Analyze, Think, Communicate

Analyze, Think, Communicate
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ATC 1-1 Business Applications Case Understanding real world annual reports

Required—Part 1

Use the Topps Company’s annual report in Appendix B to answer the following questions.

What was Topps’ net income for 2003?
Did Topps’ net income increase or decrease from 2002 to 2003, and by how much?
What was Topps’ accounting equation for 2003?
Which of the following had the largest percentage increase from 2002 to 2003: net sales, cost of sales, or selling, general, and administrative expenses? Show all computations.

Required—Part 2

Use the Harley-Davidson’s annual report that came with this book to answer the following questions.

What was Harley-Davidson’s net income for 2003?
Did Harley-Davidson’s net income increase or decrease from 2002 to 2003, and by how much?
What was Harley-Davidson’s accounting equation for 2003?
Which of the following had the largest percentage increase from 2002 to 2003: net revenue, cost of goods sold, or selling, general, and engineering expenses? Show all computations.

ATC 1-2 Group Assignment Missing information

The following selected financial information is available for J&G Inc. Amounts are in millions of dollars.

Required

Divide the class into groups of four or five students each. Organize the groups into four sections. Assign Task 1 to the first section of groups, Task 2 to the second section, Task 3 to the third section, and Task 4 to the fourth section.
Group Tasks
1. Fill in the missing information for 2001.
2. Fill in the missing information for 2002.
3. Fill in the missing information for 2003.
4. Fill in the missing information for 2004.
Each section should select two representatives. One representative is to put the financial statements assigned to that section on the board, underlining the missing amounts. The second representative is to explain to the class how the missing amounts were determined.
Each section should list events that could have caused the unusual item category on the income statement.

ATC 1-3 Real-World Case Classifying cash flow activities at five companies

The following cash transactions occurred in five real world companies during 2004:

FedEx Corp., which is the holding company of Federal Express, purchased Kinko’s, Inc., on February 12, 2004, for $2.4 billion.
Google Inc. issued 14.1 million shares of its stock on August 18, 2004, for $85 per share. On that same day, a few major shareholders of Google, including its founders, sold 5.5 million shares of its stock at the same price.
Payless ShoeSource, Inc., had cash sales of $2.8 billion during its fiscal year ending on January 31, 2004.
Red Hat, Inc., the leading provider of the open-source operating system Linux, issued $600 million of “convertible debentures” in January 2004. Convertible debentures are a form of long-term debt that is explained in more detail in Chapter 10.
Sears, Roebuck and Company completed the sale of its domestic Credit and Financial Products business to Citicorp on November 3, 2004, for $32 billion, $22 billion of which was received in cash.

Required

Determine if each of the above transactions should be classified as an operating, investing, or financing activity. Also, identify the amount of each cash flow and whether it was an inflow or an outflow.

ATC 1-4 Business Applications Case Use of real-world numbers for forecasting

The following information was drawn from the annual report of Machine Import Company (MIC):

Required

Compute the percentage of growth in net income from 2001 to 2002. Can stockholders expect a similar increase between 2002 and 2003?
Assuming that MIC collected $200,000 cash from earnings (net income), explain how this money was spent in 2002.
Assuming that MIC experiences the same percentage of growth from 2002 to 2003 as it did from 2001 to 2002, determine the amount of income from continuing operations that the owners can expect to see on the 2003 income statement.
During 2003, MIC experienced a $40,000 loss due to storm damage (note that this would be shown as an extraordinary loss on the income statement). Liabilities and common stock were unchanged from 2002 to 2003. Use the information that you computed in Part c plus the additional information provided in the previous two sentences to prepare an income statement for 2003 and balance sheet as of December 31, 2003.

ATC 1-5 Writing Assignment Elements of financial statements defined

Bob and his sister Marsha both attend the state university. As a reward for their successful completion of the past year (Bob had a 3.2 GPA in business, and Marsha had a 3.7 GPA in art), their father gave each of them 100 shares of The Walt Disney Company stock. They have just received their first annual report. Marsha does not understand what the information means and has asked Bob to explain it to her. Bob is currently taking an accounting course, and she knows he will understand the financial statements.

Required

Assume that you are Bob. Write Marsha a memo explaining the following financial statement items to her. In your explanation, describe each of the two financial statements and explain the financial information each contains. Also define each of the elements listed for each financial statement and explain what it means.

ATC 1-6 Ethical Dilemma Loyalty versus the bottom line

Assume that Jones has been working for you for five years. He has had an excellent work history and has received generous pay raises in response. The raises have been so generous that Jones is quite overpaid for the job he is required to perform. Unfortunately, he is not qualified to take on other, more responsible jobs available within the company. A recent job applicant is willing to accept a salary $5,000 per year less than the amount currently being paid to Jones. The applicant is well qualified to take over Jones’s duties and has a very positive attitude. The following financial statements were reported by your company at the close of its most recent accounting period.

Required

Reconstruct the financial statements, assuming that Jones was replaced at the beginning of the most recent accounting period. Both Jones and his replacement are paid in cash. No other changes are to be considered.
Assume that you are a CPA. Would any of the principles of the AICPA Code of Professional Conduct prevent you from replacing Jones? Explain your answer.

ATC 1-7 Research Assignment Finding real-world accounting information

The Curious Accountant story at the beginning of this chapter referred to McDonald’s Corporation and discussed who its stakeholders are. This chapter introduced the basic four financial statements companies use annually to keep their stakeholders informed of their accomplishments and financial situation. Complete the requirements below using the 2003 financial statements available on the McDonald’s website. Obtain the statements on the Internet by following the steps below. (The formatting of the company’s website may have changed since these instructions were written.)

Go to www.mcdonalds.com.
Click on the “Corporate” link at the bottom of the page. (Most companies have a link titled “investor relations” that leads to their financial statements; McDonald’s uses “corporate” instead.)
Click on the “INVESTORS” link at the top of the page.
Click on "Publications" and then on "Annual Report Archives."
Click on "McDonald’s 2003 Annual Report" and then on "2003 Financial Report."
Go to the company’s financial statements on pages 17 through 20 of the annual report.

Required

What was the company’s net income in 2003, 2002, and 2001?
What amount of total assets did the company have at the end of 2003?
How much retained earnings did the company have at the end of 2003?
For 2003, what was the company’s cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities?

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Home > Chapter 1 > Analyze Think Communicate

	Course-wide Content
		Glossary Net Tutor Spreadsheet Tips Study Guide Sample Annual Report Projects CYGL Video Guide Text Updates

	Quizzes
		Multiple Choice Quiz
	More Resources
		Check Figures Excel Templates TopicTackler Plus Review Problems Flashcards PowerPoint Presentations Narrated Slides iPod Content
	eBook
		Chapter Opener Role of Accounting in ... Reporting Entities Elements of Financial ... Accounting Equation Recording Business Eve... Historical Cost and Re... Recap: Types of Transa... Summary of Transactions Preparing Financial St... The Horizontal Financi... Careers in Accounting Importance of Ethics Real-World Financial R... A Look Back A Look Forward Self-Study Review Prob... Key Terms Questions Exercises-Series A Problems-Series A Exercises-Series B Problems-Series B Analyze Think Commu... Comprehensive Problem

	Instructor Resources
		IM Intro Text Updates Transition Notes Text Exhibits Using the IRCD Using the OLC Using Topic Tackler Plus Using CYGL Using ALEKS PageOut MH Homework Manager CPS Download CYGL Solutions Annual Report Project ...

	Course-wide Content
		Glossary Net Tutor Spreadsheet Tips Study Guide Sample Annual Report Projects CYGL Video Guide Text Updates

	Instructor Resources
		Instructors Manual Solutions Manual Solutions to Excel
	Quizzes
		Multiple Choice Quiz
	More Resources
		Check Figures Excel Templates TopicTackler Plus Review Problems Flashcards PowerPoint Presentations Narrated Slides iPod Content
	eBook
		Chapter Opener Role of Accounting in ... Reporting Entities Elements of Financial ... Accounting Equation Recording Business Eve... Historical Cost and Re... Recap: Types of Transa... Summary of Transactions Preparing Financial St... The Horizontal Financi... Careers in Accounting Importance of Ethics Real-World Financial R... A Look Back A Look Forward Self-Study Review Prob... Key Terms Questions Exercises-Series A Problems-Series A Exercises-Series B Problems-Series B Analyze Think Commu... Comprehensive Problem