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ch 3 soltions - Gibson Financial Reporting Analysis 11e...

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Gibson, Financial Reporting & Analysis, 11e Chapter 3 Balance Sheet TO THE NET 1. a. $639,891,000 b. $458,995,000 c. These shares have been issued, bought back and not retired 2. a. $3,750,142,000 b. $405,822,000 c. Intangibles are recorded at historical cost and amortized over their useful lives or their legal lives, whichever is shorter. 3. a. $8,105,000,000 b. In accordance with industry practice, inventoried costs include amounts relating to programs and contracts with long production cycles, a portion of which is not expected to be realized within one year. This gives the liquidity appearance on the high side. 4. a. Current Liabilities $46,616,000 Long-Term Liabilities $18,223,000 $64,839,000 b. The firm will use past experience and judgment related to current products. This is a subjective process. 5. a. $29,023,800,000 b. $1,036,200,000 c. No. With a consolidation, this amount would not be present. d. No. The affiliates would represent substantial revenue. 6. a. Serves as the primary vehicle for employer contributions to the Hershey Company 401(K) b. “The Milton Hershey School Trust must approve the issuance of shares of common stock or any other action that would result in the Milton Hershey School Trust not continuing to have voting control of our company.” 48
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Gibson, Financial Reporting & Analysis, 11e QUESTIONS 3-1. Assets - Resources of the firm Liabilities – Debts or obligations of the firm; creditors' interest Owners' Equity - Owners' interest in the firm 3-2. 3-3. 3-4. They are listed in order of liquidity, which is the ease with which they can be converted to cash. 3-5. Marketable securities are held as temporary investments or idle cash. They are short-term, low risk, highly liquid, low yield. Examples are treasury bills and commercial paper. Investments are long-term, held for control or future use in operations. They are usually less liquid and expected to earn a higher return. 3- 6. Accounts receivable represents the money that the firm expects to collect from customers; accounts payable represents the debts for goods or services purchased by a firm. 3-7. A retailing firm will have only finished goods and supplies. A manufacturing firm will have raw materials, work in process, finished goods, and supplies. 3-8. Depreciation represents the allocation of an asset’s cost over the period it is utilized. Tools, machinery, and buildings are depreciated because they wear out. Land is not depreciated, since its value typically does not decline. If the land has minerals or natural resources, it may be subject to depletion. 3-9. Straight-line depreciation is better for reporting, since it results in higher profits than does accelerated depreciation. Double-declining balance is preferable for tax purposes, since it allows the highest depreciation and, thereby, lower taxes in the early years of the life of the asset. Using double- declining-balance for taxes increases the firm's cash flow in the short run.
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