Exam 2: A Further Look at Financial Statements

The quality of consistency enhances

The following information is available for Bradshaw Corporation and Newell Corporation: (in millions) Bradshaw Corporation Newell Corporation 2014 2013 2014 2013 Preferred dividends 25 10 0 30 Net income 500 480 490 520 Shares outstanding at the end of the year 200 180 150 200 Shares outstanding at the beginning of the year 180 150 200 220 Based on this information, the earnings per share calculations (rounded to two decimals) suggest

Earnings available to common stockholders is equal to

Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales. Which of the following qualities of useful information has Jackson most likely violated?

Ace Company is a retail store. Due to competition, it is having trouble selling its products. Thus, inventory has been building up. Ace's current ratio has not changed for the past three years, in spite of the inventory build up. Which of the following statements is true?

Dividends appear on

Relevance and faithful representation are the fundamental qualities of useful information. (a) Briefly define each term. (b) Why are these characteristics important to users of financial statements?

Earnings per share is calculated by dividing net income minus preferred stock dividends for the period by the average number of common shares outstanding during the period.

Free cash flow is Net cash provided by operating activities less dividends.

The chief financial officer (CFO) of SuperClean Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 2014, so that the CFO could get an idea of how the company stood. He knows that certain debt agreements with its creditors require the company to maintain a current ration of at least 2:1. The preliminary balance sheet is as follows. Instructions (a) Calculate the current ratio and working capital based on the preliminary balance sheet. (b) Based in the results in (a), the CFO requested that $20,000 of cash be used to pay off the balance of the accounts payable account on December 31, 2014. Calculate the new current ratio and working capital after the company takes these actions.

Relevant accounting information

For accounting information to have relevance, it must be

These items are taken from the financial statements of Donovan Company. at December 31, 2014. Buildings \ 95,800 Accounts receivable 15,600 Prepaid insurance 4,680 Cash 18,840 Equipment 79,400 Land 61,200 Insurance expense 780 Depreciation expense 7,300 Interest expense 2,600 Common stock 57,000 Retained earnings (January 1, 2014) 40,000 Accumulated depreciation-buildings 45,600 Accounts payable 15,500 Mortgage payable 88,600 Accumulated depreciation-equipment 18,720 Interest payable 3,600 Service revenue 17,180 Instructions Prepare a classified balance sheet. Assume that $13,600 of the mortgage payable will be paid in 2015.

The debt to assets ratio measures the percentage of assets financed by creditors.

Connor Corporation hired a new accountant. Over the next four years, the accountant used four different accounting methods to depreciation for Connor's equipment. Which of the following qualities of useful information has Connor most likely violated?

A short-term creditor is primarily interested in the __________ of the borrower.

Revenues have the effect of increasing retained earnings.

The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.

Long-term investments appear in the property, plant, and equipment section of the balance sheet.

Mitchell Corporation has current assets of $1,600,000 million and current liabilities of $750,000. If they pay $250,000 of their accounts payable what will their new current ratio be?