Financial Accounting, Student Value Edition (5th Edition)
5th Edition
ISBN: 9780134728520
Author: Robert Kemp, Jeffrey Waybright
Publisher: PEARSON
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Chapter 2, Problem 1CFSAP
a.
To determine
Discuss the changes that happen in the
b.
To determine
Discuss the changes that happen in the balance sheet of Company D if Company D build new store of $50million in cash.
c.
To determine
Discuss the changes that happen in the income statement and balance sheet of Company D if Company D generates revenue of $10 million from sales.
d.
To determine
Discuss the changes that happen in the income statement and balance sheet of Company D if Company D incurred salary expense of $1 million.
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Direction: Identify what describes the following statement. Write your answer on the blank before the number.
____________________1. It pertains to the state of one’s personal monetary affairs.
____________________2. It measures the ability to generate earnings from its resources or investments.
____________________3. It measures the ability to generate profit that ensures to pay business expenses and maintain a long-term financial success of the business.
____________________4. It measures the ability of the company to settle its short term debts.
____________________ 5. It measures how the business manage its assets or resources to produce output without wastage.
____________________6. It presents the financial statement amounts as a percentage of a base number.
____________________7. It is used to evaluate a number of issues with an entity, such as its liquidity, efficiency of operations, and profitability.
____________________8. These users of financial information are…
I need help with my discussion
There will be two discussion questions listed below. By due date assigned, respond to one of the discussion questions and submit your response to the Discussion Area below, using the lessons and vocabulary found in the reading. Support your answers with examples and research and cite your sources using the APA format.
Discussion Question One:
ACME Company sells computer components and plans on borrowing some money to expand. After reading a lot about earnings management, Bill, the owner of ACME, has decided he should try to accelerate some sales to improve his financial statement ratios. He has called his best customers and asked them to make their usual January purchases by December 31. Bill told the customers he would allow them, until the end of February, to pay for the purchases, just as if they had made their purchases in January.
Explain if you think there are ethical implications of Bill’s actions.
Which ratios will be affected, and how, by…
Scenario:
Matthew Mulatto and his brother John Mulatto plans to open a business. The major decision they face is how to organize the business. They expect to generate a massive profit during the first year. Although they have enough to start the business now as a partnership, they believe cash flow may be an issue as they grow. They believe that the corporate form of operation will be best option. They have hired you as a consultant and seek your advice.
Owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020, and that Mulatto Company’s charter will authorize 1,000,000 shares of common stock and 400,000, $100 par value, 5% cumulative preferred stock. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information
Issued $100,000 shares of…
Chapter 2 Solutions
Financial Accounting, Student Value Edition (5th Edition)
Ch. 2 - The order in which assets were listed and...Ch. 2 - Prob. 2DQCh. 2 - How is revenue related to retained earnings?Ch. 2 - Prob. 4DQCh. 2 - Prob. 5DQCh. 2 - Prob. 6DQCh. 2 - Prob. 7DQCh. 2 - Distinguish between journalizing and posting.Ch. 2 - True or false: If the trial balance is in balance,...Ch. 2 - When it is time to prepare the financial...
Ch. 2 - Which sequence of actions correctly summarizes the...Ch. 2 - Prob. 2SCCh. 2 - Prob. 3SCCh. 2 - Prob. 4SCCh. 2 - Prob. 5SCCh. 2 - Which journal entry records obtaining a bank loan...Ch. 2 - RV Wholesale, Inc., paid 1,200 for supplies and...Ch. 2 - Prob. 8SCCh. 2 - Prob. 9SCCh. 2 - Prob. 10SCCh. 2 - Prob. 11SCCh. 2 - Prob. 12SCCh. 2 - Prob. 1SECh. 2 - Prob. 2SECh. 2 - Prob. 3SECh. 2 - Prob. 4SECh. 2 - Accounting terminology (Learning Objectives 2, 3, ...Ch. 2 - Effects of debits and credits on accounts...Ch. 2 - Balancing accounts and normal balances (Learning...Ch. 2 - Types of accounts and effects of debits and...Ch. 2 - Re-creating journal entries from T-account...Ch. 2 - Journalizing transactions (Learning Objective 3)...Ch. 2 - Prob. 11SECh. 2 - Prob. 12SECh. 2 - Prob. 13SECh. 2 - Accounting terminology (Learning Objectives 1, 2,...Ch. 2 - Prob. 15AECh. 2 - Journalizing transactions (Learning Objective 3)...Ch. 2 - Prob. 17AECh. 2 - Balancing accounts and preparing a trial balance...Ch. 2 - Prob. 19AECh. 2 - Prob. 20AECh. 2 - Prob. 21AECh. 2 - Prob. 22AECh. 2 - Prob. 23BECh. 2 - Prob. 24BECh. 2 - Prob. 25BECh. 2 - Balancing accounts and preparing a trial balance...Ch. 2 - Recording transactions and preparing a trial...Ch. 2 - Prob. 28BECh. 2 - Prob. 29BECh. 2 - Prob. 30BECh. 2 - Prob. 31APCh. 2 - Prob. 32APCh. 2 - Journalizing, posting, and preparing a trial...Ch. 2 - Prob. 34APCh. 2 - Preparing a trial balance, income statement,...Ch. 2 - Prob. 36APCh. 2 - Prob. 37BPCh. 2 - Prob. 38BPCh. 2 - Prob. 39BPCh. 2 - Prob. 40BPCh. 2 - Prob. 41BPCh. 2 - Prob. 42BPCh. 2 - Prob. 1CECh. 2 - Prob. 1CPCh. 2 - Prob. 1CFSAPCh. 2 - Prob. 1EIACh. 2 - Prob. 2EIACh. 2 - Prob. 1FACh. 2 - Prob. 1IACh. 2 - Prob. 1SBACh. 2 - Prob. 1WC
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- Conducting a Financial Ratio Analysis on HP INC. Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin' Brands' financial statements. In this chapter, we will use financial Internet websites (specifically, www.morningstar.com and wnvcv.google.com/finance) to analyze HP Inc., a computer hardware company. Once on either website, you simply enter HP Inc.'s ticker symbol (HPQ) to obtain the financial information needed. The text mentions that financial statement analysis has two major components: a trend analysis, where we evaluate changes in key ratios over time, and a peer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We will do both of these types of analysis in this problem. Through the Morningstar website, you can find the firm's financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firm's trend analysis. (At the bottom of the screen you will see that you can click "Glossary to find definitions for the different ratios For example, Morningstar's Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) On the Google Finance site, you can find the firms financial statements for the four most recent years or the five most recent quarters and key financial data for related companies for the most recent year or quarter. We will use the related companies' annual data to conduct the firms peer analysis. Notice that when you go to the "Related Companies" screen, you can add or remove columns. Click on that phrase, and you can check which peer data items you'd like to show on tire computer screen. Also, once you have chosen the data, you can click on a term, and the companies will be ranked in either ascending or descending order for the specific term selected. 7. From the Google Finance site, use the DuPont analysis to determine the total assets turnover ratio for each of tire peer companies. (Hint ROA = Profit margin Total assets turnover.) Once you've calculated each peer 's total assets turnover ratio, then you can use the DuPont analysis to calculate each peer's equity multiplier.arrow_forwardConducting a Financial Ratio Analysis on HP INC. Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin' Brands' financial statements. In this chapter, we will use financial Internet websites (specifically, www.morningstar.com and www.google.com/finance) to analyze HP Inc., a computer hardware company. Once on either website, you simply enter HP Inc.'s ticker symbol (HPQ) to obtain the financial information needed. The text mentions that financial statement analysis has two major components: a trend analysis, where we evaluate changes in key ratios over time, and a freer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We will do both of these types of analysis in this problem. Through the Morningstar website, you can find the firm's financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firm's trend analysis. (At the bottom of the screen you will see that you can click "Glossary" to find definitions for the different ratios. For example, Morningstar's Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) On the Google Finance site, you can find the firms financial statements for the four most recent years or the five most recent quarters and key financial data for related companies for the most recent year or quarter. We will use the related companies' annual data to conduct the firm's peer analysis. Notice that when you go to the "Related Companies" screen, you can "add or remove columns." Click on that phrase, and you can check which peer data items you'd like to show on tire computer screen. Also, once you have chosen the data, you can click on a term, and the companies will be ranked in either ascending or descending order for tire specific term selected. 2. Looking at Morningstar's Financial Health ratios, what has happened to HP's financial leverage position over tire past 10 years?arrow_forwardConducting a Financial Ratio Analysis on HP INC. Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin' Brands' financial statements. In this chapter, we will use financial Internet websites (specifically, www.morningstar.com and www.google.com/finance) to analyze HP Inc., a computer hardware company. Once on either website, you simply enter HP Inc.'s ticker symbol (HPQ) to obtain the financial information needed. The text mentions that financial statement analysis has two major components: a trend analysis, where we evaluate changes in key ratios over time, and a peer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We will do both of these types of analysis in this problem. Through the Morningstar website, you can find the firm's financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firm's trend analysis. (At the bottom of the screen you will see that you can click "Glossary" to find definitions for the different ratios. For example, Morningstar's Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) On the Google Finance site, you can find the firms financial statements for the four most recent years or the five most recent quarters and key financial data for related companies for the most recent year or quarter. We will use the related companies' annual data to conduct the firm's peer analysis. Notice that when you go to the "Related Companies" screen, you can "add or remove columns." Click on that phrase, and you can check which peer data items you'd like to show on tire computer screen. Also, once you have chosen the data, you can click on a term, and the companies will be ranked in either ascending or descending order for tire specific term selected. 5. From the Google Finance site, look at HP's liquidity position (as measured by its current ratio). How does this ratio compare with those of its peers?arrow_forward
- Conducting a Financial Ratio Analysis on HP INC. Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin' Brands' financial statements. In this chapter, we will use financial Internet websites (specifically, www.morningstar.com and www.google.com/finance) to analyze HP Inc., a computer hardware company. Once on either website, you simply enter HP Inc.'s ticker symbol (HPQ) to obtain the financial information needed. The text mentions that financial statement analysis has two major components: a trend analysis, where we evaluate changes in key ratios over time, and a freer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We will do both of these types of analysis in this problem. 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Notice that when you go to the "Related Companies" screen, you can "add or remove columns." Click on that phrase, and you can check which peer data items you'd like to show on tire computer screen. Also, once you have chosen the data, you can click on a term, and the companies will be ranked in either ascending or descending order for the specific term selected. 1. Looking at Morningstar's Financial Health ratios, what has happened to HPs liquidity position over the past 10 years?arrow_forwardConducting a Financial Ratio Analysis on HP INC. Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin' Brands' financial statements. In this chapter, we will use financial Internet websites (specifically, www.morningstar.com and www.google.com / finance) to analyze HP Inc., a computer hardware company. Once on either website, you simply enter HP Inc.'s ticker symbol (HPQ) to obtain the financial information needed. The text mentions that financial statement analysis has two major components: a trend analysis, where we evaluate changes in key ratios over time, and a peer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We will do both of these types of analysis in this problem. Through the Morningstar website, you can find the firm's financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firm's trend analysis. (At the bottom of the screen you will see that you can click "Glossary" to find definitions for the different ratios. For example, Morningstar's Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) On the Google Finance site, you can find the firms financial statements for the four most recent years or the five most recent quarters and key financial data for related companies for the most recent year or quarter. We will use the related companies' annual data to conduct the firm's peer analysis. Notice that when you go to the "Related Companies" screen, you can "add or remove columns." Click on that phrase, and you can check which peer data items you'd like to show on tire computer screen. Also, once you have chosen the data, you can click on a term, and the companies will be ranked in either ascending or descending order for the specific term selected. 4. Identify Google Finance's list of related companies to HP. Which is the largest in terms of market capitalization? Which is the smallest? Where does HT rank (in terms of market capitalization)?arrow_forwardConducting a Financial Ratio Analysis on HP INC. Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin' Brands' financial statements. In this chapter, we will use financial Internet websites (specifically, www.morningstar.com and www.google.com / finance) to analyze HP Inc., a computer hardware company. Once on either website, you simply enter HP Inc.'s ticker symbol (HPQ) to obtain the financial information needed. The text mentions that financial statement analysis has two major components: a trend analysis, where we evaluate changes in key ratios over time, and a freer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We will do both of these types of analysis in this problem. Through the Morningstar website, you can find the firm's financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firm's trend analysis. (At the bottom of the screen you will see that you can click "Glossary to find definitions for the different ratios For example, Morningstar's Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) On the Google Finance site, you can find the firms financial statements for the four most recent years or the five most recent quarters and key financial data for related companies for the most recent year or quarter. We will use the related companies' annual data to conduct the firm's peer analysis. Notice that when you go to the "Related Companies" screen, you can "add or remove columns." Click on that phrase, and you can check which peer data items you'd like to show on tire computer screen. Also, once you have chosen the data, you can click on a term, and the companies will be ranked in either ascending or descending order for tire specific term selected. 6. From the Google Finance site, look at HP's profitability ratios (as measured by its profit margin, ROA, and ROE). How do these ratios compare with those of its peers?arrow_forward
- Conducting a Financial Ratio Analysis on HP INC. Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin' Brands' financial statements. In this chapter, we will use financial Internet websites (specifically, www.morningstar.com and www.google.com/finance) to analyze HP Inc., a computer hardware company. Once on either website, you simply enter HP Inc.'s ticker symbol (HPQ) to obtain the financial information needed. The text mentions that financial statement analysis has two major components: a trend analysis, where we evaluate changes in key ratios over time, and a freer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We will do both of these types of analysis in this problem. Through the Morningstar website, you can find the firm's financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability', Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firm's trend analysis. (At the bottom of the screen you will see that you can click "Glossary to find definitions for the different ratios. For example, Morningstar's Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) On the Google Finance site, you can find the firm's financial statements for the four most recent years or the five most recent quarters and key financial data for related companies for the most recent year or quarter. We will use the related companies' annual data to conduct the firm's peer analysis. Notice that when you go to the "Related Companies" screen, you can "add or remove columns, Click on that phrase, and you can check which peer data items you'd like to show on tire computer screen. Also, once you have chosen the data, you can click on a term, and the companies will be ranked in either ascending or descending order for tire specific term selected. 8. From tire information gained in question 7 and using the DuPont analysis, what are HP's strengths and weaknesses compared to those of its competitors?arrow_forwardCodification Situation You are conducting an accounting research project for your boss. Your boss has asked you to determine the appropriate U.S. GAAP that specifies how your company should recognize revenues from the sales of products in a retail store. Your boss is confused because most customers pay cash, but some customers purchase on credit terms, and pay in cash 30 days later. Your manager also wants you to determine the GAAP guidance for how revenue should be recognized in income. Your manager has a lot of knowledge and experience in accounting and has heard about, but has never used, the FASB Accounting Standards Codification system. Directions Use the FASB Accounting Standards Codification system to conduct the research your manager has assigned to you. Use the Codification to determine how to recognize revenue from retail sales, including the right to return. Be prepared to show your manager the specific FASB ASC references that provide the appropriate guidance. Also prepare a brief memo explaining to your manager the different levels of the Codification and how to use the Codification system.arrow_forwardCHALLENGE PROBLEM In this chapter, you learned about three important financial statements: the income statement, statement of owners equity, and balance sheet. As mentioned in the margin note on page 34, most firms also prepare a statement of cash flows. Part of this statement reports the cash received from customers and cash paid for goods and services. REQUIRED Take another look at the Demonstration Problem for Kenny Youngs Home and Away Inspections. Note that when revenues are measured based on the amount earned, and expenses are measured based on the amount incurred, net income for the period was 4,165. Now, compute the difference between cash received from customers and cash paid to suppliers of goods and services by completing the form provided below. Are these measures different? Which provides a better measure of profitability?arrow_forward
- Why Does It Matter? ECOTOUR EXPEDITIONS, INC., Jamestown, Rhode Island You probably have never imagined the possibility of being an accountant who could have a direct impact on improving global ecosystems. Accountants who work for Ecotour Expeditions, Inc., an ecotourism company, might manage accounting details for guest air travel and accommodations, tour guide compensation, expedition revenue, and a variety of expenses. What type of accounting transactions would Ecotour Expeditions have? List 3 to 4 transactions and then record the journal entry for each transaction. Example: Purchase safari jeep with cash, 42,500. Safari Jeep42,500 Cash42,500arrow_forwardPURPOSE OF ACCOUNTING Match the following users with the information needed. 1. Ownersa. Whether the firm can pay its bills on time 2. Managersb. Detailed, up-to-date information to measure business performance (and plan for future operations) 3. Creditorsc. To determine taxes to be paid and whether other regulations are met 4. Government agenciesd. The firms current financial conditionarrow_forwardScenario: Matthew Mulatto and his brother John Mulatto plans to open a business. The major decision they face is how to organize the business. They expect to generate a massive profit during the first year. Although they have enough to start the business now as a partnership, they believe cash flow may be an issue as they grow. They believe that the corporate form of operation will be best option. They have hired you as a consultant and seek your advice. Requirements: 1. Answer the following questions for the Mulatto brothers. a. Which characteristic of a corporation limits a stockholder's loss to the amount of his or her investment in the stock of the corporation? b. What does the term par value of stock mean? The owners are desirous of comparing several financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020 and that Mulatto Company’s charter will authorize 1,000,000 shares of…arrow_forward
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