Concept explainers
(a)
Normal balance:
Normal balance refers to the heavier side of an account. When an account shows balance on the left side of the account, it has a normal debit balance. Similarly, when an account shows balance on the right side of the account, it has a normal credit balance. Usually, all asset accounts have normal debit balance, and all the liabilities, and
To determine: The normal balance for each account and the increase, and decrease side of each account.
(b)
To identify: The other probable account involved in the transaction and the effects of that account.
(c)
To identify: The other account that ordinarily involved.
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Financial Accounting: Tools for Business Decision Making, 8th Edition
- QUESTION 1 a) You are the accounts executive for BFC Enterprise. You are responsible to prepare the monthly receivables and payables control accounts for the business. Following are balances from the company’s record at 1 February 2020. Dr RM Cr RM Debtor ledger control account 54,000 1,000 Creditor ledger control account 200 43,000 The following information is extracted in February 2020 from the company’s records: RM Credit sales 251,000 Cash sales 34,000 Credit purchases…arrow_forwardQuestion Carlene Johnson is the Accountant in the Finance Department at Fairway Trading Limited who manages the company Accounts Receivables. She was given the following information by the Finance Manager which was extracted from the debtor's ledger as at December 31, 2022. Category of Total value of Customers Sales To Customer $ Keith Green Karen White June Hinds John Wayne 180,0000 240,000 390,000 380,000 Paul Gayle 346,000 Date of Sales December 16, 30 days 2021 December 10, 60 days 2021 November 15, 2022 30 days June 26, 2022 30 days 30 days August 25, 2022 Terms Percentage provision to be created Date of Last Payment on A/C January 15, 2022 February 14, 2022 December 20, 2022 October 24, 2022 September 24, 2022 Total Amount Paid to Date on Account S 90,500 180,000 170,000 295,000 235,000 The Accountant decided that she would age the debt outstanding in the following category and the percentage to be provided for bad debt in the amount stated beside each category accordingly. Aging…arrow_forwardQuestion Content Area Accounts Receivable Analysis Xavier Stores Company and Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions): Xavier Lestrade Sales $8,500,000 $4,585,000 Credit card receivables-beginning 820,000 600,000 Credit card receviables-ending 880,000 710,000 a. Determine the (1) accounts receivable turnover and (2) the number of days' sales in receivables for both companies. Round your calculations and answers to one decimal place. Assume 365 days a year. Xavier Lestrade 1. Accounts receivable turnover fill in the blank 1 fill in the blank 2 2. Number of days' sales in receivables fill in the blank 3 days fill in the blank 4 days b. Fill in the blank: Xavier's accounts receivable turnover is much 1)_____ than Lestrade's. The…arrow_forward
- Analyze Target The following data (in millions) are taken from the financial statements of Target Corporation (TGT), the owner of Target stores: a. For Target, determine the amount of change in millions and the percent of change rounded to one decimal place from Year 1 to Year 2 for: 1. Revenue 2. Operating expenses 3. Operating income b. What conclusions can you draw from your analysis of the revenue and total operating expenses?arrow_forwardConducting a Financial Ratio Analysis on HP INC. Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin' Brands' financial statements. In this chapter, we will use financial Internet websites (specifically, www.morningstar.com and www.google.com / finance) to analyze HP Inc., a computer hardware company. Once on either website, you simply enter HP Inc.'s ticker symbol (HPQ) to obtain the financial information needed. The text mentions that financial statement analysis has two major components: a trend analysis, where we evaluate changes in key ratios over time, and a freer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We will do both of these types of analysis in this problem. Through the Morningstar website, you can find the firm's financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firm's trend analysis. (At the bottom of the screen you will see that you can click "Glossary to find definitions for the different ratios For example, Morningstar's Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) On the Google Finance site, you can find the firms financial statements for the four most recent years or the five most recent quarters and key financial data for related companies for the most recent year or quarter. We will use the related companies' annual data to conduct the firm's peer analysis. Notice that when you go to the "Related Companies" screen, you can "add or remove columns." Click on that phrase, and you can check which peer data items you'd like to show on tire computer screen. Also, once you have chosen the data, you can click on a term, and the companies will be ranked in either ascending or descending order for tire specific term selected. 6. From the Google Finance site, look at HP's profitability ratios (as measured by its profit margin, ROA, and ROE). How do these ratios compare with those of its peers?arrow_forwardFINANCIAL RATIOS Use the work sheet and financial statements prepared in Problem 15-8A. All sales are credit sales. The Accounts Receivable balance on January 1,20--, was 3,800. REQUIRED Prepare the following financial ratios: (a) Working capital (b) Current ratio (c) Quick ratio (d) Return on owners equity (e) Accounts receivable turnover and average number of days required to collect receivables (f) Inventory turnover and average number of days required to sell inventoryarrow_forward
- Conducting a Financial Ratio Analysis on HP INC. Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin' Brands' financial statements. In this chapter, we will use financial Internet websites (specifically, www.morningstar.com and wnvcv.google.com/finance) to analyze HP Inc., a computer hardware company. Once on either website, you simply enter HP Inc.'s ticker symbol (HPQ) to obtain the financial information needed. The text mentions that financial statement analysis has two major components: a trend analysis, where we evaluate changes in key ratios over time, and a peer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We will do both of these types of analysis in this problem. Through the Morningstar website, you can find the firm's financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firm's trend analysis. (At the bottom of the screen you will see that you can click "Glossary to find definitions for the different ratios For example, Morningstar's Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) On the Google Finance site, you can find the firms financial statements for the four most recent years or the five most recent quarters and key financial data for related companies for the most recent year or quarter. We will use the related companies' annual data to conduct the firms peer analysis. Notice that when you go to the "Related Companies" screen, you can add or remove columns. Click on that phrase, and you can check which peer data items you'd like to show on tire computer screen. Also, once you have chosen the data, you can click on a term, and the companies will be ranked in either ascending or descending order for the specific term selected. 7. From the Google Finance site, use the DuPont analysis to determine the total assets turnover ratio for each of tire peer companies. (Hint ROA = Profit margin Total assets turnover.) Once you've calculated each peer 's total assets turnover ratio, then you can use the DuPont analysis to calculate each peer's equity multiplier.arrow_forwardConducting a Financial Ratio Analysis on HP INC. Use online resources to work on this chapter's questions. Please note that website information changes over time, and these changes may limit your ability to answer some of these questions. In Chapter 3, we looked at Dunkin' Brands' financial statements. In this chapter, we will use financial Internet websites (specifically, www.morningstar.com and www.google.com/finance) to analyze HP Inc., a computer hardware company. Once on either website, you simply enter HP Inc.'s ticker symbol (HPQ) to obtain the financial information needed. The text mentions that financial statement analysis has two major components: a trend analysis, where we evaluate changes in key ratios over time, and a freer analysis, where we compare financial ratios with firms that are in the same industry and/or line of business. We will do both of these types of analysis in this problem. Through the Morningstar website, you can find the firm's financials (Income Statement, Balance Sheet, and Cash Flow) on an annual or quarterly basis for the five most recent time periods. In addition, the site contains Key Ratios (Profitability, Growth, Cash Flow, Financial Health, and Efficiency) for 10 years. We will use the Key Ratios on this site to conduct the firm's trend analysis. (At the bottom of the screen you will see that you can click "Glossary" to find definitions for the different ratios. For example, Morningstar's Financial Leverage ratio is the same as the Equity multiplier that we use in the textbook.) On the Google Finance site, you can find the firms financial statements for the four most recent years or the five most recent quarters and key financial data for related companies for the most recent year or quarter. We will use the related companies' annual data to conduct the firm's peer analysis. Notice that when you go to the "Related Companies" screen, you can "add or remove columns." Click on that phrase, and you can check which peer data items you'd like to show on tire computer screen. Also, once you have chosen the data, you can click on a term, and the companies will be ranked in either ascending or descending order for the specific term selected. 1. Looking at Morningstar's Financial Health ratios, what has happened to HPs liquidity position over the past 10 years?arrow_forwardCodification Situation You are conducting an accounting research project for your boss. Your boss has asked you to determine the appropriate U.S. GAAP that specifies how your company should recognize revenues from the sales of products in a retail store. Your boss is confused because most customers pay cash, but some customers purchase on credit terms, and pay in cash 30 days later. Your manager also wants you to determine the GAAP guidance for how revenue should be recognized in income. Your manager has a lot of knowledge and experience in accounting and has heard about, but has never used, the FASB Accounting Standards Codification system. Directions Use the FASB Accounting Standards Codification system to conduct the research your manager has assigned to you. Use the Codification to determine how to recognize revenue from retail sales, including the right to return. Be prepared to show your manager the specific FASB ASC references that provide the appropriate guidance. Also prepare a brief memo explaining to your manager the different levels of the Codification and how to use the Codification system.arrow_forward
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