen can take all of his winnings today. They will be taxed by the federal government at 40%. Option B: She
> Boyne Painting Contractors needs to purchase a new truck. The owner is considering two different truck models that are currently on the market. Boyne’s two alternatives are presented here: Truck A: Boyne can purchase Truck A for $45,000. The truck has a
> Make-It-Big Corporation is planning to build a new factory costing $2,000,000. On January 1, 2019, Make-It-Big plans to issue bonds in the amount of $1,800,000 that will be paid in five years. Interest of $45,000 will be paid semiannually each January 1
> Hiteck Electronics sells a diagnostic machine to a hospital with a four-year payment plan. The company would like to estimate the bad debt allowance needed to cover the notes outstanding over the next four years. Estimated lost cash flows and the probabi
> Jewels Hair Design Studios would like to purchase another hair salon that is being sold in a neighboring town for $500,000. Assume cash flows occur at the end of the year. Based on past volume of sales, Jewels estimates the net cash flows that would be g
> Fata Food Emporium decides to obtain a new refrigerator to store its meat and produce. The refrigerator has a 15-year useful life and can be sold for $15,000 at the end of its useful life. Fata has two options: a. Purchase the Refrigerator: Purchase the
> Carfly Barbers decides to lease another barbershop for a 10-year period. The barbershop has a cash price of $200,000. If Carfly borrowed money to purchase the shop, it would have had to pay 12% interest. Answer the following questions: a. What are the re
> Carfly Barbers wants to have $200,000 in 10 years to build a second barbershop 10 years from today. Commencing two years from today, Carfly will make eight annual deposits of $18,000 at the end of each year. Alternatively, the company can invest in a fin
> Taxi Cabs, Inc. reported the following account balances on its balance sheet as of the beginning of the current year. It reported the following information for the current year: What is the balance in the retained earnings account at the end of the yea
> FA Manufacturers must make several investment decisions related to its business operations. Interest is compounded annually. Analyze the following independent situations to help FA make a profitable investment. a. FA Manufacturers reported a $150,000 deb
> Snail Company provided the following balance sheet and income statement for the current year. Prepare the operating activities section of the cash flow statement using the direct method. Accrued expenses relate to Selling, General and Administrative Expe
> Use the 2015 Annual Report, 10-K, of Foot Locker, Inc., to answer the following questions. You can locate Foot Locker’s financial statements on its website or the Securities and Exchange Commission’s Web site of company reports. a. What sections are inc
> Use the Foot Locker, Inc.’s 2015 financial statements found in its 2015 annual report to complete the following financial statement articulation worksheets. You can locate Foot Locker’s financial statements on its Web
> Centre Company provided the following listing of the current year’s post-closing account balances. Centre reported net income of $3,200 and declared dividends amounting to $600. Unrealized losses on the company’s avai
> Society Teas, Inc. provided the following information from its current-year trial balance. Society Teas issued $5,400 of no-par common stock on April 1 of the current year. Required: Prepare the stockholders’ equity section of the bal
> Delaney Products, Inc. provided the following information from its current-year trial balance. Delaney issued $55,000 of no-par common stock on October 1 of the current year. The company also repurchased $13,500 of its shares at the end of the reporting
> Jennings Incorporated provided the following account balances at December 31 for the current year. Required: a. Prepare the balance sheet at December 31 using the report format. b. Prepare the balance sheet at December 31 using the account format.
> Using the information provided by Larkin Corporation in P6-1, restructure the balance sheet for December 31 of the current year using the report format with the following change in assumptions: 1. The investments at fair value are held in a noncurrent as
> Repeat the requirements of P6-9 under the indirect method. Data From P6-9:
> Using the information provided in BE5-15, report comprehensive income in a separate statement of comprehensive income. Data From BE5-15:
> Larkin Corporation provided the following account balances prepared at December 31 of the current year. Required: a. Prepare the balance sheet at December 31st using the report format. b. Prepare the balance sheet at December 31st using the account forma
> Prepare the statement of cash flows under the indirect method for Easthoff, Incorporated using the information from P6-14 and the following cash flow information: Data From P6-14:
> Prepare the statement of cash flows under the direct method for Easthoff, Incorporated using the information from P6-13 and the following cash flow information: Data From P6-13:
> Repeat the requirements in P6-13 using the indirect method. Data From P6-13:
