cases in this chapter constitute only a beginning in understanding and it is to be expected that students will understand the matter thoroughly only after they have attacked it from several different angles. Sometimes we ask the class “Suppose a company received a lawyer’s bill for $1,000. Explain all the different ways in which this bill could be recorded in the accounts.” The answer is that if the bill relates to services rendered in a prior year (or accounting period) but not recorded in that
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Marriott’s balance sheet and income statement, Marriott’s Return on equity (ROE) in fiscal 2013 was -41.66%. This means that each dollar of Shareholder’s equity generated -41.66 cents in net income. To determine whether an ROE of -41.66% indicates good or bad performance, we might compare Marriott’s 2014 ROE to its ROE for the prior year. Marriot’s ROE for Fiscal 2013 was -46.37%. Thus, Marriott’s profitability as measured by ROE increased by 4.71%. Marriott has engaged in large share repurchase
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Major Monitor Ltd (MML) has higher gross profit margin of 34.7% ($7,080,000/$20,400,000). For every sales dollar, they are able to use 34.7 cents in the business and their COGS is 65.3 cents per sales dollar. Key Keyboard Inc.’s (KKI) gross profit margin is 31.1%. ($7,669,000/$24,650,000) They are able to use 31.1 cents in the business and the COGS is 68.9 cents, however as they have larger revenues, they can still thrive and be successful. MML has a net profit margin of 5.1%. ($1,040,000/$20,400
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excess of investment cost over book value of $210,000 was allocated entirely to a 10-year royalty agreement. Subsidiary regularly sells merchandise to Parent. In 2015, inter-company sales amounted to $123,960, with $27,558 of deferred profit remaining in ending inventory. Year-end inter-company receivables/payables amounted to $40,300. In 2016, inter-company sales amounted to $123,960 with $35,330 of deferred profit remaining in ending inventory. Year-end inter-company receivables/payables
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and stock exchanges Analysts and credit rating agencies Auditors Standard Setters Various What is at stake? Investment/loan Job, bonus, reputation, salary increase, access to capital markets by company Reputation, effective and efficient capital marketplace Reputation, profits Reputation, profits (companies are their clients) Reputation - The overall objective of financial reporting is to provide financial information that is useful to users and that is decision relevant. The statements should
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Application: Decision Focus – Bergan Brewery uses the latest in modern brewing technology to produce a prizewinning beer. In both 2011 and 2012, Bergan produced and sold 100,000 cases of beer and had no raw materials, work in process, or finished goods inventory at the beginning or end of either year. At the end of 2011, the company installed machines to perform some of the repetitive tasks previously performed with direct labor. At the beginning of 2012, Bergan’s bookkeeper estimated that net income
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Statement Stockholders’ Equity Financial Ratios Accounting Principles Bookkeeping, Debits and Credits Accounting Equation Adjusting Entries Bank Reconciliation Petty Cash Accounts Receivable and Bad Debts Expense Inventory and Cost of Goods Sold Depreciation Accounts Payable Cost Behavior and Break-even Point Payroll Accounting Standard Costing Accounting Pronouncements Organizations Pages 1 1-2 2-3 3 4 4-5 5-6 7-8 8 9 9-10 10-11 11 12 12-13 13 14 14-15 15-16 16-17 17 For personal use by the original
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balance sheet that is not also a limitation of the income statement is a. the use of judgments and estimates b. omitted items c. the numbers are affected by the accounting methods employed d. valuation of items at historical cost S26. The balance sheet contributes to financial reporting by providing a basis for all of the following except a. computing rates of return. b. evaluating the capital structure of the enterprise. c. determining the increase
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Below are the calculations required in order to obtain a cash flow analysis on Jaeden Industries. Jaeden’s Free Cash Flow Free cash flow involves the following acronyms that are to be applied to the first party of the formula: net operating profits after taxes (NOPAT), earning before interest and taxes (EBIT), T = corporate tax rate, and operating cash flow (OCF). In order to calculate the free cash flow (FCF), two steps are required. The first step is to calculate the OCF, and then the free
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turnover: A ratio showing how many times a company's inventory is sold and replaced over a period. Formula: Inventory Turnover =Cost of goods sold/Average Inventory. The ratio and time series analysis of Inventory Turnover of Beximco Pharmaceutical from 2008-2012 is given below- | Inventory Turnover | 2008 | 1.346 | 2009 | 3.01 | 2010 | 3.50 | 2011 | 1.92 | 2012 | 2.07 | Interpretation: The companies ratio increases from 2008 to 2010, then decreases in 2011 and then
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