Intermediate Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (2nd Edition)
2nd Edition
ISBN: 9780134833118
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 22, Problem 22.4E
a.
To determine
Cash flow from operating activities of SAI under indirect method.
b.
To determine
Cash flow from operating activities of SAI under direct method.
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Selected income statement and balance sheet data from Merck & Co.
for Year 9 are reproduced below:
MERCK & COMPANY, INC.
Year 9 Selected Financial Data ($ millions)
Merck & Co.
Income Statement Data
Sales revenue...
Depreciation......
Interest expense.
$7,120
230
10
Pretax income...
2,550
Income taxes..
900
Net income.
1,650
Balance Sheet Data
Current assets...
$4,850
Fixed assets, net...
2,400
Total assets..
7,250
Current liabilities...
3,290
Long-term debt...
100
Shareholders' equity...
3,860
Total liabilities & shareholders' equity..
Required:
a. Calculate return on common equity for Year 9 using year-end
amounts and assuming no preferred dividends.
b. Disaggregate Merck's ROCE. Comment on Merck's use of
leverage. (Assume all assets and current liabilities are operating
and a 35% tax rate.).
c. Disaggregate ROA and comment on that.
Selected comparative financial statements of Korbin
Company follow.
Comparative
Income Statements
For Years Ended December 31
Sales
Cost of goods sold
Gross profit
Selling expenses
Administrative expenses
Total expenses
Income before taxes
Income tax expense
Net income
KORBIN COMPANY
Assets
Current assets
Long-term investments
Plant assets, net
Total assets
KORBIN COMPANY
Comparative Balance Sheets
Liabilities and Equity
Current liabilities
Assets
Current assets
Long-term investments
Plant assets, net
Total assets
2021
2020
2019
$ 483,981 $ 370,769 $ 257,300
291,357
234,326
164,672
192,624
136,443
92,628
68,725
33,964
43,558
21,356
112,283
80,341
14,943
$ 65,398 $ 41,856
Liabilities and Equity
Current liabilities
Common stock
Other paid-in capital
Retained earnings
Total liabilities and equity
December 31
2021
$ 57,843
0
51,166
32,628
83,794
52,649
10,793
$ 23,890
66,000
$ 20,253
Common stock
66,000
Other paid-in capital
8,250
Retained earnings
41,423
Total liabilities and equity $…
Comparative financial statement data for Carmono Company follow:
Assets
Cash and cash equivalents
Accounts receivable
Inventory
Total current assets
Property, plant, and equipment
Less accumulated depreciation
Net property, plant, and equipment
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Common stock
Retained earnings
Total liabilities and stockholders' equity
For this year, the company reported net income as follows:
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net income
This Year
$ 11.00
64.00
110.00
185.00
252.00
51.20
200.80
$385.80
$ 66.00
146.00
173.80
$385.80
$ 1,200.00
720.00
480.00
460.00
$ 20.00
Last Year
$ 21.00
57.00
97.40
175.40
208.00
38 40
169.60
$345.00
$ 53.00
112.00
180.00
$345.00
This year Carmono paid a cash dividend but it did not sell any property, plant, and equipment or repurchase any of its own stock.
Required:
1. Using the indirect method, prepare a statement of cash flows for this year.
2. Compute Carmono's…
Chapter 22 Solutions
Intermediate Accounting, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (2nd Edition)
Ch. 22 - Prob. 22.1QCh. 22 - Prob. 22.2QCh. 22 - Prob. 22.3QCh. 22 - Prob. 22.4QCh. 22 - Prob. 22.5QCh. 22 - How do firms reclassify gains and losses on the...Ch. 22 - Prob. 22.7QCh. 22 - Prob. 22.8QCh. 22 - Prob. 22.9QCh. 22 - Prob. 22.10Q
Ch. 22 - Prob. 22.11QCh. 22 - What approach is used in preparing the operating...Ch. 22 - Under the indirect method, do firms subtract bond...Ch. 22 - Do firms subtract pension expense from net income...Ch. 22 - Prob. 22.15QCh. 22 - Prob. 22.16QCh. 22 - Prob. 22.1MCCh. 22 - Prob. 22.2MCCh. 22 - Big Dollars Corporation's comparative financial...Ch. 22 - Prob. 22.4MCCh. 22 - Prob. 22.5MCCh. 22 - Sykes Corporation's comparative balance sheets at...Ch. 22 - Prob. 22.7MCCh. 22 - Prob. 22.8MCCh. 22 - Prob. 22.1BECh. 22 - Prob. 22.2BECh. 22 - Prob. 22.3BECh. 22 - Prob. 22.4BECh. 22 - Prob. 22.5BECh. 22 - Prob. 22.6BECh. 22 - Prob. 22.7BECh. 22 - Operating Activities Section, Indirect Method,...Ch. 22 - Prob. 22.9BECh. 22 - Prob. 22.10BECh. 22 - Prob. 22.11BECh. 22 - Prob. 22.12BECh. 22 - Prob. 22.13BECh. 22 - Operating Activities Section, Indirect Method,...Ch. 22 - Prob. 22.15BECh. 22 - Prob. 22.16BECh. 22 - Prob. 22.17BECh. 22 - Prob. 22.18BECh. 22 - Prob. 22.19BECh. 22 - Prob. 22.20BECh. 22 - Prob. 22.21BECh. 22 - Prob. 22.22BECh. 22 - Complex Transactions, Acquisitions and...Ch. 22 - Prob. 22.24BECh. 22 - Prob. 22.25BECh. 22 - Complex Transactions, Change in Accounts...Ch. 22 - Prob. 22.1ECh. 22 - Prob. 22.2ECh. 22 - Prob. 22.3ECh. 22 - Prob. 22.4ECh. 22 - Prob. 22.5ECh. 22 - Prob. 22.6ECh. 22 - Statement of Cash Flows, Indirect Method,...Ch. 22 - Prob. 22.8ECh. 22 - Prob. 22.9ECh. 22 - Prob. 22.10ECh. 22 - Statement of Cash Flows, Indirect Method....Ch. 22 - Prob. 22.15ECh. 22 - Prob. 22.16ECh. 22 - Prepare Statement of Cash Flows, Direct Method....Ch. 22 - Prob. 22.2PCh. 22 - Statement of Cash Flows, Indirect Method, Complex...Ch. 22 - Statement of Cash Flows, Indirect Method, Complex...Ch. 22 - Statement of Cash Flows, Indirect Method, Complex...Ch. 22 - Statement of Cash Flows, Indirect Method, Complex...Ch. 22 - Statement of Cash Flows, Indirect Method, Complex...Ch. 22 - Statement of Cash Flows, Indirect Method, Complex...Ch. 22 - Prob. 22.11PCh. 22 - Prob. 22.12PCh. 22 - Prob. 22.13PCh. 22 - Statement of Cash Flows, Direct Method, Complex...Ch. 22 - Prob. 1JCCh. 22 - Prob. 1FSCCh. 22 - Prob. 1SSCCh. 22 - Surfing the Standards Case 2: Cash Flow per Share...Ch. 22 - Basis for Conclusions Cases Basis for Conclusions...Ch. 22 - Basis for Conclusions Case 2: Indirect versus...
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