Glenwood Heating, Inc. 's acid test ratio is also higher than the result of Eads Heaters, Inc. s acid-test ratio. Because Glenwood Heating, Inc. measurement of the portion of the investment that is out of debt is less than that of Eads Heaters, Inc., Glenwood Heating, Inc.
RELEVANT INCOME AND ASSETS
Certain items are also considered non-operating because Molson Coors does not believe they are indicative of its core operations. Although these items are non-operating activities, they are still factors in determining the expected future profitability and value of Molson Coors Brewing Company shares depending on their likelihood of recurrence. After taking out non-operating activities, return on net operating assets can be used to compare operating profit with net operating profit.
Because return on net operating assets, operating profit margin, and net operating income do not include non-operating activities, these values are a fair determinant of the company's future value. Special items are not operational because these values have nothing to do with the company's daily business activities. Affiliates are inactive because they arise from Molson Coors' ownership of less than a majority of the stock of another company.
STATEMENT OF CASH FLOWS
Cash flows from operations can be reported using the direct or indirect method. The indirect method reports net income and then adjusts it for items necessary to obtain net cash provided or used by business activities. Since the statement begins with net cash provided by operating activities, it is clear that the indirect method is being used.
The three sections of the statement of cash flows are operating activities, investing activities and financing activities. The information in the statement of cash flows comes from the changes in the balance sheet. Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of.
ACCOUNTS RECEIVABLE AND ESTIMATIONS
Allowance for bad and doubtful debts and expected future sales revenue are the two opposite accounts related to Pearson's trade receivables. An uncollectible account was also written off, reducing the provision for bad and doubtful debts by £20 million. Finally, the provision for bad and doubtful debts increased by £3 million due to the acquisition through a business combination.
Below are the journal entries recorded by Pearson in 2009 to capture the provision for bad and doubtful debt account activity. The Allowance for Doubtful and Doubtful Receivables account is a contra account of assets on the balance sheet. The provision for doubtful and doubtful accounts account is an expense in the income statement.
INVENTORY AND REVENUE RECOGNITION
When applying the revenue recognition principle, unearned revenue is considered a short-term liability in the balance sheet. Bad debt expenses will increase in the income statement, while sales revenue and adjustments will change. The allowance account would be deducted from the receivables in the current assets section of the balance sheet.
Now that the bank demands annual reports, the amount of sales returns is significant for the external key users; therefore decisive at the end of the period adjustment process. Sales returns and allowances will also reduce the amount of net sales revenue on the income statement. Changing to the alternative method will change the amount of inventory and decrease the amount of accounts receivable in the current asset section of the balance sheet.
DEPRECIATION
Waste Management failed to follow guidelines for reporting depreciation expense in accordance with GAAP. Waste Management's financial statements were neither fair nor complete because several expenses were missing, causing net income to be overstated to reach the amount set by executives. Waste Management simultaneously extended the estimated lifespan of the garbage trucks and increased the residual value of the trucks.
According to Waste Management's financial statements, the trucks were gaining value as they aged. Waste management eliminated or deferred depreciation expenses to achieve the defined profit target. Arthur Andersen "knowingly or recklessly" issued materially false and misleading audit reports on Waste Management's annual financial statements.
INTERNATIONAL ACCOUNTING STANDARDS Environmental Liabilities in 2007
The section of the Codification of Accounting Standards states that two situations must be met before an obligation incurred is probable. The second element states that it must be probable that the outcome of the assessment will be unfavorable. Although Construct has not been able to estimate the total costs of the remediation effort, the obligation under Section must still be recognized.
Because the amount of the liability could not be estimated, $400,000 in legal fees and RI/FS costs should be reported. Since the amount of the payment is unknown and it is not virtually certain that the payment will be received from BigMix, Construct cannot recognize a recovery. US GAAP: In 2011, Construct had to record an additional liability of $1.5 million to implement the remediation plan because Construct is held liable for the contamination and because the cost of the liability can be reasonably estimated.
LONG-TERM DEBT
Regardless of the method of discount amortization used, Rite Aid's numbers result in more liabilities than assets and greater expenses than income. As shown in part h(i) of the Appendix, Rite Aid's ratios for fiscal year 2009 and fiscal year 2008 compare unfavorably to the industry average. By analyzing Rite Aid's ratios, it becomes clear that the company will more than likely not be able to repay its debt.
Rite Aid's credit rating is CCC, which describes the company as vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments. Rite Aid differentiates between these two types of debt because although the company has accumulated a large amount of debt, most of it is secured which is less risky. Rite Aid has several different types of debt with a variety of interest rates because the company has many subsidiaries with different levels of riskiness.
STOCKHOLDERS’ EQUITY
Treasury stock can be accounted for in the shareholders' equity section of the balance sheet by two different methods. In accordance with the cost method, treasury stock is deducted from the total contributed capital and retained earnings at the bottom of the shareholders' equity section of the balance sheet. Another difference between the two methods is that treasury shares are deducted from common stock in the capital stock section of the balance sheet.
In accordance with IFRS, GlaxoSmithKline uses the movements in equity statement instead of the statement of shareholders' equity. An increase in the dividend payout ratio for a mature company is expected because only a smaller part of the earnings is required in investments; therefore, the company can distribute the profits to its shareholders. Dividends are also proof that the company is doing well enough to share some of the wealth.
SECURITIES
The third investment found on State Street Corporation's balance sheet is its held-to-maturity investment securities. Securities held to maturity can only consist of debt, because shares have no maturity date. Unlike trading securities and available-for-sale securities, held-to-maturity securities are recorded at amortized cost.
Held-to-maturity securities are debt securities that management has the intention and ability to hold to maturity. Stocks are never classified as held-to-expiry because stocks have no expiration date. Held-to-maturity securities are recorded at amortized cost because if management has no plans to sell the security, then the fair values are not relevant for measuring cash flows associated with the security.
INCOME AND REGULATION
Gross margin percentage shows the proportion of each dollar of revenue that the company retains as gross profit. Under the gross method of revenue recognition, the gross margin percentage increased by 3.39% from 2009 to 2010. Under the net method of revenue recognition, the gross margin percentage increased by 19.96% from 2009 to 2010.
Under the net method, Groupon records revenue as the difference between the amount of cash received from the customer and the payment due to the supplier of the product or service. Although the cost of sales under the gross method is higher, Groupon's financial statements appear stronger under the gross method due to the increase in revenue and the subsequent increase in gross margin. Operating cash flow was unaffected by the restatement of the fourth quarter 2011 financial statements because the amount of actual cash received by the company did not change.
DEFERRED TAXES
A deferred tax liability represents the increase in taxes payable in future years as a result of taxable temporary differences that exist at the end of the current year. The valuation allowance for deferred taxes is a offset against deferred tax assets that is included in the balance sheet for the year in which the company determines that it is more likely than not that it will not realize an amount of the related deferred tax asset. Therefore, the amount of net deferred tax asset recorded in the income tax journal entry is $8,293,000.
This amount was found by dividing the deferred income tax liability relating to property and equipment by the statutory income tax rate. This amount was found by dividing the change in the deferred income tax asset relating to the allowance for doubtful accounts by the statutory income tax rate. The amount to be recorded is calculated by dividing the amount of the deferred income tax asset account by the total statutory tax rate (38%).
PENSIONS AND RETIREMENT PLANS a. Defined contribution plans and defined benefit plans
Volatility in pension expense can result from sudden and large changes in the fair value of plan assets and changes in projected benefit obligations. Actuarial gains or losses comprise the difference between the actual return and the expected return on plan assets and the amortization of net profit or loss from previous periods. Pension expense contains a component of the expected return on plan assets, while pension plan assets contain a component of the actual return on plan assets.
This number represents the amount of funds needed in 2007 to meet the obligations of the pension plan. The December 31, 2007 value of the pension plan assets held by Johnson & Johnson's pension plan was $10,469 million. The value of the plan assets increased as a result of additional contributions received from the employer and as a result of the returns from the assets.
