Ch06 - Chapter 6 Communicating and Interpreting Accounting...

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Chapter 6 Communicating and Interpreting Accounting Information EXERCISES E6–1 Information Item Report A (1) Summarized financial data for 5- or 10-year period. C (2) Initial announcement of quarterly earnings. E (3) Complete quarterly income statement, balance sheet and cash flow statement. (See note below.) A (4) The four basic financial statements for the year. B (5) Detailed discussion of the company’s competition. A (6) Notes to financial statements. A (7) Identification of those responsible for the financial statements. C (8) Initial announcement of hiring of new vice president for sales. A. Annual report B. Annual information form C. Press release D. Quarterly Report E. None of the above. Note: Financial statements are usually presented in summarized form in quarterly reports. E6–4 Forzani’s price per share reflects investors’ expectations of a certain level of profit that they will eventually receive in the future in the form of dividends. Prior to the announcement of the earnings for the second quarter of fiscal year 2006, the share price reflected investors’ expectations at that time based on analysts’ forecasts. The reported actual earnings missed analysts’ expectations, which prompted investors to revise their expectations downward, causing a drop in the price per share, even though the company reported a significant increase in earnings compared to the previous year. The higher earnings for the second quarter of 2006 had already been incorporated into analysts’ forecasts prior to the announcement of the actual earnings. A second possible reason for the drop in share price is that during the traditional teleconference call regarding these results, the top executives of the company provide guidance to investors about the near term future of Forzani. The guidance may have been bad news, leading investors to revise their expectations about the company’s future cash flows.
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E6–6 Qualitative Characteristics __H__ (1) Relevance __C__ (2) Timeliness __E__ (3) Predictive value __F__ (4) Feedback value __ I __ (5) Reliability __ J__ (6) Verifiability __B__ (7) Representational faithfulness __D__ (8) Neutrality __G__ (9) Comparability __A__ (10) Consistency PROBLEMS P6–1 (1) E; (9) A; (16) H; (2) L; (10) R; (17) K; (3) D; (11) U; (18) J; (4) I; (12) N; (19) T; (5) M; (13) C; (20) S; (6) W; (14) G; (21) O; (7) B; (15) V; (22) P; (8) Q; (23) F. P6–2 G (1) Retained earnings B (11) Contributed surplus L (2) Current liabilities Q (12) Liabilities D (3) Liquidity P (13) Long-term assets H (4) Contra-asset account C (14) Shareholders' equity N (5) Accumulated amortization E (15) Current assets J (6) Intangible assets K (16) Assets A (7) Other assets O (17) Long-term liabilities I (8) Shares outstanding M (9) Normal operating cycle F (10) Book value
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P6–4 Req. 1 The asset category that increased the most is Property and Equipment, from $1,803.5 million at December 31, 2005 to $2,158.7 million at December 31, 2006, or $355.3 million. This net increase includes additions less disposals and amortization. The cash
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This note was uploaded on 12/09/2009 for the course ACCO comm 217 taught by Professor Mroz during the Fall '09 term at Concordia Canada.

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Ch06 - Chapter 6 Communicating and Interpreting Accounting...

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