Class Handout Ch 2 parts 2
.docx
keyboard_arrow_up
School
Virginia Tech *
*We aren’t endorsed by this school
Course
3214
Subject
Finance
Date
May 3, 2024
Type
docx
Pages
11
Uploaded by AgentBoulderJellyfish35
In-class discussion problems related to Ch. 2 parts 2.1-2.5
FIRE 311, Fall 2023
Class date: Jan 31, 2023 Prerequisites:
Basic knowledge from Ch. 2 and intro accounting classes
Questions for Chapter 2: Parts 2.1-2.5
1.
Why are publicly traded companies required to periodically disclose certain financial and other material information? Who regulates what information is disclosed?
SEC, To make a market for equity investors fair, To enable financing flow to and from companies
2.
What are the three main financial statements periodically disclosed by public companies? What information do they contain? Which statements show information of the results over time
and which statements are as of a specific date
(at a specific point in time)? Note: to answer this question, you may want to look at an example of financial statements for a fictitious company called Blue Sky, Inc. on pages 3-4 of this handout.
Balance Sheet: Assets, Liabilities Stockholder’s Equity, how they are financed ( Assets= Liability + Stockholder’s Equity) As of a specific date (Balances), Balance sheet balances at a specific date, financial position of a specific date
Income Statement: Expenses and Revenue, Financial Performance over a period of time ( sometimes annual, quarterly) Top like is Sales, and then deduct the cost, and then see net profits, we can also see intermediate profits, over the year Statement of Cash Flows: Cash inflows and outflows over time ( annual or quarterly), operating, investment, and financing Problems for Chapter 2: Parts 2.1-2.5
1
Problem 1 – Reading Information from financial statements
Blue Sky, Inc. is a small, publicly traded C-corporation that manufactures specialty parachuting equipment. Look at the Financial Statements of Blue Sky, inc. from the latest annual report attached below on pages 3 and 4. Can you answer the following question? Which financial statements do you look at to answer these questions?
a.
What was the revenue for the company in the latest year? Does this necessarily represent cash received by the company?
7.5 million 7.550 thousand $7,550,000 ( Income statement)
This is topline number b.
What was the EPS in the latest year? How is it calculated? Is it higher than the year prior?
EPS= Earnings Per Share EPS= Net Income/ # Shares of stock outstanding EPS+ 257,800/100,000= $2.58
257.8= 257,800
Declining EPS
c.
How much in dividend did Blue Sky pay to stockholders in the most recent year? How much was it per share and how much in total? Is the dividend expense considered as cost deducted on the income statement before calculating taxes? Is the dividend expense a cash expense?
Dividend Per Share= DPS= $0.48
Total Dividend= $48,000
The dividend is not tax-deductible on the income statement because of double taxation, investors have to pay taxes on the dividends. It is a cash expense Deduct interest expense, before doing taxes= Debt financing
Equity Financing is not tax-deductible 2
d.
Did inventory level increase or decrease from the end of 2021 to 2022? By how much? Does the change in inventory represent a use of cash or a source of cash for the company? Inventory increased= 1370,000-890,000= 480,000
An increase in inventory is a cash outflow Assets are ordered in terms of liquidity ( easiest to make liquid)
Current Term Assets= Within a year
Common Stock and Additional Paid-in-Capital are money they received from equity financing Retained Earnings= Liability ( claims against the asset)
You want to see positive cash flow and net income not negative Additional inventory decreases cash flow Cash flow from investing is long term assets
Cash flow from financing is equity and debt 3
Blue Sky, Inc.
Balance Sheet
As of December 31
All data in $ thousands
2022
2021
Assets
Cash
258.0
150.0
Accounts Receivable
450.0
350.0
Inventory
1,370.0
890.0
Total Current Assets
2,078.0
1,390.0
Plant & Equipment
5,800.0
5,160.0
Accumulated Depreciation
(1,010.0)
(890.0)
Net Plant & Equipment
4,790.0
4,270.0
Total Assets
6,868.0
5,660.0
2022
2021
Liabilities and Equity
Accounts Payable
570.0
480.0
Notes Payable
350.0
280.0
Total Current Liabilities
920.0
760.0
Long-term Debt
1,900.0
1,520.0
Common Stock (par $1)
100.0
80.0
Additional Paid-in-Capital
3,238.2
2,800.0
Retained Earnings
709.8
500.0
Total Stockholders' Equity
4,048.0
3,380.0
Total Liabilities and Equity
6,868.0
5,660.0
Latest Annual Financial Statement for Blue Sky, Inc.
Blue Sky, Inc.
Income Statement
For the year ended December 31
All data in $ thousands
2022
2021
Sales
7,550.0
6,150.0
Cost of Goods Sold
(5,750.0)
(4,550.0)
Gross Profit
1,800.0
1,600.0
Selling and G&A Expenses
(920.0)
(850.0)
Research and Development
(250.0)
(230.0)
EBITDA
630.0
520.0
Depreciation
(120.0)
(100.0)
Operating Income (EBIT)
510.0
420.0
Interest Expense
(152.0)
(121.0)
Pre-tax Income (EBT)
358.0
299.0
Income Tax
(100.2)
(83.7)
Net Income
257.8
215.3
Notes:
Shares Outstanding
100,000
80,000
Earnings per Share
$2.58
$2.69
Dividend per Share
$0.48
$0.45
4
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Questions
Solve #35 please
arrow_forward
ounting-20201
ACCT101 - Introduction to Financial Accounting / FINAL EXAM ACCT 101 FALL 2020-2021
International Financial Reporting Standards (IFRS ) are:
Select one:
ut of
O a. Principles that have been proven correct by academic researchers.
O b. None of the answers are correct
estion
O c. Theories that are based on physical laws of the universe.
O d. Standards that indicate how to report economic events.
O e. Income tax regulations of the Internal Revenue Service.
Next page
us page
LANSWERS
97 IRm i
9,
arrow_forward
Courses
=HCS380 Week 1 Terminology Matching
Accounts Receivable
Terminology Matching
Note Payable
Bonds Payable
Common Stock
Income Statement
Balance Sheet
Retained Earnings Statement
Statement of Cash Flow
Basic Accounting Equation
multimedia.phoenix.edu
Annual Report
View Assessment
HCS/380: Week 1 - Terminology Matching - Academic Resources
Owed to a bank for the money borrowed
Bill customer/patient for services
HCS
Debt securities sold to investors that must be repaid at a
particular date in the future
A AOL PASSV
REQUIRED
Enter your password for "kaylakı
Accounts.
Prepared by corporate management to present financial
information, management discussion, notes, and auditor's report
Used by creditors to determine if they will be paid
Assets Liabilities+Stockholder's Equity
Used by creditors and investors to analyze the organization's
cash position
Used by investors to evaluate the organization's history of
paying high dividends
The total amount paid in by stockholders for the share…
arrow_forward
please answer with working please answer with everything like explanation , computation , formulation with steps no copy paste please answer in text not image thanks need complete and correct answer please remember answer all or leave answer correct or skip
Follow the instructions and Prepare journal entries.
arrow_forward
SCORE:
SECTION:
PROFESSOR:
Problem #21
Preparation of Financial Statements
2019:
Accounts Payable
Accounts Receivable
Accumulated Depreciation-Equipment
Allowance for Uncollectible Accounts
Cash
Calamba, Capital
Calamba, Drawing
Equipment
Transportation In
General Expenses (control)
Interest Expense
Merchandise Inventory, December 31
Notes Payable
Prepaid Insurance
P 677,820
545,070
462,870
18,790
132,310
612,000
326,400
753,150
224,880
149,390
35,000
1,320,420
299,000
7,350
5,407,160
43,050
259,600
499,600
Purchases
Purchases Discounts
Purchases Returns and Allowances
Santiago, Capital
Santiago, Drawing
Sales
Sales Returns and Allowances
244,800
7,155,000
375,750
385,880
Selling Expenses (control)
There were no changes in the partners' Capital accounts during the year. The
merchandise inventory at the beginning of the year was P1,440,590. The partnership
agreement provides for salary allowances of P330,000 for Calamba and P290,000 for
Santiago. It also stipulates an interest allowance…
arrow_forward
mic Calendar My MCBS Library English (en) -
damentals of Financial Accou ing
mmer Session 1 2021/ACT 140/D2/ Course Documents/ Quiz 126-5-2021
On January 1, 2011, Baird Company had beginning balances as follows:
Assets =
Liabilities = $420
Common Stock = $500
During 2011, Baird paid dividends to its stockholders of $500. Given that ending retained
earnings was $600, what was Baird's net income for the 2011 accounting period?
$1,250
a. $770
b. $830
S1.750
arrow_forward
help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working
arrow_forward
Integrative ExerciseIntegrating Accounting for Liabilities and Equity
Obtain Apple's 2016 10-K (filed October 26, 2016) either through the "Investor Relations" portion of its website (do a web search for "Apple Investor Relations") or go to www.sec.gov and click "Company Filings Search" under "Filings."
Required:
Using Apple's 10-K, answer the following questions (Hint: It may be easier to use the Word or PDF file and use the search feature within the program):
1. Calculate Apple's current, quick, and cash ratios for 2015 and 2016. The industry averages for these ratios for 2016 were 1.72, 1.41, and 0.77, respectively. Round your answers to two decimal places.
2016
2015
Current Ratio
fill in the blank 1
fill in the blank 2
Quick Ratio
fill in the blank 3
fill in the blank 4
Cash Ratio
fill in the blank 5
fill in the blank 6
Comment on Apple's short-term liquidity.
For 2016, Apple the industry average for the cash but is below the industry average for the current and…
arrow_forward
Integrative ExerciseIntegrating Accounting for Liabilities and Equity
Obtain Apple's 2016 10-K (filed October 26, 2016) either through the "Investor Relations" portion of its website (do a web search for "Apple Investor Relations") or go to www.sec.gov and click "Company Filings Search" under "Filings."
Required:
Using Apple's 10-K, answer the following questions (Hint: It may be easier to use the Word or PDF file and use the search feature within the program):
1. Calculate Apple's current, quick, and cash ratios for 2015 and 2016. The industry averages for these ratios for 2016 were 1.72, 1.41, and 0.77, respectively. Round your answers to two decimal places.
2016
2015
Current Ratio
fill in the blank 1
fill in the blank 2
Quick Ratio
fill in the blank 3
fill in the blank 4
Cash Ratio
fill in the blank 5
fill in the blank 6
Comment on Apple's short-term liquidity.
For 2016, Apple ____?______ the industry average for the cash but is below the industry average for the…
arrow_forward
help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working
arrow_forward
What is the propuse of a statement of activities in government-wide financial reporting?
arrow_forward
Common stock-$10 par value, 120,000 shares authorized, 50,000 shares issued
and outstanding
Paid-in capital in excess of par value, common stock
Retained earnings
Total stockholders' equity
During 2020, the following transactions affected its stockholders' equity accounts.
January 2 Purchased 5,000 shares of its own stock at $23 cash per share.
January 5 Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record.
February 28 Paid the dividend declared on January 5.
July 6 Sold 1,900 of its treasury shares at $27 cash per share.
August 22 Sold 3,100 of its treasury shares at $20 cash per share.
September 5 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.
October 28 Paid the dividend declared on September 5.
December 31 Closed the $206,500 credit balance (from net income) in the Income Summary account to Retained Earnings.
Requirement
General
Journal
General
Ledger
View…
arrow_forward
Would you advise a friend to invest in that company? Support your answer with a comprehensive explanation incorporating sound reasoning. Your advice should be well written with introductory and concluding paragraph. References should be appropriately cited.
arrow_forward
I need help with just part A which is ONE question thank you attached is instructions and and the excel papers thanks :)
arrow_forward
help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all working
arrow_forward
Internal Auditing: ACCT353
Spring 2023
Class Activity 1 (CLO 2)
Required: Review the SCA Governance Guide and answer the
following questions:
1. What recommendations does the SCA Governance Guide
provide on internal audits?
2. What recommendations does the SCA Governance Guide
provide on internal controls?
3. What recommendations does the SCA Governance Guide
provide on audit committees?
Covering page: Name, student ID, assessment name, and date.
arrow_forward
please answer this question I need this for my assignment * please prepare general journal entry to record the above transaction . I need full answer please to help me on my assignment and better learning
arrow_forward
Mc
Graw
Hill
Chrome
Tab
Profies
Bookmarks
File Edit View History
Question 8-Proctoring: @x
Window
getproctorio.com/secured lockdown
Proctoring Enabled: Summer 2024 Exam #10
8
Selling stock to investors for cash would result in which of the following?
Σorress
Multiple Choice
A debit to additional paid-in capital and a credit to cash
A credit to both cash and additional paid-in capital
A debit to cash and a credit to common stock
A debit to cash and a credit to the investment account
281
< Prev
8 of 20
Next
17
MacBook Pro
G Search or type URL
2
3
4
96
5
w
E
R
T
6
A
&
8
-0
9
Y
U
<
0
S
D
F
G
H
J
K
L
X
C
v
B
N
M
H
mand
V
3
comma
Help
arrow_forward
Please help me.
Thankyou.
arrow_forward
1
arrow_forward
NAME:
SCORE:
SECTION:
PROFESSOR:
Problem #16
Shareholders' Equity Section
The shareholders' equity T-accounts of Geron Greeting Cards, Inc. for the year ended
Dec. 31, 2019, are as follows:
Ordinary Shares
Jan. 1 Balance
3,000,000
Mar. 7 Isued
1,350,000
4,350,000
27,000 shares
Dec. 31 Balance
Share Premium-Ordinary
Jan.
1 Balance
480,000
Mar. 7 Isued
27,000 shares
324,000
Dec. 31 Balance
804,000
Treasury Stock
Aug. 7 Purchased
4,500 shares
216,000
Retained Earnings
Mar. 31 Dividends
37,500
Jan. 1 Balance
5,220,000
June 30
Dividends
37,500
Dec. 31 Closing
Sept. 30
Dec. 31 Dividends
Dividends
37,500
(profit)
Dec. 31 Balance
765,000
37,500
5,835,000
Required: Prepare the shareholders' equity section for the year ended Dec. 31, 2019.
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Related Questions
- Solve #35 pleasearrow_forwardounting-20201 ACCT101 - Introduction to Financial Accounting / FINAL EXAM ACCT 101 FALL 2020-2021 International Financial Reporting Standards (IFRS ) are: Select one: ut of O a. Principles that have been proven correct by academic researchers. O b. None of the answers are correct estion O c. Theories that are based on physical laws of the universe. O d. Standards that indicate how to report economic events. O e. Income tax regulations of the Internal Revenue Service. Next page us page LANSWERS 97 IRm i 9,arrow_forwardCourses =HCS380 Week 1 Terminology Matching Accounts Receivable Terminology Matching Note Payable Bonds Payable Common Stock Income Statement Balance Sheet Retained Earnings Statement Statement of Cash Flow Basic Accounting Equation multimedia.phoenix.edu Annual Report View Assessment HCS/380: Week 1 - Terminology Matching - Academic Resources Owed to a bank for the money borrowed Bill customer/patient for services HCS Debt securities sold to investors that must be repaid at a particular date in the future A AOL PASSV REQUIRED Enter your password for "kaylakı Accounts. Prepared by corporate management to present financial information, management discussion, notes, and auditor's report Used by creditors to determine if they will be paid Assets Liabilities+Stockholder's Equity Used by creditors and investors to analyze the organization's cash position Used by investors to evaluate the organization's history of paying high dividends The total amount paid in by stockholders for the share…arrow_forward
- please answer with working please answer with everything like explanation , computation , formulation with steps no copy paste please answer in text not image thanks need complete and correct answer please remember answer all or leave answer correct or skip Follow the instructions and Prepare journal entries.arrow_forwardSCORE: SECTION: PROFESSOR: Problem #21 Preparation of Financial Statements 2019: Accounts Payable Accounts Receivable Accumulated Depreciation-Equipment Allowance for Uncollectible Accounts Cash Calamba, Capital Calamba, Drawing Equipment Transportation In General Expenses (control) Interest Expense Merchandise Inventory, December 31 Notes Payable Prepaid Insurance P 677,820 545,070 462,870 18,790 132,310 612,000 326,400 753,150 224,880 149,390 35,000 1,320,420 299,000 7,350 5,407,160 43,050 259,600 499,600 Purchases Purchases Discounts Purchases Returns and Allowances Santiago, Capital Santiago, Drawing Sales Sales Returns and Allowances 244,800 7,155,000 375,750 385,880 Selling Expenses (control) There were no changes in the partners' Capital accounts during the year. The merchandise inventory at the beginning of the year was P1,440,590. The partnership agreement provides for salary allowances of P330,000 for Calamba and P290,000 for Santiago. It also stipulates an interest allowance…arrow_forwardmic Calendar My MCBS Library English (en) - damentals of Financial Accou ing mmer Session 1 2021/ACT 140/D2/ Course Documents/ Quiz 126-5-2021 On January 1, 2011, Baird Company had beginning balances as follows: Assets = Liabilities = $420 Common Stock = $500 During 2011, Baird paid dividends to its stockholders of $500. Given that ending retained earnings was $600, what was Baird's net income for the 2011 accounting period? $1,250 a. $770 b. $830 S1.750arrow_forward
- help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all workingarrow_forwardIntegrative ExerciseIntegrating Accounting for Liabilities and Equity Obtain Apple's 2016 10-K (filed October 26, 2016) either through the "Investor Relations" portion of its website (do a web search for "Apple Investor Relations") or go to www.sec.gov and click "Company Filings Search" under "Filings." Required: Using Apple's 10-K, answer the following questions (Hint: It may be easier to use the Word or PDF file and use the search feature within the program): 1. Calculate Apple's current, quick, and cash ratios for 2015 and 2016. The industry averages for these ratios for 2016 were 1.72, 1.41, and 0.77, respectively. Round your answers to two decimal places. 2016 2015 Current Ratio fill in the blank 1 fill in the blank 2 Quick Ratio fill in the blank 3 fill in the blank 4 Cash Ratio fill in the blank 5 fill in the blank 6 Comment on Apple's short-term liquidity. For 2016, Apple the industry average for the cash but is below the industry average for the current and…arrow_forwardIntegrative ExerciseIntegrating Accounting for Liabilities and Equity Obtain Apple's 2016 10-K (filed October 26, 2016) either through the "Investor Relations" portion of its website (do a web search for "Apple Investor Relations") or go to www.sec.gov and click "Company Filings Search" under "Filings." Required: Using Apple's 10-K, answer the following questions (Hint: It may be easier to use the Word or PDF file and use the search feature within the program): 1. Calculate Apple's current, quick, and cash ratios for 2015 and 2016. The industry averages for these ratios for 2016 were 1.72, 1.41, and 0.77, respectively. Round your answers to two decimal places. 2016 2015 Current Ratio fill in the blank 1 fill in the blank 2 Quick Ratio fill in the blank 3 fill in the blank 4 Cash Ratio fill in the blank 5 fill in the blank 6 Comment on Apple's short-term liquidity. For 2016, Apple ____?______ the industry average for the cash but is below the industry average for the…arrow_forward
- help please answer in text form with proper workings and explanation for each and every part and steps with concept and introduction no AI no copy paste remember answer must be in proper format with all workingarrow_forwardWhat is the propuse of a statement of activities in government-wide financial reporting?arrow_forwardCommon stock-$10 par value, 120,000 shares authorized, 50,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity During 2020, the following transactions affected its stockholders' equity accounts. January 2 Purchased 5,000 shares of its own stock at $23 cash per share. January 5 Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record. February 28 Paid the dividend declared on January 5. July 6 Sold 1,900 of its treasury shares at $27 cash per share. August 22 Sold 3,100 of its treasury shares at $20 cash per share. September 5 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record. October 28 Paid the dividend declared on September 5. December 31 Closed the $206,500 credit balance (from net income) in the Income Summary account to Retained Earnings. Requirement General Journal General Ledger View…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College