(TCO A) An advantage of the corporate form of business is _____. (Points : 5)
it is simple to establish
the corporate tax rate is less than the personal tax rate
corporations must pay dividends
the shareholders are not responsible for the corporation’s debts
(TCO A) Dividends flow through which one of the following statements? (Points : 5)
The Balance Sheet
The Statement of Retained Earnings
The Income Statement
None of the above
(TCOs A, B) Below is a partial list of account balances for LBJ Company:
What did LBJ Company show as total credits? (Points : 5)
(TCOs B, E) Which of the following statements is correct with regard to accrual accounting? (Points : 5)
Accrual accounting is consistent with the matching principle.
Accrual accounting is less complex than the cash-basis method.
Accrual accounting does not record expenses until paid.
Accrual accounting does not record revenue until payment is received.
(TCO D) Which inventory method will result in the lowest income taxes when prices are decreasing? (Points : 5)
The average cost method
Income tax expense will be the same.
(TCO A, E) Equipment was purchased for $27,000. Freight charges amounted to $1,000 and there was a cost of $5,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $5,000 salvage value at the end of its 7-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)
(TCOs D, G) When the market rate of interest is equal to the stated rate of interest on the bond, the bond will require _____. (Points : 5)
a debit to Discount on Bonds Payable
a credit to Discount on Bonds Payable
a credit to Bonds Payable
a debit to Bonds Payable
(TCO C) Accounts receivable arising from sales to customers amounted to $50,000 and $45,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $150,000. Based on these transactions, the cash flows from operating activities to be reported on the statement of cash flows would be _____. (Points : 5)
(TCO F) If you are calculating the percentage change between 2 years worth of sales data, you are conducting a _____. (Points : 5)
(TCO F) When performing a common-size Income Statement, the 100% figure is _____. (Points : 5)
total liabilities plus stockholders’ equity
(TCO F) Ratios are most useful in expressing _____. (Points : 5)
the relationships between numbers
the delta between numbers
the root cause of the problem
(TCO F) Creditors are usually most concerned with analyzing _____. (Points : 5)
the company stock price
(TCO F) Shareholders are usually most interested in evaluating _____. (Points : 5)
the ability to pay debts as they come due
(TCO G) To calculate the market value of a bond, we need to use the time-value-of-money concept called _____. (Points : 5)
(TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report:
Income Taxes Payable
Short-term Investments and Marketable Securities
Other non-current Liabilities
Other Current Assets
Other Non-current Assets
Property, Plant and Equipment
Other Intangible Assets
Allowance for Doubtful Accounts
Short Term Notes Payable
Other Current Liabilities
Paid-in-Capital in Excess of Par Value
Other information taken from the Annual Report:
Sales Revenue for 2012
Cost of Goods Sold for 2012
Net Income for 2012
Inventory Balance on 12/31/11
Net Accounts Receivable Balance on 12/31/11
Total Assets on 12/31/11
Equity Balance on 12/31/11
1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.
2. Using the Balance Sheet from your answer above, calculate the Current Ratio and Return on common stockholders’ equity ratio. (Make sure to show all your work).
(Points : 36)
(TCO B) The following selected data was retrieved from the Walmart, Inc. financial statements for the year ending January 31, 2013:
Cost of Goods Sold
Income Tax Expense
Operating, Selling and Administrative Expenses
Using the information provided above:
1. Prepare a multiple-step income statement
2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.
(Points : 36)
(TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the two questions below:
Cash flow from operating activities
For the year ended 2012
For the year ended 2011
Net (loss) earnings
Depreciation and amortization
Impairment of goodwill and purchased intangible assets
Stock-based compensation expense
Provision for doubtful accounts
Provision for inventory
Deferred taxes on earnings
Excess tax benefit from stock-based competition
Accounts and financing receivables
Taxes on earnings
Other assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Investment in property, plant, and equipment
Proceeds from sale of property, plant, and equipment
Purchases of available-for-sale securities and other investments
Maturities and sales of available-for-sale securities and other investment
Payments in connection with business acquisitions, net of cash acquired
Proceeds from business divestiture, net
Net cash used in investing activities
Cash flow from financing activities:
(Payments) issuance of commercial paper and notes payable, net
Issuance of debt
Payment of debt
Issuance of common stock under employee stock plans
Repurchase of common stock
Excess tax benefit from stock-based compensation
Cash dividends paid
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
1) Please calculate the percentage increase or decrease in cash for the total line of the operating, investing, and financing sections bolded above and explain the major reasons for the increase or decrease for each of these sections.
2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio.
(Points : 36)
(TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”
Assuming the goal is to maximize net income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported Net Income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet.
a. Goforit carries significant electronics inventory in a competitive environment in which prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.
b. Goforit has a large investment in warehouse equipment, including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: straight line (SL) or double declining balance (DDB)?
(Points : 36)
(TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.
Johnson & Johnson
Inventory turnover ratio
Average collection period
Cash debt coverage ratio
Debt to Total assets
1) Please explain the meaning of each of the Pfizer ratios above.
2) Please state which company performed better for each ratio.
(Points : 36)