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CT 11-1 FINANCIAL REPORTING PROBLEM
(a) The common stock has a par value of $0.00001 per share.
(c) 2014 2013
The shares outstanding were (Thousands) 5,866,161 6,294,494
CT 11-2 COMPARATIVE ANALYSIS PROBLEM
(a) Columbia Sportswear Company VF Corporation
Return on common
stockholders’ equity
$141,859 ÷ $1,304,049* = 10.9%
$1,047,505 ÷ $5,853,960** = 17.9%
(b) VFC’s return on assets, 10.3%, is larger than Columbia Sportswear’s 8.4%
indicating that it is more profitable. Comparing the return on common
stockholders’ equity indicates that VFC is 64% more profitable because
its shareholders earned 17.9% on each dollar invested while
Columbia’s investors earned only 10.9%.
CT 11-2 (Continued)
Columbia Sportswear Company VF Corporation
(c)
Payout ratio
$39,836 = 28.1%
$478,933 = 45.7%
CT 11-3 COMPARATIVE ANALYSIS PROBLEM
(a) Amazon.com Wal-Mart Stores
Return on common
stockholders’ equity
$(241) ÷ $10,243.5* = (2.4%)
$16,363 ÷ $78,824.5 * = 20.8%
(b) Wal-Mart is profitable with net income and positive returns on common
stockholder’s equity and assets while Amazon had a net loss for 2014.
Amazon.com Wal-Mart Stores
(c)
Payout ratio
$0 =0
$(241)
%
$6,185 = 37.8%
$16,363
CT 11-4 INTERPRETING FINANCIAL STATEMENTS
(a) This is a dividend transaction—a property dividend.
(c) Return on assets
$(25) = (.7%)
$3,822
$200 = 6.2%
$3,207
(d) The debtholders were concerned that by splitting the company and
leaving most of the debt with only one half of the original company the
CT 11-5 REAL-WORLD FOCUS
CT 11-6 DECISION MAKING ACROSS THE ORGANIZATION
Year ended
After Purchase of
Treasury Stock
Before Purchase of
Treasury Stock
(a)
Earnings per share
$193.6 0 = $1.76
109.7
-
$123.4 0 = $1.03
119.9
-
(b)
Payout ratio
$26.8 = 13.8%
$31.0 = 25.1%
(c)
Debt to assets ratio
$1,046.3 = 50.4%
$2,076.0
$769.9 = 41.9%
$1,837.9
CT 11-6 (Continued)
Wendy’s debt to assets ratio increased from 41.9% to 50.4% indicating
a decrease in its solvency. This increase may not be cause for concern
since Wendy’s times interest earned decreased only slightly.
CT 11-7 COMMUNICATION ACTIVITY
Dear Uncle Earl:
Thanks for your recent letter and for asking me to explain four terms.
Here are my explanations:
(1) Authorized stock is the total amount of stock that a corporation is
(3) Outstanding stock is capital stock that has been issued and is being
(4) Preferred stock is capital stock that has contractual preferences over
common stock in certain areas.
CT 11-8 ETHICS CASE
(a) The stakeholders in this situation are:
The director of Pele’s R&D division.
The president of Pele.
(b) The president is risking the environment and everything and everybody in
it that is exposed to this new chemical in order to enhance his company’s
CT 11-9 ETHICS CASE
(a) The stakeholders in this situation are:
Mr. Boyd, president of Cooper Corporation.
(b) There is nothing unethical in issuing a stock dividend. But the presi-
dent’s order to write a press release convincing the stockholders that
the stock dividend is just as good as a cash dividend is unethical. A
CT 11-10 ALL ABOUT YOU
Student responses will vary depending on the organization chosen by the
CT 11-11 FASB CODIFICATION ACTIVITY
(a) Stock Dividend: An issuance by a corporation of its own common
shares to its common shareholders without consideration and under
conditions indicating that such action is prompted mainly by a desire
(b) Stock Split: An issuance by a corporation of its own common shares to
its common shareholders without consideration and under conditions
indicating that such action is prompted mainly by a desire to increase
CT 11-12 CONSIDERING PEOPLE, PLANET AND PROFIT
(a) The new law allows a company to incorporate under a new charter
which classifies a company as a “benefit company.” A benefit
company’s governing board is allowed to consider social or
(b) The article says that some people say the biggest benefit of the law
would occur when the company is being considered for either a sale
or break-up. Currently, if shareholder value would be maximized by
selling the company or breaking it into pieces, board members can be
(c) Critics of the new law say that it reduces the accountability of the
company to its shareholders. They say that if management makes a
bad decision which hurts the value of the company, management can
say that it made the decision for reasons other than to maximize
profits.
CT 11-12 (Continued)
(e) The companies that the article cites as either having adopted benefit
corporation standing, or are considering it are:
Patagonia
Ben and Jerry’s Homemade
IFRS CONCEPTS AND APPLICATION
IFRS 11-1
May 10 Cash (1,000 X $18) ....................................... 18,000
Share Capital—Ordinary
IFRS 11-2
MEENEN CORPORATION
Partial Statement of Financial Position
December 31, 2017
Equity
Share capital—ordinary, €10 par value,
IFRS 11-3
Mar. 2 Organization Expense .............................. 30,000
Share Capital—Ordinary
(5,000 X $1) ...................................... 5,000
Share Premium—Ordinary ................ 25,000
IFRS 11-4 INTERNATIONAL FINANCIAL REPORTING PROBLEM
(a) The company’s total equity is €23,003 million at year-end 2014,
(b) (1) Share capital Common stock
(c) The company declared and paid a dividend for 2014 of €8,434 million.
This information is determined from Note 15.3 to the financial
statements.
(d) The company has a 22.2% return on ordinary shareholders’ equity. The
computation is as follows:
