A-Explain the basic differences between estimating the amount ofuncollectible accounts using the percent of sales method and theaccounts receivable method
B-Explain how to record the receipt of a note receivable
C-Explain the purpose of financial statement analysis for bothexternal and internal users
D-Identify and explain the four building blocks of financialstatement analysis
E- . What are the standards for financial analysis comparison?Give examples of each.
F- Identify and describe three common tools of financialstatement analysis.
A-Explain the basic differences between estimating the amount ofuncollectible accounts using the percent of sales method and theaccounts receivable method
B-Explain how to record the receipt of a note receivable
C-Explain the purpose of financial statement analysis for bothexternal and internal users
D-Identify and explain the four building blocks of financialstatement analysis
E- . What are the standards for financial analysis comparison?Give examples of each.
F- Identify and describe three common tools of financialstatement analysis.
Related questions
Auditing and Assurance service 16th edition, alvin arens, page258-259
Pinnacle Manufacturing: part I
A) refer to the finanical statement data in figure 8-9 for thecurrent year and prior two years. analyze the year-to-year changein account balance for at least five financial statement lineitems. documents the trend analysis in a format similar to thefollowing:
Account Balance _________%change 2015-2016___________%change2014-2015
Net sales
B) calculate at least five common ratios shown in chapter 7 onpage 196-199 and document them in format similar to thefollowing:
Ratio____________________2016__________2015________2014
current ratio
C) based on the analytical procedures calculated in parts a andb, summarize your observation about pinnacle's business, includingyour assessment of the clients's business risk.
D) go to the pinnacle link on the textbookweb site(www.personhighered.com/arens) and open the pinnacle incomestatement, which is located in the pinnacle income statementworksheet of the pinnacle_financials excel file. use the incomestatement information to prepare a common-size income statement forall three years (see figure 8-4 pg. 233) for an example. use theinformation to identify accounts for which you believe there is aconcern about material misstatements. use a format to thefollowing:
account balance____________________estimate of $amount ofpotential misstatement
E) use the three divisional income statements in thepinnacle_financials excel file on the web site to prepare acommon-size income statement for each of the three divisions forall three years. each division's income statement is in separateworksheet excel file. use the information to identify accounts forwhich you believe there is a concern about material misstatements.use a format similar to the one in requirement D.
F) explain whether you believe the information is requirement Dor E provides the most useful data for evaluting the potential formisstatements. explain why.
G) analyze the account balances for accounts receivable,inventory, and short/current long-tern debt. describe anyobservation about those accounts and discuss additional informationyou want to consider duuring the current year audit.
H) based on your calculations, assess thelikelihood(high,medium,low) that pinnacle is likely to failfinancially in the next 12 months.
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Recording Transactions (Including Adjusting and Closing Entries), Preparing Financial Statements, and Performing Ratio Analysis
Josh and Kelly McKay began operations of their furniture repair shop (Furniture Refinishers, Inc.) on January 1, 2016. The annual reporting period ends December 31. The trial balance on January 1, 2017, was as follows:
| Account Titles | Debit | Credit |
| Cash | â5,000 | |
| Accounts receivable | â4,000 | |
| Supplies | â2,000 | |
| Small tools | â6,000 | |
| Equipment | ||
| Accumulated depreciation (on equipment) | ||
| Other assets (not detailed to simplify) | â9,000 | |
| Accounts payable | â7,000 | |
| Notes payable | ||
| Wages payable | ||
| Interest payable | ||
| Income taxes payable | ||
| Unearned revenue | ||
| Common stock (60,000 shares, $0.10 par value) | â6,000 | |
| Additional paid-in capital | â9,000 | |
| Retained earnings | â4,000 | |
| Service revenue | ||
| Depreciation expense | ||
| Wages expense | ||
| Interest expense | ||
| Income tax expense | ||
| Remaining expenses (not detailed to simplify) | ||
| âTotals | 26,000 | 26,000 |
Transactions during 2017 follow:
A.Borrowed $20,000 cash on July 1, 2017, signing a one-year, 10 percent note payable.
B.Purchased equipment for $18,000 cash on July 1, 2017.
C.Sold 10,000 additional shares of capital stock for cash at $0.50 market value per share at the beginning of the year.
D.Earned $70,000 in revenues for 2017, including $14,000 on credit and the rest in cash.
E.Incurred remaining expenses of $35,000 for 2017, including $7,000 on credit and the rest paid with cash.
F.Purchased additional small tools, $3,000 cash.
G.Collected accounts receivable, $8,000.
H.Paid accounts payable, $11,000.
I..Purchased $10,000 of supplies on account.
J.Received a $3,000 deposit on work to start January 15, 2018.
K.Declared and paid a cash dividend, $10,000.
Data for adjusting entries:
L.Supplies of $4,000 and small tools of $8,000 were counted on December 31, 2017 (debit Remaining Expenses).
M.Depreciation for 2017, $2,000.
N.Interest accrued on notes payable (to be computed).
O.Wages earned since the December 24 payroll but not yet paid, $3,000.
P.Income tax expense was $4,000, payable in 2018.
Required:
1.Set up T-accounts for the accounts on the trial balance and enter beginning balances.
2.Prepare journal entries for transactions (a) through (k) and post them to the T-accounts.
3.Journalize and post the adjusting entries (l) through (p).
4.Prepare an income statement (including earnings per share rounded to two decimal places), statement of stockholdersâ equity, and balance sheet.
5.Identify the type of transaction for (a) through (k) for the statement of cash flows (O for operating, I for investing, F for financing), and the direction and amount of the effect.
6.Journalize and post the closing entry.
7.Compute the following ratios (rounded to two decimal places) for 2017 and explain what the results suggest about the company:
a,Current ratio
b,Total asset turnover
c,Net profit margin
