Chap001 Solution Manual

1 45000 20000 8000 73000 3 1420 1420 bal 45000 1420

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1 +$45,000 $20,000 + $8,000 + $73,000 3 + $1,420 + $1,420 Bal. 45,000 + 1,420 + 20,000 + 8,000 = 1,420 + 73,000 6 + $4,800 + $ 4,800 Bal. 45,000 + 4,800 + 1,420 + 20,000 + 8,000 = 1,420 + 73,000 + 4,800 8 - 1,420 - 1,420 Bal. 43,580 + 4,800 + 1,420 + 20,000 + 8,000 = 0 + 73,000 + 4,800 12 + 1,400 + 1,400 Bal. 43,580 + 6,200 + 1,420 + 20,000 + 8,000 = 0 + 73,000 + 6,200 15 + 4,800 - 4,800 Bal. 48,380 + 1,400 + 1,420 + 20,000 + 8,000 = 0 + 73,000 + 6,200 17 - 805 - $ 805 Bal. 47,575 + 1,400 + 1,420 + 20,000 + 8,000 = 0 + 73,000 + 6,200 - 805 20 - 1,728 - 1,728 Bal. 45,847 + 1,400 + 1,420 + 20,000 + 8,000 = 0 + 73,000 + 6,200 - 2,533 22 + 1,400 - 1,400 Bal. 47,247 + 0 + 1,420 + 20,000 + 8,000 = 0 + 73,000 + 6,200 - 2,533 28 + 5,208 + 5,208 Bal. 47,247 + 5,208 + 1,420 + 20,000 + 8,000 = 0 + 73,000 + 11,408 - 2,533 31 - 875 - 875 Bal. 46,372 + 5,208 + 1,420 + 20,000 + 8,000 = 0 + 73,000 + 11,408 - 3,408 31 - 3,600 - $3,600 Bal. $42,772 + $5,208 + $1,420 + $20,000 + $8,000 = $ 0 + $73,000 - $3,600 + $11,408 - $3,408 1-54
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Chapter 01 - Accounting in Business Reporting in Action — BTN 1-1 1. An organization’s total assets are equal to its total liabilities plus total equity. Because Research In Motion’s liabilities and equity total $10,204 (in millions), this implies its amount of assets invested is the same $10,204 (in millions). 2. Return on assets is net income divided by the average total assets invested. For Research In Motion this return is ($ millions): $2,457 / [($8,101 + $10,204)/2] = 0.268 or 26.8% . 3. We know that net income equals total revenues less total expenses. For Research In Motion, we are told net income is $2,457 and revenues are $14,953. Thus, Research In Motion’s total expenses are computed as: $14,953 - Expenses = $2,457. Total expenses must equal $12,496 (in millions). 4. Research In Motion’s return on assets of 26.8% is good given the 2009- 2010 recessionary period. Further, its return markedly exceeds its competitors’ return on assets of approximately 18% for this period. 5. Answer depends on the current annual report information obtained. Comparative Analysis — BTN 1-2 ($ millions) Research In Motion Apple 1. Total assets = Liabilities + Equity $10,204 $47,501 2. Return on assets $2,457 $8,235 [($8,101 + $10,204)/2] [($36,171 + $47,501)/2] 26.8% 19.7% 3. Revenues-Expenses $14,953-Expenses=$2,457 $42,905-Expenses=$8,235 = Net income Expenses = $12,496 Expenses = $34,670 4. Analysis of return on assets: Research In Motion’s 26.8% return is good given the moderate risk Research In Motion confronts and the recessionary period for these returns (and vis-à-vis the 18% return of its competitors). Apple’s 19.7% return is still better than competitors but is not as strong as Research In Motion’s. 5. Analysis conclusions: Apple’s return is acceptable (good when compared to the industry norm); Research In Motion’s return is arguably very good. 1-55
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Chapter 01 - Accounting in Business Both companies’ expenses are a large percentage of their revenues. 1-56
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Chapter 01 - Accounting in Business Ethics Challenge — BTN 1-3 1. There are several parties affected. They include the users of financial statements such as shareholders, lenders, investors, analysts, suppliers, directors, unions, regulators and others. They also include the accounting firm, which can be sued if deemed a party to misleading statements. 2. A major factor in the value of an auditor's report is the auditor's independence. If an auditor accepted a fee that increases when the client’s reported profit increases, the auditor is (or at least is perceived to be) interested in higher profits for the client. This compromises the auditor's independence. 3. Thorne should not accept this fee arrangement. To avoid compromising the auditor's independence, Thorne should reject it. (Further, the AICPA Code of Professional Conduct forbids auditors from accepting contingent fees that depend on amounts reported in a client's financial statements.
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