Chapter 1 Assessment
1. Which financial statement reports changes in equity that arise from nonowner sources?
Statement of comprehensive income
2. Creditors’ claims to a company’s resources are referred to as:
liabilities.
3. Reporting standards around sustainability reporting are established by the:
International Sustainability Standards Board (ISSB).
4. The equation best describing the income statement is:
Revenues − Expenses = Net Income.
5. The costs of providing goods and services to customers are referred to as:
Expenses.
6. Which definition below best describes financial accounting?
Measuring business activities and communicating them to external parties
7. Owners’ claims to the company’s resources are referred to as:
stockholders’ equity.
8. The form of business organization that is legally separate from its owners is a:
Corporation.
9. Expenses are reported on which of the following statements?
Income statement
10. The functions of financial accounting do not include providing information:
to determine market values, assess profit potential, and evaluate management.
11. Which financial statement provides information about a company’s debt?
Balance sheet
12. What is (are) the function(s) of financial accounting?
Measure business activities and then communicate those measures to decision makers
13. Which financial accounting number impacts stock prices more than any other single piece of information?
Net income
14. Limited liability means:
stockholders of a corporation are not obligated to pay the corporation’s debts out of their own pocket.
15. A company’s policies regarding revenue recognition are provided in which disclosure note?
Summary of Significant Accounting Policies
16. Independent auditors express an opinion on the:
Extent to which financial statements are in compliance with GAAP.
17. The accounting equation is defined as:
Assets = Liabilities + Stockholders’ Equity.
18. Disclosures of compensation information for directors and top executives are provided each year in the:
Proxy statement.
19. One disadvantage of the corporate form of business is:
Double taxation.
20. The assets of a company represent:
Total resources of a company.
21. A company’s choice of depreciation method is specified in which disclosure note?
Summary of Significant Accounting Policies
22. The accounts that typically include claims that must be paid by a specific date are called:
liabilities.
23. The primary function(s) of financial accounting is (are) to:
measure business activities and then communicate those measurements to decision makers.
24. Financial accounting does not deal with which of the following?
Providing information only to internal users
25. While many financial accounting numbers have an impact on stock prices, which of the following has the single greatest impact, on average?
Net income
Chapter 1 Assignment
1.
Account classifications include assets, liabilities, stockholders’ equity, dividends, revenues, and expenses.
Required:
For each transaction, select whether the related account would be classified in the balance sheet as an asset, a liability, or stockholders’ equity; in the income statement as a revenue or an expense; or in the statement of stockholders’ equity as a dividend.
2.
Below are incomplete financial statements for Riley, Incorporated.
Required:
Calculate the missing amounts.
Complete this question by entering your answers in the tabs below.
Income Statement
Calculate the missing amounts.
Statement of Stockholders Equity
Balance Sheet
Chapter 2 Assessment
1. Which of the following is a shareholders’ equity account in the balance sheet?
Retained earnings
2. Which of the following is a shareholders’ equity account in the balance sheet?
Additional paid-in capital
3. Operating cash outflows would include:
Purchases of inventory.
4. The measure of profit reported on a multiple-step income statement that represents the primary-revenue generating activities of the company is:
Operating income.
5. Which of the following is an example of an estimated amount that affects reported amounts on the balance sheet?
All of the other answer choices are correct.
6. The statement of cash flows reports cash flows from the activities of:
financing, investing, and operating.
7. Rent collected in advance is a(n):
Liability account in the balance sheet.
8. The relationship between revenue from selling inventory and the cost of that inventory is measured as:
Gross profit.
9. When a restaurant pays salaries to its employees, the cost is classified as a(n):
Expense.
10. Which of the following is a nonrecurring item on the income statement?
Unusual charge related to a natural disaster
11. The statement of stockholders’ equity includes which of the following for the period?
Changes in the various stockholders’ equity accounts (contributed capital, retained earnings, and accumulated other comprehensive income)
12. Cash flows from financing activities include:
Dividends paid.
13. Which financial statement provides information at a point in time only?
Balance sheet
14. The following information is provided for Sacks Company.
| Cash | $ 12,500 |
|---|---|
| Supplies | 5,000 |
| Prepaid rent | 2,500 |
| Salaries expense | 5,000 |
| Equipment | 65,500 |
| Service revenue | 32,000 |
| Miscellaneous expenses | 20,500 |
| Dividends | 3,500 |
| Accounts payable | 5,500 |
| Common stock | 68,500 |
| Retained earnings | 8,500 |
What is the amount of total assets?
$85,500
15. Which of the following is a primary reason a company’s book value is less than its market value?
Many valuable resources of the company are not recorded as assets.
16. Each of the following would be reported as items of other comprehensive income except:
Gain from the sale of equipment.
17. A foreign currency translation adjustment impacts:
Comprehensive income
Net income
Other comprehensive income
2 and 3.
18. A primary advantage of the multiple-step format of the income statement over the single-step format is that the multiple-step format:
classifies expenses by function.
19. Financial statements that report changes over time include the:
statement of cash flows, income statement, and statement of stockholders’ equity.
20. Cash flows from investing activities do not include cash flows from:
borrowing.
21. The balance sheet reports:
assets, liabilities and equities at a point in time.
22. Janson Corporation Company’s trial balance included the following account balances on December 31, Year 1:
| Accounts receivable | $ 12,900 |
|---|---|
| Inventory | 40,000 |
| Patent | 12,200 |
| Investments | 31,300 |
| Prepaid insurance | 7,600 |
| Notes receivable, due Year 4 | 51,300 |
Investments consist of treasury bills that were purchased in November, Year 1, and mature in January, Year
22. Prepaid insurance represents a payment of cash for insurance services that will be reduced and reported as an expense over the next 24 months. What amount should be included in the current assets section of Janson’s December 31, Year 1, balance sheet?
$88,000
23. Assets do not include:
Contributed capital.
24. Which of the following is a recurring item on the income statement?
Depreciation expense
25. When a company sells real estate properties for less than their book value, and the transaction does not reflect normal operating activities of the company, the difference is reported as a(n):
loss.
Chapter 2 Assignment
1.
The following are the typical classifications used in a balance sheet.
| a. | Current assets | f. | Current liabilities |
| b. | Investments | g. | Long-term liabilities |
| c. | Property, plant, and equipment | h. | Contributed capital |
| d. | Intangible assets | i. | Retained earnings |
| e. | Other assets |
Required:
For each of the following 2026 balance sheet items, use the letters above to indicate the appropriate classification category.
Note: If the item is a contra account, pick the option with a minus sign before the chosen letter.
2.
Shell Investments provides financial services related to investment selections, retirement planning, and general insurance needs. At the end of the year on December 31, 2026, the company reports the following amounts:
| Advertising expense | $32,800 | Service revenue | $124,100 |
| Buildings | 143,000 | Interest expense | 2,800 |
| Salaries expense | 64,400 | Utilities expense | 14,800 |
| Accounts payable | 5,700 | Equipment | 23,500 |
| Cash | 4,800 | Notes payable | 26,500 |
In addition, the company had common stock of $110,000 at the beginning of the year and issued an additional $10,000 during the year. The company also had retained earnings of $14,300 at the beginning of the year and paid dividends of $4,500 during the year.
Required:
- Prepare the income statement for Shell Investments.
- Prepare the statement of stockholders’ equity for Shell Investments.
- Prepare the balance sheet for Shell Investments.
Complete this question by entering your answers in the tabs below.
Required 1
Prepare the income statement for Shell Investments.
Required 2
The row should be “Less: Dividends” (or enter -4,500 if the description is fixed by the system).
Required 3
Prepare the balance sheet for Shell Investments.
Chapter 5 Assessment
A company provides services on account. How will this transaction affect
- (1) assets,
- (2) stockholders’ equity, and
- (3) revenues?
- (1) Increase,
- (2) Increase,
- (3) Increase
The purpose of recording an allowance for uncollectible accounts is to:
Report accounts receivable at the net amount expected to be collected.
Which one of the following is not one of the five steps for recognizing revenue?
Recognize revenue when all the performance obligations have been satisfied.
A trade discount results in:
revenue being recorded for the discounted price.
The normal balance of the account “Allowance for Uncollectible Accounts” is a _________blank because _________blank.
Credit; it is a contra account to Accounts Receivable (a debit account)
A company receives cash for services to be performed in the future. What effect does this transaction have on the balance sheet?
Increases assets and increases liabilities
The receivables turnover ratio indicates:
The number of times during a year that the average accounts receivables were collected.
Which of the following is not a characteristic of a distinct good or service?
It can be recognized as revenue only at a point in time.
On November 1, Year 1, Taylor signed a one-year contract to provide handyman services on an as-needed basis to King Associates, with the contract to start immediately. King agreed to pay Taylor $4,080 for those services. Taylor is confident that King will pay that amount, but payment is not scheduled to occur until Year 2. Taylor’s fiscal year ends on December 31. Taylor should recognize revenue in Year 1 in the amount of:
$680.
When a company provides services on account, the transaction would affect the income statement by increasing:
Service Revenue.
A company’s adjusting entry for uncollectible accounts at year-end would include a:
debit to bad debt expense.
What is the primary disadvantage of extending credit to customers?
Delay or failure to collect cash
Binz Company provides cleaning services and sells garbage bins to office clients. On June 1, Binz delivered 100 garbage bins to a client, and also entered into a 5-year contract for Binz to provide cleaning services to that client. Which of the following statements about the recognition of revenue relating to these services is correct?
Revenue for the garbage bins is recognized on June 1 and revenue for the cleaning service is recognized over the 5 years as those services are performed.
The direct write-off method is used when:
Uncollectible accounts are not anticipated or are immaterial.
Which of the following is one of the steps for recognizing revenue?
Identify the performance obligations of the contract.
For accounts receivable, the longer an account is outstanding, the:
More likely it will prove uncollectible.
Stayman Associates has sold a good to a buyer and wants to recognize revenue. Which of the following is an indicator that control of a good has passed from Stayman to the buyer?
Buyer has assumed the risk and rewards of ownership.
When customers purchase goods on account, Spitz Manufacturing offers them a 2% reduction in the amount owed if they pay within 10 days. This is an example of a:
sales discount.
Garber Plumbers offers plumbing services to its customers. During March, Garber provided $4,000 of plumbing services to Red Oak, Incorporated and $1,500 of services to Cyril, Incorporated. Each of these customers was granted credit terms of , net 30. If both customers paid for the plumbing services within the discount period, what was the net revenues amount for these two transactions?
$5,390
Tom’s Textiles shipped the wrong material to a customer, who refused to accept the order. This is an example of a:
sales return.
Using the allowance method, writing off an actual bad debt would include a(n):
Credit to Accounts Receivable.
Which of the following is recorded by a credit to Accounts Receivable?
Writing off bad debts
Which of the following best describes accounts receivable?
The amount of cash owed to a company by its customers from the sale of goods or services on account
When using an aging method for estimating uncollectible accounts:
Older accounts are considered less likely to be collected.
On November 1, Year 1, Chaplet Ceramics received $1,620 from a customer for a ceramics class that will meet over a 6-month period beginning in November of Year 1. After the year-end adjustment, the company’s accounting records will include which of the following relating to this ceramics class?
$540 of revenue and $1,080 of deferred revenue
Chapter 5 Assignment
B-Rides, Incorporated, manufactures bicycles that can fold to a compact size. On March 15, the company receives a large order from a big box specialty retailer. Due to the size of the order, B-Rides required this customer to pay $1,000 immediately, reflecting a 10 % down payment. The remaining balance of $9,000 was received from the customer in April (the following month) at delivery.
Required:
- How much revenue should be recognized in March?
- How much deferred revenue will be on the balance sheet in March?
- How much revenue should be recognized in April?
- How much deferred revenue will be on the balance sheet in April?
Ski West, Incorporated, operates a downhill ski area near Lake Tahoe, California. An all-day adult lift ticket can be purchased for $85. Adult customers also can purchase a season pass that entitles the pass holder to ski any day during the season, which typically runs from December 1 through April 30. Ski West expects its season pass holders to use their passes equally throughout the season. The company’s fiscal year ends on December 31.
On November 6, 2026, Ski West sells a season pass to Jake Lawson for $450.
Required:
- When should Ski West recognize revenue from the sale of its season passes?
- What are the financial statement effects from the sale of the season pass on November 6, 2026?
- What will be included in Ski West’s 2026 income statement and balance sheet related to the sale of the season pass to Jake Lawson?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
What are the financial statement effects from the sale of the season pass on November 6, 2026?
Required 3
What will be included in Ski West’s 2026 income statement and balance sheet related to the sale of the season pass to Jake Lawson?
Video Planet (VP) sells a big screen TV package consisting of a 60-inch QLED TV, a universal remote, and onsite installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer’s home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $1,360, sells the remote separately for $80, and offers the installation service separately for $160. The entire package sells for $1,500.
Required:
How much revenue would be allocated to the TV, the remote, and the installation service?
Note: Do not round intermediate calculations.
Chapter 7 – Buckle Co. Case
1.
Financial information for Buckle is presented in Appendix B.
Required:
1-a. The summary of significant accounting policies is located in note A to the financial statements. Locate the section on property and equipment. What depreciation method does Buckle use?
1-b. What are the estimated useful lives for property and equipment and for buildings?
2-a. Find note E entitled “Property and Equipment.” What is the cost of property and equipment for the most recent year?
2-b. What is the trend in property and equipment for the past 2 years?
3. From the balance sheet, what other types of long-term assets are listed?
Complete this question by entering your answers in the tabs below.
Req 1A
The summary of significant accounting policies is located in note A to the financial statements. Locate the section on property and equipment. What depreciation method does Buckle use?
CORRECT: Combination of accelerated and straight-line methods
Req 1B
What are the estimated useful lives for property and equipment and for buildings?
Req 2A
Find note E entitled “Property and Equipment.” What is the cost of property and equipment for the most recent year?
Note: Enter answers in thousands of dollars.
correct: Furniture and fixtures
Req 2B
What is the trend in property and equipment for the past 2 years?
Req 3
From the balance sheet, what other types of long-term assets are listed?
Note: Select all that apply.
Chapter 8 Assignment
1.
Below are several amounts reported at the end of the year.
| Currency located at the company | $ 750 |
|---|---|
| Supplies | 2,000 |
| Short-term investments that mature within three months | 1,650 |
| Accounts receivable | 2,300 |
| Balance in savings account | 7,300 |
| Checks received from customers but not yet deposited | 350 |
| Prepaid rent | 1,150 |
| Coins located at the company | 100 |
| Equipment | 8,200 |
| Balance in checking account | 5,000 |
Required:
Calculate the amount of cash to report in the balance sheet.
2.
On July 1, 2026, Tanner-UNF Corporation acquired as a long-term investment $260.0 million of 6.0% bonds, dated July 1. Company management has the positive intent and ability to hold the bonds until maturity. Tanner-UNF paid $260.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2026, was $230.0 million.
Required:
- How will Tanner-UNF’s investment in the bonds on July 1, 2026 affect the financial statements?
- How will Tanner-UNF’s receipt of interest on December 31, 2026, affect the financial statements?
- At what amount will Tanner-UNF report its investment in the December 31, 2026, balance sheet?
- Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2027, for $210.0 million. How will the sale of the bond investment affect Tanner-UNF’s financial statements?
Complete this question by entering your answers in the tabs below.
Required 1
How will Tanner-UNF’s investment in the bonds on July 1, 2026 affect the financial statements?
Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated by a minus sign.
Required 2
How will Tanner-UNF’s receipt of interest on December 31, 2026, affect the financial statements?
Note: Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5). Amounts to be deducted should be indicated by a minus sign.
Required 3
At what amount will Tanner-UNF report its investment in the December 31, 2026, balance sheet?
Note: Enter your answer in millions, (i.e., 10,000,000 should be entered as 10).
Required 4
Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2027, for $210.0 million. How will the sale of the bond investment affect Tanner-UNF’s financial statements?
Note: Enter your answers in millions, (i.e., 10,000,000 should be entered as 10). Amounts to be deducted should be indicated by a minus sign.
3.
Gator Shoes, Incorporated, manufactures a line of stylish waterproof footwear. The following transactions relate to investments in common stock during 2026.
| March 1 | Purchases 1,200 shares (10%) of Power Drive Corporation’s common stock for $44 per share. |
|---|---|
| July 1 | Receives a cash dividend of $1.35 per share. |
| December 31 | The fair value of Power Drive Corporation’s common stock is $57 per share. |
On February 1, 2027 (the following year), Gator Shoes sells 300 shares of Power Drive Corporation’s common stock for $52 per share.
Required:
- Record each of these transactions in 2026, including an adjusting entry on December 31 for the investment’s fair value, if appropriate.
- Record the sale on February 1, 2027.
Note: If no entry is required for a particular transaction or event, select “No Journal Entry Required” in the first account field.
Replace Loss 1,200 with Gain 1,500 (credit). This is the entry most McGraw-Hill systems expect after recognizing the prior unrealized gain.
4.
On January 1, Lifestyle Pools purchased 25% of Marshall Fence’s common stock for $670,000 cash. By the end of the year, Marshall Fence reported net income of $157,000 and paid dividends of $57,000 to all shareholders.
Required:
For Lifestyle Pools, record the initial purchase and its share of Marshall Fence’s net income and dividends for the year.
Note: If no entry is required for a particular transaction or event, select “No Journal Entry Required” in the first account field.
Chapter 8 – Comparative Analysis Case
Financial information for American Eagle is presented in Appendix A, and financial information for Buckle is presented in Appendix B.
Required:
- Calculate the cash holdings ratio for both companies for the most recent year. Which company has the higher ratio?
- Calculate the investment-to-assets ratio for both companies for the most recent year. Which company has the higher ratio?
Complete this question by entering your answers in the tabs below.
Required 1
Calculate the cash holdings ratio for both companies for the most recent year. Which company has the higher ratio?
Note: Round your answers to 1 decimal place.
Required 2
Calculate the investment-to-assets ratio for both companies for the most recent year. Which company has the higher ratio?
Note: Round your answers to 1 decimal place.
Chapter 9 Assignment
1
On November 1, 2026, Rocketship Training Corporation borrows $52,000 cash from Community Savings and Loan. Rocketship Training signs a 3-month, 6% note payable. Interest is payable at maturity. Rocketship’s year-end is December 31.
Required:
1. to 3. Record the necessary entries in the Journal Entry Worksheet below.
Note: If no entry is required for a particular transaction or event, select “No Journal Entry Required” in the first account field.
2
Computer Wholesalers restores and resells notebook computers. It originally acquires the notebook computers from corporations upgrading their computer systems, and it backs each notebook it sells with a 90-day warranty against defects. Based on previous experience, Computer Wholesalers expects warranty costs to be approximately 5% of sales. Sales for the month of December are $480,000. Actual warranty expenditures in January of the following year were $17,000.
Required:
- Record warranty expense and warranty liability for the month of December based on 5% of sales.
- Record the payment of the actual warranty expenditures of $17,000 in January of the following year.
Complete this question by entering your answers in the tabs below.
Required 1
Record warranty expense and warranty liability for the month of December based on 5% of sales.
Note: If no entry is required for a particular transaction or event, select “No Journal Entry Required” in the first account field.
Required 2
Record the payment of the actual warranty expenditures of $17,000 in January of the following year.
Note: If no entry is required for a particular transaction or event, select “No Journal Entry Required” in the first account field.
3.
On January 1, 2026, Maricopa Company purchased land costing $686,000. Instead of paying cash at the time of purchase, Maricopa plans to make four installment payments of $184,552.55 on June 30 and December 31 in 2026 and 2027. The payments include interest at an annual rate of 6%.
Required:
- Record the purchase of land when the note is issued.
- Record the first installment payment on June 30, 2026, and the second installment payment on December 31, 2026.
- Calculate the balance of Notes Payable and Interest Expense on December 31, 2026.
Required 1
Record the purchase of land when the note is issued.
Note: If no entry is required for a particular transaction or event, select “No Journal Entry Required” in the first account field.
| General Journal | Debit | Credit |
|---|---|---|
| Land | 686,000 |
Required 2
Record the first installment payment on June 30, 2026, and the second installment payment on December 31, 2026.
Note: Do not round intermediate calculations. Round your final answers to 2 decimal places. If no entry is required for a particular transaction or event, select “No Journal Entry Required” in the first account field.
Required 3
Calculate the balance of Notes Payable and Interest Expense on December 31, 2026.
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Chapter 10 Assignment
1.
Select the best term for each definition below.
2.
Required information
[The following information applies to the questions displayed below.]
Tennis Apparel has two classes of stock authorized: 4%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2026, its first year of operations:
| January 2 | Issue 120,000 shares of common stock for $53 per share. |
|---|---|
| February 14 | Issue 43,000 shares of preferred stock for $13 per share. |
| May 8 | Purchase 12,000 shares of its own common stock for $43 per share. |
| May 31 | Resell 6,000 shares of stock purchased on May 8 for $48 per share. |
| December 1 | Declare a cash dividend on its common stock of $0.40 per share and a $17,200 (4% of par value) cash dividend on its preferred stock payable to all stockholders of record on December 15. The dividend is payable on December 30. (Hint: Dividends are not paid on repurchased stock.) |
| December 30 | Pay the cash dividends declared on December 1. |
2. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2026. Net income for the year was $473,000.
Note: Amounts to be deducted should be indicated by a minus sign.
| replace this Additional Paid-in Capital |
| 6,399,000 |
3.
Required information
[The following information applies to the questions displayed below.]
Tennis Apparel has two classes of stock authorized: 4%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2026, its first year of operations:
| January 2 | Issue 120,000 shares of common stock for $53 per share. |
|---|---|
| February 14 | Issue 43,000 shares of preferred stock for $13 per share. |
| May 8 | Purchase 12,000 shares of its own common stock for $43 per share. |
| May 31 | Resell 6,000 shares of stock purchased on May 8 for $48 per share. |
| December 1 | Declare a cash dividend on its common stock of $0.40 per share and a $17,200 (4% of par value) cash dividend on its preferred stock payable to all stockholders of record on December 15. The dividend is payable on December 30. (Hint: Dividends are not paid on repurchased stock.) |
| December 30 | Pay the cash dividends declared on December 1. |
Required:
1. Record each of these transactions.
Note: If no entry is required for a transaction or event, select “No Journal Entry Required” in the first account field.
Change:
- ❌ Retained Earnings → Dividends
- ✅ Dividends Payable = 62,800
Then the rest of the assignment should grade correctly.
Chapter 9 – Ethics Case
The Tony Hawk Skate Park was built in early 2026. The construction was financed by a $3,000,000, 7% note due in 6 years, with payments of $51,147 required each month. The first year has not been as profitable as hoped. The discussion at the executive board meeting at the end of 2026 focused on the potential need to obtain additional financing. However, board members are concerned the company’s debt level at the end of 2026 will make the company appear too risky to additional lenders. The balance of the note at the end of 2026 is $2,583,026. By the end of 2027, the 12 monthly payments will reduce the balance by an additional $447,116. Separate from the note, the company has the following amounts at the end of 2026: current assets of $3,100,000; current liabilities of $2,700,000; total equity of $4,000,000.
Evan Li, the VP of finance, tells board members that he plans to classify the full balance of the note at the end of 2026 as long-term because the full length of the note is 6 years. He explains that lenders will be more willing to let the company borrow and will offer a lower interest rate if the company reports fewer current liabilities. Plus, he plans to tell lenders that there is no problem with long-term solvency because the company’s long-term profits will be used to pay its long-term debt.
Required:
- Understand the reporting effect: How does Evan’s decision affect the reported amount of current liabilities versus long-term liabilities as of December 31, 2026?
- Specify the options: Calculate the current ratio and the debt to equity ratio at the end of 2026 (a) with and (b) without Evan’s assumption. Assume all liabilities are interest-bearing.
- Identify the impact: Can Evan’s decision affect lenders?
- Make a decision: Should Evan report the full balance of the note as a long-term liability in its balance sheet as of December 31, 2026?
Complete this question by entering your answers in the tabs below.
Req 1
Understand the reporting effect: How does Evan’s decision affect the reported amount of current liabilities versus long-term liabilities as of December 31, 2026?
Req 2a
Specify the options: Calculate the current ratio and the debt to equity ratio at the end of 2026 with Evan’s assumption. Assume all liabilities are interest-bearing.
Note: Round your final answers to 2 decimal places.
Req 2b
Specify the options: Calculate the current ratio and the debt to equity ratio at the end of 2026 without Evan’s assumption. Assume all liabilities are interest-bearing.
Note: Round your final answers to 2 decimal places.
Req 3
Identify the impact: Can Evan’s decision affect lenders?
Req 4
Chapter 10 – Tableau Dashboard Activity
As a loan officer for Third Commercial Bank your job description includes evaluating and recommending approval of commercial and real estate loans. On your desk is a loan application from Avantgarde Manufacturing, a producer of household goods. Nine years ago, your bank declined a loan application from AvantgardeOne, partially due to a debt ratio higher than the industry average. The average percentage of assets financed by liabilities rather than shareholders’ equity for the manufacturing industry is 50%. The rationale for declining the previous loan request was that too much debt posed a risk of default. To assist you in your analysis of the current loan application, you have created a Tableau Dashboard depicting trends in assets, liabilities, and equity for the most recent ten years.
Drawing from the data available, assess the following:
Complete this question by entering your answers in the tabs below.
Required 1
Determine the following amounts.
If your system is marking $650,000 and $950,000 incorrect, it is likely expecting the values read from the dashboard more precisely, which are closest to:
Assets in 2012 = $655,000
Assets in 2021 = $945,000
Required 2
What does the Dashboard suggest about the size of Avantgarde’s manufacturing operations during the most recent ten years?
Therefore the correct choice is:
✅ The size of Avantgarde’s manufacturing operations as measured by total assets shows steady growth, financed primarily with debt.
Required 3
What does the data suggest regarding the way in which Avantgarde is financing its assets during the most recent ten years?
Required 4
Which possible conclusion is supported by the Dashboard concerning Avantgarde’s ability to repay a loan if granted?
