SOLUTION MANUAL FOR
FINANCIAL ACCOUNTING FOR MANAGERS 1ST EDITION BY WAYNE THOMAS
AND DAVID SPICELAND AND MARK NELSON
CHAPTER 1
A FRAMEWORK FOR FINANCIAL ACCOUNTING
REAL WORLD PERSPECTIVES
RWP1-1 EDGAR Nike (ticker: NKE)
Requirement 1
a. $23,717 million
b. $9,040 million
c. Total liabilities = Total assets – total shareholder’s equity
$23,717 – $9,040 = $14,677 million
Requirement 2
a. $39,117 million. Revenue increased from the previous year.
b. $4,029 million. Net income increased from the previous year.
Requirement 3
a. Operating cash flow = $5,903 million. Operating cash flow was more positive
than the previous year.
b. Investing cash flow = −$264 million. Investing cash flow went from positive to
negative from the previous year.
c. Financing cash flow = −$5,293 million. Financing cash flow was more negative
than the previous year.
RWP1-2 EDGAR Netflix Inc (ticker: NFLX)
Requirement 1
a. Average paying membership increased by 23% and average monthly revenue per
paying membership increased by 5%.
b. $2,795,434 / $20,156,447 = 13.9%
c. $2,652,462, 13% of revenues
Requirement 2
a. $9,801,215 / $24,504,567 = 40%
b. $33,141 million
Requirement 3
a. $20,723,441. Long-term debt went up from the previous year.
, b. $736,969
Requirement 4
9%
Requirement 5
a. Ernst & Young LLP
b. Yes
RWP1-3 EDGAR General Mills Inc. (ticker: GIS)
Requirement 1
First Quarter.
Requirement 2
August 26, 2018. The same quarter of last year is used as the comparison quarter.
Requirement 3
The quarterly report includes 15 notes.
RWP1-4 EDGAR Nordstrom Inc. (ticker: JWN)
Requirement 1
The COVID-19 pandemic.
Requirement 2
On March 23, 2020, the Company announced that it would be taking several steps in an abundance
of caution to proactively strengthen its financial flexibility and navigate through this unprecedented
situation. Specifically, the Company suspended its quarterly dividend beginning in the second
quarter of 2020, drew down $800 million on its Revolving Credit Facility, targeted further
reductions of more than $500 million in operating expenses, capital expenditures, and working
capital, and suspended share repurchases.
RWP1-5 Financial Analysis: American Eagle
($ in thousands)
Requirement 1
Total assets = $3,328,679
Total liabilities = $2,080,826
Stockholders’ equity = $1,247,853
Assets = Liabilities + Stockholders’ Equity
$3,328,679 = $2,080,826 + $1,247,853
Requirement 2
Consolidated Statements of Operations
,Requirement 3
Net sales = $4,308,212
Net income = $191,257
Requirement 4
Inflows Outflows
Investing activities Sale of available-for-sale Capital expenditures for
investments property and equipment
Financing activities Net proceeds from stock Repurchase of common stock
options exercised
Requirement 5
The company’s auditor is Ernst & Young LLP.
The auditor states, ―We have audited the accompanying consolidated balance sheets of American
Eagle Outfitters, Inc. (the Company) as of February 1, 2020 and February 2, 2019, the related
consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows
for each of the three years in the period ended February 1, 2020, and the related notes (collectively
referred to as the ―consolidated financial statements‖). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at February
1, 2020 and February 2, 2019, and the results of its operations and its cash flows for each of the three
years in the period ended February 1, 2020, in conformity with U.S. generally accepted accounting
principles.‖
RWP1-6 Financial Analysis Case: The Buckle, Inc.
($ in thousands)
Requirement 1
Total assets = $867,890
Total liabilities = $478,742
Stockholders’ equity = $389,148
Assets = Liabilities + Stockholders’ Equity
$867,890 = $478,742 + $389,148
Requirement 2
Consolidated Statements of Income
Requirement 3
Net sales = $900,254
Net income = $104,429
Requirement 4
Inflows Outflows
Investing activities Proceeds from sales/maturities Purchases of investments
of investments
Financing activities There are none Payment of dividends
, Requirement 5
The company’s auditor is Deloitte & Touche LLP.
The auditor states, ―We have audited the accompanying consolidated balance sheets of The Buckle,
Inc. and subsidiary (the "Company") as of February 1, 2020 and February 2, 2019, the related
consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows, for
each of the three fiscal years in the period ended February 1, 2020, and the related notes and the
schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of February 1, 2020 and February 2, 2019, and the results of its operations and its cash
flows for each of the three fiscal years in the period ended February 1, 2020, in conformity with
accounting principles generally accepted in the United States of America.‖
RWP1-7 Comparative Analysis: American Eagle vs. Buckle
Requirement 1
The total assets of American Eagle are higher than the total assets of The Buckle.
Requirement 2
The total liabilities of American Eagle are higher than the total liabilities of The Buckle.
A higher amount of liabilities does not necessarily mean a higher chance of bankruptcy. The
probability of bankruptcy relates to the ability of a company to repay its liabilities as they become
due. If sufficient resources are available, then high levels of debt can be paid.
Requirement 3
Ability to repay debt.
The ratio of total liabilities to total assets can be used as one measure of a company’s ability to repay
its liabilities. The higher the ratio, the more difficult it will be for a company to pay its liabilities.
Requirement 4
The net income of American Eagle is higher than the net income of The Buckle. When one
company has a higher net income than another company does, this does not always mean the
company’s operations are more successful. One company may be larger than another company so it
has higher net income in absolute dollar amounts because operations are larger, but it may be
making less profit per dollar of invested assets.
Requirement 5
Ability to generate profits.
Net income provides a measure of a company’s ability to generate profit for its owners. In the case
of American Eagle and The Buckle, the owners are the stockholders of the company. An increase in
net income is a desirable characteristic of a company that, along with other factors, increases the
value (or stock price) of the company to its owners.
RWP1-8 Ethics
Requirement 1
Yes.
The role of an auditor is to express an independent, professional opinion of the extent to which
FINANCIAL ACCOUNTING FOR MANAGERS 1ST EDITION BY WAYNE THOMAS
AND DAVID SPICELAND AND MARK NELSON
CHAPTER 1
A FRAMEWORK FOR FINANCIAL ACCOUNTING
REAL WORLD PERSPECTIVES
RWP1-1 EDGAR Nike (ticker: NKE)
Requirement 1
a. $23,717 million
b. $9,040 million
c. Total liabilities = Total assets – total shareholder’s equity
$23,717 – $9,040 = $14,677 million
Requirement 2
a. $39,117 million. Revenue increased from the previous year.
b. $4,029 million. Net income increased from the previous year.
Requirement 3
a. Operating cash flow = $5,903 million. Operating cash flow was more positive
than the previous year.
b. Investing cash flow = −$264 million. Investing cash flow went from positive to
negative from the previous year.
c. Financing cash flow = −$5,293 million. Financing cash flow was more negative
than the previous year.
RWP1-2 EDGAR Netflix Inc (ticker: NFLX)
Requirement 1
a. Average paying membership increased by 23% and average monthly revenue per
paying membership increased by 5%.
b. $2,795,434 / $20,156,447 = 13.9%
c. $2,652,462, 13% of revenues
Requirement 2
a. $9,801,215 / $24,504,567 = 40%
b. $33,141 million
Requirement 3
a. $20,723,441. Long-term debt went up from the previous year.
, b. $736,969
Requirement 4
9%
Requirement 5
a. Ernst & Young LLP
b. Yes
RWP1-3 EDGAR General Mills Inc. (ticker: GIS)
Requirement 1
First Quarter.
Requirement 2
August 26, 2018. The same quarter of last year is used as the comparison quarter.
Requirement 3
The quarterly report includes 15 notes.
RWP1-4 EDGAR Nordstrom Inc. (ticker: JWN)
Requirement 1
The COVID-19 pandemic.
Requirement 2
On March 23, 2020, the Company announced that it would be taking several steps in an abundance
of caution to proactively strengthen its financial flexibility and navigate through this unprecedented
situation. Specifically, the Company suspended its quarterly dividend beginning in the second
quarter of 2020, drew down $800 million on its Revolving Credit Facility, targeted further
reductions of more than $500 million in operating expenses, capital expenditures, and working
capital, and suspended share repurchases.
RWP1-5 Financial Analysis: American Eagle
($ in thousands)
Requirement 1
Total assets = $3,328,679
Total liabilities = $2,080,826
Stockholders’ equity = $1,247,853
Assets = Liabilities + Stockholders’ Equity
$3,328,679 = $2,080,826 + $1,247,853
Requirement 2
Consolidated Statements of Operations
,Requirement 3
Net sales = $4,308,212
Net income = $191,257
Requirement 4
Inflows Outflows
Investing activities Sale of available-for-sale Capital expenditures for
investments property and equipment
Financing activities Net proceeds from stock Repurchase of common stock
options exercised
Requirement 5
The company’s auditor is Ernst & Young LLP.
The auditor states, ―We have audited the accompanying consolidated balance sheets of American
Eagle Outfitters, Inc. (the Company) as of February 1, 2020 and February 2, 2019, the related
consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows
for each of the three years in the period ended February 1, 2020, and the related notes (collectively
referred to as the ―consolidated financial statements‖). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at February
1, 2020 and February 2, 2019, and the results of its operations and its cash flows for each of the three
years in the period ended February 1, 2020, in conformity with U.S. generally accepted accounting
principles.‖
RWP1-6 Financial Analysis Case: The Buckle, Inc.
($ in thousands)
Requirement 1
Total assets = $867,890
Total liabilities = $478,742
Stockholders’ equity = $389,148
Assets = Liabilities + Stockholders’ Equity
$867,890 = $478,742 + $389,148
Requirement 2
Consolidated Statements of Income
Requirement 3
Net sales = $900,254
Net income = $104,429
Requirement 4
Inflows Outflows
Investing activities Proceeds from sales/maturities Purchases of investments
of investments
Financing activities There are none Payment of dividends
, Requirement 5
The company’s auditor is Deloitte & Touche LLP.
The auditor states, ―We have audited the accompanying consolidated balance sheets of The Buckle,
Inc. and subsidiary (the "Company") as of February 1, 2020 and February 2, 2019, the related
consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows, for
each of the three fiscal years in the period ended February 1, 2020, and the related notes and the
schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of February 1, 2020 and February 2, 2019, and the results of its operations and its cash
flows for each of the three fiscal years in the period ended February 1, 2020, in conformity with
accounting principles generally accepted in the United States of America.‖
RWP1-7 Comparative Analysis: American Eagle vs. Buckle
Requirement 1
The total assets of American Eagle are higher than the total assets of The Buckle.
Requirement 2
The total liabilities of American Eagle are higher than the total liabilities of The Buckle.
A higher amount of liabilities does not necessarily mean a higher chance of bankruptcy. The
probability of bankruptcy relates to the ability of a company to repay its liabilities as they become
due. If sufficient resources are available, then high levels of debt can be paid.
Requirement 3
Ability to repay debt.
The ratio of total liabilities to total assets can be used as one measure of a company’s ability to repay
its liabilities. The higher the ratio, the more difficult it will be for a company to pay its liabilities.
Requirement 4
The net income of American Eagle is higher than the net income of The Buckle. When one
company has a higher net income than another company does, this does not always mean the
company’s operations are more successful. One company may be larger than another company so it
has higher net income in absolute dollar amounts because operations are larger, but it may be
making less profit per dollar of invested assets.
Requirement 5
Ability to generate profits.
Net income provides a measure of a company’s ability to generate profit for its owners. In the case
of American Eagle and The Buckle, the owners are the stockholders of the company. An increase in
net income is a desirable characteristic of a company that, along with other factors, increases the
value (or stock price) of the company to its owners.
RWP1-8 Ethics
Requirement 1
Yes.
The role of an auditor is to express an independent, professional opinion of the extent to which
