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cash basis. He does not see the purpose of accrual based statements. His most
recent outburst went something like this: After all, I collect cash from customers,
pay my bills in cash, and I am going to pay the bank loan with cash. And, I already
show my building and equipment as assets and depreciate them. I just dont
understand the problem.
Required:
Explain the difference between a cash basis and an accrual basis
measure of performance.
Why, in most cases, does accrual basis net income provide a better
Required:
Is earnings management always intended to produce higher income? Explain.
delivery.
2.
At what times, other than those included in (1) and (2) above, may it be
Required:
Prepare a statement of cash flows for 2011 for Bluebonnet Bakers. Use the direct
method for reporting operating activities.
Required:
1. Analyze each transaction and classify each as a financing, investing and/or
operating activity (a transaction can represent more than one type of activity). In
doing so, also indicate the cash effect of each, if any. If there is no cash effect, simply
place a check mark () in the appropriate column(s).
2. Prepare a statement of cash flows, using the direct method to present cash flows
from operating activities. Assume the cash balance at the beginning of the month
was $40,000.
Required:
Prepare Tigers statement of cash flows, using the indirect method to present cash
flows from operating activities.
until now. The CPA in charge of the audit of Covington Pike Corporation brings you
the list of ratios shown below and tells you these reflect the relationships maintained
by Covington Pike in recent years.
Profit margin on sales = 5%
Return on assets = 7.5%
Gross profit margin = 40%
Inventory turnover ratio = 6 times
Receivables turnover ratio = 25
Acid-test ratio = .9
Current ratio = 2 to 1
Return on shareholders equity = 10%
Debt to equity ratio = 1/3
Times interest earned ratio = 12 times
Jotted in the margins are the following notes:
Net income $15,000
Only one short-term note ($5,000); all other current liabilities are trade accounts
Property, plant, and equipment are the only noncurrent assets
Bonds payable are the only noncurrent liabilities
The effective interest rate on short-term notes and bonds is 8%
No investment securities
Cash balance totals $15,000
Required:
You are requested to approximate the current years balances in the form of a
balance sheet and income statement, to the extent the information allows.
Accompany those financial statements with the calculations you use to estimate
each amount reported.
Cowboys: $2.5 million signing bonus payable immediately and an annual salary of
$1 million for the five-year term of the contract.
With both contracts, the annual salary will be paid in one lump sum at the end of
the football season.
Required:
You have been hired as a consultant to Harveys agent, Phil Marks, to evaluate the
two contracts. Write a short letter to Phil with your recommendation including the
method you used to reach your conclusion. Assume that Harvey has no preference
between the two teams and that the decision will be based entirely on monetary
considerations. Also assume that Harvey can invest his money and earn an 8%
annual return.
2. All of the companys cash disbursements are made by check. Each check must be
supported by an approved voucher, which is in turn supported by the appropriate
invoice and, for purchases, a receiving document. The vouchers are approved by
Dean Leiser, the chief accountant, after reviewing the supporting documentation.
Betty Hanson prepares the checks for Leisers signature. Leiser also maintains the
companys check register (the cash disbursements journal) and reconciles the bank
account at the end of each month.
3. Fran Jones opens the companys mail and makes a listing of all checks and cash
received from customers. A copy of the list is sent to Jerry McDonald who maintains
the general ledger accounts. Fran prepares and makes the daily deposit at the bank.
Fran also maintains the subsidiary ledger for accounts receivable, which is used to
generate monthly statements to customers.
Prepare the necessary journal entries for Evergreen for each of the above
dates. For transactions involving the sale of merchandise, ignore the entry for the
cost of goods sold (round all calculations to the nearest dollar).
2.
entries are only recorded at year- end (round all calculations to the nearest dollar).
3.
ACC 305 Week 4 Assignment E8-13, E8-14, E8-18, P8-5, E9-19, E921, P9-1
E 813 Altira Corporation Inventory cost flow methods; periodic system
LO1 LO4
Altira Corporation uses a periodic inventory system. The following information
related to its merchandise inventory during the month of August 2011 is available:
Required:
Determine the inventory balance Altira would report in its August 31, 2011, balance
sheet and the cost of goods sold it would report in its August 2011 income statement
using each of the following cost flow methods: 1. First-in, first-out (FIFO) 2. Last-in,
first-out (LIFO) 3. Average cost
Johns first reaction was to communicate his finding to the auditors and to revise the
financial statements before they are issued. However, he knows that his and his
fellow workers profit-sharing plans are based on annual pretax earnings and that if
he revises the statements, everyones profit-sharing bonus will be significantly
reduced.
Required:
1.
earnings?
2.
If the error is not corrected in the current year and is discovered by the
auditors during the following years audit, how will it be reported in the companys
financial statements?
3.
even though the equipment likely will be used on only one project. The company
president has asked Alice to make every effort to increase 2011 earnings because in
2012 the company will be seeking significant new financing from both debt and
equity sources. I guess we might use the equipment in other projects later, Alice
wondered to herself.
Discuss depreciation as a tool for managing and evaluating the life and utility of
assets of the firm. What are the methods and under what conditions would each
method be used and applied? Does a firms tax planning influence the decision? How
do external stakeholders assess the validity of depreciation schemes?
P11-5 on page 608 Thompson Corporation Property, plant, and equipment and
intangible assets; comprehensive