Exam 2: Financial Statements: a Window on an Entity

Which of the following statements about the cash flow statement is true?

If an entity pays off an amount owed to a supplier, what is the effect on the accounting equation?

Which of the following statements best describes the IFRS conceptual framework?

Which of the following is an objective of general purpose financial reporting?

Mats owns and operates a small advertising business from an office.His home is worth $400,000, his business assets are worth $275,000, and his business obligations total $65,000.How much equity does he have in his advertising business?

The opening balance of shareholders' equity for Sedona Transport was $530,000.During the year, Sedona issued 50,000 common shares at market price of $3.50 per share.The company earned net income of $152,400, recorded other comprehensive income of ($2,300), and paid dividends of $10,000.What is the closing balance of shareholders' equity?

Below are the income statements and balance sheets for Cookshire Cookware Corp.(CCC) for 2012 and 2013. Cookshire Cookware Corp. Income Statement For the years ended June 30 (in thousands) 2013 2012 Revenue \ 5,200 \ 4,400 Cost of goods sold 2,850 2,500 Operating expenses 1,120 970 Amortization expense 300 250 Interest expense 100 120 Tax expense Net income \ 540 \ 360 Cookshire Cookware Corp. Balance Sheet For the years ended June 30 (in thousands) 2013 2012 Assets: \ 10 18 Cash 520 440 Accounts Receivable 560 500 Inventory 100 100 Property, Plant and Equipment (net of accumulated amortization) 1,800 1,700 Other non-current assets 150 150 Total Assets: \3 ,140 \2 ,908 Liabilities: Bank loan 100 150 Accounts payable 480 370 Other current liabilities 70 80 Long-term debt 970 1,200 1,620 1,800 Shareholders' Equity: Capital Stock 500 500 Retained Earnings 1,020 608 1,520 1,308 Total Liabilities and Shareholders' Equity \3 ,140 \2 ,908 Required: A) Calculate the following ratios for Cookshire Cookware Corp for 2012 and 2013: i) current ratio ii) debt-to-equity ratio iii) gross margin percentage B) Explain any changes in the ratios from year to year. C) If you were a potential investor, how would the changes from 2012 to 2013 affect your decision to buy shares in CCC?

Bass Ltd.borrowed $100,000 from a bank.They will repay $10,000 a year for the next ten years plus 5% interest.How would the loan be initially recorded on Bass's statement of financial position?

Lennox Limited reported sales of $5,000,000, cost of goods sold of $3,200,000, operating expenses of $1,400,000, and income tax expense of $160,000 for the year.What was their net income for the year?

Pike Ltd.bought a new delivery truck for its business.The truck sells for $75,000, because Pike bought a demonstrator model, they paid $65,000 only.While driving it home from the sales lot, the driver had an accident, and damages were estimated at $1,000.At what value should the truck be recorded on Pike's statement of financial position?

Which of the following is not a liability?

Why are financial statements prepared on a comparative basis?

Which financial statement is a snapshot at a point in time?

When assessing general purpose financial statements, the financial analyst takes into consideration the fact that many important assets may not be included in the company's statement of financial position, such as human resource capital, intellectual property and social responsibility.This limitation is the result of applying which of the following characteristics of financial information?

Below are partial income statements for Haliburton Ltd.for three years. Required: A) Fill in the missing amounts. B) Is Haliburton's operating performance improving? Support your answer.

An employee worked for a small business during the current month but will not be paid until the next month.If the business uses cash accounting, what would be the effect on the accounting equation in the current month?

If an entity receives cash from a customer for payment of an amount owing to them, what is the effect on the accounting equation?

Indicate whether each of the following independent events would be included in a calculation of net income on the cash basis, the accrual basis or both.Provide a brief explanation for your treatment.Use the following format. Net income on the Net income on the Transaction cash basis \& explanation accrual basis \& explanation A) B) Transactions: A) Company sells goods for cash. B) Company pays wages for work done last period. C) Inventory is purchased in current period and sold, but not yet paid for. D) Purchased and paid for a 5-year license for exclusive rights to sell a product.E) Company agrees to hire a new salesman to start work next period.

How often do companies prepare general purpose financial statements?

The use of a company's financial statements to assess a new share offering would rely most heavily on which of the following characteristics of information?