Homework ch 10 11
ACTG 4610 Homework – Chapter 10
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E10-29. Analyzing and Interpreting Footnote on Operating and Capital Leases
Verizon Communications Inc. provides the following footnote relating to adoption of the new lease
accounting standards (Topic 842) in its 10Q report for the quarter ended March 31, 2019.
● What is the amount of the rightofuse asset the company added to its balance sheet upon
adoption of the new standard?
● How will Verizon treat the rightofuse asset on the balance sheet during the life of the
lease?
● Assume the rightofuse assets had a weighted average lease term of 12 years. Approximate
the effect the operating leases had on Verizon’s income statement in Q1 2019.
● What is the amount of the total operating lease liabilities the company added to its balance
sheet upon adoption of the new standard? Explain what this amount represents.
● The company decided to adopt the standard with a modified retrospective method and did
not adjust numbers on the comparative balance sheet. What analysis challenges does this
create?
E10-31. Analyzing and Interpreting Pension Disclosures
General Mills Inc. reports the following pension footnote in its 10K report.
● Describe what is meant by service cost and interest cost.
● What is the total amount paid to retirees during fiscal 2019? What is the source of funds to
make these payments to retirees?
● Compute the 2019 funded status for the company’s pension plan.
● What are actuarial gains and losses? What are the plan amendment adjustments, and how
do they differ from the actuarial gains and losses?
● General Mills projects payments to retirees of between $320 and $350 million per year.
How is the company able to contribute only $30.4 million to its pension plan?
● What effect would a substantial decline in the financial markets have on General Mills’
contribution to its pension plans?
E10-34. Analyzing and Interpreting Income Tax Disclosures
The income tax footnote to the 2018 financial statements for Boeing follows.
M4-18. Compute ROE
Selected balance sheet and income statement information for Facebook Inc. follows. Compute the return on equity
for the year ended December 31, 2018.
M4-28. Compute Liquidity and Solvency Ratios
Selected balance sheet and income statement information from Verizon Communications Inc. follows.
Compute the following ratios for Verizon for both 2018 and 2017.
● Cu
ent ratio
● Times interest earned
● Liabilitiestoequity
E4-30. Compute Liquidity and Solvency Ratios for Competing Firms
Halliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data fo
the two companies to answer the requirements.
● Compute the following measures for both companies.
● Cu
ent ratio
● Quick ratio
● Times interest earned
● Liabilitiestoequity
● Which company appears more liquid?
● Which company appears more solvent?
M5-21. Evaluating Accounts Receivable Turnover for Competitors
The Procter & Gamble Company and ColgatePalmolive Company report the following sales and accounts receivable
alances.
● Compute the accounts receivable turnover and DSO for both companies for 2018.
● Identify and discuss a potential explanation for the difference between these competitors’ accounts
eceivable ratios.
M6-15. Computing and Evaluating Inventory Turnover for Two Companies
PriceSmart and Nordstrom report the following information in their respective 10K reports relating to their two most
ecent fiscal years.
● Compute the 2018 inventory turnover for each of these two retailers.
● Discuss any difference we observe in inventory turnover between these two companies. Does the difference
confirm our expectations given their respective business models? Explain. (Hint: Nordstrom is a higherend
etailer and PriceSmart operates nofrills, warehouse stores.)
● Describe ways that a retailer can improve its inventory turnover.
P6-36. Evaluating Turnover and Nontraditional Efficiency Ratios Across Industries
The following information is taken from publicly traded retailers. The data come from the balance sheet, income
statement, and Item 2 on the companies’ Form 10K filings. Use the information to answer the requirements.
Required
● Compute the days inventory outstanding (DIO) for each company.
● Compute the gross profit margin for each company.
● Compare the DIO and gross profit margin for each of the three combinations of competitors. What do we
observe? How are the two ratios related?
● Compute the following two nontraditional efficiency metrics: Revenue per square foot and Revenue pe
store. What do we observe?