The Balance Sheet
Chapter 3: Balance Sheet ? Question 1
Identify the date shown at the top of your selected company?s balance sheet.
Current Year Prior Year
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Click here to enter text.Does the company?s fiscal year follow the calendar year? Yes, No Click here to enter text.
If not, why do you think it is different?
Click here to enter text.

Chapter 3: Balance Sheet ? Question 2
Review the current asset section of your selected company?s balance sheet. Explain why the order of individual items begins with cash. In your opinion, would it be more or less appropriate to order these items according to dollar magnitude? Explain.
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Chapter 3: Balance Sheet ? Question 3
Review your company?s balance sheet (or SEC Form 10-K) and compare accumulated depreciation to the historical cost of Plant and Equipment (PE) using the following ratio.
Compute the following:
Accumulated depreciation /
Plant and Equipment
Click here to enter text.
Percentage of Asset Life Remaining
? High percentage means older assets
? Low percentage means newer assets
Is the investment in fixed assets, on average, relatively recent? If not, can we assume that these assets will be replaced shortly?

Click here to enter text.

Chapter 3: Balance Sheet ? Question 4
Since property, plant, and equipment (PPE) and long-term investments in stock represent a company?s investment, why do we distinguish between them in the balance sheet?
Click here to enter text.
Chapter 3: Balance Sheet ? Question 5
Review the noncurrent asset section of your company?s balance sheet. Are any intangible assets listed? If so, identify the types of intangible assets and the percent of total assets that the intangible assets represent.
Intangible Asset 1: Click here to enter text.Intangible Asset 2: Click here to enter text.Intangible Asset 3: Click here to enter text.Total Intangible Assets ? Total Assets = Click here to enter text.If this company were to be acquired by another company, would the intangible assets influence the purchase price? Explain your answer.
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Chapter 3: Balance Sheet ? Question 6
Now review your company?s total assets for the most recent year. What percentage of total assets is current? Noncurrent?
Current Noncurrent
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Click here to enter text.Should companies have a greater investment in current assets or noncurrent assets, or does it depend on the nature of their business? Explain your answer.

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Chapter 3: Balance Sheet ? Question 7
Review your company?s balance sheet. Does it report a deferred tax asset? A deferred tax liability? If so, are the deferred tax assets and/or liabilities reported as current or noncurrent?
Deferred tax asset? Yes or No Click here to enter text.
Current or Noncurrent* Click here to enter text.Deferred tax liability? Yes or No Click here to enter text.
Current or Noncurrent* Click here to enter text.*Note: If your company reports a current deferred tax asset (liability), it will realize an income tax benefit (obligation) in the next accounting period because of a previously reported event.
If your company reports a noncurrent deferred tax asset (liability), it will realize an income tax benefit (obligation) in future accounting periods (beyond the next) because of a previously reported event.

Chapter 3: Balance Sheet ? Question 8
Identify the information that relates to the stockholders? equity section of your company?s balance sheet.
Par value per share of common stock? Click here to enter text.Number of common shares authorized? Click here to enter text.Number of common shares issued? Click here to enter text.Number of common shares outstanding? Click here to enter text.Number of treasury shares held by the company? Click here to enter text.
Chapter 3: Balance Sheet ? Question 9
Answer the following questions relative to the stockholders? equity section of the balance sheet.
By what amount did retained earnings increase or decrease from the prior year? Click here to enter text.Was the increase or decrease in retained earnings equal to the company?s current year net income or net loss? Yes or N
Click here to enter text.** If No, then dividends were paid (or declared) by your selected company or certain events took place during the year where the accounting for the events directly affected the retained earnings account.

Chapter 3: Balance Sheet ? Question 10
List (write-in) each financial statement element as shown in your company?s balance sheet.
Assets Liabilities Stockholders? Equity
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Click here to enter text.Chapter 3: Balance Sheet ? Question 11
Identify the combined carrying values (dollar amounts) of the following selected account groups taken from your company?s balance sheet:

Account Groups
Current Year
Prior Year Increase or Decrease
(in dollars)
Current Assets Click here to enter text.
Click here to enter text.
Click here to enter text.Net Fixed Assets Click here to enter text.
Click here to enter text.
Click here to enter text.Intangible and Other Noncurrent Assets Click here to enter text.
Click here to enter text.
Click here to enter text.Current Liabilities Click here to enter text.
Click here to enter text.
Click here to enter text.Long-term Liabilities Click here to enter text.
Click here to enter text.
Click here to enter text.Common Stock Click here to enter text.
Click here to enter text.
Click here to enter text.Additional Paid in Capital* Click here to enter text.
Click here to enter text.
Click here to enter text.Retained Earnings Click here to enter text.
Click here to enter text.
Click here to enter text.Other Equity Components Click here to enter text.
Click here to enter text.
Click here to enter text.*Note again that additional paid in capital is known as share premium in IFRS based financial statements.
Chapter 3: Balance Sheet ? Question 12
Identify the three major balance sheet accounts, for example accounts receivable, accounts payable, inventory, etc. that changed the most from the prior year. What events might explain these changes? Working to explain why these changes occurred contributes to a greater understanding about a company.
Account Explanation
Example:
Account Receivable Example:
An increase in accounts receivable should coincide with an increase in sales, i.e., a 10% increase in sales would explain a 10% increase in accounts receivable. If accounts receivable are increasing and sales decreasing, the signal is unfavorable.
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Chapter 3: Balance Sheet ? Question 13
Prepare a common-sized balance sheet (expressed in percentages) using the following account groups shown in your selected company?s balance sheet.

Account Group
Current Year
Prior Year Increase or Decrease
(current year percent minus prior year percent)
Current Assets Click here to enter text.
Click here to enter text.
Click here to enter text.Net Fixed Assets Click here to enter text.
Click here to enter text.
Click here to enter text.Intangible and Other Noncurrent Assets Click here to enter text.
Click here to enter text.
Click here to enter text.Total Assets 100% 100%
Current Liabilities Click here to enter text.
Click here to enter text.
Click here to enter text.Long-term Liabilities Click here to enter text.
Click here to enter text.
Click here to enter text.Common Stock Click here to enter text.
Click here to enter text.
Click here to enter text.Additional Paid in Capital Click here to enter text.
Click here to enter text.
Click here to enter text.Retained Earnings Click here to enter text.
Click here to enter text.
Click here to enter text.Other Equity Components Click here to enter text.
Click here to enter text.
Click here to enter text.Total Liabilities and Stockholders? Equity 100% 100%

Chapter 3: Balance Sheet ? Question 14
Identify the three balance sheet groups from question 13 above that changed most significantly. Within each of these groups, identify the primary balance sheet element that drove this change. What events might explain these changes?
Group Name:
Current Assets Explanation:
(Example ? sales increased by 22%, thus accounts receivable increased by approximately 22%)
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Chapter 3: Balance Sheet ? Question 15
Did your company become more or less liquid when comparing this year to last year?
Current Year:
Current Assets minus Current Liabilities =
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Prior Year:
Current Assets minus Current Liabilities =
Click here to enter text.Explain why?
Click here to enter text.

Chapter 3: Balance Sheet ? Question 16
Did your company increase or decrease its financial leverage when comparing total debt to total stockholders? equity from this year to last?
Current Year:
Total debt ? Total stockholders? equity =
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Prior Year:
Total debt ? Total stockholders? equity = Click here to enter text.Explain why:

Click here to enter text.The Income Statement or Statement of Earnings
Chapter 3: Income Statement ? Question 1
Review the heading of your company?s income statement. Does the company?s income statement provide two or three years of comparative information? (Insert number to the right.)
Click here to enter text. ___ yrs.
Why do you think the SEC requires that balance sheets provide two years of comparative financial information and income statements provide three years of comparative financial information?

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Chapter 3: Income Statement ? Question 2
Review the middle section of your company?s income statement. Did operating income (loss) increase or decrease from the prior year and by how much? You may have to compute operating income (loss).

Increased by $ Click here to enter text.

Decreased by $ Click here to enter text.
Chapter 3: Income Statement ? Question 3
Does the middle section of your company?s income statement show a non-operating income (loss) increase or decrease from the prior year and by how much? You may have to compute non-operating income (loss).

Increased by $ ___ Click here to enter text.

Decreased by $ ___ Click here to enter text. ___________
Chapter 3: Income Statement ? Question 4
In reference to why you are studying this company, is it important to know the different sources of income?operating or non-operating?
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Chapter 3: Income Statement ? Question 5
If any of the irregular events are shown on your company?s income statement, describe the nature and the amount. Select the most current year affected by the event if multiple years are affected.
Irregular Event Amount Nature of the Change
Restructuring charge? Click here to enter text.
Click here to enter text.Discontinued operation? Click here to enter text.
Click here to enter text.Extraordinary event? Click here to enter text.
Click here to enter text.
Chapter 3: Income Statement ? Question 6
Review the lower section of your selected company?s income statement. Did net income (loss) increase or decrease from the prior year and by how much?

Increased by $ Click here to enter text.

Decreased by $ Click here to enter text.
Chapter 3: Income Statement ? Question 7
Prepare a common-sized income statement for the categories below.
Account/Category Current Year Prior Year Increase or Decrease
(current year percent minus prior year percent)
Net Sales (revenues) 100% 100%
Cost of Goods/Services (if applicable) Click here to enter text.
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Click here to enter text.Gross Profit Click here to enter text.
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Click here to enter text.Operating Expenses Click here to enter text.
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Click here to enter text.Operating Income (Loss) Click here to enter text.
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Click here to enter text.Non-operating Income (Loss) Click here to enter text.
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Click here to enter text.Income Tax Expense Click here to enter text.
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Click here to enter text.Net Income Click here to enter text.
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Chapter 3: Income Statement ? Question 8
Identify the three income statement accounts/categories that changed the most in Question 7. What events might explain these changes?
Account or Category: Explanation:
(Hint ? the MD&A section will provide good information to answer this question.)
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Chapter 3: Income Statement ? Question 9
Identify your company?s Basic and Diluted EPS amounts. Place a N/A in Diluted EPS if not reported.
Basic EPS Diluted EPS
Current year Click here to enter text.
Click here to enter text.Preceding year 1 Click here to enter text.
Click here to enter text.Preceding year 2 Click here to enter text.
Click here to enter text.Why is diluted EPS always equal to or less than basic EPS?

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Statement of Cash Flows (SCF)
Chapter 3: SCF ? Question 1
Is the SCF dated in the title for a period of time similar to the income statement or for a point in time similar to the balance sheet? Why?

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Chapter 3: SCF ? Question 2
Identify the following sections of the SCF and record the amounts. Check the math by summing to the cash balance at end of year. Verify that the ending cash balance reported on the SCF is the same as reported on the balance sheet.
Section Current Year Prior Year Second Prior Year
Net operating cash flows Click here to enter text.
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Click here to enter text.Net investing cash flows Click here to enter text.
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Click here to enter text.Net financing cash flows Click here to enter text.
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Click here to enter text.Net increase (decrease) in cash flows Click here to enter text.
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Click here to enter text.Cash balance at beginning of year Click here to enter text.
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Click here to enter text.Cash balance at end of year Click here to enter text.
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Click here to enter text.Does the total match balance sheet cash? Yes / No Click here to enter text.
Yes / No Click here to enter text.

Chapter 3: SCF ? Question 3
Record net sales, net income and net operating cash flows below. All three should be trending in approximately the same direction. If so, this is a sign of a well-run business. If one or more are going in a different direction, or random, then you must keep an eye open for an explanation why.
Item Current Year Prior Year Second Prior Year
Net Sales Click here to enter text.
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Click here to enter text.Net Income Click here to enter text.
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Click here to enter text.Net Operating Cash Flows Click here to enter text.
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Click here to enter text.Explain why net sales, net income and net operating cash flows are trending together or differently. (Hint: Look at depreciation expense and substantial changes in inventory, accounts receivable and accounts payable balances. Explaining why is a key learning point.)

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Chapter 3: SCF ? Question 4
Identify the primary cash outflows and inflows from investing activities.
Description of Activity Amount
Cash outflow: Click here to enter text.Cash inflow: Click here to enter text.Consider three key issues at this point. Is the company adding assets? This is a sign of growth. Is the company replacing assets? This is a sign of growth and stability. Is the company only selling assets? This is a sign of retrenchment.

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Chapter 3: SCF ? Question 5
Identify the primary cash inflow and outflow from financing activities.
Description of Activity Amount
Cash inflow: Click here to enter text.Cash outflow: (Note: cash dividends paid are reported here.) Click here to enter text.Consider two key issues at this point. How is the company being financed, through debt or equity? Can you determine which is growing faster and why? A sound corporate strategy is to finance a company with debt during stable times, because this demands regular payment of principal and interest, and to finance a company with equity during unstable times, because leadership can elect to pay or not pay dividends.

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The Statement of Stockholders? Equity (SSE)

Chapter 3: SSE ? Question 1
Identify the elements that comprise the statement of stockholders? equity section of your company. Hint: These items are generally illustrated across the top of the page using a columnar format. (Example. Common stock ? shares and dollar amount.)

Click here to enter text.

Chapter 3: SSE ? Question 2
Identify the cash dividends per share. Click here to enter text.Determine the dividend payout percentage. A company?s dividend payout percentage is computed by dividing dividend per common share by net income or earnings per common share. (Hint: If your company reported a net loss for the year, the answer lacks meaning.) Click here to enter text.Compute dividend yield. A company?s dividend yield is computed by dividing dividend per common share by market price per common share. (Hint: Use the current per share price for your selected company.) Click here to enter text.Is your company?s dividend yield a reasonable return given current market conditions?

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Notes to the Financial Statements
Chapter 3: Notes to the Financial Statements ? Question 1
How does your company define ?cash and cash equivalents??

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Chapter 3: Notes to the Financial Statements ? Question 2
How does your company value its ?inventories?? Explain the meaning of the inventory valuation method. Are domestic and international inventories valued the same? Service companies will typically not have inventory.

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Chapter 3: Notes to the Financial Statements ? Question 3
Does your company report any investments in marketable securities? Identify the respective amount(s) invested.
Category Current Year Amount
Trading Securities Click here to enter text.Available-for-Sale Securities Click here to enter text.Held-to-Maturity Debt Securities Click here to enter text.
Chapter 3: Notes to the Financial Statements ? Question 4
Note 1 and a separate note on income taxes should provide the information to answer this question.
What was your company?s income tax expense for the current year? Click here to enter text.How much cash was paid for income taxes in the current year? (Hint: Review the SCF. The difference generally relates to the accrual basis of accounting.) Click here to enter text.Identify the three major elements, such as depreciation or other post-employment benefits, that gave rise to deferred tax assets or deferred tax liabilities:
Deferred Tax Assets Deferred Tax Liabilities
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Click here to enter text.What is this year?s effective tax rate for your company? What is the current year statutory rate? Effective Tax Rate: __ Click here to enter text. ____%
Statutory Tax Rate: ___ Click here to enter text. ___%
Chapter 3: Notes to the Financial Statements ? Question 5
Reviewing note #1, any related supporting notes, and/or the 10-K, identify the fixed asset group(s), depreciation methods used, and the estimated useful lives of these fixed assets.
Fixed Asset Group Depreciation Method Estimated Lives (range)
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Chapter 3: Notes to the Financial Statements ? Question 6
Review the balance sheet, note #1, and any related notes and identify the amount of goodwill reported in the current year.
Amount reported in current year. Click here to enter text.Identify the amount of any significant write-down of goodwill that occurred during the current year. Click here to enter text.How does management describe how it accounts for goodwill as disclosed in the note(s) to the financial statements?

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Chapter 3: Notes to the Financial Statements ? Question 7
Given present executive compensation packages, why would the user of financial information prefer a company follow SFAS No. 123(R) instead of APBO No.25? Explain.

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Chapter 3: Notes to the Financial Statements ? Question 8
Review your company?s lease note (and related balance sheet information), then identify the following amounts:
Minimum lease payments under operating leases Click here to enter text.Minimum lease payments under capital leases Click here to enter text.Ratio of operating lease payments to capital lease payments Click here to enter text.As a user of reported financial information, would you be concerned about a significant amount of operating leases that are not reported in the balance sheet? Explain.

Click here to enter text.

Chapter 3: Notes to the Financial Statements ? Question 9
Review your company?s long-term debt note and identify the following (consider the three most significant liabilities only):
Instrument Maturity Date Rate Amount Due
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Click here to enter text.How much interest expense was recognized in the current year? Click here to enter text.How much cash was paid for interest in the current year? (Hint: Look in the SCF.*) Click here to enter text.*The difference between interest expense and cash paid for interest is due to the accrual basis of accounting (and in some cases, the capitalization of interest).

Chapter 3: Notes to the Financial Statements ? Question 10
Review your company?s pension and OPEB note (if applicable) and answer the following questions.
Pensions OPEB
How much is the Projected Benefit Obligation (PBO) and Accumulated Postretirement Benefit Obligation (APBO) for your company at the end of the current year? Click here to enter text.
Click here to enter text.What was the amount of pension or OPEB benefits paid to plan participants during the current year? Click here to enter text.
Click here to enter text.What amount of cash did the company contribute to the respective funds during the current year? This is known as ?employer contributions.? Click here to enter text.
Click here to enter text.What is the value of the plan assets at the end of the current year? Click here to enter text.
Click here to enter text.Based on your review of the plan assets and the projected benefit obligation (or accumulated postretirement benefit obligation), has your company sufficiently funded its employee benefit plans (this is known as funded status)?

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An expected average return on invested plan assets is used to reduce the volatility in the reporting of pension or OPEB expense. Higher expected average returns reduce pension or OPEB expense, and lower expected returns increase pension expense. What rate of return on plan assets does your company use to compute pension or OPEB expense? Does this appear reasonable, given present market conditions?

Rate employed? _____ Click here to enter text. ___

Response:Click here to enter text.
Chapter 3: Notes to the Financial Statements ? Question 11
Based on your review of the contingencies note, briefly identify specific events that have led to the accrual of contingent liabilities in your selected company?s the balance sheet.

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Chapter 3: Notes to the Financial Statements ? Question 12
Based on your review of the segment-reporting note to the financials, identify the reported operating segments, their related revenues, and operating income. Identify the largest three if more than three are disclosed.
Reportable Operating Segments Net Sales Revenue Net Operating Income
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Chapter 3: Notes to the Financial Statements ? Question 13
Based on your review of the segment-reporting note to the financials, identify the geographical segments and their related revenues. Identify the largest three if more than three are disclosed.
Country Net Sales Revenue
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Chapter 3: Notes to the Financial Statements?Question 14
Based on your review of the notes to the financials or the statement of stockholders? equity, identify the components (no more than four) that comprise Other Comprehensive Income for your company.
Component Amount
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The Balance Sheet
Chapter 3: Balance Sheet ? Question 1
Identify the date shown at the top of your selected company?s balance sheet.
Current Year Prior Year
Click here to enter text.
Click here to enter text.Does the company?s fiscal year follow the calendar year? Yes, No Click here to enter text.
If not, why do you think it is different?
Click here to enter text.

Chapter 3: Balance Sheet ? Question 2
Review the current asset section of your selected company?s balance sheet. Explain why the order of individual items begins with cash. In your opinion, would it be more or less appropriate to order these items according to dollar magnitude? Explain.
Click here to enter text.

Chapter 3: Balance Sheet ? Question 3
Review your company?s balance sheet (or SEC Form 10-K) and compare accumulated depreciation to the historical cost of Plant and Equipment (PE) using the following ratio.
Compute the following:
Accumulated depreciation /
Plant and Equipment
Click here to enter text.
Percentage of Asset Life Remaining
? High percentage means older assets
? Low percentage means newer assets
Is the investment in fixed assets, on average, relatively recent? If not, can we assume that these assets will be replaced shortly?

Click here to enter text.

Chapter 3: Balance Sheet ? Question 4
Since property, plant, and equipment (PPE) and long-term investments in stock represent a company?s investment, why do we distinguish between them in the balance sheet?
Click here to enter text.
Chapter 3: Balance Sheet ? Question 5
Review the noncurrent asset section of your company?s balance sheet. Are any intangible assets listed? If so, identify the types of intangible assets and the percent of total assets that the intangible assets represent.
Intangible Asset 1: Click here to enter text.Intangible Asset 2: Click here to enter text.Intangible Asset 3: Click here to enter text.Total Intangible Assets ? Total Assets = Click here to enter text.If this company were to be acquired by another company, would the intangible assets influence the purchase price? Explain your answer.
Click here to enter text.
Chapter 3: Balance Sheet ? Question 6
Now review your company?s total assets for the most recent year. What percentage of total assets is current? Noncurrent?
Current Noncurrent
Click here to enter text.
Click here to enter text.Should companies have a greater investment in current assets or noncurrent assets, or does it depend on the nature of their business? Explain your answer.

Click here to enter text.
Chapter 3: Balance Sheet ? Question 7
Review your company?s balance sheet. Does it report a deferred tax asset? A deferred tax liability? If so, are the deferred tax assets and/or liabilities reported as current or noncurrent?
Deferred tax asset? Yes or No Click here to enter text.
Current or Noncurrent* Click here to enter text.Deferred tax liability? Yes or No Click here to enter text.
Current or Noncurrent* Click here to enter text.*Note: If your company reports a current deferred tax asset (liability), it will realize an income tax benefit (obligation) in the next accounting period because of a previously reported event.
If your company reports a noncurrent deferred tax asset (liability), it will realize an income tax benefit (obligation) in future accounting periods (beyond the next) because of a previously reported event.

Chapter 3: Balance Sheet ? Question 8
Identify the information that relates to the stockholders? equity section of your company?s balance sheet.
Par value per share of common stock? Click here to enter text.Number of common shares authorized? Click here to enter text.Number of common shares issued? Click here to enter text.Number of common shares outstanding? Click here to enter text.Number of treasury shares held by the company? Click here to enter text.
Chapter 3: Balance Sheet ? Question 9
Answer the following questions relative to the stockholders? equity section of the balance sheet.
By what amount did retained earnings increase or decrease from the prior year? Click here to enter text.Was the increase or decrease in retained earnings equal to the company?s current year net income or net loss? Yes or N
Click here to enter text.** If No, then dividends were paid (or declared) by your selected company or certain events took place during the year where the accounting for the events directly affected the retained earnings account.

Chapter 3: Balance Sheet ? Question 10
List (write-in) each financial statement element as shown in your company?s balance sheet.
Assets Liabilities Stockholders? Equity
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Click here to enter text.Chapter 3: Balance Sheet ? Question 11
Identify the combined carrying values (dollar amounts) of the following selected account groups taken from your company?s balance sheet:

Account Groups
Current Year
Prior Year Increase or Decrease
(in dollars)
Current Assets Click here to enter text.
Click here to enter text.
Click here to enter text.Net Fixed Assets Click here to enter text.
Click here to enter text.
Click here to enter text.Intangible and Other Noncurrent Assets Click here to enter text.
Click here to enter text.
Click here to enter text.Current Liabilities Click here to enter text.
Click here to enter text.
Click here to enter text.Long-term Liabilities Click here to enter text.
Click here to enter text.
Click here to enter text.Common Stock Click here to enter text.
Click here to enter text.
Click here to enter text.Additional Paid in Capital* Click here to enter text.
Click here to enter text.
Click here to enter text.Retained Earnings Click here to enter text.
Click here to enter text.
Click here to enter text.Other Equity Components Click here to enter text.
Click here to enter text.
Click here to enter text.*Note again that additional paid in capital is known as share premium in IFRS based financial statements.
Chapter 3: Balance Sheet ? Question 12
Identify the three major balance sheet accounts, for example accounts receivable, accounts payable, inventory, etc. that changed the most from the prior year. What events might explain these changes? Working to explain why these changes occurred contributes to a greater understanding about a company.
Account Explanation
Example:
Account Receivable Example:
An increase in accounts receivable should coincide with an increase in sales, i.e., a 10% increase in sales would explain a 10% increase in accounts receivable. If accounts receivable are increasing and sales decreasing, the signal is unfavorable.
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Chapter 3: Balance Sheet ? Question 13
Prepare a common-sized balance sheet (expressed in percentages) using the following account groups shown in your selected company?s balance sheet.

Account Group
Current Year
Prior Year Increase or Decrease
(current year percent minus prior year percent)
Current Assets Click here to enter text.
Click here to enter text.
Click here to enter text.Net Fixed Assets Click here to enter text.
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Click here to enter text.Intangible and Other Noncurrent Assets Click here to enter text.
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Current Liabilities Click here to enter text.
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Click here to enter text.Total Liabilities and Stockholders? Equity 100% 100%

Chapter 3: Balance Sheet ? Question 14
Identify the three balance sheet groups from question 13 above that changed most significantly. Within each of these groups, identify the primary balance sheet element that drove this change. What events might explain these changes?
Group Name:
Current Assets Explanation:
(Example ? sales increased by 22%, thus accounts receivable increased by approximately 22%)
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Chapter 3: Balance Sheet ? Question 15
Did your company become more or less liquid when comparing this year to last year?
Current Year:
Current Assets minus Current Liabilities =
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Prior Year:
Current Assets minus Current Liabilities =
Click here to enter text.Explain why?
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Chapter 3: Balance Sheet ? Question 16
Did your company increase or decrease its financial leverage when comparing total debt to total stockholders? equity from this year to last?
Current Year:
Total debt ? Total stockholders? equity =
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Prior Year:
Total debt ? Total stockholders? equity = Click here to enter text.Explain why:

Click here to enter text.The Income Statement or Statement of Earnings
Chapter 3: Income Statement ? Question 1
Review the heading of your company?s income statement. Does the company?s income statement provide two or three years of comparative information? (Insert number to the right.)
Click here to enter text. ___ yrs.
Why do you think the SEC requires that balance sheets provide two years of comparative financial information and income statements provide three years of comparative financial information?

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Chapter 3: Income Statement ? Question 2
Review the middle section of your company?s income statement. Did operating income (loss) increase or decrease from the prior year and by how much? You may have to compute operating income (loss).

Increased by $ Click here to enter text.

Decreased by $ Click here to enter text.
Chapter 3: Income Statement ? Question 3
Does the middle section of your company?s income statement show a non-operating income (loss) increase or decrease from the prior year and by how much? You may have to compute non-operating income (loss).

Increased by $ ___ Click here to enter text.

Decreased by $ ___ Click here to enter text. ___________
Chapter 3: Income Statement ? Question 4
In reference to why you are studying this company, is it important to know the different sources of income?operating or non-operating?
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Chapter 3: Income Statement ? Question 5
If any of the irregular events are shown on your company?s income statement, describe the nature and the amount. Select the most current year affected by the event if multiple years are affected.
Irregular Event Amount Nature of the Change
Restructuring charge? Click here to enter text.
Click here to enter text.Discontinued operation? Click here to enter text.
Click here to enter text.Extraordinary event? Click here to enter text.
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Chapter 3: Income Statement ? Question 6
Review the lower section of your selected company?s income statement. Did net income (loss) increase or decrease from the prior year and by how much?

Increased by $ Click here to enter text.

Decreased by $ Click here to enter text.
Chapter 3: Income Statement ? Question 7
Prepare a common-sized income statement for the categories below.
Account/Category Current Year Prior Year Increase or Decrease
(current year percent minus prior year percent)
Net Sales (revenues) 100% 100%
Cost of Goods/Services (if applicable) Click here to enter text.
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Click here to enter text.Gross Profit Click here to enter text.
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Click here to enter text.Operating Expenses Click here to enter text.
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Click here to enter text.Operating Income (Loss) Click here to enter text.
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Click here to enter text.Non-operating Income (Loss) Click here to enter text.
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Click here to enter text.Income Tax Expense Click here to enter text.
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Click here to enter text.Net Income Click here to enter text.
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Chapter 3: Income Statement ? Question 8
Identify the three income statement accounts/categories that changed the most in Question 7. What events might explain these changes?
Account or Category: Explanation:
(Hint ? the MD&A section will provide good information to answer this question.)
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Chapter 3: Income Statement ? Question 9
Identify your company?s Basic and Diluted EPS amounts. Place a N/A in Diluted EPS if not reported.
Basic EPS Diluted EPS
Current year Click here to enter text.
Click here to enter text.Preceding year 1 Click here to enter text.
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Click here to enter text.Why is diluted EPS always equal to or less than basic EPS?

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Statement of Cash Flows (SCF)
Chapter 3: SCF ? Question 1
Is the SCF dated in the title for a period of time similar to the income statement or for a point in time similar to the balance sheet? Why?

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Chapter 3: SCF ? Question 2
Identify the following sections of the SCF and record the amounts. Check the math by summing to the cash balance at end of year. Verify that the ending cash balance reported on the SCF is the same as reported on the balance sheet.
Section Current Year Prior Year Second Prior Year
Net operating cash flows Click here to enter text.
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Click here to enter text.Net investing cash flows Click here to enter text.
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Click here to enter text.Net increase (decrease) in cash flows Click here to enter text.
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Click here to enter text.Cash balance at beginning of year Click here to enter text.
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Click here to enter text.Does the total match balance sheet cash? Yes / No Click here to enter text.
Yes / No Click here to enter text.

Chapter 3: SCF ? Question 3
Record net sales, net income and net operating cash flows below. All three should be trending in approximately the same direction. If so, this is a sign of a well-run business. If one or more are going in a different direction, or random, then you must keep an eye open for an explanation why.
Item Current Year Prior Year Second Prior Year
Net Sales Click here to enter text.
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Click here to enter text.Net Income Click here to enter text.
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Click here to enter text.Net Operating Cash Flows Click here to enter text.
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Click here to enter text.Explain why net sales, net income and net operating cash flows are trending together or differently. (Hint: Look at depreciation expense and substantial changes in inventory, accounts receivable and accounts payable balances. Explaining why is a key learning point.)

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Chapter 3: SCF ? Question 4
Identify the primary cash outflows and inflows from investing activities.
Description of Activity Amount
Cash outflow: Click here to enter text.Cash inflow: Click here to enter text.Consider three key issues at this point. Is the company adding assets? This is a sign of growth. Is the company replacing assets? This is a sign of growth and stability. Is the company only selling assets? This is a sign of retrenchment.

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Chapter 3: SCF ? Question 5
Identify the primary cash inflow and outflow from financing activities.
Description of Activity Amount
Cash inflow: Click here to enter text.Cash outflow: (Note: cash dividends paid are reported here.) Click here to enter text.Consider two key issues at this point. How is the company being financed, through debt or equity? Can you determine which is growing faster and why? A sound corporate strategy is to finance a company with debt during stable times, because this demands regular payment of principal and interest, and to finance a company with equity during unstable times, because leadership can elect to pay or not pay dividends.

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The Statement of Stockholders? Equity (SSE)

Chapter 3: SSE ? Question 1
Identify the elements that comprise the statement of stockholders? equity section of your company. Hint: These items are generally illustrated across the top of the page using a columnar format. (Example. Common stock ? shares and dollar amount.)

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Chapter 3: SSE ? Question 2
Identify the cash dividends per share. Click here to enter text.Determine the dividend payout percentage. A company?s dividend payout percentage is computed by dividing dividend per common share by net income or earnings per common share. (Hint: If your company reported a net loss for the year, the answer lacks meaning.) Click here to enter text.Compute dividend yield. A company?s dividend yield is computed by dividing dividend per common share by market price per common share. (Hint: Use the current per share price for your selected company.) Click here to enter text.Is your company?s dividend yield a reasonable return given current market conditions?

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Notes to the Financial Statements
Chapter 3: Notes to the Financial Statements ? Question 1
How does your company define ?cash and cash equivalents??

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Chapter 3: Notes to the Financial Statements ? Question 2
How does your company value its ?inventories?? Explain the meaning of the inventory valuation method. Are domestic and international inventories valued the same? Service companies will typically not have inventory.

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Chapter 3: Notes to the Financial Statements ? Question 3
Does your company report any investments in marketable securities? Identify the respective amount(s) invested.
Category Current Year Amount
Trading Securities Click here to enter text.Available-for-Sale Securities Click here to enter text.Held-to-Maturity Debt Securities Click here to enter text.
Chapter 3: Notes to the Financial Statements ? Question 4
Note 1 and a separate note on income taxes should provide the information to answer this question.
What was your company?s income tax expense for the current year? Click here to enter text.How much cash was paid for income taxes in the current year? (Hint: Review the SCF. The difference generally relates to the accrual basis of accounting.) Click here to enter text.Identify the three major elements, such as depreciation or other post-employment benefits, that gave rise to deferred tax assets or deferred tax liabilities:
Deferred Tax Assets Deferred Tax Liabilities
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Click here to enter text.What is this year?s effective tax rate for your company? What is the current year statutory rate? Effective Tax Rate: __ Click here to enter text. ____%
Statutory Tax Rate: ___ Click here to enter text. ___%
Chapter 3: Notes to the Financial Statements ? Question 5
Reviewing note #1, any related supporting notes, and/or the 10-K, identify the fixed asset group(s), depreciation methods used, and the estimated useful lives of these fixed assets.
Fixed Asset Group Depreciation Method Estimated Lives (range)
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Chapter 3: Notes to the Financial Statements ? Question 6
Review the balance sheet, note #1, and any related notes and identify the amount of goodwill reported in the current year.
Amount reported in current year. Click here to enter text.Identify the amount of any significant write-down of goodwill that occurred during the current year. Click here to enter text.How does management describe how it accounts for goodwill as disclosed in the note(s) to the financial statements?

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Chapter 3: Notes to the Financial Statements ? Question 7
Given present executive compensation packages, why would the user of financial information prefer a company follow SFAS No. 123(R) instead of APBO No.25? Explain.

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Chapter 3: Notes to the Financial Statements ? Question 8
Review your company?s lease note (and related balance sheet information), then identify the following amounts:
Minimum lease payments under operating leases Click here to enter text.Minimum lease payments under capital leases Click here to enter text.Ratio of operating lease payments to capital lease payments Click here to enter text.As a user of reported financial information, would you be concerned about a significant amount of operating leases that are not reported in the balance sheet? Explain.

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Chapter 3: Notes to the Financial Statements ? Question 9
Review your company?s long-term debt note and identify the following (consider the three most significant liabilities only):
Instrument Maturity Date Rate Amount Due
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Click here to enter text.How much interest expense was recognized in the current year? Click here to enter text.How much cash was paid for interest in the current year? (Hint: Look in the SCF.*) Click here to enter text.*The difference between interest expense and cash paid for interest is due to the accrual basis of accounting (and in some cases, the capitalization of interest).

Chapter 3: Notes to the Financial Statements ? Question 10
Review your company?s pension and OPEB note (if applicable) and answer the following questions.
Pensions OPEB
How much is the Projected Benefit Obligation (PBO) and Accumulated Postretirement Benefit Obligation (APBO) for your company at the end of the current year? Click here to enter text.
Click here to enter text.What was the amount of pension or OPEB benefits paid to plan participants during the current year? Click here to enter text.
Click here to enter text.What amount of cash did the company contribute to the respective funds during the current year? This is known as ?employer contributions.? Click here to enter text.
Click here to enter text.What is the value of the plan assets at the end of the current year? Click here to enter text.
Click here to enter text.Based on your review of the plan assets and the projected benefit obligation (or accumulated postretirement benefit obligation), has your company sufficiently funded its employee benefit plans (this is known as funded status)?

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An expected average return on invested plan assets is used to reduce the volatility in the reporting of pension or OPEB expense. Higher expected average returns reduce pension or OPEB expense, and lower expected returns increase pension expense. What rate of return on plan assets does your company use to compute pension or OPEB expense? Does this appear reasonable, given present market conditions?

Rate employed? _____ Click here to enter text. ___

Response:Click here to enter text.
Chapter 3: Notes to the Financial Statements ? Question 11
Based on your review of the contingencies note, briefly identify specific events that have led to the accrual of contingent liabilities in your selected company?s the balance sheet.

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Chapter 3: Notes to the Financial Statements ? Question 12
Based on your review of the segment-reporting note to the financials, identify the reported operating segments, their related revenues, and operating income. Identify the largest three if more than three are disclosed.
Reportable Operating Segments Net Sales Revenue Net Operating Income
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Chapter 3: Notes to the Financial Statements ? Question 13
Based on your review of the segment-reporting note to the financials, identify the geographical segments and their related revenues. Identify the largest three if more than three are disclosed.
Country Net Sales Revenue
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Chapter 3: Notes to the Financial Statements?Question 14
Based on your review of the notes to the financials or the statement of stockholders? equity, identify the components (no more than four) that comprise Other Comprehensive Income for your company.
Component Amount
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