Question: Which of the following is not one

> In 2017, Kathleen Tweardy incurs $30,000 of interest expense related to her investments. Her investment income includes $7,500 of interest, $6,000 of qualified dividends, and a $12,000 net capital gain on the sale of securities. Kathleen asks you to comp

> Tonya sells a passive activity in the current year for $150,000. Her adjusted basis in the activity is $50,000, and she uses the installment method of reporting the gain. The activity has suspended losses of $12,000. Tonya receives $60,000 in the year of

> Commercial Bank has initiated an advertising campaign that encourages customers to take out home equity loans to pay for purchases of automobiles. Are there any tax advantages related to this type of borrowing? Explain.

> Dan, a self-employed individual taxpayer, prepared his own income tax return for the past year and has asked you to check it for accuracy. Your review indicates that Dan failed to claim certain business entertainment expenses. a. Will the correction of t

> Explain why market-to-book valuation multiples demonstrate less variance over time and across firms than do price-earnings valuation multiples.

> Identify three economic factors that will drive a firm’s price-earnings ratio to decrease over time. Identify three accounting factors that will drive a firm’s price-earnings ratio down in a given period.

> Identify three economic factors that will drive a firm’s price-earnings ratio to be higher than that of other firms in the same industry. Identify three accounting factors that will drive a firm’s price-earnings ratio in a given period to be higher than

> In practice, it is common to observe price-earnings ratios measured as current period price divided by trailing-twelve-months (or most recent annual) earnings per share. Identify and explain three potential flaws inherent in this measurement of the price

> In conceptual terms, explain the value-earnings ratio. Explain the difference between the value-earnings ratio and the price-earnings ratio. What is the critical assumption about future earnings in both the value-earnings and price-earnings ratio?

> Identify three economic factors that will drive a firm’s value-to-book ratio to decrease over time. Identify three accounting factors that will drive a firm’s value-to-book ratio to decrease over time.

> Identify three economic factors that will drive a firm’s value-to-book ratio to be higher than that of other firms in the same industry. Identify three accounting factors that will drive a firm’s value-to-book ratio to be higher than that of other firms

> We projected financial statements for Walmart Stores for Years þ1 through +5. The data in Chapter 12 Exhibits 12.17–12.19 include the actual amounts for 2012 and the projected amounts for Year +1 to Year +5 for the income

> In this chapter, we evaluated shares of common equity in PepsiCo using the value-to-book approach, market multiples, price differentials, and reverse engineering. The Coca-Cola Company competes directly with PepsiCo. The data in Chapter 12 Exhibits 12.14

> Explain the implications of a value to-book ratio that is greater than the market-to-book ratio. Explain the implications of a value to-book ratio that is less than the market-to-book ratio.

> The Coca-Cola Company is a global soft-drink beverage company that is a primary and direct competitor with PepsiCo. The data in Chapter 12 Exhibits 12.14–12.16 include the actual amounts for 2012 and projected amounts for Year +1 to Yea

> In 2000, Enron enjoyed remarkable success in the capital markets. During that year, Enron’s shares increased in value by 89%, while the S&P 500 index fell by 9%. At the end of 2000, Enron’s shares were trading at roughly $83 per share and all of the sell

> This problem explores the sensitivity of the value-earnings and value-to-book models to changes in underlying assumptions. We recommend that you design a computer spreadsheet to perform the calculations, particularly for the value-to-book ratio. REQUIRE

> Exhibit 14.12 presents data on market-to-book ratios, ROCE, the cost of equity capital, and price-earnings ratios for seven pharmaceutical companies. (Note that price-earnings ratios for these firms typically fall in the 30–35 range.) E

> Problem 13.18 and Exhibit 13.7 in Chapter 13 present selected hypothetical data from projected financial statements for Steak ‘n Shake for Year +1 to Year +11. The amounts for Year +11 reflect a long-term growth assumption of 3%. The co

> Using the evidence presented in Exhibit 14.10, describe the extent to which the market is efficient with respect to quarterly earnings surprises during the 60 trading days prior to quarterly earnings announcements. Using the evidence presented in Exhibit

> Explain the role of analysts in increasing capital market efficiency.

> What does market efficiency mean? What does market efficiency not mean? Explain how market efficiency relates to the amount of information that affects share prices and the speed with which information affects share prices.

> Explain reverse engineering of share prices in conceptual terms. How does reverse engineering of share prices enable an analyst to infer (or deduce) the assumptions that the capital markets appear to impound in share price?

> What does a price differential measure? How does a price differential relate to risk?

> In Integrative Case 10.1, we projected financial statements for Starbucks for Years +1 through +5. In this portion of the Starbucks Integrative Case, we use the projected financial statements from Integrative Case 10.1 and apply the techniques in Chapter

> Each column presents financial information taken from one of four different companies, with one or more items of data missing. Required: Use your understanding of the relationships among financial statements and financial statement items to find the mi

> Parker Renovation Inc. renovates historical buildings for commercial use. During 2019, Parker had $763,400 of revenue from renovation services and $5,475 of interest income from miscellaneous investments. Parker incurred $222,900 of wages expense, $135,0

> Information for TTL Inc. is given below. Required: Use the relationships in the balance sheet, income statement, and retained earnings statement to determine the missing values. Total assets at the beginning of the year S (a) Total assets at the en

> At the beginning of 2019, Huffer Corporation had total assets of $232,400, total liabilities of $94,200, common stock of $50,000, and retained earnings of $88,200. During 2019, Huffer had net income of $51,750, paid dividends of $10,000, and issued addit

> Carson Corporation reported the following amounts for assets and liabilities at the beginning and end of a recent year. Required: Calculate Carson’s net income or net loss for the year in each of the following independent situations: 1.

> Data from the financial statements of four different companies are presented in separate columns in the table below. Each column has one or more data items missing. Required: Use your understanding of the relationships among the financial statement item

> The following information relates to Ashton Appliances for 2019. Accounts payable $ 16,800 Income taxes expense $ 16,650 Accounts receivable 69,900 Income taxes payable 12,000 Accumulated depreciation (building) 104,800 Insurance expense 36,

> The table below presents the retained earnings statements for Bass Corporation for 3 successive years. Certain numbers are missing. Required: Use your understanding of the relationship between successive retained earnings statements to calculate the miss

> Dittman Expositions has the following data available: Dividends, 2019 $ 10,250 Retained earnings, 12/31/2018 $ 20,900 Dividends, 2020 12,920 Revenues, 2019 407,500 Expenses, 2019 382,100 Revenues, 2020 451,600 Expenses, 2020 418,600 Required

> The following information for Rogers Enterprises is available at December 31, 2019, and includes all of Rogers’ financial statement amounts except retained earnings: Accounts receivable $72,920 Property, plant, and equipment $ 90,000 Cash 13,240

> What types of questions are answered by the financial statements?

> Each column presents financial information taken from one of four different companies, with one or more items of data missing. Required: Use your understanding of the relationships among financial statements and financial statement items to determine t

> Powers Wrecking Service demolishes old buildings and other structures and sells the salvaged materials. During 2019, Powers had $425,000 of revenue from demolition services and $137,000 of revenue from salvage sales. Powers also had $1,575 of interest in

> Information for Beethoven Music Company is given below. Total assets at the beginning of Equity at the beginning of the year $ (b) the year $145,200 Equity at the end of the year 104,100 Total assets at the end of the year (a) Divid

> Which of the following statements is true? a. The auditor’s opinion is typically included in the notes to the financial statements. b. The notes to the financial statements are an integral part of the financial statements that clarify and expand on the i

> Which of the following sentences regarding the statement of cash flows is false? a. The statement of cash flows describes the company’s cash receipts and cash payments for a period of time. b. The statement of cash flows reconciles the beginning and endi

> Which of the following statements concerning retained earnings is true? a. Retained earnings is the difference between revenues and expenses. b. Retained earnings is increased by dividends and decreased by net income. c. Retained earnings represents accu

> For the most recent year, Grant Company reported revenues of $182,300, cost of goods sold of $108,800, inventory of $8,500, salaries expense of $48,600, rent expense of $12,000, and cash of $12,300. What was Grant’s net income? a. $9,400 b. $12,900 c. $2

> Which of the following statements regarding the income statement is true? a. The income statement provides information about the profitability and growth of a company. b. The income statement shows the results of a company’s operations at a specific poin

> Refer to the information for Marker above. What is Marker’s stockholders’ equity? a. $7,500 b. $17,500 c. $19,100 d. $25,000

> Refer to the information for Marker above. What is the total of Marker’s current assets? a. $12,100 b. $13,700 c. $14,500 d. $25,000

> Name and briefly describe the purpose of the four financial statements.

> Which of the following is not shown in the heading of a financial statement? a. The title of the financial statement b. The name of the company c. The time period covered by the financial statement d. The name of the auditor

> What type of questions do the financial statements help to answer? a. Is the company better off at the end of the year than at the beginning of the year? b. What resources does the company have? c. For what did a company use its cash during the year? d.

> At December 31, Pitt Inc. has assets of $12,900 and liabilities of $6,300. What is the stockholders’ equity for Pitt at December 31? a. $6,600 b. $6,300 c. $18,100 d. $19,200

> Cam and Anna met during their freshman year of college as they were standing in line to buy tickets to a concert. While waiting in line, the two shared various aspects of their lives. Cam, whose father was an executive at a major record label, was raised

> Refer to the 10-K reports of Under Armour, Inc., and Columbia Sportswear that are available for download from the companion website at CengageBrain.com. Required: Answer the following questions: 1. Describe each company’s business and list some of the m

> Obtain Apple Inc.’s 2016 annual report either through the ‘‘Investor Relations’’ portion of their website (do a web search for Apple investor relations) or go to www.sec.gov and click ‘‘Company Filings Search’’ under ‘‘Filings.’’ Required: Answer the fo

> Lola, the CEO of JB Inc., and Frank, the accountant for JB Inc., were recently having a meeting to discuss the upcoming release of the company’s financial statements. Following is an excerpt of their conversation: Lola: These financial statements don’t s

> Professional ethics guide public accountants in their work with financial statements. Required: Why is ethical behavior by public accountants important to society? Be sure to describe the incentives that public accountants have to behave ethically and u

> Reproduced below are portions of the president’s letter to stockholders and selected income statement and balance sheet data for the Wright Brothers Aviation Company. Wright Brothers is a national airline that provides both passenger se

> Define the terms revenue and expense. How are these terms related?

> Agency Rent-A-Car Inc. rents cars to customers whose vehicles are unavailable due to accident, theft, or repair (‘‘Wheels while your car heals’’). The company has a fleet of more tha

> Which of the following statements regarding business activities is true? a. Operating activities involve buying the long-term assets that enable a company to generate revenue. b. Financing activities include obtaining the funds necessary to begin and ope

> The accounting profession is organized into three major groups: (a) Accountants who work in nonbusiness entities, (b) Accountants who work in business entities, and (c) Accountants in public practice. The periodical literature of accounting includes

> Jim Hadden is a freshman at Major State University. His earnings from a summer job, combined with a small scholarship and a fixed amount per term from his parents, are his only sources of income. He has a new MasterCard that was issued to him the week he

> Which of the following statements is false concerning forms of business organization? a. A corporation has tax advantages over the other forms of business organization. b. It is easier for a corporation to raise large sums of money than it is for a sole

> Decision-makers use accounting information in a wide variety of decisions including the following: 1. Deciding whether or not to lend money to a business 2. Deciding whether or not an individual has paid enough in taxes 3. Deciding whether or not to plac

> Bill and Steve recently formed a company that manufactures and sells high-end kitchen appliances. The following is a list of activities that occurred during the year. a. Bill and Steve each contributed cash in exchange for common stock in the company. b.

> Listed below are various activities that companies engage in during a period. a. Purchase of equipment b. Payment of a dividend c. Purchase of supplies d. Sale of equipment e. Sale of goods or services f. Borrow money from a bank g. Contribution of cash

> Hanson Construction has an operating cycle of 9 months. On December 31, 2019, Hanson has the following assets and liabilities: a. A note receivable in the amount of $1,500 to be collected in 6 months b. Cash totaling $1,380 c. Accounts payable totaling $

> Dunn Sporting Goods sells athletic clothing and footwear to retail customers. Dunn’s accountant indicates that the firm’s operating cycle averages 6 months. At December 31, 2019, Dunn has the following assets and liabilities: a. Prepaid rent in the amoun

> Define the terms assets, liabilities, and stockholders’ equity. How are the three terms related?

> The following accounts exist in the ledger of Higgins Company: accounts payable, accounts receivable, accumulated depreciation, bonds payable, building, common stock, cash, equipment, income taxes payable, inventory, notes payable (due in 5 years), prepa

> Financial information for three independent cases is given below. Required: Compute the missing numbers in each case. Liabilities Equi ty Assets 1. 2. 3. SI 16,200 212,600 (c) S (a) 145,900 22,500 $55,400 (b) 48,300

> A list of accounting concepts and related definitions is presented below. Concept Definition 1. Revenue a. Owner’s claim on the resources of a company 2. Expense b. The difference between revenues and expenses 3. Net income (loss) c. Increase in

> Listed below are definitions, examples, or descriptions related to business entities. 1. Owned by one person 2. Can make and sell goods (manufacturing) 3. Owned by more than one person 4. Can sell goods (merchandising) 5. Can provide and sell services 6.

> Ethical behavior is essential to the conduct of business activity. Consider each of the following business behaviors: a. A manager prepares financial statements that grossly overstate the performance of the business. b. A CPA resigns from an audit engage

> DeSalle Company’s annual report includes the following items: financial statements, notes to the financial statements, management’s discussion and analysis, and a report of independent accountants. Required: For each of the following items, where would

> During 2019, Moore Corporation paid $20,000 of dividends. Moore’s assets, liabilities, and common stock at the end of 2018 and 2019 were: Required: Using the information provided, compute Moore’s net income for 2019.

> The following information for Kellman Inc. is available at the end of 2019. Total assets on 12/31/2018 $82,400 Common stock on 12/31/2018 $50,000 Total assets on 12/31/2019 88,500 Common stock on 12/31/2019 50,000 Total liabilities on 12/31/201 8 9

> Zachary Corporation’s December 31, 2018 balance sheet included the following amounts: Cash...................................... $ 20,400 Retained earnings.................. 105,600 Zachary’s accountant provided the following data for 2019: Revenues

> Walters Inc. began operations on January 1, 2019. The following information relates to Walters’ cash flows during 2019. Cash received from owners $201,500 Cash paid to purchase machine $32,000 Cash paid for purchase of land and Cash paid to

> Name and describe the three main types of business activities.

> At the end of 2018, Sherwood Company had retained earnings of $18,240. During 2019, Sherwood had revenues of $837,400 and expenses of $792,100, and paid cash dividends in the amount of $38,650. Required: 1. Determine the amount of Sherwood’s retained ea

> The following information is available for Wright Auto Supply at December 31, 2019. Cost of goods sold $292,000 Rent expense $ 21,000 Depreciation expense 31,250 Salaries (administrative) 33,800 Income taxes expense 32,520 Sales revenue

> The following information is available for Bergin Pastry Shop. Gross margin........................................................................... $34,700 Income from operations............................................................. 9,200 Inco

> ERS Inc. maintains and repairs office equipment. ERS had an average of 10,000 shares of common stock outstanding for the year. The following income statement account balances are available for ERS at the end of 2019. Advertising expense $24,200 Salar

> The following accounts exist in the ledger of Butler Company: salaries expense, advertising expense, cost of goods sold, depreciation expense, interest expense, income taxes expense, sales revenue, and utilities expense. Required: 1. Organize the above

> Balance sheet information for Milton Company is as follows: Required: Compute the missing values (a)–(j). All the necessary information is provided. (Hint: It is not necessary to calculate your answers in alphabetical order.) 201

> Jerrison Company operates a wholesale hardware business. The following balance sheet accounts and balances are available for Jerrison at December 31, 2019. Required: 1. Prepare a classified balance sheet for Jerrison at December 31, 2019. 2. Compute Je

> College Spirit sells sportswear with logos of major universities. At the end of 2019, the following balance sheet account balances were available. Accounts payable $104,700 Income taxes payable $ 11,400 Accounts receivable 6,700 Inventory 48

> On January 1, 2019, Mulcahy Manufacturing Inc., a newly formed corporation, issued 1,000 shares of common stock in exchange for $150,000 cash. No other shares were issued during 2019, and no shares were repurchased by the corporation. On November 1, 2019

> Swanson Products was organized as a new business on January 1, 2019. On that date, Swanson acquired equipment at a cost of $425,000, which is depreciated at a rate of $40,000 per year. Required: Describe how the equipment and its related depreciation wi

> Name and describe three different forms of business organization.

> What equation describes the income statement?

> Describe how items are ordered within the current assets and current liabilities sections on a balance sheet.

> Describe the items (other than the financial statements) found in the annual report.

> How is the retained earnings statement related to the balance sheet? How is the income statement related to the retained earnings statement?

> Name and describe the three categories of the statement of cash flows.

> Explain the items reported on a retained earnings statement.

> How does the multiple-step income statement differ from the single-step income statement?

> Name the two main components of stockholders’ equity. Describe the main sources of change in each component.

> Give an example of unethical behavior by a public accountant and describe its consequences.

> Listed below are several descriptions related to other items found in an annual report. Description Location in the Annual Report 1. An integral part of the financial a. Notes to the financial statements statements that hel