to measure the income of a firm under two different income measurement systems. The results for the first income system (M1) were incomes of $3,000, $2,600, and $2,200. Under the second system (M2), results were $5,000, $4,000, and $3,000. Assume that users of accounting data believe that dividends of a year are equal to 75 percent of income determined by M1 for the previous year. Users also believe that dividends of a year are equal to 60 percent of income determined by M2 for the previous year. Actual dividends for the year following the income measurements were $3,000. Determine the objectivity and bias of each

to measure the income of a firm under two different income measurement systems. The results for the first income system (M1) were incomes of $3,000, $2,600, and $2,200. Under the second system (M2), results were $5,000, $4,000, and $3,000. Assume that users of accounting data believe that dividends of a year are equal to 75 percent of income determined by M1 for the previous year. Users also believe that dividends of a year are equal to 60 percent of income determined by M2 for the previous year. Actual dividends for the year following the income measurements were $3,000. Determine the objectivity and bias of each

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 39E: Cuneo Companys income statements for the last 3 years are as follows: Refer to the information for...

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Revenue and expense data for the current calendar year for Tannenhill Company and for the electronics industry are as follows. Tannenhill’s data are expressed in dollars. The electronics industry averages are expressed in percentages. Please see the attachment for details: a. Prepare a common-sized income statement comparing the results of operations for Tannenhill Company with the industry average. Round to the nearest whole percentage.b. As far as the data permit, comment on significant relationships revealed by the comparisons.
ANALY SIS OF PROFITABILITY Based on the financial statement data in Exercise 24-1A, compute the following profitability measures for 20-2 (round all calculations to two decimal places): (a) Profit margin ratio (b) Return on assets (c) Return on common stockholders equity (d) Earnings per share of common stock
Sundahl Companys income statements for the past 2 years are as follows: Refer to the information for Sundahl Company above. Required: 1. Prepare a common-size income statement for Year 1 by expressing each line item as a percentage of sales revenue. (Note: Round percentages to the nearest tenth of a percent.) 2. Prepare a common-size income statement for Year 2 by expressing each line item as a percentage of sales revenue. (Note: Round percentages to the nearest tenth of a percent.)
The following data (in millions) are taken from the financial statements of Target Corporation: a. For Target Corporation, determine the amount of change in millions and the percent of change (round to one decimal place) from the prior year to the recent year for: 1. Revenue 2. Operating expenses 3. Operating income b. What conclusions can you draw from your analysis of the revenue and the total operating expenses?
Sundahl Companys income statements for the past 2 years are as follows: Refer to the information for Sundahl Company above. Required: Prepare a common-size income statement for Year 2 by expressing each line item for Year 2 as a percentage of that same line item from Year 1. (Note: Round percentages to the nearest tenth of a percent.)
Juroe Company provided the following income statement for last year: Juroes balance sheet as of December 31 last year showed total liabilities of 10,250,000, total equity of 6,150,000, and total assets of 16,400,000. Refer to the information for Juroe Company on the previous page. Also, assume that Juroes total assets at the beginning of last year equaled 17,350,000 and that the tax rate applicable to Juroe is 40%. Required: Note: Round answers to two decimal places. 1. Calculate the average total assets. 2. Calculate the return on assets.
Cuneo Companys income statements for the last 3 years are as follows: Refer to the information for Cuneo Company above. Required: 1. Prepare a common-size income statement for Year 2 by expressing each line item for Year 2 as a percentage of that same line item from Year 1. (Note: Round percentages to the nearest tenth of a percent.) 2. Prepare a common-size income statement for Year 3 by expressing each line item for Year 3 as a percentage of that same line item from Year 1. (Note: Round percentages to the nearest tenth of a percent.)
Cuneo Companys income statements for the last 3 years are as follows: Refer to the information for Cuneo Company above. Required: 1. Prepare a common-size income statement for Year 1 by expressing each line item as a percentage of sales revenue. (Note: Round percentages to the nearest tenth of a percent.) 2. Prepare a common-size income statement for Year 2 by expressing each line item as a percentage of sales revenue. (Note: Round percentages to the nearest tenth of a percent.) 3. Prepare a common-size income statement for Year 3 by expressing each line item as a percentage of sales revenue. (Note: Round percentages to the nearest tenth of a percent.)
Prepare a comparative common-size income statement for Jubilee Corporation. To an investor, how does the current year compare with the prior year? Explain your reasoning. E (Click the icon to view the comparative income statement.) Data table Start by calculating the percentages. (Round the percentages to two decimal places, X.XX.) Jubilee Corporation Comparative Common-Size Income Statement A C For the Years Ended December 31 1 Jubilee Corporation Current 2 Income Statement year Prior year 3 For the Years Ended December 31 Sales revenues 100.00 % 100.00 % 4 (amounts in thousands) Less: Cost of goods sold % % Current Gross profit % % year Prior year Less: Operating expenses % 6 Sales revenues $ 494,208 $ 429,000 % Operating income % 7 Less: Cost of goods sold 172,640 160,000 Less: Interest expense 8 Gross profit 2$ 321,568 $ 269,000 0% Income before income taxes % % 9 Less: Operating expenses 143,370 135,000 Less: Income tax expense 10 Operating income 2$ 178,198 $ 134,000 % % 11 Less:…
According to the information available in Income and Financial position statements (Image), calculate the following ratios for the business Competitors Average: - Net profit margin 31%- Gross profit margin 54%- Current ratio 2.87x- Acid test ratio 1.35x- Accounts receivable collection period 50 days- Accounts payable payment period 72 days
Comparative balance sheets report average total assets for the year of $2,450,000 and average totalequity of $1,825,000 (dollar amounts in thousands, except earnings per share).a. Prepare an income statement for the year in a multiple-step format.b. Compute the ( 1 ) gross profit rate, ( 2 ) net income as a percentage of net sales, ( 3 ) return onassets, and ( 4 ) return on equity for the year. (Round computations to the nearest one-tenth of1 percent.)c. Explain why interest revenue is not included in the company’s gross profit computation
You are the auditor for Sigma Pty Ltd.As part of your preliminary work, you have obtained the following information: Current Year (unaudited) Previous Year(audited) Industry average i) Current ratio (Working capital ratio) 1.91 2.35 2.91 ii) Receivables turnover 57 days 51 days 73 days iii) Inventory turnover 72 days 65 days 96 days iv) Gross profit margin 20% 18% 20% v) Net profit margin 4% 4% 6% In addition you have found that: The financial controller resigned during the year and the company has yet to hire another financial controller. The accounts of the current year were prepared by the assistant accountant. For situation mentioned above: i). Which component of the Audit Risk Model (ARM) would be affected, and how? ii). Discuss how your audit plan would be affected. Note:Prepare your answers in a tabular format as follows: Component of ARM Effect on Audit Plan