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Libby/Libby/Hodge Financial Accounting, 11th Edition
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Libby/Libby/Hodge Financial Accounting, 11th Edition
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Solution Manual for Financial Accounting 11th Edition Robert Libby, Patricia Libby, Complete Chapters 1 - 13, Verified Newest Version
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Libby/Libby/Hodge Financial Accounting, 11th Edition
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Libby/Libby/Hodge Financial Accounting, 11th Edition
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Libby/Libby/Hodge Financial Accounting, 11th Edition SolutionManual
Which of the following describes the primary objective of the balance sheet? -
ANSWER:To report the financial position of the reporting entity at a particular point
in time, because, the balance sheet shows the assets, liabilities and stockholders'
claims against the assets (called financial position) at a moment in time
During the fiscal year ended 2014, a company had revenues of $400,000, operating
expenses of $280,000 and an income tax rate of 30 percent on income before
income taxes. What was the company's 2014 net income? - ANSWER:84,000;
Revenue $400,000 minus operating expenses of $280,000 equals pretax income of
$120,000 times 30% tax rate equals income tax expense of $36,000. Pretax income
$120,000 minus income tax expense of $36,000 equals of $84,000.
What is the difference between net income and net cash flow from operations? -
ANSWER:Net income is measured under accrual timing on the income statement
(revenues are recorded when earned not necessarily when cash is collected and
expenses are recorded when incurred not necessarily when cash is paid). Net cash
flow from operations is cash timing because it includes cash collected from revenue
sources and cash paid for expenses.
Which financial statement would you utilize to determine whether a company will be
able to pay liabilities which are due in 30 days? - ANSWER:The balance sheet would
show cash on hand and other highly liquid assets (readily convertible to cash) and
the amount of current liabilities which would be payable within a year. One of the
major tests of liquidity which assesses the ability to pay current liabilities is the
current ratio which divides current assets by current liabilities.
Describe what is found on a balance sheet. - ANSWER:The balance sheet contains
three elements; assets represent the items owned by the business, liabilities
represent obligations owed to creditors, and stockholders' equity represents the
owners' claims against the assets at a moment in time. The balance sheet is said to
show financial position.
Describe liabilities and stockholders' equity. - ANSWER:Liabilities and stockholders'
equity which are found on the balance sheet represent the sources of financing of a
company's assets (economic resources) and are found on the right side of the
accounting equation. Liabilities are amounts owed to creditors and stockholders'
equity represents the owners' financing both invested and earned equity.
Which financial statement would you use to determine a company's earnings
performance during an accounting period? - ANSWER:The income statement (also
referred to as the statement of earnings or statement of operations) shows revenues
that have been earned by central, ongoing operations, gains from peripheral
, sources, expenses that have been incurred by central, ongoing operations and losses
from peripheral activities. Revenues plus gains minus expenses and losses equal net
income or net earnings.
Madrid Company has provided the following data (ignore income taxes):
2014 revenues were $77,500
2014 net income was $33,900
Dividends declared and paid during 2014 totaled $5,700
Total assets at December 31, 2014 were $217,000
Total stockholders' equity at December 31, 2014 was $123,000
Retained earnings at December 31, 2014 were $83,000
By how much as Madrid's retained earnings changed from January 1, 2014 to
December 31, 2014? - ANSWER:Retained earnings increases by the amount of net
income which is $33,900 for the year and decreases by the dividends declared which
were $5,700 to derive the $83,000 ending retained earnings balance on December
31, 2014. Working backward to the beginning retained earnings on January 1, 2014
requires the mathematical functions be reversed. Start with ending retained
earnings $83,000 minus net income $33,900 plus dividends $5,700 equals $54,800
Madrid Company has provided the following data (ignore income taxes):
2014 revenues were $77,500
2014 net income was $33,900
Dividends declared and paid during 2014 totaled $5,700
Total assets at December 31, 2014 were $217,000
Total stockholders' equity at December 31, 2014 was $123,000
Retained earnings at December 31, 2014 were $83,000
How much is contributed capital (common stock and additional paid in capital) at
December 31, 2014? - ANSWER:Stockholders' equity at $123,000 on December 31,
2014 is comprised of retained earnings and contributed capital (common stock plus
additional paid in capital). Since retained earnings is $83,000 on December 31, 2014,
then contributed capital must be $40,000 ($123,000 minus $83,000).
When would a company report a net loss on the income statement? - ANSWER:A net
loss would be reported on the income statement when expenses (losses) are greater
than or exceed revenues (gains).
Describe the operating activities section of the statement of cash flows. -
ANSWER:The operating activities section of the statement of cash flows includes
revenues that were collected (cash inflows) and expenses that were paid (cash
outflow) for the accounting period. Net cash flow from operating activities which is
the operating inflows minus the outflows equals net income "cash timing".
During 2014, Canton Company's assets increased $95,500 and the liabilities
decreased $17,300. Canton Company's stockholders' equity at December 31, 2014
(the end of the year) was $211,500. What was the amount of stockholders' equity at
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