Review of Financial Statements

Transcription

1 Professor Authored Problems Intermediate Accounting I Acct 341/541 Review of Financial Statements Problem 1 Balance sheet missing values. The basic accounting equation follows the organization of the balance sheet: Assets = Liabilities + Owners Equity Case A Assets = $35,000, Liabilities =?, Owners Equity = $14,000 Case B Assets =?, Liabilities = $50,000, Owners Equity = $20,000 Case C Assets = $64,000, Owners Equity =?, Liabilities = $28,000 Required: Solve for the missing value in each of the above cases. Problem 2 Balance sheet missing values. Case A Current assets ,200 Property plant and equipment ,300 Current liabilities ,000 Long term debt ,500 Common stock ,600 Retained earnings ? Case B Current assets ,300 Cash flows from investing activities ,300 Investments ,100 Property plant and equipment ,600 Current liabilities ,000 Long term debt ,000 Common stock ,000 Retained earnings ? Accumulated items of other comprehensive income. 2,

2 Case C Accumulated items of other comprehensive income.....? Investments ,200 Current liabilities ,000 Current assets ,300 Common stock ,000 Retained earnings (5,000) Property plant and equipment ,000 Long term debt ,000 Required: Solve for the missing value in each of the above cases. Problem 3 Balance sheet equation used in different ways. Owners Assets Liabilities Equity 1/1/ ,000 A B During 2002 C + 15, ,000 12/31/2002 D 35,000 E Required: Solve for the missing values in the above table. Problem 4 Classified balance sheet. Equipment 65 Total assets 553 Wages expense 41 Bonds payable 52 Customer deposits (unearned revenue) 10 Accounts Payable 84 Cash 50 Notes payable 113 Common stock 70 Building? Retained earnings? Accounts receivable 120 Inventory 90 Prepaid insurance 21 Investments 59 Trading securities 15 Land 40 Wages payable 36 Accumulated items of other comprehensive income 28 Total stockholders equity 258 Required: Prepare a classified balance sheet. [Hint, one item above should not be included.] 105

3 Problem 5 Income statement missing values. Revenue! Expense = Net Income R!E = NI Case A Revenue = $70,000, Expenses =?, Net income = $16,000 Case B Sales revenue ? Wages expense ,000 Net income ,000 Ending retained earnings ,000 Service revenue ,000 Cost of goods sold expense ,000 Required: Solve for the missing value in each of the above cases. Problem 6 Statement of cash flows missing values. The statements of cash flows equation is: ±OA ± IA ± FA = Current CF Current CF + beg CASH = end CASH Case A Find OA if IA =! 2, FA = + 6, beg cash = 2, end cash = 11 Case B Find Current CF if OA = + 9, IA =! 5, beg cash = 4, end cash = 5 Case C Find beg cash if OA = + 6, IA =! 4, FA = + 4, end cash = 13 Required: Solve for the missing value in each of the above cases. 106

4 Problem 7 Statement of cash flows missing values. Case A Find beg cash if OA = + 11, IA =! 4, FA =!3, end cash = 11 Case B Find OA if IA =! 2, FA = + 5, beg cash = 6, end cash = 6 Case C Find Current CF if OA = + 9, IA =! 5, beg cash = 6, end cash = 4 Required: The equation for statement of cash flows is an important equation. Solve for the missing value in each of the above cases. Problem 8 Which section of statement of cash flows? Identify if the following transactions are accounted for on the Statement of Cash Flows as an operating activity (OA), investing activity (IA), financing activity (F A) or not applicable (NA). In addition, identify the direction as either an inflow (+) or outflow( ). Credit purchases Repaid loan Issue debt Purchase of subsidiary company Dividends paid Paid to suppliers Received from customers Issued common stock Taxes paid Interest paid Sale of used equipment Problem 9 Which section of statement of cash flows? Identify if the following transactions are accounted for on the Statement of Cash Flows as an operating activity (OA), investing activity (IA), financing activity (F A) or not applicable (NA). In addition, identify the direction as either an inflow (+) or outflow( ). Cash received from borrowing money. Cash paid to purchase a subsidiary company Cash paid to investors as a dividend Purchase inventory on credit Purchase inventory using cash Receive payment from customers for accounts receivable Make payment on accounts payable Cash used to repay loan Cash from issuing common stock Cash used to pay taxes Cash from sale of used equipment 107

5 Problem 10 Retained earnings equation missing values. This problem consists of three independent exercises dealing with changes in Retained Earnings. Work each case separately. Case A The Wiseman Company reported Retained Earnings of $65,000 on its December 31, 2001 balance sheet, and Retained Earnings of $75,000 on its December 31, 2002 balance sheet. The income statement for 2002 reports Net Income of $34,000. How much did Wiseman pay out in dividends during 2002? Case B The Bennett Company ended 2001 with Retained Earnings of $47,000. During 2002, the Bennett Company reported net income of $53,000 and paid dividends of $24,000. What amount is reported for retained earnings on the balance sheet at the end of 2002? Case C The Haddad Company paid dividends of $10,000 during It reported retained earnings of $85,000 on its December 31, 2001 balance sheet, and $62,000 on its December 31, 2002 balance sheet. Haddad reported expenses of $75,000 on the 2002 income statement. How much was Haddad s 2002 net income or loss? How much was Haddad s 2002 revenue? Problem 11 Classify items for different statements. The following items are found on financial statements. Identify each as BS (balance sheet), IS.{income statement), CF (statement of cash flows) or SHE (statement of changes in stockholders equity). Borrowed $ from bank (during year) Cash (at end of year) Note payable (at end of year) New stock issued (during year) Retained earnings (at beginning of year) Retained earnings (at end of year) Net income (for entire year) Accounts receivable (at end of year) Accounts payable (at end of year) Land (at end of year) Land purchased during year Service expense ( during year) Wages expense (during year) Wages payable (at end of year) Payments received from customers (during year) 108

6 Problem 12 Classify items for different statements. The following items are found on financial statements. Identify each as BS (balance sheet), IS (income statement), CF (statement of cash flows) or SHE (statement of changes in stockholders equity). Retained earnings (at beginning of year) Retained earnings Net income Accounts receivable Accounts payable Borrowed from bank Cash Note payable Cash (at beginning of year) Common stock issued Land Land purchased Service expense Wages expense Wages payable Payments received from customers Problem 13 Preparing a set of financial statements. The following information for the Huerena Company was taken from its financial statements. Wages expense ,000 Supplies ,000 Cash ,000 Wages payable ,000 Rent expense ,000 Land ,000 Dividends paid ,000 Interest expense ,000 Insurance expense ,000 Common stock ,000 Investing activities (88,000) Building ,000 Unearned revenue ,000 Service revenue ,000 Interest Revenue ,000 Operating activities ,000 Accounts receivable ,000 Supplies expense ,000 Accounts payable ,000 Financing activities (2,000) Prepaid insurance ,000 Note payable ,000 Issue common stock ,000 Retained Earnings ? Use this information to construct an income statement, statement of changes in stockholders equity, balance sheet and statement of cash flows, pretty much in good form. Include all section headings as needed. (Show only the totals for each activity on the statement of cash flows). 109

7 Problem 14 Preparing a set of financial statements. The following information for the Mason Company was taken from its financial statements. Common stock? Retained earnings? Supplies expense 7,000 Interest expense 14,000 Operating activities 30,000 Wages payable 6,000 Interest Revenue 5,000 Cash 41,000 Financing activities (2,000) Beginning common stock 35,000 Note payable (long term) 72,000 Accounts receivable 12,000 Supplies 6,000 Prepaid insurance 4,000 Land 75,000 Building 210,000 Accounts payable 32,000 Service revenue 285,000 Wages expense 170,000 Rent expense 60,000 Insurance expense 11,000 Investing activities (98,000) Issue common stock 15,000 Unearned revenue 5,000 Dividends paid (21,000) Required: Prepare a complete set of financial statements in good form. No abbreviations are allowed. All balance sheet items are for year end unless stated otherwise. For the statement of cash flows, use the section totals instead of individual detail provided for other financial statements. 110

8 Problem 15 A Look at Target s Financial Statements Target Corporation is a general retail company. Go to this page at its web site: Choose to download the 10-K for the latest year (fiscal 2013 issued in 2014). Answer the following questions. 1. The Target fiscal year starts and ends on which dates? [Hint: look to Note #1] 2. How many years are presented for the balance sheet? Income statement? Cash flows statement? Statement of changes in stockholders equity? 3. Using totals for each category (total assets, total liabilities, total SHE), what is Target s balance sheet equation for current year? 4. What is the debt percentage (total liabilities divided by total assets) for the current fiscal year? 5. How many items are listed in the stockholders equity section of the balance sheet? 6. Using totals for each category (total revenues, total expenses), what is Target s income statement equation for the current fiscal year? 7. What is the value for net sales for the current fiscal year? 8. What is the value for gross margin for the current fiscal year? The gross margin percentage? 9. What is the retained earnings equation for the current fiscal year? Do the values in this equation equal the numbers reported on the balance sheet and income statement? 10. In which two locations can you find out if Target paid dividends in the most recent fiscal year? How much, if anything, did it pay out in dividends for the current fiscal year? 11. In which year did Target spend the most to acquire property, plant and equipment? How much did it spend that year? Why is the value for capital expenditures in brackets? 111

9 12. Who is the auditor (CPA firm) for Target. What words in the auditor s opinion are used to report that the financial statements are OK? Problem 16 A Look at Tiffany s Financial Statements Tiffany & Co. is a jewelry company. Go to this page at its web site: Click on the link for the Annual Report for the latest year (fiscal 2013 issued in 2014). and scroll down to its financial statements. Then answer the following questions. 1. The Tiffany fiscal year starts and ends on which dates? [Hint: look to Note #1] 2. What is the value of total assets for the most recent fiscal year? 3. Using totals for each category (total assets, total liabilities, total SHE), what is Tiffany s balance sheet equation for the most recent fiscal year? 4. What is the debt percentage (total liabilities divided by total assets) for the most recent fiscal yaer? 5. What is the value for net sales for the most recent fiscal year? 6. What is the value for gross margin for the most recent fiscal year? The gross margin percentage? 7. What is operating income for the most recent fiscal year? What is operating income as a percentage of net sales? 8. What is the retained earnings equation for the most recent fiscal year? Do the values in this equation equal the numbers reported on the balance sheet and income statement? 9. In which two locations can you find out if Tiffany paid dividends in the most recent fiscal year? How much, if anything, did it pay out in dividends for the most recent fiscal year? The prior year? 10. In which year did Tiffany spend the most on acquisitions? How much did it spend that year? 11. Why is the value for capital expenditures in brackets? 12. Who is the auditor (CPA firm) for Tiffany. What words in the auditor s opinion are used to report that the financial statements are OK? 112