Comprehensive Income IDQ’s income statement data for the year ended November 30, 1999, is presented below (dollars in millions). 11/30/99 Net sales $340 Cost of goods sold 249 Gross profit 91 Selling, general, and administrative 40 Income before depreciation 51 Nonoperating income 2 Income before tax 53 Provisions for income tax 20 Net income $ 33 Dividends 12 Unrealized gain on securities 10 Foreign exchange […]

Comprehensive Income Trends IDQ’s income statement data for the years ended November 30, 2000 and 2001 are presented below (dollars in millions). 11/30/00 11/30/01 Net sales $1061 $1154 Cost of goods sold 792 830 Gross profit 269 324 Selling, general, and administrative 111 134 Income before depreciation 158 190 Nonoperating income 5 6 Income before tax 163 196 Provisions for income tax 64 76 Net […]

Accounting Principle Change Mesple Music, Inc. purchased musical instrument equipment on January 1, 1999, for $25,000. Mesple depreciated it on the straight-line basis over five years with no salvage value. However, on January 1, 2001, the company realized that the productive capacity of this equipment is declining, so it decided to change to the double-declining balance method of depreciation. Required a. Calculate depreciation expense for […]

Ratios: Accounting Change Polymer Element Corporation presented the following (partial) income statements (dollars in thousands, except EPS): December 31 2000 1999 1997 Income from continuing operations after tax $ 207,500 $ 195,400 $ 189,600 Cumulative effect of change in accounting principle (25,000) 0 (45,000) Net income $ 182,500 $ 195,400 $ 144,600 Weighted-average common shares outstanding 146,000 146,000 146,000 Average total shareholders’ equity $3,650,000 $3,908,000 […]

Calculating Depreciation A firm has a computer that originally cost $37,500 with an estimated salvage value of $17,500 and an estimated life of five years. During the first two years, the firm used straight-line (SL) depreciation. In the third year, the sum-of-the years’ digits (SYD) method was adopted. Required a. Calculate the depreciation expense during the first two years under each method. b. What would […]

Natalie”s friend, Curtis Lesperance, decides to meet with Natalie after hearing that her discussions about a possible business partnership with her friend Katy Peterson have failed. Because Natalie has been so successful with Cookie Creations and Curtis has been just as successful with his coffee shop, they both conclude that they could benefit from each other”s business expertise. Curtis and Natalie next evaluate the different […]

Calculating Depreciation A firm has a delivery truck that originally cost $55,000 with an estimated salvage value of $5,000 and an estimated life of 10 years. During the first two years, the firm used sum-of-the-years’ digits (SYD) depreciation. At the beginning of the third year, straight-line (SL) depreciation was adopted. Required a. Calculate the depreciation expense during the first two years under each method. b. […]

Interpreting Financial Statements: Effects of U.S. GAAP Polygram’s financial statements included the following additional disclosure: The calculation of Net income substantially in accordance with U.S.GAAP is as follows (in millions of Netherlands guilders): 1994 1993 Net income per PolyGram’s Consolidated Statements of Income 738 614 Adjustments to reported income: a. Amortization of goodwill (27) (26) b. Amortization of intangible assets (57) (64) c. Remeasurement of […]

Foreign Currency Effects Boise Cascade Company is a major producer of paper, building, and office products. The company reported the following items related to foreign exchange gains and losses in its 1993 financial statements (dollars in thousands): 1993 1992 Foreign exchange gain $1,610 $6,590 Notes: Foreign exchange gains and losses reported on the Statements of Income (Loss) arose primarily from activities of the Company’s Canadian […]

Financial Analysis in the U.S. and U.K. Access the EDGAR archives and locates the Schedule 14D1 filing (February 1, 1995) made by Cadbury Schweppes on the successful acquisition of Dr. Pepper/Seven-Up Companies Inc. Hint: Search on “Cadbury” or “Dr. Pepper.” Examine the section that contains the financial statements of the U.K. corporation and locate the information on differences between U.K. GAAP and U.S. GAAP. In […]