Solutions for Managerial Accounting Tools for Business Decision Making, 10th Edition by Weygandt (All Chapters included)
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Course
Managerial Accounting Tools for Business 10e
Institution
Managerial Accounting Tools For Business 10e
Complete Solutions Manual for Managerial Accounting Tools for Business Decision Making, 10th Edition by Jerry J. Weygandt, Paul D. Kimmel, Jill E. Mitchell ; ISBN13: 9781394173860....(Full Chapters are included and organized in reverse order from Chapter 14 to 1)...Chapter 1: Managerial Accounting...
Chapter 10: Budgetary Control and Responsibility
Accounting
Chapter 11: Standard Costs and Balanced Scorecard
Chapter 12: Planning for Capital Investments
Chapter 13: Statement of Cash Flows
Chapter 14: Financial Analysis
,Solutions Manual organized in reverse order, with the last chapter displayed first, to
ensure that all chapters are included in this document.
(Complete Chapters included Ch14-1)
CHAPTER 14
Financial Analysis: The Big Picture
Learning Objectives
1. Apply the concepts of sustainable income and quality of earnings.
2. Apply horizontal analysis and vertical analysis.
3. Analyze a company’s performance using ratio analysis.
14-1
, ANSWERS TO QUESTIONS
1. Sustainable income is defined as the most likely level of income to be obtained in the future. It is
the amount of regular income that a company can expect to earn from its normal operations. In
order to distinguish a company’s net income from its sustainable income, unusual revenues,
expenses, gains, and losses are separated from operating transactions. In addition, information
on unusual items such as gains and losses on discontinued items and components of other
comprehensive income are disclosed.
LO 1 BT: C Difficulty: Medium TOT: 3 min. AACSB: None AICPA FC: Reporting IMA: FSA
2. This would not be considered a favorable trend for Hogan Inc. The relevant earnings per share
figures are the $3.26 in 2026 and the $2.99 in 2027. These figures indicate that, unless there was
a sale of common stock, the earnings from the continuing operations of the company decreased
during 2027. This should give the company’s management some concern because they will not
always be able to count on income or gains from discontinued operations.
LO 1 BT: AN Difficulty: Medium TOT: 4 min. AACSB: Analytic AICPA FC: Reporting IMA: FSA
3. Companies report a change from the FIFO method to the average cost method for inventory
costing, retroactively. That is, they report both the current period and any previous periods
reported on the face of the statement using the new principle. As a result, the same principle
applies to all periods reported. This treatment improves the ability to compare results across
years.
LO 1 BT: C Difficulty: Easy TOT: 3 AACSB: None AICPA FC: Reporting IMA: FSA
4. Apple reported “Total other comprehensive income” of $3,827 million for year ended September
28, 2019. “Comprehensive income” was more than “Net income” by 5.0% [($58,037 – $55,256) ÷
$55,256]
LO 1 BT: AN Difficulty: Medium TOT: 4 min. AACSB: Analytic AICPA FC: Reporting IMA: FSA
5. (1) Use of alternative accounting methods. Variations among companies in the application of
generally accepted accounting principles may hamper comparability.
(2) Use of pro forma income measures that do not follow GAAP. Pro forma income is calculated
by excluding items that the company believes are unusual or nonrecurring. It is often difficult
to determine what was included and excluded.
(3) Improper revenue and expense recognition. Many high-profile cases of inappropriate
accounting involve recording items in the wrong period.
LO 1 BT: K Difficulty: Medium TOT: 3 min. AACSB: None AICPA FC: Reporting IMA: FSA
14-2
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