Analyze, Think, Communicate

Analyze, Think, Communicate
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ATC 1-1 BUSINESS APPLICATIONS CASE Understanding Real World Annual Reports

Required—Part 1

The Topps Company, Inc.

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

Harley-Davidson, Inc.

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 Deciding Which Company Is the Best Investment

Following are the net earnings of four large companies for the fiscal years from 1999 to 2002. Note that these amounts are in thousands of dollars.

Required

Based on this information alone, decide which of the companies you think would present the best investment opportunity for the future and which would be the worst. Write a brief memorandum supporting your choices, and show any computations that you used to reach your conclusions. As part of your analysis, compute the annual growth rates for each company’s earnings. To do this, compute by what percentage each company’s earnings increased or decreased from the year before. You will not be able to compute a growth rate for 1999 since the earnings for 1998 are not given. Perform whatever additional analysis you think is useful.

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 (i.e., 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 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.
Discuss the short- and long-term ramifications of replacing Jones. There are no right answers. However, assume that you are required to make a decision. Use your judgment and common sense to support your choice.

ATC 1-7 SPREADSHEET ASSIGNMENT Using Excel

The financial statements for Simple Company are reported here using an Excel spreadsheet.

Required

Recreate the financial statements using your own Excel spreadsheet.

For each number with an arrow by it, enter a formula in that particular cell address to solve for the number shown. (Do not enter the arrow.)
When complete, print the spreadsheet with formulas rather than absolute numbers.

Spreadsheet Tips

(1)	Widen a column by positioning the cursor on the vertical line between two column headings until a crosshair appears. Either double click to automatically widen or click and drag the crosshair to the desired width.
(2)	Negative numbers can be parenthesized by choosing Format and then Cells. Under Category, choose Custom and under Type, choose the first option containing parentheses.
(3)	The SUM function is one way to add a series of numbers. For example, the formula for net income in cell B6 is =SUM(B4:B5).
(4)	Single and double lines can be drawn using the Borders icon.
(5)	Print a spreadsheet on one page by choosing File, Page Setup, and Fit to 1.
(6)	Print without gridlines by choosing File, Page Setup, and Sheet and uncheck Gridlines. Another option is to choose Tools and Options and uncheck Gridlines.
(7)	Print formulas by choosing Tools, Options, and Formulas.

ATC 1-8 SPREADSHEET ASSIGNMENT Mastering Excel

Required

Enter the following headings for the horizontal statements model onto a blank spreadsheet.
Under the appropriate headings, record the effects of each of the following accounting events for the first month of operations. The first event has been recorded as an example.

(1)	Acquired $6,100 from the issue of common stock.
(2)	Paid $4,400 to purchase land.
(3)	Borrowed $3,000 cash.
(4)	Provided services to customers and received $700 in cash.
(5)	Paid $300 for expenses.
(6)	Paid a $100 dividend to the stockholders. (Note: The amounts on the statement of cash flows can be referenced to the Cash account on the balance sheet. In other words, recording the cash amounts twice is not necessary. Instead enter formulas in the Statement of Cash Flows column equating those cell addresses to the respective cell in the Cash column. Notice that the formula in cell O6 (statement of cash flows) is set equal to cell B6 (cash on the balance sheet). Once the formula is completed for cell O6, it can be easily copied to cells O7 through O11.)

Using formulas, sum each of the quantitative columns to arrive at the end-of-month amounts reported on the financial statements.

Spreadsheet Tips

(1)	Center the heading Balance Sheet across columns by entering the entire heading in cell B1. Position the cursor on B1 until a fat cross appears. Click and drag the cursor across B1 through G1. Click on the Merge and Center icon (it is highlighted in the screen in the computer display).
(2)	Enter arithmetic signs as headings by placing an apostrophe in front of the sign. For example, to enter the equals sign in cell D4, enter ’ =.
(3)	Copy cells by positioning the cursor in the bottom right corner of the cell to copy from (such as cell O6) until a thin cross appears. Click and drag the cursor down through the desired locations to copy to (through cell O11).
(4)	To enter the dollar sign, choose Format, Cells, and Currency.

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Home > Chapter 1 > Analyze, Think, Communicate

	More Resources
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		Learning Objectives The Curious Accountant Chapter Opening Role of Accounting in ... Measurement Rules 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... 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, Com...

	More Resources
		PowerPoint Presentations
	eBook
		Learning Objectives The Curious Accountant Chapter Opening Role of Accounting in ... Measurement Rules 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... 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, Com...