Chapter 13, Problem 3UJ

To determine

Financial statements: Financial statement of a company includes statement of assets and liabilities, income and expenses, notes to accounts, ratios, working capital and cash flow statements.

Case 1: NC. Co.

(a)

To evaluate: To evaluate the company’s liquidity by calculating and analyzing working capital and the current ratio.

To determine

(b)

To comment: To comment on management’s statement, and to give remedy to the situation.

To determine

Case 2: M. Company

(a)

To distinguish: To differentiate between the cash basis and the accrual basis of accounting for warranty costs.

To determine

(b)

To determine under what circumstance, if any, would it be appropriate for M. Company to recognize deferred revenue on warranty contracts.

To determine

(c)

To determine how would the company recognize the deferred revenue on warranty contracts in subsequent periods.

To determine

Case 3: BOP Clothing Co.

(a)

To determine how the operating cycle data relate to the amount of working capital and the current and acid-test ratios.

To determine

(b)

To compute: To compute turnover ratios.