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Ch 5: Financial Statements Analysis (Household)

Terms in this set (32)

When describing personal statements, what is often referred to a the statement of financial position?

What consists of all one's assets, their liabilities, and their net worth?

What are assets that are expected to be or can be converted into cash in the current year called?

Which types of assets do checking accounts, money market funds, and refunds due such as those on catalog purchases fall under?

What are investments that are traded publicly--fx., stocks and bonds.

Marketable Investments

What typically refers to the ownership of a home?

What are assets used in day to day around the house activities called? Examples include: Furniture, appliances, and vehicles.

Household Assets

The most prominent asset for the household is typically the future income stream of its wage earners, called _____________.

The term human related is used because the value is derived from human related work efforts or human relationships.

Household equity is also known as what?

Household Net Worth

_________________ is the difference between its assets and liabilities.

Household Equity

Which part of the balance sheet is intended to show how much the household is worth at that point in time.

Household Equity

Net worth, or household equity, generally ____________as the marketable investment portion rises on a balance sheet.

Tricia had a $20,000 savings account, owned a car valued at $12,000, and owed $9,000 that she had borrowed to help finance the car. Calculate her net worth.

$____________.

Shirley had a $500 in cash, $12,500 in stocks, and $2,500 in bonds as well as a car worth $12,000. She had debt of $2,000 in credit card payments , an education loan of $8,000 with payments not due to begin for three years, and a mortgage loan of $144,000 with $5,000 due this year. She owned a home worth $175,000, furniture and fixtures of $3,000, appliances with a value of $4,000, and jewelry of $5,000. She expects to pay her mortgage and other obligations from current year's earnings.

Her liabilities add up to be $_____________.

Shirley had a $500 in cash, $12,500 in stocks, and $2,500 in bonds as well as a car worth $12,000. She had debt of $2,000 in credit card payments , an education loan of $8,000 with payments not due to begin for three years, and a mortgage loan of $144,000 with $5,000 due this year. She owned a home worth $175,000, furniture and fixtures of $3,000, appliances with a value of $4,000, and jewelry of $5,000. She expects to pay her mortgage and other obligations from current year's earnings.

Her assets add up to be $_____________.

Shirley had a $500 in cash, $12,500 in stocks, and $2,500 in bonds as well as a car worth $12,000. She had debt of $2,000 in credit card payments , an education loan of $8,000 with payments not due to begin for three years, and a mortgage loan of $144,000 with $5,000 due this year. She owned a home worth $175,000, furniture and fixtures of $3,000, appliances with a value of $4,000, and jewelry of $5,000. She expects to pay her mortgage and other obligations from current year's earnings.

Her net worth is $_____________.

Which statement is perhaps the single best measurement of the financial performance and is therefore the health of a household?

Statement of Cash Flows

Which statement separates cash flows by type of household activity into basically 3 types:

1. Operational
2. Financing
3. Investment

Functional Cash Flow Statement

Assets intended to be liquidated within the year are called what?

Checking accounts, tax refunds, and merchandise refunds not yet received are examples of which asset?

What are the day to day financial function of the household called?

Operating Activities

THe principal difference between the household statement and the business income statement is that the household statement is recorded on a strict cash basis, while the business one includes noncash items.

The difference between income and expenses is the cash flow from __________

______________are outlays on household related matters that provide benefits beyond the current year. They are a form of investment.

Capital Expenditures

Items such as cars, furniture, fixtures, and appliances would fall under which household functional cash flow statement?

Capital Expenditures

Which part of the functional cash flow statement is responsible for the cash flows that come from changes in debt?

Financial Activities

Which part of the functional cash flow statement is the cash left over after your operating, capital expenditure, and debt activities?

Which part of the functional cash flow statement is also known as the cash flow?

Regarding the functional cash flow statement, where should savings placed into vehicles such as stocks be placed?

Regarding the functional cash flow statement, where should interest on debt be placed?

Nondiscretionary Expenses

Regarding the balance sheet, where should savings placed into vehicles such as stocks be placed?

Marketable Securities

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Verified questions

ACCOUNTING

Humanity International sells medical and food supplies to those in need in underdeveloped countries. Customers in these countries are often very poor and must purchase items on account. At the end of 2018, total accounts receivable equal $1,300,000. The company understands that it's dealing with high credit risk clients. These countries are often in the middle of a financial crisis, civil war, severe drought, or some other difficult circumstance. Because of this, Humanity International typically estimates the percentage of uncollectible accounts to be 35% (=$455,000). Actual write-offs in 2019 total only $300,000, which means that the company significantly overestimated uncollectible accounts in 2018. It appears that efforts by the International Monetary Fund (IMF) and the United Nations (UN), and a mild winter mixed with adequate spring rains, have provided for more stable economic conditions than were expected, helping customers to pay on their accounts. 1. Record the adjustment for uncollectible accounts at the end of 2018, assuming there is no balance in Allowance for Uncollectible Accounts at the end of 2018 before any adjustment. 2. By the end of 2019, Humanity International has the benefit of hindsight to know that estimates of uncollectible accounts in 2018 were too high. How did this overestimation affect the reported amounts of total assets and expenses at the end of 2018? Ignore tax effects. 3. Should Humanity International prepare new financial statements for 2018 to show the correct amount of uncollectible accounts? Explain.

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ACCOUNTING

When posting amounts from a journal to general ledger accounts, a $10.00 debit to Supplies is mistakenly posted as a credit to Utilities Expense. Will this error be discovered when the work sheet is prepared? Explain.

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ACCOUNTING

For each of the following plant assets: 1. calculate the amount to be depreciated, 2. calculate the annual depreciation expense using the straight-line method, 3. calculate the depreciation expense for the first year. Use the form provided in your working papers. $$ \begin{array}{llll} \text{ } & \text{Months} & \text{ } & \text{Estimated} & \text{ }\\ \text{ } & \text{Owned} & \text{Original} & \text{Disposal} & \text{Estimated}\\ \text{Plant Asset } & \text{First Year} & \text{Cost} & \text{Value} & \text{Useful Life}\\ \hline \text{1. Cash register} & \text{8} & \text{\$450} & \text{\$30} & \text{7 years}\\ \text{2. Computer} & \text{2} & \text{$6,500$} & \text{$1,500$} & \text{5 years}\\ \text{3. Conference table} & \text{6} & \text{$1,900$} & \text{100} & \text{25 years}\\ \text{4. Delivery truck} & \text{3} & \text{$36,400$} & \text{$6,400$} & \text{5 years}\\ \text{5. Desk} & \text{11} & \text{$3,180$} & \text{300} & \text{20 years}\\ \end{array} $$

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ACCOUNTING

Below are incomplete financial statements for Cyclone, Inc. $$ \text{CYCLONE, INC.} \\ \underline{\text{Income Statement}} \\ \begin{matrix} \text{Revenues} & \text{(a) }\\ \text{Expenses:} & \text{ }\\ \text{Salaries} & \text{$\$ 13,000$}\\ \text{Rent} & \text{$7,000$}\\ \text{Advertising} & \underline{5,000}\\ \text{Net income} & \underline{\underline{(b)}}\\ \end{matrix} $$ $$ \text{CYCLONE, INC.} \\ \underline{\text{Statement of Stockholders' Equity}} \\ \begin{matrix} \text{ } & \text{Common} & \text{Retained} & \text{Total}\\ \text{ } & \text{Stock} & \text{Earnings} & \text{S. Equity}\\ \text{Beginning balance} & \text{$\$ 14,000$} & \text{$\$ 7,000$} & \text{$\$ 21,000$}\\ \text{Issuances of stock} & \text{$(\mathrm{c})$} & \text{ } & \text{(c)}\\ \text{Add: Net income} & \text{ } & \text{$5,000$} & \text{$5,000$}\\ \text{Less: Dividends} & \text{\_\_\_\_\_} & \underline{(d)} & \underline{(d)}\\ \text{Ending balance} & \underline{\underline{\$ 17,000}} & \underline{\underline{\$ 8,000}} & \underline{\underline{\$ 25,000}}\\ \end{matrix} $$ $$ \text{CYCLONE, INC.} \\ \text{Balance Sheet } \\ \begin{matrix} \underline{Assets} & \text{ } & \underline{Liabilities} & \text{ }\\ \text{Cash} & \text{\$1,100} & \text{Accounts payable} & \text{\$ 4,000}\\ \text{Supplies} & \text{(e)} & \underline{\text{Stockholders' Equity}} & \text{ }\\ \text{Land} & \text{$6,000$} & \text{Common stock} & \text{(g)}\\ \text{Building} & \underline{16,000} & \text{Retained earnings} & \underline{(h)}\\ \text{Total assets} & \underline{\underline{(f)}} & \text{Total liabilities and} & \text{ }\\ \text{ } & \text{ } & \text{stockholders' equity} & \underline{\underline{(i)}}\\ \end{matrix} $$ Calculate the missing amounts.

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