Test bank and solution manual for foundations accounting (2)

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Test bank and solution manual for foundations accounting (2)

BHD_16e_SM_Chapter_02.pdfIM_chap002_16th_edition.pdfBHD_16e_Chap002.pdfCase_02_16e.pdfChapter_02_Student.pdfIMCase_02_16e.pdfChapter 02: Review of Acc

Test bank and solution manual for foundations accounting (2)countingChapter 2 Review of AccountingDiscussion Questions2-1.Discuss some financial variables that affect the price-earnings ratio.The price-earnings

ratio will be influenced by the earnings and sales growth of the firm, the risk or volatility in performance, the debt-equity structure of the firm, Test bank and solution manual for foundations accounting (2)

the dividend payment policy, the quality of management, and a number of other factors. The ratio tends to be future-oriented, and the more positive th

Test bank and solution manual for foundations accounting (2)

e outlook, the higher it will be.2-2.What is the difference between book value per share of common stock andmarket value per share? Why does this disp

BHD_16e_SM_Chapter_02.pdfIM_chap002_16th_edition.pdfBHD_16e_Chap002.pdfCase_02_16e.pdfChapter_02_Student.pdfIMCase_02_16e.pdfChapter 02: Review of Acc

Test bank and solution manual for foundations accounting (2)e number of common shares outstanding. It is based on the historical cost of the assets. Market value per share is based on the current assessed value

of the firm in the marketplace and may bear little relationship to original cost. Besides the disparity between book and market value caused by the h Test bank and solution manual for foundations accounting (2)

istorical cost approach, other contributing factors are the growth prospects for the firm, the quality of management, and the industry outlook. To the

Test bank and solution manual for foundations accounting (2)

extent these are quite negative or positive: market value may differ widely from book value.2-3.Explain how depreciation generates actual cash flows

BHD_16e_SM_Chapter_02.pdfIM_chap002_16th_edition.pdfBHD_16e_Chap002.pdfCase_02_16e.pdfChapter_02_Student.pdfIMCase_02_16e.pdfChapter 02: Review of Acc

Test bank and solution manual for foundations accounting (2)duction may provide cash flow equal to the tax rate times the depreciation charged. This much in taxes will be saved, while no cash payments occur.2-4

.What is the difference between accumulated depreciation and depreciationexpense? How are they related?Accumulated depreciation is the sum of all past Test bank and solution manual for foundations accounting (2)

and present depreciation charges, while depreciation expense is the current year's charge. They are related in that the sum of all prior depreciation

Test bank and solution manual for foundations accounting (2)

expense should be equal to accumulated depreciation (subject to some differential related to asset write-offs).Copyright c 2017 .McGraw-Hill Educatio

BHD_16e_SM_Chapter_02.pdfIM_chap002_16th_edition.pdfBHD_16e_Chap002.pdfCase_02_16e.pdfChapter_02_Student.pdfIMCase_02_16e.pdfChapter 02: Review of Acc

Test bank and solution manual for foundations accounting (2)2-7.How is the income statement related to the balance sheet?rhe earnings (less dividends) reported in the income statement is transferred to the owne

rship section of the balance sheet as retained earnings. Tims, what we earn in the income statement becomes pair of the ownership interest in the bala Test bank and solution manual for foundations accounting (2)

nce sheet.Comment on why inflation may restrict the usefulness of the balance sheet as normally presented.The balance sheet is based on historical cos

Test bank and solution manual for foundations accounting (2)

ts. When prices are rising rapidly, historical cost data may lose much of their meaning particularly for plant and equipment and inventory.Explain why

BHD_16e_SM_Chapter_02.pdfIM_chap002_16th_edition.pdfBHD_16e_Chap002.pdfCase_02_16e.pdfChapter_02_Student.pdfIMCase_02_16e.pdfChapter 02: Review of Acc

Test bank and solution manual for foundations accounting (2)t are based on the accrual method of accounting, which attempts to match revenues and expenses in the period in which they occur. However, accrual acc

ounting does not attempt to properly assess the cash flow position of the firm. The statement of cash flows fulfills this need.What are the three prim Test bank and solution manual for foundations accounting (2)

ary sections of die statement of cash flows? In what section would the payment of a cash dividend be shown?The sections of the statement ofcash flows

Test bank and solution manual for foundations accounting (2)

are:Cash flows from operating activitiesCash flows from investing activities Cash flows from financing activitiesThe payment ofcash dividends falls in

BHD_16e_SM_Chapter_02.pdfIM_chap002_16th_edition.pdfBHD_16e_Chap002.pdfCase_02_16e.pdfChapter_02_Student.pdfIMCase_02_16e.pdfChapter 02: Review of Acc

Test bank and solution manual for foundations accounting (2)tten consent

BHD_16e_SM_Chapter_02.pdfIM_chap002_16th_edition.pdfBHD_16e_Chap002.pdfCase_02_16e.pdfChapter_02_Student.pdfIMCase_02_16e.pdfChapter 02: Review of Acc