This item is the first of two exercise books that correspond directly with the Using Accounting Information textbook. Exercises focus on income statement reporting requirements for special situations such as discontinued operations, extraordinary items, and comprehensive income; computation of basic and fully diluted earnings per share; book value per share; return on assets and return on equity; and adjustments to retained earnings.
Type of Material:
Drill and practice to accompany open textbook.
Homework outside of class.
Must provide email to and school affiliation to download .
Identify Major Learning Goals:
The learning goals include:
Preparing a multi-step income statement containing discontinued operations and extraordinary items.
Computing basic and fully diluted earnings per share.
Computomg book value per share.
Computing return on assets and return on equity.
Adjusting beginning retained earnings for prior period errors and the effect of change in accounting principle.
Computing other comprehensive income.
Target Student Population:
Introductory or upper division financial accounting course.
Prerequisite Knowledge or Skills:
Must have a basic knowledge of the income statement and the stockholders’ equity section of the balance sheet. Intended for use with the online textbook Using Accounting Information offered by Book Boon.
Detailed practice problems are provided that can be completed without using the associated online textbook. Solution templates provide formulas needed to complete problems. Can be used as an out of class assignment or as an in class demonstration. It would be easy to change the numbers to create different practice problems. The module demonstrates core concepts grounded in the discipline, is current and relevant, self-contained, and flexible.
Solutions contain several errors that need to be corrected to provide benefit to students. For example, Problem 2 has a mistake in the calculation of weighted average per share which affects all the other calculations. An error has been made calculating Net Income in Problem 6 as well as calculating weighted average shares outstanding which affects all the other calculations. See comments at the end of the review regarding a more detailed discussion of the errors.
Potential Effectiveness as a Teaching Tool
The module demonstrates relationships between concepts, is easy to write assignments for, and is efficient. The detailed problems provide an opportunity to prepare a multi-step income statement, as well as use selected information form the balance sheet to compute selected ratios for use in financial statement analysis. The number of problems includes are sufficient to provide practice to reinforce the concepts. An instructor can easily change the numbers to create additional problems. Sufficient number of problems to reinforce the concepts.
Prerequisite knowledge is not identified. Each problem should have learning objectives specified. The problem set includes several comprehensive problems that cannot be covered in a short period of time. Formulas are provided in the solutions and may encourage students to look at the solution before working problems. It may beneficial to give the formulas along with the problem detail or provide a reference to the associated textbook.
Ease of Use for Both Students and Faculty
The set of practice problems is easy to use. Instructions are clear. Problems, worksheets (blank problem templates) and solutions can be printed. The problems are beneficial as a drill and practice assignment.
The module could be more visually appealing, interactive, and of higher design quality. The ads placed throughout the pages are distracting. Users would have to print 25 pages to get about 18 useful pages.
Other Issues and Comments:
The solutions contained the following errors:
Problem 3: Compute book value per share for Cairo Company. The solution contains the following sentence “Cairo’s common stock has a book value of $38.65 (incorrect amount). The solution that follows shows the correct calculations resulting in book value per share of $21.26.
Problem 4: The problem states the financial services division was sold at a pretax gain of $1,500,000 (correct amount) but the solution incorrectly shows the amount as $1,600,000 (typo).
Income from operations is $1,120,000 (correct). The gain on sale of financial section is reported under discontinued operations (net of tax) as $1,050,000. The company incurred a pre-tax cleanup cost of $350,000. This is correctly reported as an extraordinary item of $245,000 (net of tax).
The solution reports net income of $1,365,000 but the numbers equal $1,925,000 ($1,120,000 + 1,050,000 – 245,000). This causes the amount for total comprehensive income to be reported incorrectly as $2,165,000. The correct amount should be $2,725,000.
Problem 7 – The number of weighted share of common stock outstanding is incorrect.
The computation provided is:
1,900,000 X 4/12 = 633,333
2,200,000 X 6/12 = 1,100,000
2,000,000 X 2/12 = 566,667 (correct amount is 333,333)
Total weighted shares = 2,300,000 (correct amount is 1,733,666). Because this number is incorrect the basic and fully diluted EPS are both incorrect. The solution gives basic EPS as .23 (correct amount is .305). The fully diluted EPS is given as .21 (correct amount is .2667).
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