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Reading 27: Analysis of Financial Statements: A Synthesis

 

Lowe Corporation Balance Sheet
(in thousands $)

Assets

Liabilities & Owners’ Equity

Cash

$ 500

Accounts payable

$ 2,000

Marketable Securities

1,000

Notes payable

1,500

Accounts Receivable

3,000

Total current liabilities

$ 3,500

Inventory

1,500

 

 

Total current assets

$ 6,100

 

 

 

 

Long-term debt

$ 500

 

 

 

 

 

 

Preferred stock (100K shs)

1,000

 

 

Common stock (20M shs)

2,000

Net Prop., Plant, & Eq.

$ 4,000

Retained earnings

5,600

Prepaid pension cost

500

Total stockholders’ equity

8,600

Intangible assets

3,000

 

 

Total assets

$ 13,600

Total liabilities & equity

$ 13,600

 

 

 

 

Q18. Footnote disclosures:

§      One of Lowe’s major customers, who accounts for $500 in receivables, has just filed bankruptcy.

§      Inventories are valued at cost as determined by last in, first out (LIFO) method. The LIFO reserve is $300.

§      Additional operating facilities and equipment are financed with operating leases that have a present value of $1,000.

§      Intangible assets represent $3,000 of goodwill from previous acquisitions.

§      Due to a decrease in interest rates, long-term debt has a current market value of $600.

§      The current market price of Lowe’s preferred stock is $2/share.

§      Lowe’s is expected to incur expenses with a present value of $300 to remedy an environmental problem at one of its sites.

Lowe's total long-term obligations on the adjusted balance sheet total which of the following?

A)   $1,800.

B)   $1,900.

C)   $2,100.

 

Q19. What is Lowe's ratio of long-term debt to equity based on the historical cost balance sheet?

A)   0.03.

B)   0.30.

C)   0.06.

 

Q20. What is Lowe's adjusted inventory based on the first in, first out (FIFO) method?

A)   $1,200.

B)   $1,800.

C)   $300.

 

Q21. Which of the following statements is correct when inventory prices are falling?

A)     LIFO results in higher COGS, lower earnings, higher taxes, and higher cash flows.

B)     LIFO results in lower COGS, lower earnings, lower taxes, and higher cash flows.

C)     LIFO results in lower COGS, higher earnings, higher taxes, and lower cash flows.

 

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回复:(yangh)[2009] Session 7 - Reading 27: Anal...

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