costs related to common stock issued by the parent company are a. expensed as incurred. b. deducted from other contributed capital. c. included in the investment cost. d. deducted from the investment cost. 6. On the consolidated balance sheet, consolidated stockholders' equity is a. equal to the sum of the parent and subsidiary stockholders' equity. b. greater than the parent's stockholders' equity. c. less than the parent's stockholders' equity. equal to the parent's stockholders'
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CASE 1 1. An accountant prepared a balance sheet for a business. In the balance sheet, the equity of the owner was shown next to the liabilities. This confused the owner, who argued: My equity is my major asset and so should be shown as an asset on the balance sheet. How would you explain this misunderstanding to the owner? 2. The accountant goes on to explain that the the balance sheet shows how much a business is worth. Do you agree with this statement?
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Financial Analysis Problems 1. A firm has the following ratios: ROE=25% (return on equity), ACP=37 days (average collection period), PM=5% (profit margin), CR=2.4 (current ratio), ATO=2.2 (asset turnover), and DSI=92 days (days of sales in inventory). Find the firm’s debt-to-asset (D/A) ratio. ROE=PM*ATO*EM 0.25=.05*2.2* EM EM=2.2727 =A/E D/A= 1.2727/2.2727 = .56 2. a) If the equity multiplier of a company is 3, what is its D/A ratio and its D/E ratio? EM=3= A/E E/A= 1/3
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Introduction Uses for Financial Models in Investment Banking and Private Equity Investment bankers and Private Equity Professionals often must create financial models that illustrate historic financial statements along with integrated income statement, balance sheet and cash flow projections for evaluating various types of transactions such as: Sale of the Company Merger of the Company Public or Private Placement of new capital (bank loans, high yield issue, IPO or secondary equity offering, private equity
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(purchases) another company and the purchase price is greater than the combination or net of 1) the fair value of the identifiable tangible and intangible assets acquired, and 2) the liabilities that were assumed. Goodwill is reported on the balance sheet as a noncurrent asset. Since 2001, U.S. companies are no longer required to amortize the recorded amount of goodwill. However, the amount of goodwill is subject to a goodwill impairment test at least once per year. Outside of accounting, goodwill
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11345 | 200701-1 Capital 10,00005-1 Cash 75012-1 Cash 50024-1 J.Carlton 95 ____ 11345 Balance b\d | Dr Capital Cr 20071-1 Bank 10,000
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Case A Overview Neil, Inc. engaged Lifeson and Lee, CPAs to audit its 2010 financial statement. Neil, Inc. has never been audited in prior years. Neil, Inc. is a manufacturing company that uses the periodic inventory system and has no controls in its purchasing process. Neil, Inc. is not a public company. Lifeson and Lee conclude the audit of Neil, Inc.’s financial statements and found no material deviations from GAAP and no other scope limitations. The subsequent discussion will be regarding
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Accrual Accounting Concepts The Navigator • Scan Study Objectives • Read Feature Story • Read Preview • Read text and answer Before You Go On p. 169 p. 174 p. 183 • Work Using the Decision Toolkit • Review Summary of Study Objectives • Work Demonstration Problem • Answer Self-Study Questions • Complete Assignments Feature Story What Was Your Profit? The accuracy of the financial reporting system depends on answers to a few fundamental questions. At what point
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Larissa Galberth Financial Statements Paper Part 1 University of Phoenix ACC/497 Bob Davis Proper interpretation of the information found in a company’s financial statements is vital for everyone affected by the actions of the company. Those affected include potential investors and current stakeholders, including stockholders, employees, vendors and lenders. All of these people must be able to make business decisions based on information found in financial statements. This paper will identify
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------------------------------------------------------------------------------------------------------------ DISPENSERS OF CALIFORNIA, INC. ------------------------------------------------------------------------------------------------------------ ------------------------------------------------- INTRODUCTION Peter Hynes, creator of a commercial paint spray, sought investors to provide capitalization of $200,000 par value capital stock for his newly patented product. The product had 16 years
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