Concept explainers
(a)
Introduction:
A financial statement is the complete record of financial transactions that take place in a company at a particular period of time. It provides important financial information like assets, liabilities, revenues and expenses of the company to its internal and external users. It helps them to know the exact financial position of the company. There are four basic financial statements, they are;
- The income statement: This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. An income statement is also known as an operations statement, an earnings statement, a revenue statement, or a
profit and loss statement. The net income is the excess of revenue over expenses. - The retained earnings statement: This is a financial statement that shows the amount of net income retained by a company at a particular point of time for reinvestment and pays its debts and obligations. It shows the amount of retained earnings that is not paid as dividends to shareholders.
- The balance sheet: This is a financial statement that shows the assets, liabilities, and
stockholders’ equity of a company at a particular point of time. It reveals the financial health of a company. Thus, this statement is also called as theStatement of Financial Position . It helps the users to know about the creditworthiness of a company as to whether the company has enough assets to pay off its liabilities. - Statement of cash flows: This is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It determines the net changes in cash through reporting the sources and uses of cash due to the operating, investing, and financing activities of a company.
Annual Report: It is a comprehensive financial report that shows all the business activities that takes place throughout the previous financial year. Its purpose is to provide the complete financial information of a company’s financial activities to its users in order to help them analyze, and take well informed decisions.
To determine: Total liabilities, net property, plant, and equipment, net cash provided (used) in investing activities, and the net income
(b)
To conclude: concerning the data of the two companies
Want to see the full answer?
Check out a sample textbook solutionChapter 1 Solutions
Financial Accounting: Tools for Business Decision Making, 8th Edition
- ABC Inc. Balance Sheet as at December 31, 2015 and 2016 ($ thousands) Current Assets Cash Accounts Receivable Inventory Total Current Assets Fixed Assets Property, Plant & Equipment Less Accumulated Depreciation Property. Plant & Equipment, net Total Assets Liabilities and S/H Equity Current Liabilities Accounts Payable Notes Payable and short-term debl Total Current Liabilities Long-Term Debt Shareholders Equity Common Shares Paid-In Capital Retained Earnings Total Total Liabilities and S/H Equity ABC Inc. Income Statement for 2015 and 2016 ($ thousands) Revenue Cost of Goods Sold Operating Expenses Depreciation Earnings Before Interest & Taxes (EBIT) Interest Paid Income Before Taxes (EBT) Taxes Paid Net Income (NI) Dividend $ 200 450 550 $1,200 2.200 (1,000) 1,200 2015 $2,400 $ 200 0 $ 200 $ 600 300 600 700 $1,600 $2,400 2015 $1,200 700 30 220 $ 250 150 $ 200 80 $ 120 2016 $1,450 850 140 200 360 60 $ 300 120 $ 180 80 $ 2016 $ 150 425 625 $1,200 2,700 11.200) 1,500 $2,700 $ 150 150…arrow_forwardRequired information [The following information applies to the questions displayed below.) The following financial statements and additional information are reported. IKIBAN INCORPORATED Comparative Balance Sheets 2021 At June 30. Assets Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Equipment Accumulated depreciation-Equipment Total assets Liabilities and Equity Accounts payable Wages payable Income taxes payable. Total current liabilities Notes payable (long term) Total liabilities Equity Common stock, $5 par value Retained earnings Total liabilities and equity Sales Cost of goods sold Gross profit $ 96,700 92,000 81,800 6,200 276,700 142,000 (36,000) $ 382,700 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense. Net incone $ 43,000 7,800 5,200 56,000 48,000 104,000 IKIBAN INCORPORATED Income Statement For Year Ended June 30, 2021 256,000 22,700 $ 382,700 Operating expenses (excluding depreciation) Depreciation…arrow_forwardAssume Microsoft Corporation reports the following balances for the prior-year balance sheet and current-year income statement ($ millions). Prepare the articulation of Microsoft’s financial statements for fiscal years 2014 and 2015.arrow_forward
- The comparative balance sheets for 2018 and 2017 and the statement of income for 2018 are given below for Dux Company. Additional information from Dux's accounting records is provided also. DUX COMPANY Comparative Balance Sheets December 31, 2018 and 2017 (S in 8ees) 2018 2017 Assets $ 20 50 Cash Accounts receivable Less: Allowance for uncollectible accounts Dividends receivable Inventory Long-term investment Land Buildings and equipment Less: Accumulated depreciation $ 33 48 (4) (3) 2 55 50 15 1e 70 48 250 (50) $ 369 225 (25) $ 420 Liabilities $ 13 2 $ 20 Accounts payable Salaries payable Interest payable Income tax payable Notes payable Bonds payable Less: Discount on bonds Shareholders' Equity 4 2 7. 30 95 78 (2) (3) Common stock 210 200 Paid-in capital-excess of par Retained earnings Less: Treasury stock 24 20 45 47 (8) $ 420 $ 369 DUX COMPANY Income Statement For the Year Ended December 31, 2018 ($ in Bees) Revenues $ 200 3 $ 203 Sales revenue Dividend revenue Expenses Cost of…arrow_forwardThe comparative balance sheets for 2021 and 2020 and the statement of income for 2021 are given below for Wright Company. Additional information from Wright's accounting records is provided also. Assets Cash WRIGHT COMPANY Comparative Balance Sheets December 31, 2021 and 2020 ($ in thousands) Accounts receivable Short-term investment Inventory Land Buildings and equipment Less: Accumulated depreciation Liabilities Accounts payable Salaries payable Interest payable Income tax payable Notes payable Bonds payable Shareholders' Equity Common stock Paid-in capital-excess of par Retained earnings $ 42 73 40 75 50 550 (115) 715 $ $ 2021 $ 28 2 5 9 0 160 2:22 250 126 135 715 $ $ 2020 30 75 15 70 60 400 (75) 575 35 5 3 12 30 100 200 100 90 $ 575arrow_forwardBirtle Corporation reports the following statement of financial position information for 2017 and 2018. BIRTLE CORPORATION2017 and 2018 Statement of Financial Position Assets Liabilities and Owners’ Equity 2017 2018 2017 2018 Current assets Current liabilities Cash $ 9,279 $ 11,173 Accounts payable $ 41,060 $ 43,805 Accounts receivable 23,683 25,760 Notes payable 16,157 16,843 Inventory 42,636 46,915 Total $ 75,598 $ 83,848 Total $ 57,217 $ 60,648 Long-term debt $ 40,000 $ 35,000 Fixed assets Owners’ equity Net plant and equipment $ 272,047 $ 297,967 Common stock and paid-in surplus $ 50,000 $ 50,000 Retained earnings 200,428 236,167 Total $ 250,428 $ 286,167 Total assets $ 347,645 $ 381,815 Total liabilities…arrow_forward
- The following table shows an abbreviated income statement and balance sheet for McDonald's Corporation for 2012. INCOME STATEMENT OF MCDONALD'S CORP., 2012 (Figures in $ millions) Net sales Costs Depreciation Earnings before interest and taxes (EBIT) Interest expense Pretax income Taxes Net income Assets Current assets Cash and marketable securities Receivables Inventories Other current assets Total current assets Fixed assets Property, plant, and equipment Intangible assets (goodwill) Other long-term assets Total assets Additional tax 2012 BALANCE SHEET OF MCDONALD'S CORP., 2012 (Figures in $ millions) Liabilities and Shareholders' 2,353 1,392 $ 139 1,106 4,990 24,694 2,821 3,000 35,505 27,584 17,586 1,419 8,579 534 8,045 2,648 5,397 2011 2,353 Debt due for repayment 1,352 Accounts payable equity Current liabilities 134 Total current liabilities 633 4,472 Long-term debt 22,852 Other long-term liabilities 2,670 Total liabilities 3,116 33,110 million Total shareholders' equity Total…arrow_forwardBirtle Corporation reports the following statement of financial position information for 2017 and 2018. BIRTLE CORPORATION2017 and 2018 Statement of Financial Position Assets Liabilities and Owners’ Equity 2017 2018 2017 2018 Current assets Current liabilities Cash $ 9,279 $ 11,173 Accounts payable $ 41,060 $ 43,805 Accounts receivable 23,683 25,760 Notes payable 16,157 16,843 Inventory 42,636 46,915 Total $ 75,598 $ 83,848 Total $ 57,217 $ 60,648 Long-term debt $ 40,000 $ 35,000 Fixed assets Owners’ equity Net plant and equipment $ 272,047 $ 297,967 Common stock and paid-in surplus $ 50,000 $ 50,000 Retained earnings 200,428 236,167 Total $ 250,428 $ 286,167 Total assets $ 347,645 $ 381,815 Total liabilities…arrow_forwardBirtle Corporation reports the following statement of financial position information for 2017 and 2018. BIRTLE CORPORATION2017 and 2018 Statement of Financial Position Assets Liabilities and Owners’ Equity 2017 2018 2017 2018 Current assets Current liabilities Cash $ 9,279 $ 11,173 Accounts payable $ 41,060 $ 43,805 Accounts receivable 23,683 25,760 Notes payable 16,157 16,843 Inventory 42,636 46,915 Total $ 75,598 $ 83,848 Total $ 57,217 $ 60,648 Long-term debt $ 40,000 $ 35,000 Fixed assets Owners’ equity Net plant and equipment $ 272,047 $ 297,967 Common stock and paid-in surplus $ 50,000 $ 50,000 Retained earnings 200,428 236,167 Total $ 250,428 $ 286,167 Total assets $ 347,645 $ 381,815 Total liabilities…arrow_forward
- In its December 31, 2017, balance sheet Oakley Corporationreported as an asset, “Net notes and accounts receivable,$7,100,000.” What other disclosures are necessary?arrow_forwardThe table below contains data on Fincorp Inc. The balance sheet items correspond to values at year-end 2018 and 2019, while the income statement items correspond to revenues or expenses during the year ending in either 2018 or 2019. All values are in thousands of dollars. Revenue Cost of goods sold Depreciation Inventories Administrative expenses Interest expense Federal and state taxes* Accounts payable Accounts receivable Net fixed assets Long-term debt Notes payable Dividends paid Cash and marketable securities Fincorp Inc. Income Statement Reinvested earnings 2018 $4,000 1,600 $ 500 300 500 150 400 300 400 5,000 2,000 1,000 410 800 * Taxes are paid in their entirety in the year that the tax obligation is incurred. t Net fixed assets are fixed assets net of accumulated depreciation since the asset was installed. Construct an income statement for Fincorp for 2018 and 2019. (Enter your answers in thousands of dollars.) 2018 2019 $4,100 1,700 0 520 350 550 150 420 350 450 5,800 2,400…arrow_forwardRequired: 1. Calculate the following risk ratios for 2024: 2. When we compare two companies, can one have a higher current ratio while the other has a higher acid-test ratio? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the following risk ratios for 2024: (Round your answers to 1 decimal place.) Risk Ratios a. Receivables turnover ratio b. Inventory turnover ratio c. Current ratio d. Acid-test ratio e. Debt to equity ratio times times % Required 1 Required 2 >arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education