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3. (TCO C) Please review the following real-world Hewlett Packard
Statement of Cash flows and address the 2 questions below:
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Required:
1) Please calculate the percentage increase or decrease in cash for the
operating, investing, and financing sections and explain the major
reasons for the increase or decrease for each of these sections.
2) Please calculate the free cash flow for 2012 and explain the meaning
of this ratio.
4. (TCO D) You are CFO of Goforit, Inc., a wholesale distribution
company specializing in emerging technologies. Your CEO is a brilliant
marketer, but relies on you to explain issues and choices in accounting
and finance. She has heard from other members of a CEO organization
to which she belongs that a company’s net income can vary widely
depending on which accounting choices are made from the “GAAP
menu.”
Assuming the goal is to maximize net income, choose an accounting
treatment from each of the following scenarios, and explain to your CEO
why the choice will produce the desired effect on reported Net Income
for the current year. Include in your answer the effect of the choice on
both the income statement and balance sheet.
Required:
a. Goforit carries significant electronics inventory in a competitive
environment where prices are actually falling. Which inventory
valuation method would you choose—LIFO, FIFO, or average cost?
Assume that unit purchases exceed unit sales
b. Goforit has a large investment in warehouse equipment including
conveyor belts, forklifts, and automated packaging systems. Which
depreciation method would you choose: Straight line (SL) or double
declining balance (DDB)?
5. (TCO F) Please review the following real-world ratios for Johnson &
Johnson and Pfizer for the year ended 2012 and address the 2 questions
below.