Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Textbook Question
Chapter 2, Problem 2.20BE
Assumptions in Financial Reporting. Indicate the assumption (going concern, business/economic entity, monetary unit, or periodicity) that best fits the following scenarios.
| Scenario | Related Assumption |
| a. Monro Manufacturing requires that its division managers report to corporate headquarters on a monthly basis. | |
| b. Rainbow Paints, Inc. owns 15% of New Eljam Company. Rainbow does not consolidate this affiliate company because it cannot control New Eljam’s operations. | |
| c. Financial analysts at Nelson Corporation use an infinite-growth assumption in building a model to value the company. | |
| d. Factory buildings are reported on Jack Jones Warehousing Inc.’s |
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Based on the background example of this assignment, kindly provide answer/working of this assignment please.
1) The person in charge of the finances of the company MGT, S.A. wants to know the company's situation concerning the industrial sector to which it belongs. For this, it has the following information regarding the industry:
a) General liquidity ratio is 1.55; the acid test is 1.20, and the ratio between the available and the current liabilities is 0.95.
b)The debt ratio stands at 1.25. The margin on sales is 21%. The investment rotation is 1.45 times.
c) Economic profitability is around 23%, and financial profitability is 29%
The data referred to the company (in thousands of €) are the following:
Assets
Liability and Net Equity
Non-current asset (net)
170
Equity
125
Stocks of finished products
45
Reservations
25
Clients
65
External Resources
105
Banks
70
Loans
65
Supplier
30
Total Assets
350
Total Net Equity…
The fact that generally accepted accounting principles allow companies flexibility in choosing between certain allocation methods can
make it difficult for a financial analyst to compare periodic performance from firm to firm.
Suppose you were a financial analyst trying to compare the performance of two companies. Company A uses the double-declining-
balance depreciation method. Company B uses the straight-line method. You have the following information taken from the 12/31/2024
year-end financial statements for Company B:
Income Statement
Book
Depreciation expense
$ 5,000
Balance Sheet
Assets:
Print
Plant and equipment, at cost
Less: Accumulated depreciation
Net
$ 100,000
(20,000)
Ferences
$ 80,000
You also determine that all of the assets constituting the plant and equipment of Company B were acquired at the same time, and that
all of the $100,000 represents depreciable assets. Also, all of the depreciable assets have the same useful life and residual values are
zero.
Required:
1. In…
The following table presents the financial summary of a major international company
After analysis the analyst made following assertions:
The company’s efficiency deteriorated
The company’s liquidity improved
The company’s solvency deteriorated
The company’s profitability deteriorated
Required:
Verify analyst claims while supporting your answers with relevant calculations
Comment on overall financial performance of the company.
Chapter 2 Solutions
Intermediate Accounting
Ch. 2 - Prob. 2.1QCh. 2 - Prob. 2.2QCh. 2 - Why is a conceptual framework of accounting...Ch. 2 - Prob. 2.4QCh. 2 - Prob. 2.5QCh. 2 - Prob. 2.6QCh. 2 - Prob. 2.7QCh. 2 - When is financial information considered...Ch. 2 - Prob. 2.9QCh. 2 - Prob. 2.10Q
Ch. 2 - What is the recognition principle and when is an...Ch. 2 - What is the revenue recognition principle and when...Ch. 2 - Prob. 2.14QCh. 2 - When are expenses recognized under IFRS?Ch. 2 - How are transactions recorded under accrual...Ch. 2 - Prob. 2.17QCh. 2 - Prob. 2.1BECh. 2 - Objective of Financial Reporting. Explain the...Ch. 2 - Prob. 2.3BECh. 2 - Fundamental and Enhancing Characteristics....Ch. 2 - Prob. 2.5BECh. 2 - Prob. 2.6BECh. 2 - Prob. 2.7BECh. 2 - Fundamental and Enhancing Characteristics....Ch. 2 - Faithful Representation. Match the component of a...Ch. 2 - Prob. 2.10BECh. 2 - Prob. 2.11BECh. 2 - Capital Maintenance Adjustments, IFRS. Describe...Ch. 2 - Expense Recognition. Discuss the three main...Ch. 2 - Element Definitions. Identify whether the...Ch. 2 - Prob. 2.15BECh. 2 - Element Definitions, U.S. GAAP, IFRS. Identify...Ch. 2 - Prob. 2.17BECh. 2 - Measurement Bases. Match the measurement basis...Ch. 2 - Cash versus Accrual Bases of Accounting. The...Ch. 2 - Assumptions in Financial Reporting. Indicate the...Ch. 2 - Conceptual Framework. Noeleen Auto Mall, Ltd....Ch. 2 - Qualitative Characteristics. Referring to the...Ch. 2 - Prob. 2.3ECh. 2 - Cash versus Accrual Bases of Accounting. Top Notch...
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