Exam 17: Understanding Corporate Annual Reports: Basic Financial Statements

Presented below are the balance sheets of Monty Company and Hall Company at January 1, 20X6: Hall Company Balance MontyC omp any Sheet Balance Sheet January 1, 20X6 January 1, 20X6 Cash \ 100 Cash \ 400 Net fixed assets Net fixed assets Total assets \ 500 Total assets \ 780 Accounts payable Long- \ 20 Accounts payable Long- \ 120 term bonds term bonds payable 220 payable 280 Stockholders' equity Total 260 Stockholders' equity 380 liabilities and Total liabilities and stockholders' equity \ 500 stockholders' equity \ 780 On January 1, 20X6, Monty Company acquired 100% of the outstanding common stock of Hall Company for $260 in cash. If Hall Company generated net income during 20X2 of $30, and none of the income resulted from intercompany sales, would be the amount of the elimination entry at the end of 20X6.

The effects of price changes in marketable securities are reported:

Financial statements that combine the financial statements of the parent company with those of various subsidiaries, as if they were a single entity

Dividends per common share / earnings per share

Common- size statements are expressed in component percentages.

The following are the income statements and balance sheets for Coors Company: 20X2 Sales (only credit sales) \ 1,606.0 Less cost of goods sold Gross profit \ 544.0 Less operating expenses Operating income \ 222.0 Less other expense:Interest Income before tax \ 212.4 Less income tax expense Net income \ Currentassets: 20\times1 20\times2 20\times1 Cash \ 36 \ 38 Accts payable \ 98 \ 64 Accts receivable 180 144 Wages payable 18 16 Inventory 120 100 Taxes payable 28 4 Prepaid rent Current portion Total current assets \3 56 \3 06 of long-term debt 30 6 20X2 Sales (only credit sales) \ 1,606.0 Less cost of goods sold Gross profit \ 544.0 Less operating expenses Operating income \ 222.0 Less other expense:Interest Income before tax \ 212.4 Less income tax expense Net income \ Currentassets: 20\times1 20\times2 20\times1 Cash \ 36 \ 38 Accts payable \ 98 \ 64 Accts receivable 180 144 Wages payable 18 16 Inventory 120 100 Taxes payable 28 4 Prepaid rent Current portion Total current assets \3 56 \3 06 of long-term debt 30 6 Long- term assets: Total current Fixed ass ets \ 320 \ 316 liabilities \ 174 \ 90 Accum. deprec. (206) (180) Long- termliabilities 66 92 Total long- term \ 114 \ 136 Total liabilities \ 240 \ 182 assets Orners' equity: Common stock, \ 5 par \8 0 \8 0 Retainedinc ome 150 180 Total owners' equity \ 230 \ 260 Total liab. and own. equity \ 470 \ 442 Total assets \ 470 \ 42 December 31 market price per share: \1 20 \1 06 The earnings per share for Coors Company in 20X2 is:

Increases (or decreases) in the replacement costs of the assets held during the current period

A basic knowledge about reporting the effects of changing prices is useful for which of the following reasons?

Nominal dollars that are restated in terms of current purchasing power

Historical cost is defined as:

The statement "total liabilities should not exceed net worth" is an example of a(n):

(Average accounts receivable x 365) / sales on account

The following information pertains to Barnum Company: Balance Sheet At December $31,20 \times 2$ Current ass ets \ 18,700 Current liabilities \ 7,600 Long- term assets Long- term liabilities 13,250 Stockholders' equity Total assets \ 48,400 T otal liabilities and s.e. \ 48,400 Barnum Company Income Statement For the Year Ended December 31, 20X2 Sales \ 106,950 Less: Cost of goods sold Gross profit \ 45,150 Less: Operating expenses Operatingincome \ 13,450 Less other expenses: interest \ 1,300) Income before taxes \ 12,150 Less: Income tax expense \ 4,850) Net income \ 7,300 There were 1,000 shares of common stock outstanding with a market value of $75 as of December 31, 20X2. Dividends declared and paid was $5 per share. The dividend yield ratio for 20X2 is:

The following are the income statements and balance sheets for Coors Company: 20X2 Sales (onlycredit sales) \ 1,606.0 Less cost of goods sold Gross profit \ 544.0 Less operating expenses Operatingincome \ 222.0 Less other expense: Interest Income before tax \ 212.4 Less income tax expense Net income \ 127.4 Currentassets: Currentliab: Cash \3 6 \3 8 Accts payable \9 8 \ 64 Accts receivable 180 144 Wages payable 18 16 20X2 Sales (onlycredit sales) \ 1,606.0 Less cost of goods sold Gross profit \ 544.0 Less operating expenses Operatingincome \ 222.0 Less other expense: Interest Income before tax \ 212.4 Less income tax expense Net income \ 127.4 Currentassets: Currentliab: Cash \3 6 \3 8 Accts payable \9 8 \ 64 Accts receivable 180 144 Wages payable 18 16 32 Inventory 120 100 Taxes payable 28 4 Prep aid rent Current portion Total current assets \3 56 \3 06 of long-term debt 30 6 Long-term as sets: Total current Fixed ass ets \ 320 \ 316 liabilities \ 174 \ 90 Accum. deprec. Long-term liabilities Total long-term \ 114 \ 136 Total liabilities \ 240 \ 182 assets The return on sales for Coors Company in 20X2 is:

Jeff Company purchased, as a long- term investment, common stock of Garcia Company. During the current year, Garcia Company earned $4,000,000 and paid dividends of $1,000,000. Assume that Jeff Company owns 10% of the outstanding shares of Garcia Company. Garcia Company's net income will affect Jeff Company by:

On January 1, 20X6, Jane Company acquired 80% of the outstanding shares of Pauley Company for $152 in cash. The stockholders' equity accounts of Jane Company and Pauley Company were $420 and $190, respectively. The balance in stockholders' equity on the consolidated balance sheet immediately after the acquisition of Pauley Company's stock is:

Rock Company acquired 10% of the voting stock of Hudson Company for $10 million. In year 1, Hudson Company reports net income of $15 million and pays cash dividends of $5 million. At the end of the year the market value of Rock Company's investment in Hudson Company is $11 million. What accounts would be affected on Rock Company's books to reflect the year- end market value and by how much?

Presented below are the balance sheets of Monty Company and Hall Company at January 1, 20X6: Hall Company Balance Monty Company Balance Sheet Sheet January 1,20X6 January 1,20X6 Cash \ 100 Cash \ 400 Net fixed assets Net fixed assets Total assets \ 500 Total assets \ 780 Accounts payable Long- \ 20 Accounts payable \ 120 termbonds Long-termbonds payable 220 payable 280 Stockholders' equity 260 Stockholders' equity 380 Total liabilities and Total liabilities and stockholders' equity \5 00 stockholders' equity \7 80 On January 1, 20X6, Monty Company acquired 100% of the outstanding common stock of Hall Company for $260 in cash. _ _ is the balance of the cash and other assets on the consolidated balance sheet immediately after the acquisition of Hall's stock.

Presented below are the balance sheets of Monty Company and Hall Company at January 1, 20X6: Hall Company Balance Monty Company Balance Sheet Sheet January 1,20X6 J anuary 1, 20X6 Cash \ 100 Cash \ 400 Net fixed assets Net fixed assets 380 Total assets \5 00 Total assets \7 80 Accounts payable Long- \ 20 Accounts payable \ 120 termbonds Long-termbonds payable 220 payable 280 Stockholders' equity 260 Stockholders' equity 380 Total liabilities and Total liabilities and stockholders' equity \ 500 stockholders' equity \ 780 On January 1, 20X6, Monty Company acquired 100% of the outstanding common stock of Hall Company for $260 in cash. is the balance of stockholders' equity on the consolidated balance sheet immediately after the acquisition of Hall's stock.

The excess of cost over fair market value of the net identifiable assets of a business acquired less the liabilities when a company purchases more than 50% of another company