Tutorial 1-4.docx - Chapter 1 Exercise 1(p 38 a Calculate gross profit margin(gross profit\/sales operating profit margin(operating profit sales and net

# Tutorial 1-4.docx - Chapter 1 Exercise 1(p 38 a Calculate...

• 28
• 81% (16) 13 out of 16 people found this document helpful

This preview shows page 1 - 9 out of 28 pages.

Chapter 1: Exercise 1 (p. 38) a) Calculate gross profit margin (gross profit/sales), operating profit margin (operating profit / sales) and net profit margin (net earnings/sales) for each of these companies. If a particular ratio cannot be calculated, explain why not.b. Is it valid to compare the profit margins calculated in part (a) across these companies in assessing relative profitability? Exercise 7 (p. 40)As noted in this chapter, diversity in accounting practice across countries generates problems for a number of groups.a) Which is the greatest problem arising from worldwide accounting diversity?b) Which groups is most affected by worldwide accounting diversity?c) Which group can most easily deal with problems associated with accounting diversity?
Exercise 8 (p. 40)Various attempts have ben made to reduce the accounting diversity that exists internationally. This process is known as convergence and is discussed in more detail in Chapter 3. The ultimate form of convergence would be a world in which all countries followed a similar et of financial reporting rules and practices. Which of the sources of Accounting Diversity represents the greatest impediment to the international convergence of accounting? Which factor do you believe creates the smallest impediment to convergence?
Chapter 2: Exercise 1 (p. 77-78)Refer to worksheet in Exhibits 10.12 and 10.13 in which the financial statements of Acrot Company have been restated to U.S GAAP. a) Calculate each of the ratios listed below using (1) the Local GAAP amounts in Column 1, and (2) the U.S. GAAP amounts in Column 4. b) Determine the percentage difference in each of these ratios using the formula (U.S. GAAP ratio – Local GAAP ratio) / Local GAAP ratio. c) Determine which ratios appear to be most and least affected by differences in the two sets of accounting principles.
Question 18Please find below the worksheets in Exhibit 10.12 and 10.13 in which the financial statements of Arcot Company have been restated to U.S. GAAP. Required:Calculate each of the ratios listed below using (1) the Local GAAP amounts in Column 1, and (2)the U.S. GAAP amounts in Column 4. Round to 3 decimal places. Ratio Local GAAP U.S. GAAP Profit margin Blank 1 Blank 2 Return on equity Blank 3 Blank 4 ARCOT COMPANY Worksheet for Restatement of Income and Retained Earnings to U.S. GAAP for the Year Ended December 31, Year 3 (1) (2) (3) (4) Reconciling Adjustments (Millions of Crowns) Local GAAP Debit Credit U.S. GAAP Sales 9,148 9,148 Cost of goods sold (5,163) 169 (1) (4,994) Gross profit 3,985 4,154 Operating expenses (453) 22 (4) 40 (2) (350) 5 (3) 14 (4) 3 (6) 73 (7) Operating income 3,532 3,804 Interest expense (156) (156) Other income(expense), net 132 124 (5) (41) 49 (8) Income before income taxes 3,508 3,607 Provision for income taxes (1,052) 29 (11) (1,081) Net income 2,456 2,526 Retained earnings, January 1 4,276 34 (4) 19 (1) 24 (6) 40 (2) 70 (8) 24 (3) 13 (11) Dividends 340 340 (10) 0 Retained earnings, December 31 6,392 6,770 ARCOT COMPANY Worksheet for the Restatement of Balance Sheet to U.S. GAAP for the Year Ended December 31, Year 3 (1) (2) (3) (4) Reconciling Adjustments (Millions of Crowns) Local GAAP Debit Credit U.S. GAAP Cash 1,704 1,704 Accounts receivable 2,798 2,798 Inventories 5,276 188 (1) 5,464
Exercise 2 (p. 78)