CT 1-2 COMPARATIVE ANALYSIS PROBLEM
(a)
(amounts in thousands)
Columbia
Sportswear
Company
VF Corporation
1. Total liabilities
3. Net cash provided
(used) by investing
$436,975
$4,349,258*
(b) Both companies are profitable. VF’s net property, plant, and equipment
and net income suggest that it is a substantially bigger company than
CT 1-3 COMPARATIVE ANALYSIS PROBLEM
(in millions)
Amazon
Wal-Mart
1.
Total assets
$54,505
$203,706
2.
Accounts receivable (net)
$5,612
$6,778
3.
Net sales
4.
Net income (loss)
(b) Wal-Mart’s total assets were approximately 374% greater than
Amazon’s total assets, and Wal–Mart’s net sales were over 5 times
greater than Amazon’s net sales. Wal-Mart’s accounts receivable were
CT 1-4 INTERPRETING FINANCIAL STATEMENTS
(a) Creditors lend money to companies with the expectation that they will
be repaid at a specified point in time in the future. If a company is
(b) As a stockholder you are interested in the long-term performance of a
company and how that translates into its stock price. Often during the
early years of a company’s life its cash provided by operations is not
(c) The statement of cash flows reports information on a cash basis. An
investor cannot get the complete story on the company’s performance
and financial position without looking at the income statement and
(d) Xerox is a well known company. It has a past record of paying dividends.
Its management probably decided to continue to pay a dividend to
demonstrate confidence in the company’s future. They may have felt
CT 1-5 REAL-WORLD FOCUS
Answers to this question will differ depending on the companies chosen by
the student, and the year. We provide the following solution for Apple for
the year ended September 27, 2014.
(a) During the year ended September 27, 2014, Apple reported net income
of $39,510 million.
(b) During the year ended September 27, 2014, Apple reported sales of
$182,795 million.
CT 1-6 RESEARCH CASE
(a) The ideas that the Public Company Accounting Oversight Board
proposed for expanding the role of auditors in “passing judgement on
more of what a company does and says” include weighing in on the
(b) Many people were surprised by the fact that many of the financial
institutions that failed or required government support received
“clean” audit opinions shortly before they announced their troubles.
(c) The proposed Auditor’s Discussion and Analysis report would include
information about the auditor’s views on the company’s use of
(d) It is likely that auditors would have mixed opinions of these proposals.
On-the-one-hand, the expansion of the auditor’s role would create new
revenue opportunities for auditors. However, the expansion of duties
could very well create additional tension between the auditor and the
CT 1-7 DECISION-MAKING ACROSS THE ORGANIZATION
(a) The Report of Independent Registered Public Accounting Firm indicates
that Ernst & Young LLP performed the audit of Apple’s financial
statements.
(b) The Consolidated Statements of Operations states that its earnings per
share were $6.49 in 2014.
(c) Management Discussion and Analyses of Financial Condition and
Results of Operations, Item 7, Sales Data indicates that net sales in
CT 1-8 COMMUNICATION ACTIVITY
To: Marci Ling
From: Student
I have received the balance sheet of Samco Company, Inc. as of December
31, 2017. The purpose of a balance sheet is to report a company’s financial
position at a point in time. It reports what the company owns (assets) and
what it owes (liabilities) and the net amount attributed to owners (equity). A
number of items in this balance sheet are not properly reported. They are:
(2) Equipment should be below Supplies on the balance sheet.
(4) Accounts payable should be shown as a liability, not an asset.
(5) Liabilities and stockholders’ equity should be shown separately on the
(6) Common stock, Retained earnings, and Dividends are part of stock-
holders’ equity. The Dividends account is not reported on the balance
A correct balance sheet is as follows:
CT 1-8 (Continued)
SAMCO COMPANY, INC.
Balance Sheet
December 31, 2017
Assets
Cash …………………………………………………………………….. $ 9,000
Accounts receivable ……………………………………………… 6,000
Liabilities and Stockholders’ Equity
Liabilities
Notes payable ……………………………………………….. $10,000
Accounts payable ………………………………………….. 4,000
Total liabilities ………………………………………… $14,000
Stockholders’ equity
CT 1-9 ETHICS CASE
(a) Investors rely on auditors to perform an independent assessment of a
company. If the auditor owns stock in that company, he or she might
not be able to act in an independent and impartial manner.
(b) There are pros and cons to this argument. On the positive side, it
could be argued that as long as a person has no direct relationship
with a client company, that person will not influence the findings of the
(c) The fact that four firms have become so big means that prohibiting
employees of those accounting firms from buying stock in clients of
the firm would bar those employees from investing in roughly 25% of
publicly traded firms. Some have argued that such restrictive rules
would create undue hardship, and unfairly restrict the investment
(d) Answers to this question will vary. This is a particularly difficult issue
since the rule effectively eliminates the individual’s control over their
investment portfolio. They did nothing wrong when they bought the
shares, but now they are being forced to sell when it is not advantageous.
(e) The management of PricewaterhouseCoopers noted that auditor inde-
pendence is vitally important to the audit function. If investors don’t
CT 1-10 ALL ABOUT YOU
(a) Answers to the following will vary depending on students’ opinions.
(i) This does not represent the hiding of assets, but rather a choice
as to the order of use of assets. This would seem to be ethical.
(ii) This does not represent the hiding of assets, but rather is a change
(b) Companies might want to overstate net income in order to potentially
increase the stock price by improving investors’ perceptions of the
(c) Sometimes companies want to report a lower income if they are
negotiating with employees. For example, professional sports teams
frequently argue that they cannot increase salaries because they
(d) Unfortunately many times people who are otherwise very ethical will
make unethical decisions regarding financial reporting. They might be
driven to do this because of greed. Frequently it is because their
CT 1-11 FASB CODIFICATION ACTIVITY
No solution necessary.
CT 1-12 CONSIDERING PEOPLE, PLANET AND PROFIT
(a) The 5 aspirations relate to the company’s goals related to sustaining
its business, its brands, its people, its community and the planet.
(b) The annual reports discussed in the chapter report on a company’s
IFRS CONCEPTS AND APPLICATION
IFRS1-1
The International Accounting Standards Board, IASB, and the Financial
Accounting Standards Board, FASB, are two key players in developing inter-
national accounting standards. The IASB releases international standards
IFRS1-2
A single set of high-quality accounting standards is needed because of
increases in multinational corporations, mergers and acquisitions, use of
IFRS1-3 INTERNATIONAL FINANCIAL REPORTING PROBLEM
(a) Ernst & Young et Autres; Deloitte & Associes
(b) 22 avenue Montaigne, Paris, France 75008