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Reporting in Action — BTN 13-1
(All shares in thousands.)
1. As of September 28, 2013, the shares of common stock issued and
The weighted-average common shares used in calculating earnings per
For fiscal 2013, the shares outstanding at year-end were less than the
basic weighted-average shares outstanding during the year, which
* Given that there is only one class of stock issued and outstanding, all the equity items listed
can be considered to represent the book value of the common stock.
3. As found on its statement of cash flows, Apple reported $10,564 million
4. Apple’s income statement reports the following
(Fiscal years) 2013 2012 2011
5. Apple’s consolidated balance sheet reports no shares of treasury stock
as of September 28, 2013, or September 29, 2012.
Comparative Analysis — BTN 13-2
1. Book value per common share =
Apple’s book value per common share
Google’s book value per common share
2. Earnings per share =
3. Dividend yield =
Analysis: The low (zero) dividend yield for Google implies that it would
be characterized as a “growth stock.” Apple is becoming more like an
“income stock” following a long period as a “growth stock.”
4. Price-earnings ratio =
Interpretation: The price-earnings ratio of Google is more than 2 times
Ethics Challenge — BTN 13-3
During the course of her duties, Harriet has learned information that others
It is possible that the new drug will not be as profitable as expected, and
Communicating in Practice — BTN 13-4
There is no set solution to this activity. Solutions will vary based on the
industry and the companies selected.
Taking It to the Net — BTN 13-5
1. The balance sheet of McDonald’s shows that they have both preferred
2. The preferred stock has no par value. There are 165.0 million preferred
3. In 2013, the financing section of the statement of cash flows shows that
4. In 2013, the financing section of the statement of cash flows shows that
Teamwork in Action — BTN 13-6
1. The team statement should include the following:
a. When a corporation “buys back” its stock (engages in a treasury
b. Reasons for “buybacks”:
to use shares to acquire another corporation.
2. The team should establish the acquisition entry as follows
Each member should prepare one of the following reissue entries:
b. Cash........................................................................................15,000
Paid-In Capital, Treasury Stock....................................... 1,600
c. Cash........................................................................................12,000
Teamwork in Action (Continued)
d. Cash........................................................................................12,000
e. Cash........................................................................................12,000
3. When presenting and explaining the above entries to the team, the
following points should be made by the team members:
The similarities in all reissue entries a through e are:
1* The net affect of the transaction is to increase assets and equity by
the amount received on reissue.
The differences in reissue entries b through e are:
(b) Reissuing above cost creates additional Paid-In Capital.*
(d) Reissuing below cost reduces existing Paid-In Capital,*
but after this account’s balance has been eliminated, then Retained
Earnings must be reduced by the additional amount below cost.
(e) Reissuing below cost reduces Retained Earnings when Paid-In
*Refers to the Paid-In Capital, Treasury Stock account.
Entrepreneurial Decision — BTN 13-7
1.
Plan A Plan B
Net income............................................................ $ 72,000 $ 72,000
Less preferred dividends..................................... 0 (10,000)
2.
Plan A Plan B
Net income............................................................ $ 16,800 $ 16,800
Less preferred dividends..................................... 0 (10,000)
Net income for common stockholders................ $ 16,800 $ 6,800
3. The difference between the answers for parts 1 and 2 arises from the
percent of return generated with the assets invested in the corporation.
In part 1, the founder’s return on equity is 15.4% for Plan A, which is
These results indicate that the 8% dividend rate on the preferred stock
is advantageous to the founder as long as the rate of return on the
Hitting the Road — BTN 13-8
There is no formal solution for this field activity. Students often find this
assignment interesting as it highlights the relevance of their accounting
studies. Instructors also sometimes assign a particular financial news
show to watch on a certain day for the entire class—this can help
encourage a general class discussion on the topics raised.
Global Decision — BTN 13-9
1. Book value per common share =
Note: Equity applicable to common shares includes the total share
premium as Samsung does not provide a break-down of the common share
premium from the preferred share premium.
2. Earnings per share:
= (Net income – Preferred dividends) / Weighted-average common shares outstanding
= Net income available for common stock / Weighted-average common shares outstanding
3. Samsung’s EPS is ₩197,841, and Samsung declared 14,300 in cash₩
dividends per share during fiscal year 2013. Consequently, for the
