SOLUTIONS TO ANALYZE, THINK, COMMUNICATE CHAPTER 1

1-64 Solutions Manual for Survey of Accounting, 6e Thomas Edmonds, Christopher Edmonds, Olds, McNair, Tsay (All Chapters Download Link at the end of this file)

SOLUTIONS TO ANALYZE, THINK, COMMUNICATE – CHAPTER 1

ATC 1 – 1 (All dollar amounts are in millions.)

• $ 2,937

• Net income increased by $23

STOCKHOLDERS’

• ASSETS = LIABILITIES + EQUITY

$41,290 = $29,993* + $11,297

• Liabilities must be computed by subtracting equity from assets.

• Sales increased by 3.7% from 2017 to 2018.

($74,443− $71,786)  $71,786 = 3.7%

Cost of sales increased by 4.3% from 2017 to 2018.

($53,299− $51,125)  $51,125 = 4.3%

Selling, general and administrative expenses increased by 3.9% from 2017 to 2018. ($15,723− $ 15,140)  $ 15,140 = 3.9%

The largest percentage increase was for cost of sales expenses.

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ATC 1-2

a.Income Statements (amounts given are in millions)

Year 6 Year 5 Year 4 Year 3

Revenue $ 860 $1,520 (a) $2,720 $1,200 Cost and Expenses (a) (840) (a) (1,070) (2,400) (860) Income from Cont. Op. (b) 20 450 320 (a) 340 Unusual Items -0- 175 (b) (145) (b) ( 40) Net Income $ 20 (b) $ 625 $ 175 $ 300

Balance Sheets Cash and Marketable Sec. $ 350 $1,720 (c) $ 750 $ 940 Other Assets 1,900 (c) 1,180 2,500 (c) 2,560 Total Assets $2,250 $2,900 (d) $3,250 $3,500

Liabilities (c) $ 730 (d) $1,555 $1,001 (d) $1,300

Stockholders’ Equity Common Stock $ 880 $ 720 (e) $1,449 $ 800 Retained Earnings (d) 640 (e) 625 800 (e) 1,400 Total Stockholders’ Equity 1,520 1,345 (f) 2,249 2,200

Total Liab. and Stk. Equity $2,250 (f) $2,900 $3,250 $3,500

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ATC 1-3

This solution is based on McDonald’s 2017 financial report.

a. McDonald’s net income for 2017, 2016, and 2015 were as follows:

2017: $5,192.3 million

2016: 4,686.5

2015: 4,529.3

• The company had $33,803.7 million of assets at the end of 2017.

• The company had $48,325.8 million of retained earnings at the end of

2017.

d. For 2017, the company’s:

net cash flow from operating activities were $5,551.2 million net cash flow from investing activities were $562.0 million.net cash flow from financing activities were ($5,310.8) million.

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ATC 1-4

This problem is designed to test written communication skills. The memo should describe the balance sheet and the income statement. It should explain that the balance sheet is a statement of assets, liabilities, and stockholders’ equity at the date of the financial statement. The income statement gives the amount of revenues and expenses for the designated

period. The memo should also define each of the following terms:

Assets Liabilities Stockholders’ Equity Revenue Expense Net Income

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