Concept explainers
Communication Case 2–3
• LO2–4
“I don’t understand,” complained Chris, who responded to your bulletin board posting for tutoring in introductory accounting. The complaint was in response to your statements that recording adjusting entries is a critical step in the accounting processing cycle, and the two major classifications of adjusting entries are prepayments and accruals.
Required:
Respond to Chris.
1. When do prepayments occur? Accruals?
2. Describe the appropriate adjusting entry for prepaid expenses and for deferred revenues. What is the effect on net income, assets, liabilities, and shareholders’ equity of not recording a required adjusting entry for prepayments?
3. Describe the required adjusting entry for accrued liabilities and for accrued receivables. What is the effect on net income, assets, liabilities, and shareholders’ equity of not recording a required adjusting entry for accruals?
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INTERMEDIATE ACCOUNTING
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- CONDUCTING A FINANCIAL RATIO ANALYSIS ON HP INC. Use online resources to work on this chapters questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin Brands financial statements. In this chapter, we will use a financial Internet website, www.morningstar.com, to analyze HP Inc., a computer hardware company. Once on the website, you simply enter HP Inc.s ticker symbol (HPQ) to obtain the financial information needed. We will also perform a trend analysis, where we evaluate changes in key ratios over time. Through the Morningstar website, you can find the firms financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firms trend analysis. (At the bottom of the screen you will see that you can click Glossary to find definitions for the different ratios. For example, Morningstars Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) Looking at Morningstars Financial Health ratios, what has happened to HPs liquidity position over the past 10 years?arrow_forwardCONDUCTING A FINANCIAL RATIO ANALYSIS ON HP INC. Use online resources to work on this chapters questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin Brands financial statements. In this chapter, we will use a financial Internet website, www.morningstar.com, to analyze HP Inc., a computer hardware company. Once on the website, you simply enter HP Inc.s ticker symbol (HPQ) to obtain the financial information needed. We will also perform a trend analysis, where we evaluate changes in key ratios over time. Through the Morningstar website, you can find the firms financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firms trend analysis. (At the bottom of the screen you will see that you can click Glossary to find definitions for the different ratios. For example, Morningstars Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) Looking at Morningstars Profitability ratios, what has happened to HPs profit margin (net margin %) over the past 10 years? What has happened to its return on assets (ROA) and return on equity (ROE) over the past 10 years?arrow_forwardCONDUCTING A FINANCIAL RATIO ANALYSIS ON HP INC. Use online resources to work on this chapters questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin Brands financial statements. In this chapter, we will use a financial Internet website, www.morningstar.com, to analyze HP Inc., a computer hardware company. Once on the website, you simply enter HP Inc.s ticker symbol (HPQ) to obtain the financial information needed. We will also perform a trend analysis, where we evaluate changes in key ratios over time. Through the Morningstar website, you can find the firms financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firms trend analysis. (At the bottom of the screen you will see that you can click Glossary to find definitions for the different ratios. For example, Morningstars Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) Looking at Morningstars Financial Health ratios, what has happened to HPs financial leverage position (looking at both its financial leverage and debt/equity ratios) over the past 10 years?arrow_forward
- CONDUCTING A FINANCIAL RATIO ANALYSIS ON HP INC. Use online resources to work on this chapters questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin Brands financial statements. In this chapter, we will use a financial Internet website, www.morningstar.com, to analyze HP Inc., a computer hardware company. Once on the website, you simply enter HP Inc.s ticker symbol (HPQ) to obtain the financial information needed. We will also perform a trend analysis, where we evaluate changes in key ratios over time. Through the Morningstar website, you can find the firms financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firms trend analysis. (At the bottom of the screen you will see that you can click Glossary to find definitions for the different ratios. For example, Morningstars Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) Looking at Morningstars Efficiency ratios, how well has it managed its assets (as measured by days sales outstanding, inventory turnover, fixed assets turnover, and total assets turnover) over the past 10 years?arrow_forwardQuestion 10 Closing entries are made after adjustments are made. a.True b.Falsearrow_forwardWP NWP Assessment Player UI Applic Question 17 of 42 View Policies Current Attempt in Progress Credits decrease both assets and liabilities. increase both assets and liabilities. decrease assets and increase liabilities. O increase assets and decrease liabilities. Save for Laterarrow_forward
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