Full download Test Bank for Financial Accounting for MBAs 4th Edition by Easton file pdf free all chapter

Test Bank for Financial Accounting for
MBAs 4th Edition by Easton

Go to download the full and correct content document:
http://testbankbell.com/product/test-bank-for-financial-accounting-for-mbas-4th-edition
-by-easton/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...
Test Bank for Financial and Managerial Accounting for

MBAs 4th Edition Easton
https://testbankbell.com/product/test-bank-for-financial-and-
managerial-accounting-for-mbas-4th-edition-easton/
Test Bank for Financial Statement Analysis & Valuation,

4th Edition, by Easton, McAnally, Sommers, Zhang,
https://testbankbell.com/product/test-bank-for-financial-
statement-analysis-valuation-4th-edition-by-easton-mcanally-
sommers-zhang/
Solution Manual for Financial Statement Analysis and

Valuation 2nd Edition by Easton
https://testbankbell.com/product/solution-manual-for-financial-
statement-analysis-and-valuation-2nd-edition-by-easton/
Test Bank for Financial Statement Analysis and

Valuation, 5th Edition, by Easton, McAnally, Sommers,
Zhang,
statement-analysis-and-valuation-5th-edition-by-easton-mcanally-
sommers-zhang/
Test Bank for Financial Statement Analysis and
Valuation, 2nd Edition: Easton
statement-analysis-and-valuation-2nd-edition-easton/
Test Bank for Financial Accounting Fundamentals, 4th

Edition : Wild
accounting-fundamentals-4th-edition-wild/
Test Bank for Financial Accounting 10th by Libby
accounting-10th-by-libby/
Test Bank for Fundamentals of Financial Accounting, 4th

Edition: Fred Phillips
https://testbankbell.com/product/test-bank-for-fundamentals-of-
financial-accounting-4th-edition-fred-phillips/
Test Bank for Financial Accounting 9th Edition by Libby
accounting-9th-edition-by-libby/
Test Bank for Financial Accounting for MBAs 4th
Edition by Easton
Full download link at: https://testbankbell.com/product/test-bank-for-
financial-accounting-for-mbas-4th-edition-by-easton/
Financial Accounting for MBAs

Learning Objectives – coverage by question
True/ Multiple Essay
Exercises Problems
False Choice Questions
LO1 Identify and
discuss the
users and
suppliers of
1-4 1-2 - 1 1-2
financial
statement
information.
LO2 Identify and

explain the four
financial
statements, and
5-10 3-19 1-8 2-5 3
define the
accounting
equation.
LO3 Explain and

apply the basics
of profitability 11-13 20-25 9-10 6-7 4
analysis.
LO4 Describe
business
analysis within
the context of a 14 26-27 - 8 -
competitive
environment.
LO5 Describe
the accounting
principles and
15 28-30 - 9-10 5
regulations that
frame financial
statements.
© Cambridge Business Publishers, 2010

Test Bank, Module 1 1-1
Cambridge Business Publishers, ©2010
1-2 Financial Accounting for MBAs, 4th Edition
Module 1: Financial Accounting for MBAs
True/False
Topic: Users of Financial Statement Information
LO: 1
1. Shareholders demand financial information primarily to assess profitability and risk whereas
bankers demand information primarily to assess cash flows to repay loan interest and principle.
Answer: True
Rationale: While both shareholders and bankers are interested in all the information company’s
provide, shareholders care about more about a company’s profitability and bankers care more about
solvency and creditworthiness.
Topic: Publicly available financial reports

LO: 1
2. Publicly traded companies are required to provide quarterly financial reports directly to the public.
Answer: False
Rationale: Companies provide electronic versions of quarterly financial statements to the SEC that
posts them to the internet for the public to access them.

LO: 1
3. Publicly traded companies provide financial information primarily to satisfy the SEC and the tax
authorities (that is, the Internal Revenue Service).
Answer: False
Rationale: Demand for information extends to many users, the regulators such as the SEC and the
IRS are only one class of users.
Topic: SEC filings

LO: 1
4. Publicly traded companies must provide to the Securities Exchange Commission annual audited
financial statements (10K reports) and quarterly audited financial statements (10Q reports).
Answer: False
Rationale: Quarterly reports do not need to be audited.
Topic: Balance Sheet

LO: 2
5. If a company reports retained earnings of $175.3 million on its balance sheet, it must also report
$175.3 million in cash.
Answer: False
Rationale: The accounting equation requires total assets to equal total liabilities plus stockholders’
equity. That does not imply, however, that liability and equity accounts relate directly to specific
assets.

LO: 2
6. A balance sheet shows a company’s position over a period of time, whereas an income statement,
statement of stockholders’ equity, and statement of cash flows show its position at a point in time.
Answer: False
Rationale: The statement is reversed: A balance sheet shows a company’s position at a point in time,
whereas an income statement, statement of equity, and statement of cash flows show its position
over a period of time.
Topic: Accounting Equation

L: O2
7. Assets must always equal liabilities plus equity.
Answer: True
Rationale: The accounting equation is Assets = Liabilities + Equity. This relation must always hold.
Topic: Income Statement

LO: 2
8. The income statement reports net income which is defined as the company’s profit after all
expenses and dividends have been paid.
Answer: False
Rationale: The statement contains two errors. First, net income does not include any dividends
during the period; these are a distribution of profits and not part of its calculation. Second, the income
statement is prepared on an accrual basis and thus includes expenses incurred (as opposed to paid).
Topic: Statement of Cash Flows

LO: 2
9. A statement of cash flows reports on cash flows for operating, investing and financing activities at
a point in time.
Answer: False
Rationale: A statement of cash flows reports on cash flows for operating, investing, and financing
activities over a period of time.
Topic: Statement of Stockholders’ Equity

LO: 2
10. An increase in treasury stock would be reflected in the statement of stockholders’ equity.
Answer: True
Rationale: The statement of stockholders’ equity reports on changes in the accounts that make up
stockholders’ equity. This includes contributed capital, retained earnings, and treasury stock.

Topic: Return on Assets
LO: 3
11. Return on Assets (ROA) measures the profit the company makes on each dollar of total assets it
uses.
Answer: True
Rationale: Return on Assets profitability metric that measures how much profit the company made for
each dollar of assets the company holds on average during the year.

LO: 3
12. Return on Assets (ROA) = Net Income / Sales × Asset Turnover
Answer: True
Rationale: Return on Assets = Net income / Average Assets. The disaggregation of the ROA into its
components
Topic: Asset Turnover

LO: 3
13. Consider two companies (A and B) with equal profit margins of 15%. Company A has an asset
turnover of 1.2 and Company B has an asset turnover of 1.5. If all else is equal, Company B with its’
higher asset turnover, is less profitable because it is expensive to turn assets over.
Answer: False
Rationale: Asset turnover is an efficiency metric. The higher the turnover, the more efficient the
company is with its assets and thus, the more profitable. Algebraically, ROA = PM × AT. Company A
above is less profitable: 15% × 1.2 = 18% whereas Company B’s ROA is 15% × 1.2 = 22.5%.
Topic: Financial Accounting and Business Analysis

LO: 4
14. Financial statements are influenced by five important forces that determine a company’s
competitive intensity: (A) industry competition, (B) buyer power, (C) supplier power, (D) product
substitutes, and (E) threat of entry.
Answer: True
Rationale: By systematically considering these five business forces, we can gain better insights from
financial statements.
Topic: Audit Report

LO: 5
15. A “clean” audit report asserts – among other things – that (a) the auditor has prepared all
necessary financial statements and (b) management has expressed its opinion that they are prepared
in conformity with GAAP.
Answer: False
Rationale: The statement is reversed: A “clean” audit report asserts – among other things – that (a)
management has prepared all necessary financial statements and (b) the auditor has expressed its
opinion that they are prepared in conformity with GAAP.

Multiple Choice
LO: 1
1. Which of the following groups would likely not be interested in the financial statements of a large
public company such as Berkshire Hathaway?
a. Shareholders
b. Employees
c. Competitors
d. Taxing agencies
e. None of the above
Answer: e
Rationale: All of these parties would use the financial statements, albeit in different ways and for
different purposes.

LO: 1
2. The SEC adopted Regulation FD, to curb public companies practice of:
a. Routinely filing extensions for annual reports (Form 10-k)
b. Selectively disclosing information
c. Reporting pro forma (non-GAAP) numbers
d. Hiring auditors for non-audit services such as consulting engagements
Answer: b
Rationale: Reg FD reads as follows: “Whenever an issuer discloses any material nonpublic
information regarding that issuer, the issuer shall make public disclosure of that information . . .
simultaneously, in the case of an intentional disclosure; and . . . promptly, in the case of a non-
intentional disclosure.”
Topic: Components of the Balance Sheet

LO: 2
3. A list of assets, liabilities and equity can be found on which of the following?
a. Balance Sheet
b. Income Statement
c. Statement of Assets and Liabilities
d. Statement of Cash Flows
e. Statement of Stockholders’ Equity
Answer: a
Rationale: A balance sheet lists amounts for assets, liabilities and equity at a point in time.

LO: 2
4. Which of the following items would not be found on a balance sheet? (Select all that apply)
a. Stockholders’ Equity
b. Property, plant and equipment
c. Nonowner financing
d. Sales
e. Cost of Goods Sold
Answer: d and e
Rationale: The balance sheet reports assets (including property, plant and equipment), liabilities
(including nonowner financing) and equity. Sales and Cost of Goods Sold appear on the income
statement.
Topic: Profit and Cash Flow

LO: 2
5. A company’s net cash flow will equal its net income …
a. Almost always
b. Rarely
c. Occasionally
d. Only when the company has no investing cash flow for the period
e. Only when the company has no investing or financing cash flow for the period
Answer: b
Rationale: Net income reflects the company’s revenue minus expenses for the given period. Net
cash flow represents the amount of money received (spent) on operating, investing and financing
activities for the given period. These values are rarely the same.
Topic: Financial Statement Information

LO: 2
6. Which of the following statements are correct (select all that apply):
a. A balance sheet reports on investing and financing activities.
b. An income statement reports on financing activities.
c. The statement of equity reports on changes in the accounts that make up equity.
d. The statement of cash flows reports on cash flows from operating, investing, and financing
activities over a period of time.
e. A balance sheet reports on a company’s assets and liabilities over a period of time.
Answer: a, c, and d
Rationale: Statement (b) is incorrect – the statement of cash flows reports on financing activities that
are reflected on the balance sheet. Statement (e) is incorrect – the balance sheet reports on a
company’s assets and liabilities at a point in time

Topic: Balance Sheet – Numerical calculations required
LO: 2
7. The Goodyear Tire & Rubber Company’s December 31, 2008 financial statements reported the
following (in millions)
Total assets $15,226

Total liabilities 14,204
Total shareholders’ equity 1022
Net income (loss) (77)
Retained earnings, December 31, 2007 $ 1,602
What did Goodyear report for Retained earnings at December 31, 2008?
a. $1,679 million
b. $1,525 million
c. $1,022 million
d. $945 million
e. There is not enough information to determine the answer.
Answer: e
Rationale: To determine the balance in retained earnings at the end of the year we must also know
the amount of dividends (if any) paid by the company during the year.

LO: 2
8. American Airlines’ 2007 balance sheet reported the following (in millions)
Total Assets $25,385

Total Liabilities 23,941
Contributed Capital $ 4,422
What was American Airlines’ Total liabilities and Stockholders’ Equity at December 31, 2007?
a. $25,385 million
b. $23,941 million
c. $28,363 million
d. $4,422 million
Answer: a
Rationale: Assets = Liabilities + Stockholders Equity. Assets = $25,385 so this is the total of liabilities
and equity combined.

LO: 2
9. On September 30, 2008 Starbuck’s Corporation reported, on its Form 10-K, the following (in
millions):
Total assets $5,672.6

Total stockholders’ equity 2,490.9
Total current liabilities $2,189.7
What did Starbuck’s report as Total liabilities on September 30, 2008?

a. $5,672.6 million
b. $3,482.9 million
c. $3,181.7 million
d. $992 million
e. None of the above.
Answer: c
Rationale: Assets = Liabilities + Stockholders Equity. $5,672.6 = Liabilities + $2,490.9. Therefore,
Liabilities = $3,181.7 on September 30, 2008.

LO: 2
10. In its 2008 annual report, Snap-On Incorporated reported the following (in millions):
Current assets $1,140.7

Total shareholders’ equity $1,186.5
Total liabilities $1,523.8
What did Snap-On report as total assets at year-end 2008?

a. $1,569.6 million
b. $1,140.7 million
c. $3,851.0 million
d. $2,710.3 million
Answer: d.
Rationale: Assets = Liabilities + Stockholders Equity. Assets = $1,523.8 + $1,186.5. Therefore,
Assets= $2,710.3 at year end.

LO: 2
11. In its 2007 annual report, Kohl’s Corporation reported the following (in millions):
Total assets $10,560

Total shareholders’ equity $ 6,102
Total liabilities $ 4,458
What proportion of Kohl’s Corporation is financed by non-owners?

a. 42%
b. 58%
c. 37%
d. 73%
Answer: a.
Rationale: Non-owner financing for Kohl’s assets is provided from liabilities (the shareholders are the
owners). $4,458 / $10,560 = 42%.
Topic: Balance Sheet – Numerical calculations required (More challenging – requires calculation of
total assets before ratio can be calculated.)
LO: 2
12. In its 2007 annual report, Mattel Inc. reported the following (in millions):
Total liabilities $3,498

Total shareholders’ equity $1,307
What proportion of Mattel is financed by non-owners?

a. 27%
b. 37%
c. 73%
d. 63%
Answer: c.
Rationale: Nonowner financing for Kohl’s assets is provided from liabilities (the shareholders are the
owners). Assets = Liabilities + Equity. Assets = $3,498 + $1,307 = $4,805. $3,498 / $4,805 = 73%.

Topic: Income Statement – Numerical calculations required
LO: 2
Sales $19,488
Cost of sales $16,139
Other expenses (excluding cost of sales) $ 3,426
What did Goodyear report for Net income for the year ending December 31, 2008?
a. $77 million
b. $(77) million
c. $3,349 million
d. $16,062 million
Answer: b
Rationale: Sales – Cost of sales – Other expenses = Net income.
$19,488 – $16,139 – $3,426 = $(77).

LO: 2
14. E. I. du Pont reported the following on its 2007 income statement (in millions)
Sales revenue $29,378

Gross profit 7,813
Total expenses $26,390
What did E. I. du Pont report for Cost of goods sold during 2007?
a. $18,577 million
b. $21,565 million
c. $37,191 million
d. $2,988 million
Answer: b
Rationale: Sales – Cost of goods sold = Gross profit. $29,378 – Cost of goods sold = $7,813.
Therefore, Cost of goods sold = $21,565.

LO: 2
millions):
2008 2007
Total expenses $10,067.5 $8,738.9
Operating income 503.9 1,053.9
Net earnings $ 315.5 $ 672.6
What amount of revenues did Starbuck’s report for the year ending September 30, 2008?
a. $10,383.0
b. $9,411.5
c. $10,571.4
d. $9,752.0
Answer: a
Rationale: Revenues – Total expenses = Net earnings. Revenues – $10,067.5 = $315.5. Therefore,
Revenues were $10,383.0.
Topic: Income Statement – Numerical calculations required (More challenging, requires calculation of
negative “growth” rate.)
LO: 2
millions):
2008 2007
Operating income $ 503.9 $1,053.9
Net earnings $ 315.5 $ 672.6
Calculate year-over-year decline in Net earnings, in percentage terms.

a. -213%
b. -113%
c. -53%
d. -47%
Answer: d
Rationale: During the year, Net earnings decreased compared to the prior year. This decline is
calculated as ($315 = $672.6) / $672.6 = -47%.

Topic: Income Statement – Numerical calculations required (More challenging – requires calculation
of Gross profit and ratios for two years.)
LO: 2
17. In its 2007 annual report, Caterpillar, Inc. reported the following (in millions):
2007 2006
Sales $44,958 $41,517
Cost of goods sold $32,626 $29,549
As a percentage of Sales, did Caterpillar’s Gross profit increase or decrease during 2007?
a. Gross profit increased from 27% to 29%
b. Gross profit decreased from 29% to 27%
c. Gross profit increased from 71% to 73%
d. Gross profit decreased from 73% to 71%
e. There is not enough information to answer the question.
Answer: b
Rationale: Sales = Cost of goods sold = Gross profit. In 2006, gross profit to sales was 29%. This
ratio decreased to 27% in 2007.
Topic: Statement of Cash Flow – Numerical calculations required

LO: 2
Cash December 31, 2008 $ 1,894

Cash from operating activities (745)
Cash from investing activities (1,136)
Cash from financing activities $ 312
What did Goodyear report for Cash on its December 31, 2007 balance sheet?
a. $1,894 million
b. $3,463 million
c. $325 million
d. $1,973 million
e. none of the above
Answer: b
Rationale: Cash, beginning of year + Cash from operating activities + Cash from investing activities +
Cash from financing activities = Cash at end of year
Cash, beginning of year – $745 – $1,136 + $312 = $1,894. Cash, beginning of year = $3,463

Topic: Statement of Cash Flow – Numerical calculations required
LO: 2
19. Procter & Gamble’s June 30, 2008 financial statements reported the following (in millions)
Cash, beginning of year $ 5,354

Cash, end of year 3,313
Cash from operating activities 15,814
Cash from investing activities $(2,549)
What did Procter & Gamble report for Cash from financing activities for the year ended June 30,
2008?
a. $(21,932) million
b. $15,306 million
c. $(15,306) million
d. $(13,265) million
e. $13,265 million
Answer: c
Rationale: Cash, beginning of year + Cash from operating activities + Cash from investing activities +
Cash from financing activities = Cash at end of year
$5,454 + $15,814 – $2,549 + Cash from financing = $3,313. Cash from financing = $(15,306)

LO: 3
20. A company’s return on assets (ROA) can be disaggregated to reveal which of the following
(select all that apply):
a. Financial leverage
b. Profit Margin
c. Sales growth
d. Asset growth
e. Asset turnover
Answer: b and e
Rationale: ROA can be disaggregated into profit margin and asset turnover. Financial leverage and
sales growth are not components of this ratio. Asset growth affects the calculation via the
denominator, but can’t be disaggregated directly.
Topic: Return on Equity

LO: 3
21. The ratio of net income to equity is also known as:
a. Total net equity ratio
b. Profit margin
c. Return on equity
d. Net income ratio
Answer: b
Rationale: The ratio of net income to equity is called ROE, return on equity and measures how
profitable the company was given the shareholders’ investment.

Topic: Return on Equity – Numerical calculations required
LO: 3
22. Sales for the year = $107,229, Net Income for the year= $12,144, Income from equity
investments = $4,309, and average Equity during the year = $48,556. Return on equity (ROE) for the
year is:
a. 25.0%
b. 20.8%
c. 45.3%
d. 8.9%
e. There is not enough information to answer the question.
Answer: a.
Rationale: Return on equity = Net income / Average Equity = $12,144 / $48,556 = 25%.
Topic: Return on Assets – Numerical calculations required

LO: 3
23. Sales for the year = $81,229, Net Income for the year= $7,186, and average Assets during the
year = $53,445. Return on Assets (ROA) for the year is:
a. 13.4%
b. 65.8%
c. 8.8%
d. There is not enough information to calculate ROA.
Answer: a
Rationale: ROA = Net Income /Average assets. Therefore ROA equals $7,186 / $53,445 = 13.4%.
Topic: Return on Assets – Numerical calculations required (More challenging because Net income is
not provided, must be calculated.)
LO: 3
24. Sales for the year = $177,022, Profit margin = 16%, and average Assets during the year =
$259,108. Return on Assets (ROA) for the year is:
a. 16%
b. 4.27%
c. 10.9%
d. There is not enough information to calculate ROA.
Answer: c
Rationale: ROA = Net Income /Average assets. We are not given Net income, but we do know that
profit margin is 16%. Thus we can calculate Net income as Sales × PM = $28,324. ROA = $28,324 /
$259,108 = 10.9%.

Topic: Return on Assets – Numerical calculations required (More challenging because Average
assets are not provided, must be calculated.)
LO: 3
25. On December 31, 2008 Harley-Davidson Inc. reported, on its Form 10-K, the following (in
millions):
2008 2007
Total assets $7,829 $5,657
Total sales 5,594 5,727
Net income $ 655 $ 934
Calculate return on assets (ROA) for 2008.

a. 8.4%
b. 11.7%
c. 71.5%
d. 9.7%
Answer: d
Rationale: Return on assets = Net income / Average Assets. A simple way to calculate average
assets is to take the average of the beginning and ending assets: $7,829 + $5,657 = $6,743. ROA =
$655 / $6,743 = 9.7%.
Topic: Five Forces of Competitive Industry

LO: 4
26. Which of the following are NOT one of the five forces that determine a company’s competitive
intensity? (select as many as apply)
a. Bargaining power of suppliers
b. Threat of substitution
c. Ability to obtain financing
d. Threat of entry
e. Threat of regulatory intervention
Answer: c and e
Rationale: The five forces of the competitive industry include: industry competitors, bargaining power
of buyers, bargaining power of suppliers, threat of substitution, and threat of entry.
Topic: Business Environment

LO: 4
27. Which of the following are relevant in an analysis of a company’s business environment? (select
as many as apply)
a. Financing
b. Labor
c. Buyers
d. Governance
e. All of the above
Answer: e
Rationale: The components of business analysis are: life cycle, outputs, buyers, inputs, financing,
labor, governance, risk.

Topic: Clean audit opinion
LO: 5
28. A clean audit opinion includes which of the following assertions:
a. Financial statements present fairly the company’s financial condition
b. The auditor certifies the financials to be error free
c. The financial statements are management’s responsibility
d. Management has handled transactions efficiently in all material respects
e. All of the above
Answer: a and c
Rationale: The audit is not a certification (b is wrong) and the auditor does not provide any opinion
about how management handles transactions (d is wrong).
Topic: Auditor Report

LO: 5
29. The audit report is addressed to:
a. The audit committee
b. The board of directors
c. The shareholders
d. The board of directors and the shareholders
e. The Securities and Exchange Commission (SEC)
Answer: d
Rationale: The auditors report to the owners and the directors.
Topic: GAAP
LO: 5
30. Generally Accepted Accounting Principles (GAAP) are created by: (select all that apply)
a. The Securities and Exchange Commission
b. The Generally Accepted Accounting Principles Task Force
c. The Sarbanes Oxley Act
d. The Financial Accounting Standards Board
e. The Emerging Issues Task Force
Answer: a, d and e.
Rationale: The Sarbanes Oxley Act did not create new accounting principles but rather, rules for
auditors and corporate governance mechanisms for companies. Answer b is fictional.

Exercises
Topic: Financial Accounting Vocabulary
LO: 2
1. Match the item on the left to a numbered item on the right to complete each sentence.
a. Resources that a company owns or controls are 1. liabilities

called ____________________.
b. The difference between a company’s assets and 2. return on assets
its equity is equal to ___________.
c. Net income divided by average assets is known 3. assets
as ____________________.
d. Sales, cost of goods sold and all other expenses 4. income statement
are necessary to calculate a company’s
__________________. 5. net income
Answer: a. 3. b. 1. c. 2. d. 5.
Topic: Financial Accounting Vocabulary

LO: 2
2. Match the item on the left to a numbered item on the right to complete each sentence.
a. Companies report assets, liabilities, and equity on 1. income statement

the ____________________.
b. Sales, cost of goods sold, and net income are 2. balance sheet
found on the ___________.
c. Changes in contributed capital during the period 3. statement of cash flows
are explained on the ____________________.
d. The ___________________ reports cash from 4. statement of shareholders’ equity
financing activities.
5. financial statements
Answer: a. 2. b. 1. c. 4. d. 3.

Topic: Income Statement Components
LO: 2
3. Fill in the blanks to complete Whole Foods’ Income Statement ($ thousands).
Whole Foods
Income Statement
For Year Ended September 28, 2008
Sales 7,953,912
Cost of goods sold and occupancy costs ?
Gross profit 2,706,705
Operating expenses ?
Operating income 236,238
Answer:
Whole Foods
Income Statement
Sales 7,953,912
Cost of goods sold and occupancy costs 5,247,207
Gross profit 2,706,705
Operating expenses 2,470,467
Operating income 236,238
Topic: Income Statement Components

LO: 2
4. Fill in the blanks to complete Procter & Gamble’s Income Statement ($ millions).
Procter & Gamble

Income Statement
For Year Ended June 30, 2008
Sales ?
Expenses 67,425
Earnings before income taxes 16,078
Income taxes ?
Net earnings $12,075
Answer:
Procter & Gamble
Income Statement
For Year Ended June 30, 2008
Sales $83,503
Expenses 67,425
Earnings before income taxes 16,078
Income taxes 4,003
Net earnings $12,075

Topic: Statement of Cash Flow Components
LO: 2
5. Fill in the blanks to complete Whole Food’s Statement of Cash Flow ($thousands).
Whole Foods
Statement of Cash Flows
Net cash provided by operating activities $ 325,760
Net cash used in investing activities (365,054)
Net cash provided by financing activities 69,828
Net change in cash ?
Cash at beginning of year ?
Cash at end of year $ 30,534
Answer:
Whole Foods
Net cash provided by operating activities $ 325,760
Net cash used in investing activities (365,054)
Net cash provided by financing activities 69,828
Net change in cash 30,534
Cash at beginning of year 0
Topic: Balance Sheet Components

LO: 2
6. Fill in the blanks to complete Whole Foods’ Balance Sheet ($thousands).
Whole Foods
Balance Sheet
September 28, 2008
Cash $ 30,534 Current liabilities $ 666,177
Non-cash assets ? Long-term liabilities ?
Stockholders’ equity 1,506,024
Total assets $3,380,736 Total liabilities and equity $ ?
Answer:
Whole Foods
Balance Sheet
September 28, 2008
Cash $ 30,534 Current liabilities $ 666,177
Non-cash assets 3,350,202 Long-term liabilities 1,208,535
Total assets $3,380,736 Total liabilities and equity $3,380,736

Topic: Balance Sheet Components
LO: 2
7. Fill in the blanks to complete the Procter & Gamble Balance Sheet ($ millions).
Procter & Gamble

Balance Sheet
September 28, 2008
Cash 3,313 Current liabilities ?
Non-cash assets ? Long-term liabilities 43,540
Shareholders’ equity 69,494
Total assets ? Total liabilities and equity 143,992
Answer:
Procter & Gamble
Balance Sheet
September 28, 2008
Cash 3,313 Current liabilities 30,958
Non-cash assets 140,679 Long-term liabilities 43,540
Shareholders’ equity 69,494
Total assets 143,992 Total liabilities and equity 143,992
Topic: Retained Earnings Reconciliation

LO: 2
8. Whole Foods reports the following balances in its stockholders’ equity accounts. Fill in the blanks.
($ millions) 2008 2007 2006

Retained earnings beginning of year ? ? 486,299
Net income ? 182,740 203,828
Dividends 85,300 121,802 ?
Retained earnings end of year 439,422 410,198 ?
Answer:
($ millions) 2008 2007 2006
Retained earnings beginning of year 410,198 349,260 486,299
Net income 114,524 182,740 203,828
Dividends 85,300 121,802 340,867
Retained earnings end of year 439,422 410,198 349,260

LO: 3
9. Procter & Gamble reports the following items in their financial statements. Fill in the blanks.
($ millions) 2008 2007

Average assets 141,003 136,854
Net earnings 12,075 ?
Return on assets ? 7.6%
Answer:
($ millions) 2008 2007

Net earnings 12,075 10,340
Return on assets 8.6% 7.6%

LO: 3
10. Whole Foods reports the following items in their financial statements. Fill in the blanks.
($ thousands) 2008
Average assets 3,296,959
Sales 7,953,912
Net income 114,524
Return on assets ?
Profit margin ?
Asset turnover ?
Answer:
($ thousands) 2008
Average assets 3,296,959
Sales 7,953,912
Net income 114,524
Return on assets 3.47%
Profit margin 1.44%
Asset turnover 2.41%

Problems
Topic: Other Financial Information
LO: 1
1. In addition to the four financial statements, list three sources of financial information available to
external stakeholders?
Answer:
Management Discussion and Analysis (MD&A)
Management’s report on internal controls
Annual corporate report
Auditor’s report and opinion
Notes to financial statements
Proxy statements
Various regulatory filings for SEC and IRS, etc.
Topic: Constructing Financial Statements

LO: 2
2. In its September 28, 2008 annual report, Starbucks Corporation reports the following items.
($ millions) 2008
Cash flows from operations 1,258.7
Total revenues 10,383.0
Shareholders’ equity 2,490.9
Cash flows from financing (183.6)
Total liabilities 3,181.7
Cash, ending year 269.8
Expenses 10,067.5
Noncash assets 5,402.8
Cash flows from investing (1,086.6)
Net earnings 315.5
Cash, beginning year 281.3
a. Prepare the balance sheet for Starbucks for September 28, 2008.
b. Prepare the income statement for Starbucks for the year ended September 28, 2008.
c. Prepare the statement of cash flows for Starbucks for the year ended September 28, 2008.
Answer:
a.
Starbucks Corporation
Balance Sheet
September 28, 2008
Cash $ 269.8 Total liabilities $3,181.7
Non-cash assets 5,402.8 Shareholders’ equity 2,490.9
Total assets $5,672.6 Total liabilities and equity $5,672.6
b.
Income Statement
Total revenues $10,383.0
Expenses 10,067.5
Net earnings $ 315.5
c.
Cash flows from operations $1,258.7
Cash flows from investing (1,086.6)
Cash flows from financing (183.6)
Net change in cash (11.5)
Cash, beginning year 281.3
Cash at end of year $ 269.8
Topic: Constructing Financial Statements

LO: 2
3. In its December 31, 2007 annual report, Mattel Inc. reports the following items.
($ thousands) 2007
Net cash flows from operating activities 560,532
Net sales 5,970,090
Net cash flows from financing activities (579,646)
Total assets 4,805,455
Cash, ending year 901,148
Expenses 5,370,097
Noncash assets 3,904,307
Net cash flows from investing activities (285,290)
Net income 599,993
Cash, beginning year 1,205,552
a. Prepare the balance sheet for Mattel Inc. for December 31, 2007.
b. Prepare the income statement for Mattel Inc. for the year ended December 31, 2007.
c. Prepare the statement of cash flows for Mattel Inc. for the year ended December 31, 2007.
Answer:
a.
Mattel Inc.
Balance Sheet
December 31, 2007
Cash $ 901,148 Total liabilities $2,498,713
Non-cash assets 3,904,307 Stockholders’ equity 2,306,742
Total assets $4,805,455 Total liabilities and equity $4,805,455
b.
Mattel Inc.
Income Statement
For Year Ended December 31, 2007
Net sales $5,970,090
Expenses 5,370,097
Net income $ 599,993

c.
Mattel Inc.
Net cash flows from operating activities $ 560,532
Net cash flows from investing activities (285,290)
Net cash flows from financing activities (579,646)
Net change in cash (304,404)
Cash, beginning year 1,205,552
Topic: Statement of stockholders’ equity from raw data

LO: 2
4. In its December 31, 2007 annual report, Mattel Inc. reports the following items.
($ thousands) 2007
Retained earnings, December 31, 2006 1,652,140
Treasury stock, December 31, 2006 (996,981)
Treasury stock, December 31, 2007 (1,571,511)
Net income for 2007 599,993
Contributed capital, December 31, 2006 2,054,676
Dividends during 2007 274,677
Stock issued during 2007 21,931
Prepare the Statement of stockholders’ equity for Mattel Inc. for the year ended December 31, 2007.
Answer:
Mattel Inc.
Statement of Stockholders’ Equity
Contributed capital, beginning of year $2,054,676
Stock issued during 2007 21,931
Contributed capital, beginning of year $2,076,607
Treasury stock, beginning of year $(996,981)

Stock repurchased during 2007 (574,530)
Treasury stock, end of year $(1,571,511)
Retained earnings, beginning of year $1,652,140

Net income for 2007 599,993
Dividends during 2007 (274,677)
Treasury stock, end of year $1,977,456

Topic: Balance Sheet Relations
LO: 2
5. Nike Inc. has a fiscal year end of May 31. On May 31, 2007, Nike Inc. reported $10,688.3 million in
assets and $7,025.4 million in equity. During fiscal 2008, Nike’s assets increased by $1,754.4 million
while its equity increased by $799.9 million. What were Nike’s total liabilities at May 31, 2007 and
May 31, 2008?
Answer:
Assets = Liabilities + Equity
May 31, 2007: $10,688.3 = Liabilities + $7,025.4, Liabilities = $3,362.9
May 31, 2008: $10,688.3 + $1,754.4 = Liabilities + $7,025.4 + $799.9, Liabilities = $4,617.4
Topic: Calculating ROA

LO: 3
6. Use Southwest Airlines 2008 financial statement information, below to answer the following:
a. Calculate Southwest Airlines’ return on assets (ROA) for the year ending December 31, 2008.
b. Disaggregate Southwest Airlines’ ROA into profit margin (PM) and asset turnover (AT). Explain
what each ratio measures.
In millions
Total operating revenues 11,023
Net income 178
Total assets, beginning of year 16,772
Total assets, end of year 14,308
Equity 4,953
Answer:
a. Return on Assets = Net income / Average assets
= $178 / [0.5*($16,772 + $14,308)]
= 1.1%
Return on assets measures profitability of a company—specifically, how well a company has
employed its average assets in generating net income
b. Profit Margin = Net Income / Sales

= $178/ $11,023
= 1.6%
Profit Margin is an income to sales ratio that reflects the profitability of sales of a company.
Southwest Airlines has a profit margin of only 1.6% meaning the company records 1.6 cents of net
income (after paying taxes) for every dollar of sales. This is very low – the airline industry is
performing poorly in 2008.
Asset Turnover = Sales / Average Assets

= $11,023/ [0.5*($16,772 + $14,308)]
= 0.71
Asset turnover reflects the effectiveness in generating sales from assets. Southwest Airlines’ asset
turnover ratio of 0.71, means that the company generates $0.71 in sales for every $1.00 of assets.

Topic: Calculating ROA and ROE
LO: 3
7. Below are several financial statement items for two grocery chains, Whole Foods Market, an
upscale organic grocer, and The Kroger Co. a mainstream grocer. ($ millions)
a. Calculate each company’s return on assets (ROA) and return on equity (ROE). Comment on any
differences you observe.
b. Disaggregate the ROA for each company into profit margin (PM) and asset turnover (AT). Explain
why Kroger has a higher ROA, is it because of PM or AT or both?
Whole Foods The Kroger

Market Co.
Net income 115 1,181
Sales 7,954 70,235
Average stockholders’ equity 1,482 4,919
Answer:
a. Return on Assets = Net income / Average assets
Whole Foods = $115 / $3,297 = 3.5%
Kroger = $1,181 / $21,757 = 5.4%
Return on equity = Net income / Average stockholders’ equity

Whole Foods: = 115 / $1,482 = 7.8%
Kroger = $1,181 / $4,919 = 24%
Kroger appears to be more profitable – ROA and ROE are both higher. This is surprising because
Whole Foods is a premium grocery store. Perhaps the recent economic downturn in 2007 is causing
high-end food buyers to substitute some purchases for more mainstream groceries such as those
sold at Kroger.
b. Profit margin = Net income / Sales

Whole Foods = $115 / $7,954 = 1.4%
Kroger = $1,181 / $70,235 = 1.7%
Asset turnover = Sales / Average assets

Whole Foods = $7,954 / $3,297 = 2.4
Kroger = $70,235 / $21,757 = 3.2
Kroger has a higher return on assets because its profit margin is higher and its turnover is higher.
Thus Kroger is more profitable and more efficient.

Topic: Competitive Analysis
LO: 4
8. List three of the five competitive forces that confront the company and determine its competitive
intensity. Briefly explain each force that you list.
Answer:
These following are the five forces that are key determinants of profitability.
1) Industry competition: Competition and rivalry raise the cost of doing business as companies must
hire and train competitive workers, advertise products, research and develop products, and other
related activities.
2) Bargaining power of buyers: Buyers with strong bargaining power can extract price concessions
and demand a higher level of service and delayed payment terms; this force reduces both profits from
sales and the operating cash flows to sellers.
3) Bargaining power of suppliers: Suppliers with strong bargaining power can demand higher prices
and earlier payments, yielding adverse effects on profits and cash flows to buyers.
4) Threat of substitution: As the number of product substitutes increases, sellers have less power to
raise prices and/or pass on costs to buyers; accordingly, threat of substitution places downward
pressure on profits of sellers.
5) Threat of entry: New market entrants increase competition; to mitigate that threat, companies
expend monies on activities such as new technologies, promotion, and human development to erect
barriers to entry and to create economies of scale.
Topic: The Role of Auditors in Financial Reporting

LO: 5
9. What potential conflicts of interests do auditing firms face in conducting audits of publicly traded
companies?
Answer: Auditors often face the issue how to deal with mistakes or deceptive reporting methods of
clients, while still trying to please the management of these client firms that ultimately pay their fees.
This conflict could lead to auditing firms viewing the CEO, rather than the shareholders or directors,
as their client. Warren Buffet has been particularly critical of potential conflicts of interest involving
auditors.
Topic: The Effect of the Sarbanes-Oxley Act

LO: 5
10. Accounting debacles, such as in the case of Enron, brought to light the necessity of accuracy in
financial reporting and accountability of management. Describe how the introduction of the Sarbanes-
Oxley Act has changed the requirements of financial reporting.
Answer: Congress introduced the Sarbanes-Oxley act as a way of restoring confidence in the
integrity of financial statement reporting of publicly traded companies. The Act requires the chief
executive officer and chief financial officer of the company to personally sign-off on the accuracy and
completeness of financial statements and the integrity of the company’s system of internal controls.
This requirement is designed to hold management personally accountable for negligence in financial
reporting and encourage vigilance in monitoring the company’s financial accounting system.

Essay Questions
Topic: Costs and Benefits of Disclosure
LO: 1
1. Explain the benefits and costs associated with a company's disclosure of information.
Answer:
Supplying information benefits a company by helping it to compete in capital, labor, input, and output
markets. A company’s performance hinges on successful business activities and the markets’
awareness of that success. Economic incentives exist for those companies that disclose reliable
accounting information, especially when the company discloses good news about products,
processes, management, etc. Direct costs associated with the disclosure of information pertain to its
preparation and dissemination. More significant are other costs including competitive disadvantage,
litigation potential, and political costs. Managers must weigh these costs and benefits to determine
how much information to voluntarily disclose.
Topic: Demand for Financial Accounting Information

LO: 1
2. List three users of financial accounting information and explain how each user might use financial
information.
Answer:
Managers and employees – Managers and employees demand financial information on the
financial condition, profitability and prospects of their companies for their own well-being and future
earnings potential. They also demand comparative financial information on competing companies
and other business opportunities. This permits them to conduct comparative analyses to benchmark
company performance and condition.
Creditors and suppliers – Creditors and other lenders demand financial accounting information to
help decide loan terms, dollar amounts, interest rates and collateral. Suppliers similarly demand
financial information to establish credit sales terms and to determine their long-term commitment to
supply-chain relations. Both creditors and suppliers use financial information to continuously monitor
and adjust their contracts and commitments with a debtor company.
Shareholders and directors – Shareholders and directors demand financial accounting
information to assess the profitability and risks of companies. Shareholders look for information
useful in their investment decisions. Both directors and shareholders use accounting information to
evaluate manager performance Managers similarly use such information to request further
compensation and managerial power from directors. Outside directors are crucial to determining who
runs the company, and these directors use accounting information to evaluate manager performance.
Customers and Sales Staffs – Customers and sales staffs demand accounting information to
assess the ability of the company to provide products or services as agreed and to assess the
company’s staying power and reliability. Customers and sales staffs also wish to estimate the
company’s profitability to assess fairness of returns on mutual transactions.
Regulators and Tax Agencies – Regulators and tax agencies demand accounting information for
tax policies, antitrust assessments, public protection, price setting, import-export analyses and
various other uses. Timely and reliable information is crucial to effective regulatory policy. Moreover,
accounting information is often central to social and economic policy.
Voters and their Representatives – Voters and their representatives to national, state and local
governments demand accounting information for policy decisions. The decisions can involve
economic, social, taxation and other initiatives. Voters and their representatives also use accounting
information to monitor government spending. Contributors to nonprofit organizations also demand
accounting information to assess the impact of their donations.

Topic: Owner vs. Nonowner Financing
LO: 2
3. Businesses rely on financing activities to fund their operating and investments. Explain the
difference between owner and non-owner financing, and explain the benefits and risks involved in
relying more heavily on each type of financing.
Answer:
Owner financing, also called equity, refers to money given to the business in exchange for partial
control of the company. Stocks are the most common form of owner financing. Companies are not
obligated to guarantee a return on owner investments. However, if returns are unacceptable to
owners, they may use their power to take the business in different directions. In sum, owner financing
provides cash inflow to the company without any guarantee of repayment. Control over the company
is vested in the shareholders.
Non-owner financing refers to money given to the business in exchange for a guaranteed
repayment, usually with interest. Loans and bonds are very common examples of non-owner
investment. The risk to the company lies in potential default if operations decline. The benefit is that
the company does not need to cede operational control to its creditors, unless it defaults on its
repayment. In sum, non-owner financing allows the current owners to maintain full control of the
company, but requires repayment with interest.
Companies that rely more heavily on owner financing are said to be financed conservatively.
Companies that rely more heavily on non-owner financing are said to be financed less conservatively.
Topic: Usefulness of ROA for Managers

LO: 3
4. Investors and lenders place significant importance on management’s effectiveness in generating a
high return on assets (ROA). Explain how ROA is also important for managers’ analysis of its own
performance, particularly when ROA is disaggregated.
Answer:
Return on assets (ROA) is a helpful measure of a company’s profitability. In its most basic form, ROA
is a ratio between net income and average assets, i.e. it indicates the return the company is earning
from its assets. While ROA is a valuable indicator for investors, it is just as valuable for company
managers. This is because ROA indicates how successful managers are in acquiring and using
investments on behalf of shareholders.ROA is particularly useful for managers when it is
disaggregated into more focused, meaningful components.
Return on assets can be ‘disaggregated’ into profit margin (PM), which measures profitability and
asset turnover (AT), which measures efficiency or productivity.
The ratio of net income to sales is called ‘profit margin’ and the ratio of sales to average assets is
called ‘asset turnover.’ The profit component reflects the amount of profit from each dollar of sales,
and the productivity component reflects the effectiveness in generating sales from assets.
This disaggregation yields additional insights into the factors that cause overall ROA to change during
the year. It could be that the company is more or less profitable or that the company is more or less
efficient or both. This disaggregation provides more informative than just knowing that ROA has
increased or decreased during the year.

Another random document with
no related content on Scribd:
CHAPTER XIV—THE AUTOCRAT
The enterprise which Pee-wee was now about to launch was the
most gigantic of any that had ever emanated from his seething brain.
We shall have to follow it step by step. His first call was at
Administration Shack where he asked Tom Slade, camp assistant, if
he and his patrol might have the use of the old float for cruising.
“You know the one I mean,” he said; “it’s the one I fell off of that
summer when I was diving for licorice jaw breakers. Don’t you
remember the day my mouth was all black? It’s got four barrels
under it to hold it up—”
“What, your mouth?” young Mr. Slade asked.
“No, the old float, and the barrels are airtight, because they were
filled with water when the float was drawn up and I’ve got two in my
patrol and they haven’t shrunk, I mean the barrels, so will it be all
right for us to pitch our tent on that old float and kind of be sea
scouts, because anyway all of us know how to swim and I saved a
scout from drowning last summer. Can we?”
Young Mr. Slade was not too ready with his approval of this
scheme; he said he would take a look at the old mooring float.
Pee-wee did not wait for his approval but proceeded immediately
to the cooking shack where he accosted Chocolate Drop, the smiling
negro chef.
“I want an onion and an empty bottle and a lot of other things to
eat,” he said. “Three of us are going camping on an old float and we
want beans enough to last for a week and some Indian meal and
some flour and some bacon and I’ll give you a note to say we’ll pay
for them. We want some sugar too, and some egg powder and if the
bottle’s full of olives or pickles, it won’t make any difference because
we can empty it and we want some coffee too and some potatoes.”
“Lordy me, Massa Pee-wee! What else you want, eh? Yo’ hev a
reckezishon from Massa Slade, hey?”
“I’ll get it,” said Pee-wee; “you get the stuff ready.”
It was the rule that supplies for bivouac camping and camping
outside the community limits should be supplied by the commissary
at nominal prices. Scouts could give their I. O. U.’s for such supplies
and these charges appeared upon the regular bills for board and
accommodation. But requisitions, properly endorsed by either
scoutmaster or camp official, were necessary to the procuring of
such supplies.
“I’ll get it, I’ll get it,” Pee-wee shouted, waving all doubts aside; “I’ll
get it from Tom Slade. Do you know what an enterprise is? I had an
inspiration about an enterprise and my patrol is going to make lots of
money and we can pay for everything, because if you’ve got an
inspiration about an enterprise you can get credit, can’t you?
“Listen, Chocolate Drop, do you remember that summer when all
the scouts were jollying each other about going scout pace around
the lake? Do you remember? Do you remember you said that every
scout that went scout pace around the lake in an hour could have
three helpings of dessert for the rest of the season? Gee whiz,
you’re the boss of the desserts, you have a right to do that, haven’t
you? Gee whiz, you’ve got just as much right to offer prizes for scout
stunts as anybody, haven’t you? Because anyway you’re an official.
One thing sure, you’re the boss of the eats, aren’t you?”
Chocolate Drop was certainly the boss of the eats, desserts
included. Not even John Temple himself was such an autocrat as
Chocolate Drop in his Utopian dominion. Within those hallowed
precincts he waved his frying-pan like a sceptre of imperial authority.
He and he alone was never interfered with by officials higher up. Not
even the National Scout Commissioner could tell Chocolate Drop
what he should serve for dessert. The President of the United States
could not add or subtract one dab of icing to or from those luscious
cakes.
Every time an honor medal was awarded the proud recipient
received an “honor pie” from Cooking Shack, a huge round medal,
as it were, more precious than shining gold. Yes, the will of
Chocolate Drop was supreme and he spoke to the multitude as no
one else could speak.
His liking was expressed in crullers, his tribute to prowess or
heroism found voice in puddings. He conquered with fried corn
cakes. He made friends and converts with fudge. His cookies were
like so many merit badges. He was such an artist that he could
reproduce these in icing. Once, upon a mince pie (a hot one)
Chocolate Drop designed in luscious jelly the First Aid badge. For
Chocolate Drop had a sense of humor....
CHAPTER XV—BON VOYAGE
Pee-wee had the freedom of the cooking shack. Being a specialist
on eats, he was honored with this privilege. It was like a college
degree conferred upon him, in testimony of his wonderful
achievements in the world of food. He now sat upon a flour barrel
strategically near a dishpan full of cookies. As he talked his hand
made occasional flank movements in the direction of this pan.
Sometimes he captured some prisoners.
“That offer still holds good,” he said, as he munched a cookie,
“because you never took it back. So it’s open yet?... Isn’t it?” he
concluded anxiously.
“It’s open yet, Massa Pee-wee, coze it ain’t never been done nor
ever will n’ it was jes’ a joke n’ a lot of nonsense ’n’ you better not try
it coze ’f you do you’ll jes get dem feet of yourn wet ’n’ Chocolate
Drop he hev ter put cough mixture in dem cakes. How you like dat,
Massa Pee-wee?”
“Anyway will you cross your heart that if any feller hikes scout
pace around the lake in an hour he can have three helpings of
dessert for the rest of the time he stays?”
“So dats th’ kind of a insperize you got?” Chocolate Drop laughed,
showing his white teeth and placing his flour covered hand on Pee-
wee’s khaki shirt. “Dere’s my hand on it, Massa Pee-wee. You jes’ go
scout pace around dat lake in sixty minutes n’ you get dat three
helpings all de time you here. You hear that?”
“Or any other scout?”
“Das it,” laughed Chocolate Drop.
“Three helpings? Regular size ones?”
“You ain’t nebber see no other sizes hab you, roun’ here?”
“All right,” said Pee-wee, jumping off the barrel and beating the
flour from his shirt, “you’re a scout just as much as anybody else
here is, because Mr. Temple says that the rules are for everybody
that has anything to do with scouting, and the rule says a scout has
to keep his word, see?”
“It don’t say nuthin’ ’bout him keeping cookies, does it?” the cook
asked. “Here, you take a pocketful ’n’ doan’ you lose no sleep ’bout
ole Chocolate Drop keepin’ his word coze he am a scout. ’N’ you
come back here with your paper signed ’n’ you get rations for one
week, ’n’ extrees. Now how’s dat?”
That was perfectly satisfactory and Pee-wee returned to the float
where a curious throng of scouts was assembled. The two little hop-
toads seemed rather embarrassed to be the center of so much
interest.
Tom Slade was also there considering the seaworthy qualities of
the old float. He found the four barrels (one under each corner) filled
with water which had kept the staves tight, and it was only necessary
to pump the water out to have as bouyant a raft as one could want,
its flooring well clear of the surface of the water. So gayly did it ride
when it was pushed in that it seemed more likely to go up in the air
than to sink. As for tipping over, a ferry-boat was cranky compared
with it. It was in no more peril of capsizing than a turtle is.
In the presence of the curious multitude (rivaling the watchers who
had seen the Pilgrim Fathers depart), the food (properly
requisitioned) was put on board, the tent was raised, and a couple of
old grocery boxes and a dilapidated camp stool contributed as deck
furniture. Nor was this all; for Tom Slade, always careful and
thorough, made the two small followers of the great adventurer swim
from the float to the springboard to determine their skill in that
necessary art.
Since nothing less than a volcanic upheaval could capsize the
float, the only danger seemed to be that of falling off it. This danger
was greatly minimized by the placid character of the lake which was
usually as gentle as a cup of tea. It would have been difficult for this
gallant bark to drift out to sea by reason of the surrounding
mountains which completely enclosed the little lake. The only real
peril lay in the possibility of a storm so terrific as to lift the float and
blow it over the mountains. But even then it would stand a good
chance of alighting in the Hudson River and being stopped before it
reached New York. For the rest, as young Mr. Slade said dryly, the
reckless voyagers would have to take their chances.
Behold, then, the new Hop-toad Patrol standing on the deck of
their gay platform as it bobbed near the shore, with Scout Harris, a
patrol leader at last, posing defiantly upon a keg of assorted edibles
and raw materials for cooking. Under one arm he held a tin lock-box
(for what terrible purpose no one knew), while in his hand he held an
apple (extracted from the keg), for what purpose everybody knew.
“What’s the big idea, kid?” some flippant scout called.
“Don’t hurry back,” called another.
This encouraged a laughing chorus as the float drifted out upon
the lake.
“Come over and see us some time when you can’t stay.”
“If you happen to be passing we’ll be glad to see you—pass.”
“Remember, the other side of the lake is best for camping.”
“What’s the tin box for? Buried treasure?”
“Speech, speech!” half a dozen yelled.
“No hard feeling, is there?” one clear, earnest voice called. It was
that of the new raving Raven, Billy Simpson. “You sure about plenty
of fun?”
“Sure I’m sure,” Pee-wee shouted at the boy who had succeeded
him in the patrol. He scorned to answer any of the others. “I’m
pronouncing the world—”
“He means denouncing,” said a scout.
“Do you mean renouncing?” another called.
“I’ll give you a tip,” he called to Billy Simpson; “because I’m not
mad at you on account of your joining—”
“He’s more to be pitied than blamed,” Roy Blakeley shouted.
“It’s better than if he was in the Silver Foxes,” Pee-wee screamed.
“Hey, Billy Simpson, you look for a bottle with invisible writing and
hold it over the campfire, so that proves I’m not sore at you! It’s a
mystery.”
“A how?” several called.
“We’re going to make a fortune,” Pee-wee yelled defiantly. “We’re
going to be the richest patrol—”
“On the other side of Black Lake,” a laughing voice called.
“You’d better all look at regulation seven,” Pee-wee shouted;
“you’d better all look at regulation seven, that’s all I say!”
His mouth now embraced the remainder of his apple in a
touching, last farewell. His voice was stifled by the clinging core.
Then, in a kind of agony of parting forever, he threw the core from
him and it floated through the air like a thrown kiss, and landed plunk
in one of the twinkling eyes of Roy Blakeley, patrol leader of the
Silver Foxes.
The Hop-toad Patrol was off upon its great adventure.
CHAPTER XVI—REGULATION SEVEN
“The plot grows thicker,” said Roy. “What’s all this about a bottle?”
“And regulation seven,” said another scout. “What the dickens
regulation is that? Let’s go up and see.”
Just for the fun of it they all strolled up toward Main Pavilion.
Fastened to the trunk of an oak tree just outside it was the bulletin-
board at which Hervey Willetts, the most picturesque scout that had
ever visited camp, had thrown a luscious, soft tomato, which exploit
had an interesting sequel elsewhere told. How strange the camp
seemed that summer without the captivating personality of that
wandering minstrel.
“He said he wouldn’t be here this summer,” said a scout
reminiscently.
“That’s what makes me think maybe he will be,” said another.
“Anything’s likely with him,” said a third.
“One, two, three, four, five, six, here it is—seven,” said a scout,
following the rules down with his finger, and reading aloud:
7—The rights of property, owned or hired, are to be respected

by all scouts. A scout shall not trespass upon any farm or other
property while a guest at this camp. It is likewise unscoutlike for
a scout to enter without permission the cabin, tent or precincts,
of another scout, or of a troop or patrol of which he is not a
member. He shall not use without permission any boat or canoe
assigned to other scouts. No explanation of practical joking or of
other innocent intent shall excuse him from the stigma of
trespassing when he crosses or enters property officially
assigned to others within the camp limits.
“What’s the idea?” a scout asked curiously. “Just a few of us sat

on the edge of the float. The kid didn’t seem to object.”
“Maybe he means we’d better not go near his stalking signs while
he’s away,” another said. “He’s watching a couple of nests in that big
elm.”
“I guess he’s got the rule mixed up with some other rule,” another
suggested. “Everything is all jumbled up in his massive dome.”
Since the scouts were in the habit of observing at least the spirit of
this good rule, the group concluded that Pee-wee’s ominous warning
referred to some other rule. He had been greatly excited, as was
natural when setting off upon a cruise of perhaps a mile or more.
There was one scout among them, and only one, who entertained
any serious thoughts about Pee-wee and his epoch-making
enterprise. This was Billy Simpson. He could not rid his mind of the
thought that his position in the Raven Patrol was somewhat that of a
usurper. He had sized Pee-wee up very accurately and he had an
uncomfortable feeling that the little former mascot was merely on a
sort of adventurous spree and did not realize what he had done in
his thoughtless resignation from the patrol.
“WE’RE GOING TO MAKE A FORTUNE,” PEE-WEE YELLED DEFIANTLY.
It consoled him somewhat, and eased his conscience, to know

that at least Pee-wee was having the time of his life as a leader,
even though he had only two followers. He could not do otherwise
than laugh at Pee-wee, but all the while he had a queer feeling about
the whole matter. He hoped that everything was all right and that
Pee-wee knew his own mind.
As if there was anything that Pee-wee didn’t know....
CHAPTER XVII—TEARS
Pee-wee had sticking in his belt an envelope which he had sealed
and addressed to the Hoptoad Patrol. Being the only one in authority
in that patrol he now opened it and read aloud the letter within it
which he had likewise written himself. Its contents must have
surprised him greatly for he scowled as he read the portentous
words:
The cruiser Hop-toad will go to the other side of the lake and
we will get it into Goldenrod Cove so as it’s wedged in, kind of.
Then we’ll eat.
After that we’ll write a message with an onion and cast it in
the sea—that’s the same as the lake. That message will tell
them they can hike around the lake in sixty minutes and we’ll
charge them five cents each to cross our property and I’ll be the
treasurer and we’ll divide up even. If anybody wants to back out
he can say so now or he can stay till the death.
“Are we going to get killed,” Willie Rivers asked anxiously.

“Staying till the death means till it’s all over,” Pee-wee explained.
“Now I’ll tell you about those sealed orders, only usually nobody but
the captains know about those. Last year Chocolate Drop, he’s cook
and I stand in with him, last year he said every scout that could go
scout pace around the lake in an hour could have three helpings of
dessert for the rest of the season. But anyway nobody did it because
on account of Goldenrod Cove; that’s an outlet of the lake.
“So now we’re going to sail into that cove and you’ll see how it is
when we get there. It’s kind of like a cove only different. So now we
have to do what it says in the sealed orders. And you’ll see how I’m
going to win the pioneering badge too.”
“What are we going to write in the note that’s invisible?” little
Howard Delekson ventured to ask.
“We’re going to tell them the way is clear for them to hike around
in less than an hour if they want to.”
“Why don’t we send it right away so they’ll be sure to find it soon?”
Willie asked.
“Because the bottle’s full of stuffed olives and we have to empty it
first but anyway that reminds me that I’m hungry.”
“Can we help you empty it?” Howard asked tactfully.
“Sure you can,” said Pee-wee, fishing the bottle of olives up out of
the keg; “I never knew I wanted some olives till you reminded me.”
The bottle was soon emptied, and now Pee-wee, kneeling at an
old grocery box, stood his precious onion on it like an inkstand.
Having next produced his scout note book and laid it solemnly upon
the grocery box, he brought forth a deadly skewer which he had
extracted from a ham in Cooking Shack, and with it stabbed the
onion to the heart. Perhaps it was because their gallant bark was
nearing the middle of the lake and the beloved camp receding in the
distance, or perhaps it was from sheer joy at the great good turn he
expected so soon to perform, but it is a fact that at the very moment
he punctured the onion with his makeshift pen, his eyes filled with
tears.
With the pensive tear-drops standing on his round cheeks and
with eyes glistening from the sadness of parting, or from some other
equally logical cause, he penned the following missive, stabbing the
onion afresh for every tender word he wrote, and weeping so
copiously that he could not have deciphered the writing even if it had
been visible. These were the words, all unseen, which he penned
with the magic onion juice:
The offer of three helpings all through the season is still open
and the cove is bridged and any feller can hike around scout
pace in less than an hour so now’s your chance.
Harris—hop-toad,
Ex-raven
He strained his eyes to read those memorable words which were
to mean so much to him, and to all the scouts at camp. To say
nothing of the camp commissary. But the spirit of the onion spoke
not to those who did not know its secret. Not a sign of writing was
there upon that virgin page.
Pee-wee rolled the missive, injected it into the bottle, and corked
the bottle tight. He then produced a small limp article connected with
a short stick. On blowing through the stick the limp attachment
swelled to astounding dimensions as Pee-wee’s cheeks puffed more
and more till they seemed like to burst. Now upon the inflated
balloon appeared the words Catskill Garage in conspicuous white
letters.
The limit of Pee-wee’s blowing capacity having been reached, he
jabbed the blow-stick into the onion to check the egress of air, when
suddenly that humble vegetable, so modest that its very blood
shunned the gaze of prying eyes, threw out a veritable spray in every
direction like an electric sparkler, as the balloon grew smaller till it
staggered, then collapsed, leaving the Hop-toad Patrol weeping and
sneezing and groping frantically for their handkerchiefs, no doubt as
flags of truce.
“I—eh—eh—chhh—ew—chh—I—llchew—try it—again.”
CHAPTER XVIII—THE BATTLE OF THE BURS
The gallant bottle with its aerial companion attached was not yet
set free upon the angry waves of Black Lake. For the epoch-making
announcement must not be premature and the good bark Hop-toad
had still some yards to travel before bunking against the farther
shore.
Indeed, it did not bunk against the farther shore at all. Like the
ships of another famous adventurer (Christopher Columbus) it
reached a destination, but not the destination intended. It flopped
against the shore at the northern extremity of the lake, where the
natives (consisting of three turtles) fled precipitately upon the
approach of the explorers.
“We’ll have to pull it around,” said the leader of the Hop-toads;
“we’ll have to coast along shore. Our port is due west of the camp.
Maybe it’s kind of south by due west. Come on, let’s pull.”
“Is it deep enough all the way around by the shore?” Howard
asked.
“You mean the coast, not the shore,” said Pee-wee; “we have to
go coastwise; we have to hug the coast; that doesn’t mean putting
our arms around it.”
By reason of the surrounding hills the shore of Black Lake was
precipitous all the way round, except where the camp was. The
water was therefore comparatively deep, even close under the
shore. Wriggling in and out of the tiny passes near the lake wound a
trail which would have completely encircled it, notwithstanding many
smaller obstacles, save for Goldenrod Cove which was the
beginning of the lake’s main outlet.
By dint of pulling on the bushes and pushing with a couple of
scout staffs and dancing on the unsusceptible platform, they
succeeded in getting it along the shore till the camp was almost
opposite them across the water.
The progress of the gallant bark was something like the progress
of a stubborn mule, and it certainly hugged the shore with an
altogether affectionate embrace. It would flop along but nothing
would tempt it to tear itself away from the sheltering bushes. These
hung so low that in places they playfully removed our hero’s hat and
ruffled his curly hair and deposited volleys of clinging burs upon his
martial regalia.
Scout Willie and Scout Howard wrestled valiantly with these leafy
tormentors, closing their eyes and sweeping the assaulting clusters
aside as the noble float flopped resolutely along. But they were
covered with burs from head to foot; there were prickling burs on
their stockings, down their necks, and worst of all, in their shoes.
Burs lurked in their hair and would not be routed. One bur, more
valiant than the rest, dared to penetrate within the khaki shirt of our
hero, taking up a strategic position in the small of his back where it
kept up a running assault with a hundred million tiny prongs. It was in
vain that he approached this invader from the rear; in vain that he
wriggled and twisted and almost tied his heroic body in a knot. The
tormentor was not to be harried or dislodged.
“I got burs all over me,” said Scout Willie; “wait a minute, I have to
take off my shoe.”
“Feel down my neck,” said Scout Howard; “it tickles.”
“Do you think that an explorer—do you think that—Peary—was
scared of burs?” Pee-wee demanded contemptuously, the while
madly scratching his back.
“Maybe they don’t have burs at the North Pole,” Scout Howard
ventured.
“Don’t you suppose there were burs in France?” Pee-wee said.
“Maybe French ones aren’t so bad,” Howard suggested, removing
his shoe and extracting a whole regiment of burs, while Willie made
a sudden raid up one sleeve with his hand.
“Burs are—they’re just like natives,” Pee-wee said. “You’re not
scared of natives, are you? Scouts are supposed to love everything
in the woods.”
“They ain’t in the woods when they’re on stockings, are they?”
Willie asked, rather boldly.
Our hero was now reduced to the use of one arm in poling the
float, his other hand being continually engaged in scratching his
writhing back. With that one stalwart arm he tried to keep the float far
enough off shore to be clear of the assaulting legions. Willie Rivers,
having battled nobly, sat helpless on the stubborn float, holding a
shoe in one hand and clearing the gory field of his stockings with the
other. The naked, undefended area between the ends of his loose
khaki trousers and the tops of his stockings was swarming with the
enemy.
The tent, knocked askew by the assaulting branches, was
covered with clinging burs. It seemed to reel and stagger under the
attacks of the aroused and enraged brush. All the famous sea fights
of history were nothing to this. Scout Howard, warding off the
relentless onslaughts with one sturdy arm, was trying vainly to reach
the small of his back over his left shoulder with the other.
Suddenly the voice of our hero rose above the roar of battle,
“Look out for the poison ivy! Give her a push out! Quick!”
Withdrawing his hand from the forlorn enterprise down his back,
Scout Howard grasped a scout staff and gave a mighty shove
against the shore sending the harassed cruiser clear of this ghastly
peril just as a low hanging branch, lurking unnoticed like a
sharpshooter, toppled over the keg of provisions and it went rolling
into the water.
This dastardly attempt to starve out a gallant adversary was met
by quick action from the leader of the Hop-toads. Giving one frantic
look at a package of Uneeda biscuits floating near the bobbing keg,
he plunged into the angry waters and returned triumphant with
several varieties of commissary stores, while Scout Rivers, forgetting
all else at the thought of his commander’s wrath, reached out with
his scout staff and brought the rolling keg safely aboard.
But alas, just in the moment of this heroic rescue, the float,
unguided for the moment, bobbed plunk against the shore and into a
veritable jungle of tangled vines.
“Wild roses! Wild roses! Look out for the thorns!” cried
Commander Harris.
But it was too late. Already they were surrounded, enveloped,
embraced, in a very labyrinth of Nature’s barbed wire
entanglements. The wounds and scars of battle were already upon
them. The uncovered portions of Scout Harris were tattooed with a
system of scratches which ran here and there like bloody trails. A
scratch was on his nose and his hair was pulled up in the combing
process of the thorned tentacles. The martial regalia of the three
warriors was in tatters.
But they did not give up. Lying flat upon the raft they pushed with
all their might and main till their staffs sunk into the spongy shore.
And at last, by dint of superhuman effort, the cruiser Hop-toad
emerged from this fearful trap and was happily caught in the flowing
water which bespoke the neighborhood of Goldenrod Cove.
CHAPTER XIX—SAIL ON, THOU BOTTLE!
This famous cruise to the remote farther shore of Black Lake is
famous in camp history. And the awful conflict there is often spoken
of as The Battle of the Burs. The losses on the side of the invaded
coast were about fifty million burs, several entire branches of the
Wild Rose Battalion and a ton or two of grassy earth.
The losses of the exploring party were one khaki jacket, three
scout hats, six stockings, one box of egg powder, four cans of
condensed milk, one scout staff, a package of spaghetti, one shoe,
four buttons and three tin spoons. The wounded were one nose,
three ears, two knees, two heads of hair, three arms and about one
square mile of scratches. There is at present a movement in Temple
Camp to safeguard the neighborhood from the recurrence of such a
frightful world catastrophe.
One thing remained unscarred after this sanguinary adventure.
The bottle with its companion balloon had been safe within the tent.
The Hoptoad was now carried merrily into the cove upon the
hurrying water and proceeded as far into the outlet as its dimensions
would permit it to do. Here it stopped, just as its far-seeing navigator
knew it would do, wedged immovably between the two shores. Pee-
wee had always claimed to be lucky, and his luck was faithful to his
purpose here. For the two ends of the trail ended at the opposite
sides of the lumbering float. A line across the float and the trail would
have been unbroken.
Goldenrod Cove could not quite be seen from Temple Camp
across the lake, but in the early fall its profusion of yellow was visible
like a dab of gold across the water. And when that dab of gold
appeared, the scouts still at camp knew that presently school would
open and the camp close for the season. Some fanciful youngster
had said that that golden area was the shape and color of a bell, and
it came to be called The School-bell by the scouts of camp. But the
momentous affair of Goldenrod Cove was in the earlier summertime
and there was no school-bell there.
Let us observe the geography of this dim, quiet spot, made
memorable by the immortal exploit of Pee-wee. The cove at its
widest point (that is, where it joined the lake) was about twenty feet
wide. It narrowed gradually till it was just wide enough to let a little
brook from the lake pass through. This trickling outlet found its way
to the lordly Hudson.
Hiking around the lake by the trail, the scout came upon the shore
of this cove where it was perhaps fifteen feet wide. You will say that
he could swim across, and so he could. But that is just where the
joker came in, for the standing offer of Chocolate Drop stipulated for
an unbroken hike. The unbroken hike around Black Lake was like
the fountain of perpetual youth that old What’s-his-name searched
for in Florida. There wasn’t any.
The tempting offer of three desserts for the balance of the season
as a reward for an unbroken hike was just a practical joke. A very,
very cruel practical joke to those who love and reverence desserts.
Every new scout tried it with high hopes till he reached the
challenging shore of the cove. If he followed this shore to a point
where he might wade across he would consume more time than he
could afford.
That smile of Chocolate Drop’s which showed all his white teeth
was not a vain and meaningless smile. “This thing could not be did,”
as Roy Blakeley had said. It had come to be the hoary-headed
tottering old practical joke of the camp. And so it remained until Pee-
wee Harris touched it with the wand of his genius.
“Sling the bottle in the water,” he said; “throw it as far as you can.”
This romantic form of announcement, borrowed from shipwrecked
mariners of old, was of course not essential to Pee-wee’s mammoth
enterprise. But in the field of romance and adventure he was nothing
if not thorough.
The bottle splashed into the lake beyond the area of outflowing
water and the balloon advertising the Catskill Garage was caught in
the breeze and wafted off upon its mission. It hovered a yard or more
above the bobbing bottle, leading and dragging it eastward like a

Full download Test Bank for Financial Accounting for MBAs 4th Edition by Easton file pdf free all chapter

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Full download Test Bank for Financial Accounting for MBAs 4th Edition by Easton file pdf free all chapter

Uploaded by

Copyright:

Available Formats

Test Bank for Financial Accounting for

MBAs 4th Edition by Easton

Test Bank for Financial and Managerial Accounting for

Test Bank for Financial Statement Analysis & Valuation,

Solution Manual for Financial Statement Analysis and

Test Bank for Financial Statement Analysis and

Test Bank for Financial Accounting Fundamentals, 4th

Test Bank for Financial Accounting 10th by Libby

Test Bank for Fundamentals of Financial Accounting, 4th

Test Bank for Financial Accounting 9th Edition by Libby

Financial Accounting for MBAs

LO2 Identify and

LO3 Explain and

© Cambridge Business Publishers, 2010

Topic: Publicly available financial reports

Topic: Users of Financial Statement Information

Topic: SEC filings

Topic: Balance Sheet

© Cambridge Business Publishers, 2010

Topic: Accounting Equation

Topic: Income Statement

Topic: Statement of Cash Flows

Topic: Statement of Stockholders’ Equity

Cambridge Business Publishers, ©2010

Topic: Return on Assets

Topic: Asset Turnover

Topic: Financial Accounting and Business Analysis

Topic: Audit Report

© Cambridge Business Publishers, 2010

Topic: Users of Financial Statement Information

Topic: Components of the Balance Sheet

Cambridge Business Publishers, ©2010

Topic: Profit and Cash Flow

Topic: Financial Statement Information

© Cambridge Business Publishers, 2010

Total assets $15,226

Topic: Balance Sheet – Numerical calculations required

Total Assets $25,385

Cambridge Business Publishers, ©2010

Total assets $5,672.6

What did Starbuck’s report as Total liabilities on September 30, 2008?

Topic: Balance Sheet – Numerical calculations required

Current assets $1,140.7

What did Snap-On report as total assets at year-end 2008?

© Cambridge Business Publishers, 2010

Total assets $10,560

What proportion of Kohl’s Corporation is financed by non-owners?

Total liabilities $3,498

What proportion of Mattel is financed by non-owners?

Cambridge Business Publishers, ©2010

Topic: Income Statement – Numerical calculations required

Sales revenue $29,378

© Cambridge Business Publishers, 2010

Calculate year-over-year decline in Net earnings, in percentage terms.

Cambridge Business Publishers, ©2010

Topic: Statement of Cash Flow – Numerical calculations required

Cash December 31, 2008 $ 1,894

© Cambridge Business Publishers, 2010

Cash, beginning of year $ 5,354

Topic: Return on Assets

Topic: Return on Equity

Cambridge Business Publishers, ©2010

Topic: Return on Assets – Numerical calculations required

© Cambridge Business Publishers, 2010