chapter 3 - CHAPTER 3 INCOME STATEMENT REPORTING THE...

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3-1 Odd-numbered Solutions CHAPTER 3 INCOME STATEMENT: REPORTING THE RESULTS OF OPERATING ACTIVITIES Questions, Short Exercises, Exercises, Problems, and Cases: Answers and Solutions 3.1 See the text or the glossary at the end of the book. 3.3 The amount of revenue recognized equals the amount of cash the firm expects to collect from customers. The firm does not necessarily recognize the revenue, however, at the time it receives the cash. It typically recognizes revenue at the time of sale even though it has not yet collected cash from customers. Likewise, the amount of expense recognized equals the cash disbursement made for equipment, materials, labor, and so forth. However, the firm recognizes the expense when it consumes the services of these factor inputs, not when it makes the cash expenditure. 3.5 Cost is the economic sacrifice made to acquire goods or services. When the good or service acquired has measurable future benefits to a firm, the cost is an unexpired cost, or an asset. When the firm consumes the good or service, the cost is an expired cost, or expense. 3.7 Current accounting practice takes the viewpoint of shareholders by reporting the amount of net income available to shareholders after subtracting from revenues all expenses incurred in generating the revenue by claimants (for example, employees, lenders, governments) other than shareholders. Critics point out that funds provided by shareholders have a cost just as much as funds provided by lenders and accounting should subtract this cost as well in measuring net income. 3.9 (Microsoft Corporation; analyzing changes in accounts receivable.) (Amounts in Millions) Accounts Receivable, Beginning of Year 13. ................................... $ 5,129 Plus Sales on Account during Year 13. ............................................. 32,120 Less Cash Collections during Year 13. ............................................. (?) Accounts Receivable, End of Year 13. .............................................. $ 5,196 Cash collections during Year 13 total $32,053 million.
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Odd-numbered Solutions 3-2 3.11 (Ann Taylor Stores; analyzing changes in inventory and accounts payable.) (Amounts in Millions) Inventory, Beginning of Year 13. ....................................................... $ 180.1 Plus Purchases of Inventory during Year 13. .................................. ? Less Cost of Goods Sold for Year 13. ................................................. (633.5) Inventory, End of Year 13. .................................................................. $ 185.5 Purchases during Year 13 total $638.9 million. Accounts Payable, Beginning of Year 13. ........................................ $ 52.0 Plus Purchases of Inventory on Account during Year 13 from above. ............................................................................................... 638.9 Less Cash Payments to Suppliers during Year 13. ....................... (?) Accounts Payable, End of Year 13.
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This note was uploaded on 05/31/2008 for the course ORIE 310 taught by Professor Callister during the Fall '07 term at Cornell.

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chapter 3 - CHAPTER 3 INCOME STATEMENT REPORTING THE...

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