Exam 2: Financial Statements and the Annual Report

Which of the following is the best description of the purpose of financial reporting?

_________________________ are cash and other assets that are reasonably expected to be converted to cash during the normal operating cycle of the business.

Information that is material means that an error or alternative method of handling a transaction

Smith Corporation Listed below is information from the financial records of Smith Corporation at December 31, 2017: Retained earnings \ 37,000 Notes payable-Due July 1,2020 \ 12,000 Accumulated depreciation 13,000 Interest payable 1,000 Income taxes payable 24,000 Office supplies 2,000 Buildings 48,000 Accounts payable 46,000 Cash 11,000 Inventory 33,000 Accounts receivable 35,000 Land 50,000 Capital stock 60,000 Prepaid rent 4,000 -Read the information about Smith Corporation. Required: Prepare the Long-Term Assets section of Smith Corporations's balance sheet at December 31,2017.You may omit the heading.Why are these amounts classified as "long-term"?

The current ratio is irrelevant in liquidity analysis for service companies because they do not have inventories among their current assets.

Hammar Corporation's partial income statement is as follows: ​ Sales \ 2,400,000 Cost of sal es 900,000 Selling expenses 121,600 General and administrative 150,000 expenses Required Determine the profit margin.Would you invest in Hammar Corporation? Explain your answer.

A construction company that builds skyscrapers is likely to have an operating cycle longer than one year.

Financial statements are intended to tell the reader the value of a company.

Huntington Corporation Presented below are all of the items from Huntington Corporation's income statement for the years ending December 31, 2018 and 2017. December 31, 2018 December 31, 2017 Service fees \ 2,300,000 \ 2,100,000 General and administrative expenses 1,900,000 1,500,000 Other income, net 40,000 20,000 Income taxes 150,000 180,000 -Read the information about Crystal,Inc.Has Crystal been profitable since it began operations? How do you know?

Fellsmere Corporation Presented below are the condensed balance sheets of Fellsmere Corporation at December 31,2018 and 2017.Net income for the years ending December 31,2018 and 2017 is $346,000 and $109,000,respectively. ​ December 31, 2018 December 31, 2017 Current assets \ 2,228,186 \ 2,544,683 Property, plant, and equipment 530,589 376,647 (net) 131,206 118,121 Total assets \ 2,889,981 \ 3,039,451 Current liabilities \ 1,429,674 \ 1,003,906 Long-term obligations 3,360 7,240 Warranty and other liabilities 112,971 98,081 Total liabilities \ 1,546,005 \ 1,109,227 Stockhol ders' equity: Common stock \ 1,566 \ 501,631 Additional paid-in capital 365,986 799,483 Retained earnings 980,509 634,509 Accumulated other (4,085) (5,399) comprehensive loss Total stockholders' equity \ 1,343,976 \ 1,930,224 Total liabilities and stockholders' \ 2,889,981 \ 3,039,451 equity -Read the information about Fellsmere Corporation. ​ Required (A)Explain the change in Fellsmere's working capital from 2017 to 2018.Why do users believe the current ratio provides more information than the dollar amount of working capital? Explain. ​ (B)Fellsmere Corporation's creditors need to know whether its working capital position improved during the year.How would you evaluate this?

Vance Corporation's partial income statement is as follows: Required Determine the profit margin.Would you invest in Vance Corporation? Explain your answer. Sales \ 1,300,000 Cost of sales 300,000 Selling expenses 210,000 General and administrative 150,000 expenses

Moore Industries Moore Industries began operations on January 2, 2017, with an investment of $50,000 by each of its two stockholders. Net income for its first year of business was $240,000. Moore Industries paid a total of $100,000 in dividends to its stockholders during the year. -Read the information about Moore Industries.The company's dividends for the year

____________________ is the quality of accounting information that makes it comprehensible to those willing to spend the necessary time.

Which statement is true concerning an income statement?

______________________________ is a liquidity measure that is calculated by subtracting current assets from current liabilities.

Jobston,Inc. The balance sheet of Jobston Inc.includes the following items: ​ Cash \ 22,400 Accounts receivable 11,700 Inventory 23,300 Prepaid insurance 1,040 Land 80,000 Accounts payable 47,500 Salaries payable 1,200 Capital stock 84,040 Retained earnings 5,700 ​ -Read the information about Jobston,Inc.What is Jobston's working capital?

Which one of the following items is reported as a current asset on a classified balance sheet?

Jones,Inc. ,a manufacturer of tires,has given you its most recent annual report in an effort to obtain a sizable loan.The company is very profitable and appears to have a sound financial position.Based on a report presented on prime-time television last night,you are aware that Jones is a defendant in several lawsuits related to its defective tires that cause vehicles to overturn.The information presented on television is an example of financial information that is

Moore Industries Moore Industries began operations on January 2, 2017, with an investment of $50,000 by each of its two stockholders. Net income for its first year of business was $240,000. Moore Industries paid a total of $100,000 in dividends to its stockholders during the year. -Read the information about Moore Industries.What is the company's retained earnings balance at December 31,2017?

The SEC created the objectives of financial reporting.