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13-1 Financial Analysis: The Big Picture Be. 232 Using the following selected items from the comparative balance sheet of Kato Company, illustrate horizontal and vertical analysis. December 31, 2014December 31, 2013 Accounts Receivable$   720,000$   630,000 Inventory450,000360,000 Total Assets3,200,0003,000,000 Be. 233 Using these data from the comparative balance sheet of K. Leen Company, perform vertical analysis. December 31, 2014December 31, 2013 Accounts.
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13-1 Financial Analysis: The Big Picture 11.Comparisons of company data with industry averages provide information about a company's relative position within the industry. 12.Horizontal, vertical, and circular analyses are the basic tools of financial statement analysis. 13.In horizontal analysis, the base year is the most current year being examined. 14.Horizontal analysis is.
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13-1 Financial Analysis: The Big Picture Ex. 249 The following information was taken from the financial statements of Bjorg Company:     2014    2013 Gross profit on sales ..............................$600,000$680,000 Income before income taxes ........................230,000221,000 Net income .....................................180,000153,000 Net income as a percentage of net sales ................10%9% Instructions (a)Compute the net sales for each year. (b)Compute the cost of goods sold in dollars.
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12-1 Statement of Cash Flows COMPLETION STATEMENTS               212.A statement of cash flows summarizes the operating, ____________, and  ___________ activities of an entity.               213.The cash effects of selling goods and services appears in the ______________ activities section of a statement of cash flows.               214.Net cash provided/used by operating activities can be determined using.
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13-1 Financial Analysis: The Big Picture Be. 242 The income statement for the Carolina Service Company for the year ended December 31, 2014, appears below. Sales revenue$670,000 Cost of goods sold  390,000 Gross profit280,000 Expenses  180,000* Net income$100,000 *Includes $25,000 of interest expense and $20,000 of income tax expense. Additional information: 1.Common stock outstanding on January 1, 2014, was 50,000 shares..
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13-1 Financial Analysis: The Big Picture Be. 238 Selected data from the Florida Fruit Company are presented below: Total assets$1,500,000 Average total assets1,850,000 Net income175,000 Net sales1,300,000 Average common stockholders' equity1,000,000 Net cash provided by operating activities275,000 Instructions Assuming that no dividends were declared or paid during the period, calculate the following profitability ratios from the above information: 1. Profit margin 2..
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13-1 Financial Analysis: The Big Picture 51.An extraordinary item must meet which of the following two criteria? a.Foreseeable and material b.Infrequent and unusual c.Substantial and measurable d.Unusual and measurable 52.All of the following are reported on the income statement net of tax except a.irregular items. b.other comprehensive income items. c.income from operations. d.extraordinary items. 53.Indian River Groves in central Florida lost about.
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13-1 Financial Analysis: The Big Picture Ex. 248 The comparative balance sheet of Delta Company appears below: Delta COMPANY Comparative Balance Sheet December 31, Assets   20142013 Current assets ........................................$   450$280 Plant assets ..........................................     550  520 Total assets .......................................$1,000$800 Liabilities and stockholders' equity Current liabilities ......................................$   180$120 Long-term debt .......................................250160 Common stock ........................................310320 Retained earnings .....................................     260  200 Total liabilities and stockholders' equity ...................$1,000$800 Ex. 248(Cont.) Instructions (a)Using horizontal.
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13-1 Financial Analysis: The Big Picture Ex. 254 The financial statements of Elcamino Company appear below: ELCAMINO COMPANY Comparative Balance Sheet December 31, Assets    2014    2013 Cash ............................................$  25,000$  40,000 Debt investments ...................................20,00060,000 Accounts receivable (net) .............................50,00030,000 Inventory .........................................140,000170,000 Property, plant and equipment (net) ......................  170,000  200,000 Total assets ....................................$405,000$500,000 Ex. 254(Cont.) Liabilities and stockholders' equity Accounts payable ...................................$  25,000$  30,000 Short-term notes payable .............................40,00090,000 Bonds payable .....................................75,000160,000 Common.
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12-1 Statement of Cash Flows S-A E 231 The statement of cash flows is the only required financial statement that is not prepared from an adjusted trial balance. What are the sources of information for preparing a statement of cash flows? Explain how the accrual basis of accounting affects the statement of cash.
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12-1 Statement of Cash Flows MATCHING Set 1 — Indirect Method 226.For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. A.Added to net income B.Deducted from net income C.Cash outflow—investing activity D.Cash inflow—investing activity E.Cash outflow—financing activity F.Cash inflow—financing activity G.Significant.
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13-1 Financial Analysis: The Big Picture 121.Cochran Corporation, Inc. has the following income statement (in millions): COCHRAN CORPORATION, INC. Income Statement For the Year Ended December 31, 2014 Net Sales$240 Cost of Goods Sold    80 Gross Profit  160 Operating Expenses    65 Net Income$  95 Using vertical analysis, what percentage is assigned to net income? a.100% b.60% c.40% d.33% 122.Given the following data for the King Company: Current.
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12-1 Statement of Cash Flows SHORT-ANSWER ESSAY QUESTIONS S-A E 228 Why is the statement of cash flows useful? S-A E 229 Distinguish among the three activities reported in the statement of cash flows. . S-A E 230 (a) What are the phases of the corporate life cycle? (b) What effect does each phase have on the numbers reported in.
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13-1 Financial Analysis: The Big Picture 181.Net sales are $2,400,000, beginning total assets are $700,000, and the asset turnover is 3.0. What is the ending total asset balance? a.$800,000 b.$900,000 c.$700,000 d.$750,000 182.The following information pertains to Unique Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were.
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13-1 Financial Analysis: The Big Picture Ex. 253 Belcanto Corporation experienced a fire on December 31, 2014, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following balances. December 31, 2014December 31, 2013 Cash $  40,000$  15,000 Accounts receivable (net) 84,000126,000 Inventory200,000180,000 Accounts payable50,00010,000 Notes payable30,00020,000 Common.
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13-1 Financial Analysis: The Big Picture 91.Under which of the following cases may a percentage change be computed? a.The trend of the amounts is decreasing but all amounts are positive. b.There is no amount in the base year. c.There is a negative amount in the base year and a negative amount in the subsequent year. d.There.
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13-1 Financial Analysis: The Big Picture 101.Comparative balance sheets a.are usually prepared for at least one year. b.are usually prepared for at least two years. c.do not show both dollar amount and percentage changes. d.do not show a comparison of total stockholders’ equity. 102.Assume the following cost of goods sold data for a company: 2015$1,300,000 20141,200,000 20131,000,000 If 2013 is.
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13-1 Financial Analysis: The Big Picture Ex. 256 B. Jones Corporation has issued common stock only. The company has been successful and has a gross profit rate of 20%. The information shown below was taken from the company's financial statements. Beginning inventory$   482,000 Purchases4,346,000 Ending inventory? Average accounts receivable700,000 Average common stockholders' equity3,100,000 Sales revenue (all on credit)5,600,000 Net income341,000 Instructions Compute.
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13-1 Financial Analysis: The Big Picture 191.The following information pertains to Blue Flower Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments$  45,000 Accounts receivable (net)30,000 Inventory15,000 Property, plant and equipment  210,000 Total Assets$300,000 Liabilities and Stockholders’ Equity Current liabilities$  60,000 Long-term liabilities90,000 Stockholders’ equity—common .
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13-1 Financial Analysis: The Big Picture 81.Which of the following would be considered an “Other comprehensive income” item? a.Loss on disposal of discontinued operations b.Unrealized loss on available-for-sale securities c.Extraordinary gain due to expropriated plant facilities d.Net income 82.Comparisons of financial data made within a company are called a.intracompany comparisons. b.interior comparisons. c.intercompany comparisons. d.industry comparisons. 83.Which one of the following is.
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13-1 Financial Analysis: The Big Picture 61.Which of the following items appears on the income statement before income before irregular items? a.Other comprehensive income. b.Extraordinary items. c.Income tax expense. d.Discontinued operations. 62.Which of the following items should be classified as an extraordinary item on an income statement? a.Gain on the sale of property, plant or equipment b.Loss due to.
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13-1 Financial Analysis: The Big Picture Ex. 251 Armada Company has these comparative balance sheet data: ARMADA COMPANY Balance Sheets December 31,     2014    2013 Cash $  40,000$  30,000 Accounts receivable (net) 65,00060,000 Inventories60,00050,000 Plant assets (net)   185,000  180,000 $350,000$320,000 Accounts payable$  50,000$  60,000 Mortgage payable (15%, due in 15 years)100,000100,000 Common stock, $10 par140,000120,000 Retained earnings   60,000   40,000 $350,000$320,000 Additional information for 2014: 1.Net income was $25,000. 2.Sales.
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13-1 Financial Analysis: The Big Picture 21.In a common size income statement, net sales are represented by 100%. 22.In a common size income statement, each item is expressed as a percentage of net income. 23.In a common size balance sheet, total assets are represented by 100%. 24.In the vertical analysis of a balance sheet, the.
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12-1 Statement of Cash Flows *S-A E 235 When preparing a statement of cash flows using the direct method, why must the sales revenue figure be adjusted to arrive at cash receipts from sales? . S-A E 236(Ethics) Mooresville Hills Trading Company's most recent financial statements showed dismal performance. There was a net loss of $10,000.
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13-1 Financial Analysis: The Big Picture 171.Ed's Drive-In $175,000 of current assets and $80,000 of current liabilities before borrowing $60,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Ed's Drive-In's current ratio? a.The ratio remained unchanged. b.The change in the current ratio cannot be determined. c.The ratio.
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13-1 Financial Analysis: The Big Picture 201.The following amounts were taken from the financial statements of R.Dodd Company: 20142013 Current liabilities$1,280,000$1,220,000 Long-term liabilities1,800,0001,600,000 Interest expense100,00050,000 Income tax expense50,00030,000 Net income400,000170,000 Net cash provided by operating activity425,000270,000 201.(Cont.) The times interest earned for 2014 is a.4.0 times. b.5.0 times. c.4.5 times. d.5.5 times. 202.The following amounts were taken from the financial statements of R.Dodd Company: 20142013 Current liabilities$1,280,000$1,220,000 Long-term liabilities1,800,0001,600,000 Interest.
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13-1 Financial Analysis: The Big Picture Be. 228 The following items were taken from the financial statements of Mint, Inc., over a three-year period:       Item        2015      2014   2013 Net Sales$355,000$336,000$300,000 Cost of Goods Sold  214,000  206,000  186,000 Gross Profit$141,000$130,000$114,000 Instructions Compute the following for each of the above time periods. a.The amount and percentage change from.
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13-1 Financial Analysis: The Big Picture 131.Return on assets is most closely related to a.profit margin and debt to assets ratio. b.profit margin and asset turnover. c.times interest earned and debt to stockholders’ equity. d.profit margin and free cash flow. 132.Return on common stockholders’ equity is most closely related to a.gross profit rate and operating expenses to sales.
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13-1 Financial Analysis: The Big Picture COMPLETION STATEMENTS               257.Discontinued operations refers to the disposal of a __________________ of a business.               258.The two criteria necessary for an item to be classified as an extraordinary item are that the transaction or event must be (1) _______________ and (2) ________________.               259.A change in depreciation methods.
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13-1 Financial Analysis: The Big Picture Be. 226 Comparative information taken from the Bergeron Company financial statements is shown below:     2014   2013 (a)Accounts receivable$ 175,000$ 140,000 (b)Retained earnings30,000(14,000) (c)Sales revenue855,000750,000 (d)Operating expenses170,000200,000 (e)Income taxes payable11,00010,000 Instructions Using horizontal analysis, show the percentage change from 2013 to 2014 with 2013 as the base year. Be. 227 The following items were taken from the.
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13-1 Financial Analysis: The Big Picture 31.Accounts receivable turnover is useful in assessing the profitability of receivables. 32.Inventory turnover measures the number of times on average the inventory was sold during the period. 33.Inventory turnover is a measure of liquidity that focuses on efficient use of inventory. 34.Profitability ratios are frequently used as a basis.
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13-1 Financial Analysis: The Big Picture CHAPTER 13 FINANCIAL ANALYSIS: THE BIG PICTURE TRUE-FALSE STATEMENTS 1.Analysts are interested in sustainable income, which is equal to the past year’s net income. 2.One objective of the income statement is to separate the results of continuing operations from those of discontinued operations. 3.When the disposal of a significant.
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13-1 Financial Analysis: The Big Picture 161.Aps Company reported the following on its income statement: Income before income taxes$420,000 Income tax expense  120,000 Net income$300,000 An analysis of the income statement revealed that interest expense was $70,000. Aps Company's times interest earned was a.5.3 times. b.9 times. c.7 times. d.4.3 times. 162.Trading on the equity (leverage) refers to the a.amount of working.
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13-1 Financial Analysis: The Big Picture 211.Akers Corporation reported net income $48,000; net sales $480,000; and average assets $800,000 for 2014. What is the 2014 profit margin? a.6% b.10% c.48% d.60% 212.Beta Corporation had net income of $325,000 and paid dividends to common stockholders of $50,000 in 2014. The weighted average number of shares outstanding in 2014.
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13-1 Financial Analysis: The Big Picture Be. 236 Selected data for Buechner Corporation appear below.     2014    2013 Net credit sales$630,000$520,000 Cost of goods sold409,500312,000 Inventory at end of year64,00085,000 Accounts receivable at end of year90,00050,000 Instructions Compute the following for 2014: (a)Gross profit percentage (b)Inventory turnover (c)Accounts receivable turnover Be. 237 Corsig Corporation had the following comparative current assets and current liabilities: Dec. 31, 2014Dec..
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13-1 Financial Analysis: The Big Picture Ex. 255 The following ratios have been computed for Southern Company for 2014. Profit margin ratio20% Times interest earned12 times Current ratio2.5:1 Accounts receivable turnover5 timesDebt to assets ratio24% The 2014 financial statements for Southern Company with missing information follows: SOUTHERN COMPANY Comparative Balance Sheet December 31, —————————————————————————————————————————— Assets     2014    2013 Cash .........................................$  25,000$  35,000 Debt Investments.................................15,00015,000 Accounts receivable.
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13-1 Financial Analysis: The Big Picture Be. 240 State the effect of the following transactions on the current ratio. Use increase, decrease, or no effect for your answer. (a)Collection of an accounts receivable (b)Declaration of cash dividends (c)Additional stock is sold for cash (d)Accounts payable are paid (e)Equipment is purchased for cash (f)Inventory purchases are made for cash (g)Temporary investments.
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13-1 Financial Analysis: The Big Picture Be. 230 If Hard in Parle Company had net income of $620,000 in 2014 and it experienced a 19% increase in net income over 2013, what was its 2013 net income? Be. 231 Horizontal analysis (trend analysis) percentages for Omega Company’s sales, cost of goods sold, and expenses are.
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13-1 Financial Analysis: The Big Picture 71.Which of the following would not be considered a change in accounting principle? a.Changing the estimated percentage used in calculating bad debt expense b.Changing the inventory costing method used from FIFO to LIFO c.Changing from straight-line depreciation to double-declining balance depreciation d.Changing from the cost method of accounting for investments.
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13-1 Financial Analysis: The Big Picture Be. 224 Dos Amugus Company has income from continuing operations of $621,000(after tax) for the year ended December 31, 2014. It also has the following items (before considering income taxes): (1)An extraordinary fire loss of $120,000. (2)A gain of $60,000 on the discontinuance of a major component. (3)A cumulative effect.
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12-1 Statement of Cash Flows Set 2 — Direct Method *227.For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the direct method. A.Added in determining cash receipts from customers B.Deducted in determining cash receipts from customers C.Added in determining.
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13-1 Financial Analysis: The Big Picture Exercises Ex. 244 Exeter Corporation had net income of $3,000,000 in 2013. Using 2013 as the base year, net income decreased by 40% in 2014 and increased by 110% in 2015. Instructions Compute the net income reported by Exeter Corporation for 2014 and 2015. Ex. 245 The following items were taken from.
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13-1 Financial Analysis: The Big Picture 141.Winsor Clothing Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $6,800,000. The average collection period of the accounts.
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12-1 Statement of Cash Flows IFRS QUESTIONS 1. Under IFRS, the cash flow statement can be prepared using     a. the direct method only.     b. the indirect method only.     c. either the direct or indirect method.     d. the T-account method only. 2. Under IFRS, bank overdrafts are classified as     a. operating activities.     b. investing activities.    .
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13-1 Financial Analysis: The Big Picture 111.Vertical analysis is a technique that expresses each item in a financial statement a.in dollars and cents. b.as a percent of the item in the previous year. c.as a percent of a base amount. d.starting with the highest value down to the lowest value. 112.In vertical analysis a.a base amount is required. b.a.
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13-1 Financial Analysis: The Big Picture Ex. 246 Here is financial information for Valdez Express Inc. December 31, 2014December 31, 2013 Current assets$114,000$80,000 Plant assets (net)414,000360,000 Current liabilities91,00065,000 Long-term liabilities134,50090,000 Common stock, $1 par149,500115,000 Retained earnings153,000170,000 Instructions Prepare a schedule showing a horizontal analysis for 2014 using 2013 as the base year. Ex. 247 Here are the comparative income statements of Georgia Development Corporation. GEORGIA.
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13-1 Financial Analysis: The Big Picture Be. 234 Vertical analysis (common-size) percentages for Austin Company’s sales, cost of goods sold, and expenses are listed here. Vertical Analysis  2015  2014  2013 Sales revenue              100.0%              100.0%              100.0% Cost of goods sold              61.2              62.4              63.5 Expenses              26.5              27.4              28.5 Did Austin Company’s net income as a percent of sales increase, decrease,.
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13-1 Financial Analysis: The Big Picture BRIEF Exercises Be. 222 Listed below are some selected Items that may appear on a corporate income statement. Indicate the order in which these items would appear on an income statement. (The first one should be assigned the number “1”, the second “2,” etc.) _____Extraordinary item _____Income before income taxes _____Discontinued.
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13-1 Financial Analysis: The Big Picture 151.Savory Thymes, Inc.had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year. The average inventory for the year amounted to $2,500,000. The average days in inventory during the year was approximately a.115 days. b.130 days. c.139 days. d.174 days. 152.Which one of the following would.
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13-1 Financial Analysis: The Big Picture MULTIPLE CHOICE QUESTIONS 46.Which of the following income statement figures would probably be the best indicator of a company’s future performance? a.Total revenues b.Income from operations c.Net income d.Gross profit 47.Which of the following is the best definition of sustainable income? a.Sustainable income is a measure of solvency that does not include capital.
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