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Problem 1-12BA (20 minutes)
Case 1. Return: No return is generated.
Risk: Moderate Risk. By hiding money at home a person
Case 2. Return: Expected winnings from your bet.
Case 3. Return: Expected return on your stock investment (both
Case 4. Return: Expected return on the bond is a function of the
Problem 1-13BB (15 minutes)
1.
O
5.
O
2.
F
6.
F
3.
I
7.
O
4.
O
8.
O
Problem 1-14BB (15 minutes)
I. Financing Activities
A. Owner financing—owner invests in the company
B. Non-owner (creditor) financing—borrowing money from a bank
©2015 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Financial and Managerial Accounting, 6th Edition
52
Serial Problem — SP 1 Business Solutions
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Computer
Supplies
+
Computer
System
+
Office
Equipment
=
Accounts
Payable
+
Common
Stock
-
Dividends
+
Revenues
-
Expenses
Oct.
1
+$45,000
$20,000
+
$8,000
+
$73,000
3
+
$1,420
+ $1,420
Bal.
45,000
+
1,420
+
20,000
+
8,000
=
1,420
+
73,000
6
+
$4,800
+
$ 4,800
Bal.
45,000
+
4,800
+
1,420
+
20,000
+
8,000
=
1,420
+
73,000
+
4,800
8
- 1,420
- 1,420
Bal.
43,580
+
4,800
+
1,420
+
20,000
+
8,000
=
0
+
73,000
+
4,800
12
+
1,400
+
1,400
Bal.
43,580
+
6,200
+
1,420
+
20,000
+
8,000
=
0
+
73,000
+
6,200
15
+ 4,800
-
4,800
Bal.
48,380
+
1,400
+
1,420
+
20,000
+
8,000
=
0
+
73,000
+
6,200
17
- 805
-
$ 805
Bal.
47,575
+
1,400
+
1,420
+
20,000
+
8,000
=
0
+
73,000
+
6,200
-
805
20
- 1,728
-
1,728
Bal.
45,847
+
1,400
+
1,420
+
20,000
+
8,000
=
0
+
73,000
+
6,200
-
2,533
22
+ 1,400
-
1,400
Bal.
47,247
+
0
+
1,420
+
20,000
+
8,000
=
0
+
73,000
+
6,200
-
2,533
28
+
5,208
+
5,208
Bal.
47,247
+
5,208
+
1,420
+
20,000
+
8,000
=
0
+
73,000
+
11,408
-
2,533
31
- 875
-
875
Bal.
46,372
+
5,208
+
1,420
+
20,000
+
8,000
=
0
+
73,000
+
11,408
-
3,408
31
- 3,600
-
$3,600
Bal.
$42,772
+
$5,208
+
$1,420
+
$20,000
+
$8,000
=
$ 0
+
$73,000
-
$3,600
+
$11,408
-
$3,408
Reporting in Action — BTN 1-1
1. An organization’s total assets are equal to its total liabilities plus total
2. Return on assets is net income divided by the average total assets
3. We know that net income equals total revenues less total expenses. For
Comparative Analysis — BTN 1-2
($ millions)
Apple
Google
1. Total assets =
Liabilities + Equity
$207,000
$110,920
2. Return on assets
$37,037
$12,920
[($207,000 + $176,064)/2]
[($110,920 + $93,798)/2]
19.3%
12.6%
3. Revenues-Expenses
= Net income
$170,910- Expenses
=$37,037
$59,825 – Expenses
=$12,920
Expenses =
Expenses = $133,873
Expenses = $46,905
4. Analysis of return on assets: Apple’s 19.3% return is good given the
5. Analysis conclusions: Google’s return is adequate (better when compared
Ethics Challenge — BTN 1-3
1. There are several parties affected. They include the users of financial
2. A major factor in the value of an auditor's report is the auditor's
independence. If an auditor accepted a fee that increases when the client’s
3. Thorne should not accept this fee arrangement. To avoid compromising
the auditor's independence, Thorne should reject it. (Further, the AICPA
4. Ethical considerations guiding this decision include the potential harm to
affected parties by allowing such a fee arrangement to exist. The
1. Deciding whether Apple is a good loan risk can be difficult because the
planned expansion is risky if customer demand does not meet
expectations. As a loan officer in this situation you would want information
2. How the company is organized is important to a loan officer. If it is a
standard partnership (which it was, and not a LLC), the personal assets of
the owners are available to repay the loan. In this case, a loan officer will
want information about the owners’ financial condition. If it is a
Taking It to the Net — BTN 1-5
(in thousands)
2013
2012
2011
2010
2009
Revenues ............
$36,315
$34,627
$31,128
$28,437
$28,539
Net income ..........
1,478
3,876
3,911
3,580
3,719
1. Rocky Mountain Chocolate Factory’s (RMCF) revenues declined slightly
during the recessionary period of 2007 through 2010 (2007 and 2008
2. Net income performance for RMCF decreased from 2008 through 2010
(2007 and 2008 data are not shown here, but available online). However,
Teamwork in Action — BTN 1-6
Suggestions for forming support/learning teams are in the Instructor’s
Entrepreneurial Decision — BTN 1-7
1. (a) AccountApp’s total amount of liabilities and equity consists of the
bank loan and the owner investments. Specifically:
2. Return on assets = $80,250 / $750,000 = 0.107 = 10.7%
Hitting the Road — BTN 1-8
Check each student’s report for the following content:
1. (a) Identification of the form of business organization for the business
Global Decision — BTN 1-9
1. Samsung’s net income and revenues figures are computed using
Korean Won (KRW), which is the currency of Korea. In contrast, Apple
and Google compute their financial figures in U.S. dollars. Accordingly,
2. Samsung’s return on assets ratio eliminates differences in monetary
units (between KRW and dollars). Consequently, we need not focus on
