Prototype for author review. This is not a MyLab deployment.
Homework: Chapter 5 Real World Reporting(with tutorial videos)
RW5-1 Southwest Airlines Co. Question 1 of 5
Completed:0 of 5 | My score:0/5 pts (0%)
Chapter 5 Real World Reporting: instructor review copy (printed )
This copy shows each assignment in full for the fiscal 2021 version: every question with the instructor key, where to find the answer in the 10-K, and the feedback for every option, with the error behind each wrong one. The tables after this note give the key for every version (2015, 2017, 2019, 2021, and 2023). In the assignment itself, students see one question at a time and see feedback only after submitting.
Prototype for author review, not a MyLab deployment. Every figure was checked against the company’s own Form 10-K for the version year.
RW5-1 Southwest Airlines Co.: answer key by version
Version
Q1
Q2
Q3
Q4
Q5
FY2015
c. $474 million; it increased from the prior year
a. Mainly amounts due from credit card companies for tickets sold for future travel and amounts due from business partners in Southwest’s frequent flyer program.
d. Note 1 says the allowance was immaterial at December 31, 2015 and 2014, so Southwest gives no dollar amount.
b. 0.48
c. 0.57; the quick ratio decreased from 2014 to 2015
FY2017
c. $662 million; it increased from the prior year
a. Mainly amounts due from credit card companies for tickets sold for future travel and amounts due from business partners in Southwest’s frequent flyer program.
d. Note 1 says the allowance was immaterial at December 31, 2017 and 2016, so Southwest gives no dollar amount.
b. 0.57
c. 0.56; the quick ratio increased from 2016 to 2017
FY2019
c. $1,086 million; it increased from the prior year
a. Mainly amounts due from business partners and suppliers, credit card companies (for tickets sold for future travel), and loyalty program partners.
d. Note 1 says the allowance was immaterial at December 31, 2019 and 2018, so Southwest gives no dollar amount.
b. 0.58
c. 0.54; the quick ratio increased from 2018 to 2019
FY2021
c. $1,357 million; it increased from the prior year
a. Mainly amounts due from business partners and suppliers, credit card companies (tickets for future travel), and loyalty partners, plus tax refunds receivable.
d. Note 1 says the allowance was immaterial at December 31, 2021 and 2020, so Southwest gives no dollar amount.
b. 1.84
c. 1.93; the quick ratio decreased from 2020 to 2021
FY2023
c. $1,154 million; it increased from the prior year
a. Mainly amounts due from business partners and suppliers, credit card companies (tickets for future travel), and loyalty partners, plus tax refunds receivable.
d. Note 1 says the allowance was immaterial at December 31, 2023 and 2022, so Southwest gives no dollar amount.
b. 1.03
c. 1.28; the quick ratio decreased from 2022 to 2023
RW5-2 Oracle Corporation: answer key by version
Version
Q1
Q2
Q3
Q4
FY2015
b. $5,618 million at May 31, 2015, a decrease from $6,087 million at May 31, 2014
d. $285 million at May 31, 2015, a decrease from $306 million at May 31, 2014
a. 6.53
c. 55.90
FY2017
b. $5,300 million at May 31, 2017, a decrease from $5,385 million at May 31, 2016
d. $319 million at May 31, 2017, a decrease from $327 million at May 31, 2016
a. 7.06
c. 51.70
FY2019
b. $5,134 million at May 31, 2019, a decrease from $5,136 million at May 31, 2018
d. $371 million at May 31, 2019, an increase from $370 million at May 31, 2018
a. 7.69
c. 47.46
FY2021
b. $5,409 million at May 31, 2021, a decrease from $5,551 million at May 31, 2020
d. $373 million at May 31, 2021, a decrease from $409 million at May 31, 2020
a. 7.39
c. 49.39
FY2023
b. $6,915 million at May 31, 2023, an increase from $5,953 million at May 31, 2022
d. $428 million at May 31, 2023, an increase from $362 million at May 31, 2022
a. 7.76
c. 47.04
RW5-3 The J. M. Smucker Company: answer key by version
Version
Q1
Q2
Q3
Q4
FY2015
d. $430.1 million at April 30, 2015, an increase from $309.4 million at April 30, 2014
b. $1.0 million at April 30, 2015, an increase from $0.9 million at April 30, 2014
c. 2.01
a. 1.74; the current ratio increased from 2014 to 2015
FY2017
d. $438.7 million at April 30, 2017, a decrease from $450.1 million at April 30, 2016
b. $1.6 million at April 30, 2017, an increase from $1.1 million at April 30, 2016
c. 0.90
a. 1.30; the current ratio decreased from 2016 to 2017
FY2019
d. $503.8 million at April 30, 2019, an increase from $385.6 million at April 30, 2018
b. $1.8 million at April 30, 2019, an increase from $1.1 million at April 30, 2018
c. 0.69
a. 1.50; the current ratio decreased from 2018 to 2019
FY2021
d. $533.7 million at April 30, 2021, a decrease from $551.4 million at April 30, 2020
b. $2.4 million at April 30, 2021, a decrease from $3.0 million at April 30, 2020
c. 0.68
a. 1.24; the current ratio decreased from 2020 to 2021
FY2023
d. $597.6 million at April 30, 2023, an increase from $524.7 million at April 30, 2022
b. $2.3 million at April 30, 2023, unchanged from April 30, 2022
c. 1.44
a. 1.03; the current ratio increased from 2022 to 2023
Faculty demo note. Real World Reporting sends students into a real company’s Form 10-K. Each assignment comes with a tutorial video that answers the same questions using an older 10-K (fiscal 2013) or another company, so students learn where to look without being handed the answers.
This demo has five versions of each assignment (fiscal 2015, 2017, 2019, 2021, and 2023). Use the Version menu to see how the questions and answers change with the year, and With tutorial videos / Without tutorial videos to see the assignment as an instructor could assign it either way. Only Question 1 is open at first, and each question opens when the one before it is submitted.Show instructor answers shows every key, where to find it in the 10-K, and the error behind each wrong choice.
RW5-1 Southwest Airlines Co.: fiscal 2015 version
Learning Objectives: 5-1 Describe and analyze accounts receivable using revenue recognition principles 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
Southwest Airlines Co. (ticker NYSE: LUV)
RW5-1 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of LUV and retrieve the Southwest Airlines Co. Form 10-K (annual report) for the year ended December 31, 2015. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-1: Southwest Airlines Co. Real World Reporting Tutorial(6:12)
This tutorial works through these same questions with an older Form 10-K. Questions 1, 4, and 5 use Southwest’s fiscal 2013 10-K; Questions 2 and 3 use Amazon’s. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather Southwest Airlines Co. financial statements and notes (Form 10-K).
The first question is: What is the amount of “Accounts and other receivables” that Southwest Airlines reports as of the specified date? Did it increase or decrease from the prior year?
To demonstrate how to answer this question, we will look at Southwest’s financial statements as of December 31, 2013.
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at Southwest’s financial statements as of the date specified. However, for this tutorial, we will look at Southwest’s 2013 consolidated financial statements.
Accounts receivables are assets, and therefore, will be on the consolidated balance sheet. As shown in the box, the balance of accounts and other receivables at December 31, 2013, is $419 million. In the prior year (2012), it was $332 million. Therefore, the December 31, 2013, receivables amount increased from the prior year.
The second question is: What does Southwest’s accounts and other receivables consist of? Hint: See Note 1 to Consolidated Financial Statements.
To demonstrate how to answer this question, we will look at Amazon’s financial statements.
Shown here is Note 1 in Amazon’s notes to consolidated financial statements. Companies will state what is include in the receivables, which are shown on the consolidated balance sheet. We can see here in the highlighted text that Amazon’s receivables includes primarily receivables from customers, vendors, sellers, as well as prepaid expenses and other current assets.
The third question is: What does the company disclose about the dollar amount of its allowance for doubtful accounts at the specified date?
To demonstrate how to answer this question, we will again look at Amazon’s financial statements.
Let’s again look at Amazon’s notes to the consolidated financial statements. In the second paragraph of Note 1 (in the highlighted text), we can see that the dollar amount of the allowance for doubtful accounts is $1.7 billion.
The fourth question is: Calculate the quick (acid-test) ratio as of the specified date (round the result to two decimal places).
To demonstrate how to answer this question, we will look at Southwest’s financial statements as of December 31, 2013.
Let’s calculate the quick (or acid-test) ratio for Southwest as of December 31, 2013. The numbers that we need for this formula can be found on the 2013 consolidated balance sheet, as shown here in the upper box. The formula for the quick ratio is: cash and cash equivalents (in this case, $1,355 million), plus short-term investments ($1,797 million), plus net current receivables ($419 million), divided by total current liabilities ($5,676 million). Using these numbers in the formula, we can find that the quick (acid-test) ratio is 0.63.
The fifth question is: Calculate the quick (acid-test) ratio as of the specified date (round the result to two decimal places). Did the specified date quick (acid test) ratio increase or decrease from the specified date ratio?
To demonstrate how to answer this question, we will again look at Southwest’s financial statements at December 31, 2013.
Now let’s repeat the previous process to calculate the quick ratio for Southwest as of December 31, 2012. The formula for this ratio, as shown on the slide, is: cash and cash equivalents ($1,113 million), plus short-term investments ($1,857 million), plus net current receivables ($332 million), divided by total current liabilities ($4,650 million). After calculation, we can see that the quick ratio is .71 as of December 31, 2012. On the previous slide, we found that the quick ratio was .63 as of December 31, 2013. Therefore, the quick ratio decreased from 2012 to 2013.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
What is the amount of “Accounts and other receivables” that Southwest reports as of December 31, 2015? Did it increase or decrease from the prior year? (Select one. 1 point.)
Error: Reversing the comparison. The amount is right, but compare it with the prior-year column: $474 million at December 31, 2015 against $365 million at December 31, 2014. The balance increased.
Error: Reading the prior-year column. $365 million is the December 31, 2014 balance, in the prior-year column. Southwest’s balance sheet shows the current year first: $474 million at December 31, 2015.
Keyed answer. The balance sheet reports accounts and other receivables of $474 million at December 31, 2015 and $365 million at December 31, 2014, so the balance increased.
Error: Reading the columns in reverse order. This reads the two columns in reverse. The first column is December 31, 2015 ($474 million); the second is December 31, 2014 ($365 million). The balance increased.
Instructor key: c. Accounts and other receivables: $474 million at December 31, 2015; $365 million at December 31, 2014; increased. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2015 10-K.
Question 2
What does Southwest’s accounts and other receivables consist of? (Select one. 1 point.)
Hint: See Note 1 to Consolidated Financial Statements.
Keyed answer. Note 1 for fiscal 2015 says accounts and other receivables primarily consist of amounts due from credit card companies associated with sales of tickets for future travel, and amounts due from business partners in the Company’s frequent flyer program.
Error: Using a different year’s 10-K. Southwest’s fiscal 2015 Note 1 does not mention tax receivables; later 10-Ks (fiscal 2021 on) add them. Read the note in the 10-K for your assigned year.
Error: Answering with the tutorial’s example company. This describes Amazon’s receivables, the example in the tutorial video. The question asks what Southwest’s Note 1 says.
Error: Assuming passengers buy tickets on account. Passengers pay when they book. Southwest’s receivables are mainly amounts due from credit card companies and business partners (Note 1).
Instructor key: a. Key is the Note 1 wording for the version year. Where to find it: Note 1, “Accounts and Other Receivables,” page 8 of the shortened fiscal 2015 10-K.
Question 3
What does the Company disclose about the dollar amount of its allowance for doubtful accounts at December 31, 2015? (Select one. 1 point.)
Error: Answering with the tutorial’s example company. $1.7 billion is Amazon’s allowance, the example in the tutorial video. Southwest’s Note 1 says its allowance was immaterial.
Error: Expecting the allowance in the balance sheet caption. Some companies (Oracle, for one) put the allowance in the balance sheet caption. Southwest’s caption is just “Accounts and other receivables”; Note 1 says the allowance was immaterial.
Error: Reading “immaterial” as “none”. Immaterial is not the same as none. Note 1 says Southwest has an allowance and that it was immaterial.
Keyed answer. Note 1: “The allowance for doubtful accounts was immaterial” at December 31, 2015 and 2014. Southwest reports no dollar amount.
Instructor key: d. Southwest discloses that the allowance was immaterial; there is no dollar amount. Where to find it: Note 1, “Accounts and Other Receivables,” page 8 of the shortened fiscal 2015 10-K.
Question 4
Calculate the quick (acid-test) ratio as of December 31, 2015 (round the result to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Quick (acid-test) ratio =Cash and cash equivalents + Short-term investments + Net current receivablesTotal current liabilities
Error: Using the prior-year column. 0.57 is the December 31, 2014 quick ratio. For December 31, 2015: ($1,583 million + $1,468 million + $474 million) ÷ $7,406 million = 0.48.
Keyed answer. ($1,583 million + $1,468 million + $474 million) ÷ $7,406 million = 0.48.
Error: Leaving out short-term investments. The quick ratio includes short-term investments ($1,468 million). ($1,583 million + $1,468 million + $474 million) ÷ $7,406 million = 0.48.
Error: Computing the current ratio instead. Total current assets ÷ total current liabilities is the current ratio. The quick ratio uses only cash, short-term investments, and receivables: ($1,583 million + $1,468 million + $474 million) ÷ $7,406 million = 0.48.
Instructor key: b. Quick ratio December 31, 2015: ($1,583 million + $1,468 million + $474 million) ÷ $7,406 million = 0.48. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2015 10-K.
Question 5
Calculate the quick (acid-test) ratio as of December 31, 2014 (round the result to two decimal places). Hint: Use the same formula in question 4. Did the December 31, 2015 quick (acid test) ratio increase or decrease from the December 31, 2014 ratio? (Select one. 1 point.)
Error: Reversing the comparison. The 2014 ratio is right, but 0.48 (2015) against 0.57 (2014) means the ratio decreased.
Error: Leaving out short-term investments. This leaves out short-term investments ($1,706 million at December 31, 2014). ($1,282 million + $1,706 million + $365 million) ÷ $5,923 million = 0.57.
Keyed answer. December 31, 2014: ($1,282 million + $1,706 million + $365 million) ÷ $5,923 million = 0.57. The ratio decreased to 0.48 at December 31, 2015.
Error: Leaving out short-term investments and reversing the comparison. This leaves out short-term investments and reverses the comparison. ($1,282 million + $1,706 million + $365 million) ÷ $5,923 million = 0.57, and the ratio decreased to 0.48.
Instructor key: c. Quick ratio December 31, 2014: ($1,282 million + $1,706 million + $365 million) ÷ $5,923 million = 0.57; 2015 ratio 0.48, so it decreased. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2015 10-K.
Score for this assignment
RW5-1 Southwest Airlines Co.: fiscal 2017 version
Learning Objectives: 5-1 Describe and analyze accounts receivable using revenue recognition principles 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
Southwest Airlines Co. (ticker NYSE: LUV)
RW5-1 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of LUV and retrieve the Southwest Airlines Co. Form 10-K (annual report) for the year ended December 31, 2017. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-1: Southwest Airlines Co. Real World Reporting Tutorial(6:12)
This tutorial works through these same questions with an older Form 10-K. Questions 1, 4, and 5 use Southwest’s fiscal 2013 10-K; Questions 2 and 3 use Amazon’s. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather Southwest Airlines Co. financial statements and notes (Form 10-K).
The first question is: What is the amount of “Accounts and other receivables” that Southwest Airlines reports as of the specified date? Did it increase or decrease from the prior year?
To demonstrate how to answer this question, we will look at Southwest’s financial statements as of December 31, 2013.
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at Southwest’s financial statements as of the date specified. However, for this tutorial, we will look at Southwest’s 2013 consolidated financial statements.
Accounts receivables are assets, and therefore, will be on the consolidated balance sheet. As shown in the box, the balance of accounts and other receivables at December 31, 2013, is $419 million. In the prior year (2012), it was $332 million. Therefore, the December 31, 2013, receivables amount increased from the prior year.
The second question is: What does Southwest’s accounts and other receivables consist of? Hint: See Note 1 to Consolidated Financial Statements.
To demonstrate how to answer this question, we will look at Amazon’s financial statements.
Shown here is Note 1 in Amazon’s notes to consolidated financial statements. Companies will state what is include in the receivables, which are shown on the consolidated balance sheet. We can see here in the highlighted text that Amazon’s receivables includes primarily receivables from customers, vendors, sellers, as well as prepaid expenses and other current assets.
The third question is: What does the company disclose about the dollar amount of its allowance for doubtful accounts at the specified date?
To demonstrate how to answer this question, we will again look at Amazon’s financial statements.
Let’s again look at Amazon’s notes to the consolidated financial statements. In the second paragraph of Note 1 (in the highlighted text), we can see that the dollar amount of the allowance for doubtful accounts is $1.7 billion.
The fourth question is: Calculate the quick (acid-test) ratio as of the specified date (round the result to two decimal places).
To demonstrate how to answer this question, we will look at Southwest’s financial statements as of December 31, 2013.
Let’s calculate the quick (or acid-test) ratio for Southwest as of December 31, 2013. The numbers that we need for this formula can be found on the 2013 consolidated balance sheet, as shown here in the upper box. The formula for the quick ratio is: cash and cash equivalents (in this case, $1,355 million), plus short-term investments ($1,797 million), plus net current receivables ($419 million), divided by total current liabilities ($5,676 million). Using these numbers in the formula, we can find that the quick (acid-test) ratio is 0.63.
The fifth question is: Calculate the quick (acid-test) ratio as of the specified date (round the result to two decimal places). Did the specified date quick (acid test) ratio increase or decrease from the specified date ratio?
To demonstrate how to answer this question, we will again look at Southwest’s financial statements at December 31, 2013.
Now let’s repeat the previous process to calculate the quick ratio for Southwest as of December 31, 2012. The formula for this ratio, as shown on the slide, is: cash and cash equivalents ($1,113 million), plus short-term investments ($1,857 million), plus net current receivables ($332 million), divided by total current liabilities ($4,650 million). After calculation, we can see that the quick ratio is .71 as of December 31, 2012. On the previous slide, we found that the quick ratio was .63 as of December 31, 2013. Therefore, the quick ratio decreased from 2012 to 2013.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
What is the amount of “Accounts and other receivables” that Southwest reports as of December 31, 2017? Did it increase or decrease from the prior year? (Select one. 1 point.)
Error: Reversing the comparison. The amount is right, but compare it with the prior-year column: $662 million at December 31, 2017 against $546 million at December 31, 2016. The balance increased.
Error: Reading the prior-year column. $546 million is the December 31, 2016 balance, in the prior-year column. Southwest’s balance sheet shows the current year first: $662 million at December 31, 2017.
Keyed answer. The balance sheet reports accounts and other receivables of $662 million at December 31, 2017 and $546 million at December 31, 2016, so the balance increased.
Error: Reading the columns in reverse order. This reads the two columns in reverse. The first column is December 31, 2017 ($662 million); the second is December 31, 2016 ($546 million). The balance increased.
Instructor key: c. Accounts and other receivables: $662 million at December 31, 2017; $546 million at December 31, 2016; increased. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2017 10-K.
Question 2
What does Southwest’s accounts and other receivables consist of? (Select one. 1 point.)
Hint: See Note 1 to Consolidated Financial Statements.
Keyed answer. Note 1 for fiscal 2017 says accounts and other receivables primarily consist of amounts due from credit card companies associated with sales of tickets for future travel, and amounts due from business partners in the Company’s frequent flyer program.
Error: Using a different year’s 10-K. Southwest’s fiscal 2017 Note 1 does not mention tax receivables; later 10-Ks (fiscal 2021 on) add them. Read the note in the 10-K for your assigned year.
Error: Answering with the tutorial’s example company. This describes Amazon’s receivables, the example in the tutorial video. The question asks what Southwest’s Note 1 says.
Error: Assuming passengers buy tickets on account. Passengers pay when they book. Southwest’s receivables are mainly amounts due from credit card companies and business partners (Note 1).
Instructor key: a. Key is the Note 1 wording for the version year. Where to find it: Note 1, “Accounts and Other Receivables,” page 7 of the shortened fiscal 2017 10-K.
Question 3
What does the Company disclose about the dollar amount of its allowance for doubtful accounts at December 31, 2017? (Select one. 1 point.)
Error: Answering with the tutorial’s example company. $1.7 billion is Amazon’s allowance, the example in the tutorial video. Southwest’s Note 1 says its allowance was immaterial.
Error: Expecting the allowance in the balance sheet caption. Some companies (Oracle, for one) put the allowance in the balance sheet caption. Southwest’s caption is just “Accounts and other receivables”; Note 1 says the allowance was immaterial.
Error: Reading “immaterial” as “none”. Immaterial is not the same as none. Note 1 says Southwest has an allowance and that it was immaterial.
Keyed answer. Note 1: “The allowance for doubtful accounts was immaterial” at December 31, 2017 and 2016. Southwest reports no dollar amount.
Instructor key: d. Southwest discloses that the allowance was immaterial; there is no dollar amount. Where to find it: Note 1, “Accounts and Other Receivables,” page 7 of the shortened fiscal 2017 10-K.
Question 4
Calculate the quick (acid-test) ratio as of December 31, 2017 (round the result to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Quick (acid-test) ratio =Cash and cash equivalents + Short-term investments + Net current receivablesTotal current liabilities
Error: Leaving out short-term investments. The quick ratio includes short-term investments ($1,778 million). ($1,495 million + $1,778 million + $662 million) ÷ $6,905 million = 0.57.
Keyed answer. ($1,495 million + $1,778 million + $662 million) ÷ $6,905 million = 0.57.
Error: Computing the current ratio instead. Total current assets ÷ total current liabilities is the current ratio. The quick ratio uses only cash, short-term investments, and receivables: ($1,495 million + $1,778 million + $662 million) ÷ $6,905 million = 0.57.
Error: Leaving out receivables. The quick ratio includes net current receivables ($662 million). ($1,495 million + $1,778 million + $662 million) ÷ $6,905 million = 0.57.
Instructor key: b. Quick ratio December 31, 2017: ($1,495 million + $1,778 million + $662 million) ÷ $6,905 million = 0.57. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2017 10-K.
Question 5
Calculate the quick (acid-test) ratio as of December 31, 2016 (round the result to two decimal places). Hint: Use the same formula in question 4. Did the December 31, 2017 quick (acid test) ratio increase or decrease from the December 31, 2016 ratio? (Select one. 1 point.)
Error: Reversing the comparison. The 2016 ratio is right, but 0.57 (2017) against 0.56 (2016) means the ratio increased.
Error: Leaving out short-term investments. This leaves out short-term investments ($1,625 million at December 31, 2016). ($1,680 million + $1,625 million + $546 million) ÷ $6,844 million = 0.56.
Keyed answer. December 31, 2016: ($1,680 million + $1,625 million + $546 million) ÷ $6,844 million = 0.56. The ratio increased to 0.57 at December 31, 2017.
Error: Leaving out short-term investments and reversing the comparison. This leaves out short-term investments and reverses the comparison. ($1,680 million + $1,625 million + $546 million) ÷ $6,844 million = 0.56, and the ratio increased to 0.57.
Instructor key: c. Quick ratio December 31, 2016: ($1,680 million + $1,625 million + $546 million) ÷ $6,844 million = 0.56; 2017 ratio 0.57, so it increased. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2017 10-K.
Score for this assignment
RW5-1 Southwest Airlines Co.: fiscal 2019 version
Learning Objectives: 5-1 Describe and analyze accounts receivable using revenue recognition principles 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
Southwest Airlines Co. (ticker NYSE: LUV)
RW5-1 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of LUV and retrieve the Southwest Airlines Co. Form 10-K (annual report) for the year ended December 31, 2019. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-1: Southwest Airlines Co. Real World Reporting Tutorial(6:12)
This tutorial works through these same questions with an older Form 10-K. Questions 1, 4, and 5 use Southwest’s fiscal 2013 10-K; Questions 2 and 3 use Amazon’s. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather Southwest Airlines Co. financial statements and notes (Form 10-K).
The first question is: What is the amount of “Accounts and other receivables” that Southwest Airlines reports as of the specified date? Did it increase or decrease from the prior year?
To demonstrate how to answer this question, we will look at Southwest’s financial statements as of December 31, 2013.
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at Southwest’s financial statements as of the date specified. However, for this tutorial, we will look at Southwest’s 2013 consolidated financial statements.
Accounts receivables are assets, and therefore, will be on the consolidated balance sheet. As shown in the box, the balance of accounts and other receivables at December 31, 2013, is $419 million. In the prior year (2012), it was $332 million. Therefore, the December 31, 2013, receivables amount increased from the prior year.
The second question is: What does Southwest’s accounts and other receivables consist of? Hint: See Note 1 to Consolidated Financial Statements.
To demonstrate how to answer this question, we will look at Amazon’s financial statements.
Shown here is Note 1 in Amazon’s notes to consolidated financial statements. Companies will state what is include in the receivables, which are shown on the consolidated balance sheet. We can see here in the highlighted text that Amazon’s receivables includes primarily receivables from customers, vendors, sellers, as well as prepaid expenses and other current assets.
The third question is: What does the company disclose about the dollar amount of its allowance for doubtful accounts at the specified date?
To demonstrate how to answer this question, we will again look at Amazon’s financial statements.
Let’s again look at Amazon’s notes to the consolidated financial statements. In the second paragraph of Note 1 (in the highlighted text), we can see that the dollar amount of the allowance for doubtful accounts is $1.7 billion.
The fourth question is: Calculate the quick (acid-test) ratio as of the specified date (round the result to two decimal places).
To demonstrate how to answer this question, we will look at Southwest’s financial statements as of December 31, 2013.
Let’s calculate the quick (or acid-test) ratio for Southwest as of December 31, 2013. The numbers that we need for this formula can be found on the 2013 consolidated balance sheet, as shown here in the upper box. The formula for the quick ratio is: cash and cash equivalents (in this case, $1,355 million), plus short-term investments ($1,797 million), plus net current receivables ($419 million), divided by total current liabilities ($5,676 million). Using these numbers in the formula, we can find that the quick (acid-test) ratio is 0.63.
The fifth question is: Calculate the quick (acid-test) ratio as of the specified date (round the result to two decimal places). Did the specified date quick (acid test) ratio increase or decrease from the specified date ratio?
To demonstrate how to answer this question, we will again look at Southwest’s financial statements at December 31, 2013.
Now let’s repeat the previous process to calculate the quick ratio for Southwest as of December 31, 2012. The formula for this ratio, as shown on the slide, is: cash and cash equivalents ($1,113 million), plus short-term investments ($1,857 million), plus net current receivables ($332 million), divided by total current liabilities ($4,650 million). After calculation, we can see that the quick ratio is .71 as of December 31, 2012. On the previous slide, we found that the quick ratio was .63 as of December 31, 2013. Therefore, the quick ratio decreased from 2012 to 2013.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
What is the amount of “Accounts and other receivables” that Southwest reports as of December 31, 2019? Did it increase or decrease from the prior year? (Select one. 1 point.)
Error: Reversing the comparison. The amount is right, but compare it with the prior-year column: $1,086 million at December 31, 2019 against $568 million at December 31, 2018. The balance increased.
Error: Reading the prior-year column. $568 million is the December 31, 2018 balance, in the prior-year column. Southwest’s balance sheet shows the current year first: $1,086 million at December 31, 2019.
Keyed answer. The balance sheet reports accounts and other receivables of $1,086 million at December 31, 2019 and $568 million at December 31, 2018, so the balance increased.
Error: Reading the columns in reverse order. This reads the two columns in reverse. The first column is December 31, 2019 ($1,086 million); the second is December 31, 2018 ($568 million). The balance increased.
Instructor key: c. Accounts and other receivables: $1,086 million at December 31, 2019; $568 million at December 31, 2018; increased. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2019 10-K.
Question 2
What does Southwest’s accounts and other receivables consist of? (Select one. 1 point.)
Hint: See Note 1 to Consolidated Financial Statements.
Keyed answer. Note 1 for fiscal 2019 says accounts and other receivables primarily consist of amounts due from the Company’s business partners and other suppliers, credit card companies associated with sales of tickets for future travel, and amounts due from business partners in the Company’s loyalty program.
Error: Using a different year’s 10-K. Southwest’s fiscal 2019 Note 1 does not mention tax receivables; later 10-Ks (fiscal 2021 on) add them. Read the note in the 10-K for your assigned year.
Error: Answering with the tutorial’s example company. This describes Amazon’s receivables, the example in the tutorial video. The question asks what Southwest’s Note 1 says.
Error: Assuming passengers buy tickets on account. Passengers pay when they book. Southwest’s receivables are mainly amounts due from credit card companies and business partners (Note 1).
Instructor key: a. Key is the Note 1 wording for the version year. Where to find it: Note 1, “Accounts and Other Receivables,” page 9 of the shortened fiscal 2019 10-K.
Question 3
What does the Company disclose about the dollar amount of its allowance for doubtful accounts at December 31, 2019? (Select one. 1 point.)
Error: Answering with the tutorial’s example company. $1.7 billion is Amazon’s allowance, the example in the tutorial video. Southwest’s Note 1 says its allowance was immaterial.
Error: Expecting the allowance in the balance sheet caption. Some companies (Oracle, for one) put the allowance in the balance sheet caption. Southwest’s caption is just “Accounts and other receivables”; Note 1 says the allowance was immaterial.
Error: Reading “immaterial” as “none”. Immaterial is not the same as none. Note 1 says Southwest has an allowance and that it was immaterial.
Keyed answer. Note 1: “The allowance for doubtful accounts was immaterial” at December 31, 2019 and 2018. Southwest reports no dollar amount.
Instructor key: d. Southwest discloses that the allowance was immaterial; there is no dollar amount. Where to find it: Note 1, “Accounts and Other Receivables,” page 9 of the shortened fiscal 2019 10-K.
Question 4
Calculate the quick (acid-test) ratio as of December 31, 2019 (round the result to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Quick (acid-test) ratio =Cash and cash equivalents + Short-term investments + Net current receivablesTotal current liabilities
Error: Leaving out short-term investments. The quick ratio includes short-term investments ($1,524 million). ($2,548 million + $1,524 million + $1,086 million) ÷ $8,952 million = 0.58.
Keyed answer. ($2,548 million + $1,524 million + $1,086 million) ÷ $8,952 million = 0.58.
Error: Computing the current ratio instead. Total current assets ÷ total current liabilities is the current ratio. The quick ratio uses only cash, short-term investments, and receivables: ($2,548 million + $1,524 million + $1,086 million) ÷ $8,952 million = 0.58.
Error: Leaving out receivables. The quick ratio includes net current receivables ($1,086 million). ($2,548 million + $1,524 million + $1,086 million) ÷ $8,952 million = 0.58.
Instructor key: b. Quick ratio December 31, 2019: ($2,548 million + $1,524 million + $1,086 million) ÷ $8,952 million = 0.58. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2019 10-K.
Question 5
Calculate the quick (acid-test) ratio as of December 31, 2018 (round the result to two decimal places). Hint: Use the same formula in question 4. Did the December 31, 2019 quick (acid test) ratio increase or decrease from the December 31, 2018 ratio? (Select one. 1 point.)
Error: Reversing the comparison. The 2018 ratio is right, but 0.58 (2019) against 0.54 (2018) means the ratio increased.
Error: Leaving out short-term investments. This leaves out short-term investments ($1,835 million at December 31, 2018). ($1,854 million + $1,835 million + $568 million) ÷ $7,905 million = 0.54.
Keyed answer. December 31, 2018: ($1,854 million + $1,835 million + $568 million) ÷ $7,905 million = 0.54. The ratio increased to 0.58 at December 31, 2019.
Error: Leaving out short-term investments and reversing the comparison. This leaves out short-term investments and reverses the comparison. ($1,854 million + $1,835 million + $568 million) ÷ $7,905 million = 0.54, and the ratio increased to 0.58.
Instructor key: c. Quick ratio December 31, 2018: ($1,854 million + $1,835 million + $568 million) ÷ $7,905 million = 0.54; 2019 ratio 0.58, so it increased. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2019 10-K.
Score for this assignment
RW5-1 Southwest Airlines Co.: fiscal 2021 version (the default shown in the demo)
Learning Objectives: 5-1 Describe and analyze accounts receivable using revenue recognition principles 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
Southwest Airlines Co. (ticker NYSE: LUV)
RW5-1 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of LUV and retrieve the Southwest Airlines Co. Form 10-K (annual report) for the year ended December 31, 2021. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-1: Southwest Airlines Co. Real World Reporting Tutorial(6:12)
This tutorial works through these same questions with an older Form 10-K. Questions 1, 4, and 5 use Southwest’s fiscal 2013 10-K; Questions 2 and 3 use Amazon’s. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather Southwest Airlines Co. financial statements and notes (Form 10-K).
The first question is: What is the amount of “Accounts and other receivables” that Southwest Airlines reports as of the specified date? Did it increase or decrease from the prior year?
To demonstrate how to answer this question, we will look at Southwest’s financial statements as of December 31, 2013.
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at Southwest’s financial statements as of the date specified. However, for this tutorial, we will look at Southwest’s 2013 consolidated financial statements.
Accounts receivables are assets, and therefore, will be on the consolidated balance sheet. As shown in the box, the balance of accounts and other receivables at December 31, 2013, is $419 million. In the prior year (2012), it was $332 million. Therefore, the December 31, 2013, receivables amount increased from the prior year.
The second question is: What does Southwest’s accounts and other receivables consist of? Hint: See Note 1 to Consolidated Financial Statements.
To demonstrate how to answer this question, we will look at Amazon’s financial statements.
Shown here is Note 1 in Amazon’s notes to consolidated financial statements. Companies will state what is include in the receivables, which are shown on the consolidated balance sheet. We can see here in the highlighted text that Amazon’s receivables includes primarily receivables from customers, vendors, sellers, as well as prepaid expenses and other current assets.
The third question is: What does the company disclose about the dollar amount of its allowance for doubtful accounts at the specified date?
To demonstrate how to answer this question, we will again look at Amazon’s financial statements.
Let’s again look at Amazon’s notes to the consolidated financial statements. In the second paragraph of Note 1 (in the highlighted text), we can see that the dollar amount of the allowance for doubtful accounts is $1.7 billion.
The fourth question is: Calculate the quick (acid-test) ratio as of the specified date (round the result to two decimal places).
To demonstrate how to answer this question, we will look at Southwest’s financial statements as of December 31, 2013.
Let’s calculate the quick (or acid-test) ratio for Southwest as of December 31, 2013. The numbers that we need for this formula can be found on the 2013 consolidated balance sheet, as shown here in the upper box. The formula for the quick ratio is: cash and cash equivalents (in this case, $1,355 million), plus short-term investments ($1,797 million), plus net current receivables ($419 million), divided by total current liabilities ($5,676 million). Using these numbers in the formula, we can find that the quick (acid-test) ratio is 0.63.
The fifth question is: Calculate the quick (acid-test) ratio as of the specified date (round the result to two decimal places). Did the specified date quick (acid test) ratio increase or decrease from the specified date ratio?
To demonstrate how to answer this question, we will again look at Southwest’s financial statements at December 31, 2013.
Now let’s repeat the previous process to calculate the quick ratio for Southwest as of December 31, 2012. The formula for this ratio, as shown on the slide, is: cash and cash equivalents ($1,113 million), plus short-term investments ($1,857 million), plus net current receivables ($332 million), divided by total current liabilities ($4,650 million). After calculation, we can see that the quick ratio is .71 as of December 31, 2012. On the previous slide, we found that the quick ratio was .63 as of December 31, 2013. Therefore, the quick ratio decreased from 2012 to 2013.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
What is the amount of “Accounts and other receivables” that Southwest reports as of December 31, 2021? Did it increase or decrease from the prior year? (Select one. 1 point.)
Error: Reversing the comparison. The amount is right, but compare it with the prior-year column: $1,357 million at December 31, 2021 against $1,130 million at December 31, 2020. The balance increased.
Error: Reading the prior-year column. $1,130 million is the December 31, 2020 balance, in the prior-year column. Southwest’s balance sheet shows the current year first: $1,357 million at December 31, 2021.
Keyed answer. The balance sheet reports accounts and other receivables of $1,357 million at December 31, 2021 and $1,130 million at December 31, 2020, so the balance increased.
Error: Reading the columns in reverse order. This reads the two columns in reverse. The first column is December 31, 2021 ($1,357 million); the second is December 31, 2020 ($1,130 million). The balance increased.
Instructor key: c. Accounts and other receivables: $1,357 million at December 31, 2021; $1,130 million at December 31, 2020; increased. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2021 10-K.
Question 2
What does Southwest’s accounts and other receivables consist of? (Select one. 1 point.)
Hint: See Note 1 to Consolidated Financial Statements.
Keyed answer. Note 1 for fiscal 2021 says accounts and other receivables primarily consist of the amounts due from the Company’s business partners and other suppliers, amounts due from credit card companies associated with sales of tickets for future travel, amounts due from business partners in the Company’s loyalty program, and tax receivables from overpayment or net operating losses that are allowed to be carried back to prior periods to claim refunds against prior taxes paid.
Error: Using a different year’s 10-K. That wording comes from Southwest’s older 10-Ks (fiscal 2015 and 2017). For fiscal 2021, Note 1 also lists amounts due from business partners and suppliers, and tax receivables.
Error: Answering with the tutorial’s example company. This describes Amazon’s receivables, the example in the tutorial video. The question asks what Southwest’s Note 1 says.
Error: Assuming passengers buy tickets on account. Passengers pay when they book. Southwest’s receivables are mainly amounts due from credit card companies and business partners (Note 1).
Instructor key: a. Key is the Note 1 wording for the version year. Where to find it: Note 1, “Accounts and Other Receivables,” page 7 of the shortened fiscal 2021 10-K.
Question 3
What does the Company disclose about the dollar amount of its allowance for doubtful accounts at December 31, 2021? (Select one. 1 point.)
Error: Answering with the tutorial’s example company. $1.7 billion is Amazon’s allowance, the example in the tutorial video. Southwest’s Note 1 says its allowance was immaterial.
Error: Expecting the allowance in the balance sheet caption. Some companies (Oracle, for one) put the allowance in the balance sheet caption. Southwest’s caption is just “Accounts and other receivables”; Note 1 says the allowance was immaterial.
Error: Reading “immaterial” as “none”. Immaterial is not the same as none. Note 1 says Southwest has an allowance and that it was immaterial.
Keyed answer. Note 1: “The allowance for doubtful accounts was immaterial” at December 31, 2021 and 2020. Southwest reports no dollar amount.
Instructor key: d. Southwest discloses that the allowance was immaterial; there is no dollar amount. Where to find it: Note 1, “Accounts and Other Receivables,” page 7 of the shortened fiscal 2021 10-K.
Question 4
Calculate the quick (acid-test) ratio as of December 31, 2021 (round the result to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Quick (acid-test) ratio =Cash and cash equivalents + Short-term investments + Net current receivablesTotal current liabilities
Error: Using the prior-year column. 1.93 is the December 31, 2020 quick ratio. For December 31, 2021: ($12,480 million + $3,024 million + $1,357 million) ÷ $9,164 million = 1.84.
Keyed answer. ($12,480 million + $3,024 million + $1,357 million) ÷ $9,164 million = 1.84.
Error: Leaving out short-term investments. The quick ratio includes short-term investments ($3,024 million). ($12,480 million + $3,024 million + $1,357 million) ÷ $9,164 million = 1.84.
Error: Computing the current ratio instead. Total current assets ÷ total current liabilities is the current ratio. The quick ratio uses only cash, short-term investments, and receivables: ($12,480 million + $3,024 million + $1,357 million) ÷ $9,164 million = 1.84.
Instructor key: b. Quick ratio December 31, 2021: ($12,480 million + $3,024 million + $1,357 million) ÷ $9,164 million = 1.84. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2021 10-K.
Question 5
Calculate the quick (acid-test) ratio as of December 31, 2020 (round the result to two decimal places). Hint: Use the same formula in question 4. Did the December 31, 2021 quick (acid test) ratio increase or decrease from the December 31, 2020 ratio? (Select one. 1 point.)
Error: Reversing the comparison. The 2020 ratio is right, but 1.84 (2021) against 1.93 (2020) means the ratio decreased.
Error: Leaving out short-term investments. This leaves out short-term investments ($2,271 million at December 31, 2020). ($11,063 million + $2,271 million + $1,130 million) ÷ $7,506 million = 1.93.
Keyed answer. December 31, 2020: ($11,063 million + $2,271 million + $1,130 million) ÷ $7,506 million = 1.93. The ratio decreased to 1.84 at December 31, 2021.
Error: Leaving out short-term investments and reversing the comparison. This leaves out short-term investments and reverses the comparison. ($11,063 million + $2,271 million + $1,130 million) ÷ $7,506 million = 1.93, and the ratio decreased to 1.84.
Instructor key: c. Quick ratio December 31, 2020: ($11,063 million + $2,271 million + $1,130 million) ÷ $7,506 million = 1.93; 2021 ratio 1.84, so it decreased. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2021 10-K.
Score for this assignment
RW5-1 Southwest Airlines Co.: fiscal 2023 version
Learning Objectives: 5-1 Describe and analyze accounts receivable using revenue recognition principles 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
Southwest Airlines Co. (ticker NYSE: LUV)
RW5-1 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of LUV and retrieve the Southwest Airlines Co. Form 10-K (annual report) for the year ended December 31, 2023. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-1: Southwest Airlines Co. Real World Reporting Tutorial(6:12)
This tutorial works through these same questions with an older Form 10-K. Questions 1, 4, and 5 use Southwest’s fiscal 2013 10-K; Questions 2 and 3 use Amazon’s. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather Southwest Airlines Co. financial statements and notes (Form 10-K).
The first question is: What is the amount of “Accounts and other receivables” that Southwest Airlines reports as of the specified date? Did it increase or decrease from the prior year?
To demonstrate how to answer this question, we will look at Southwest’s financial statements as of December 31, 2013.
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at Southwest’s financial statements as of the date specified. However, for this tutorial, we will look at Southwest’s 2013 consolidated financial statements.
Accounts receivables are assets, and therefore, will be on the consolidated balance sheet. As shown in the box, the balance of accounts and other receivables at December 31, 2013, is $419 million. In the prior year (2012), it was $332 million. Therefore, the December 31, 2013, receivables amount increased from the prior year.
The second question is: What does Southwest’s accounts and other receivables consist of? Hint: See Note 1 to Consolidated Financial Statements.
To demonstrate how to answer this question, we will look at Amazon’s financial statements.
Shown here is Note 1 in Amazon’s notes to consolidated financial statements. Companies will state what is include in the receivables, which are shown on the consolidated balance sheet. We can see here in the highlighted text that Amazon’s receivables includes primarily receivables from customers, vendors, sellers, as well as prepaid expenses and other current assets.
The third question is: What does the company disclose about the dollar amount of its allowance for doubtful accounts at the specified date?
To demonstrate how to answer this question, we will again look at Amazon’s financial statements.
Let’s again look at Amazon’s notes to the consolidated financial statements. In the second paragraph of Note 1 (in the highlighted text), we can see that the dollar amount of the allowance for doubtful accounts is $1.7 billion.
The fourth question is: Calculate the quick (acid-test) ratio as of the specified date (round the result to two decimal places).
To demonstrate how to answer this question, we will look at Southwest’s financial statements as of December 31, 2013.
Let’s calculate the quick (or acid-test) ratio for Southwest as of December 31, 2013. The numbers that we need for this formula can be found on the 2013 consolidated balance sheet, as shown here in the upper box. The formula for the quick ratio is: cash and cash equivalents (in this case, $1,355 million), plus short-term investments ($1,797 million), plus net current receivables ($419 million), divided by total current liabilities ($5,676 million). Using these numbers in the formula, we can find that the quick (acid-test) ratio is 0.63.
The fifth question is: Calculate the quick (acid-test) ratio as of the specified date (round the result to two decimal places). Did the specified date quick (acid test) ratio increase or decrease from the specified date ratio?
To demonstrate how to answer this question, we will again look at Southwest’s financial statements at December 31, 2013.
Now let’s repeat the previous process to calculate the quick ratio for Southwest as of December 31, 2012. The formula for this ratio, as shown on the slide, is: cash and cash equivalents ($1,113 million), plus short-term investments ($1,857 million), plus net current receivables ($332 million), divided by total current liabilities ($4,650 million). After calculation, we can see that the quick ratio is .71 as of December 31, 2012. On the previous slide, we found that the quick ratio was .63 as of December 31, 2013. Therefore, the quick ratio decreased from 2012 to 2013.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
What is the amount of “Accounts and other receivables” that Southwest reports as of December 31, 2023? Did it increase or decrease from the prior year? (Select one. 1 point.)
Error: Reversing the comparison. The amount is right, but compare it with the prior-year column: $1,154 million at December 31, 2023 against $1,040 million at December 31, 2022. The balance increased.
Error: Reading the prior-year column. $1,040 million is the December 31, 2022 balance, in the prior-year column. Southwest’s balance sheet shows the current year first: $1,154 million at December 31, 2023.
Keyed answer. The balance sheet reports accounts and other receivables of $1,154 million at December 31, 2023 and $1,040 million at December 31, 2022, so the balance increased.
Error: Reading the columns in reverse order. This reads the two columns in reverse. The first column is December 31, 2023 ($1,154 million); the second is December 31, 2022 ($1,040 million). The balance increased.
Instructor key: c. Accounts and other receivables: $1,154 million at December 31, 2023; $1,040 million at December 31, 2022; increased. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2023 10-K.
Question 2
What does Southwest’s accounts and other receivables consist of? (Select one. 1 point.)
Hint: See Note 1 to Consolidated Financial Statements.
Keyed answer. Note 1 for fiscal 2023 says accounts and other receivables primarily consist of the amounts due from the Company’s business partners and other suppliers, amounts due from credit card companies associated with sales of tickets for future travel, amounts due from business partners in the Company’s loyalty program, and tax receivables from overpayment or net operating losses that are allowed to be carried back to prior periods to claim refunds against prior taxes paid.
Error: Using a different year’s 10-K. That wording comes from Southwest’s older 10-Ks (fiscal 2015 and 2017). For fiscal 2023, Note 1 also lists amounts due from business partners and suppliers, and tax receivables.
Error: Answering with the tutorial’s example company. This describes Amazon’s receivables, the example in the tutorial video. The question asks what Southwest’s Note 1 says.
Error: Assuming passengers buy tickets on account. Passengers pay when they book. Southwest’s receivables are mainly amounts due from credit card companies and business partners (Note 1).
Instructor key: a. Key is the Note 1 wording for the version year. Where to find it: Note 1, “Accounts and Other Receivables,” page 8 of the shortened fiscal 2023 10-K.
Question 3
What does the Company disclose about the dollar amount of its allowance for doubtful accounts at December 31, 2023? (Select one. 1 point.)
Error: Answering with the tutorial’s example company. $1.7 billion is Amazon’s allowance, the example in the tutorial video. Southwest’s Note 1 says its allowance was immaterial.
Error: Expecting the allowance in the balance sheet caption. Some companies (Oracle, for one) put the allowance in the balance sheet caption. Southwest’s caption is just “Accounts and other receivables”; Note 1 says the allowance was immaterial.
Error: Reading “immaterial” as “none”. Immaterial is not the same as none. Note 1 says Southwest has an allowance and that it was immaterial.
Keyed answer. Note 1: “The allowance for doubtful accounts was immaterial” at December 31, 2023 and 2022. Southwest reports no dollar amount.
Instructor key: d. Southwest discloses that the allowance was immaterial; there is no dollar amount. Where to find it: Note 1, “Accounts and Other Receivables,” page 8 of the shortened fiscal 2023 10-K.
Question 4
Calculate the quick (acid-test) ratio as of December 31, 2023 (round the result to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Quick (acid-test) ratio =Cash and cash equivalents + Short-term investments + Net current receivablesTotal current liabilities
Error: Using the prior-year column. 1.28 is the December 31, 2022 quick ratio. For December 31, 2023: ($9,288 million + $2,186 million + $1,154 million) ÷ $12,256 million = 1.03.
Keyed answer. ($9,288 million + $2,186 million + $1,154 million) ÷ $12,256 million = 1.03.
Error: Leaving out short-term investments. The quick ratio includes short-term investments ($2,186 million). ($9,288 million + $2,186 million + $1,154 million) ÷ $12,256 million = 1.03.
Error: Computing the current ratio instead. Total current assets ÷ total current liabilities is the current ratio. The quick ratio uses only cash, short-term investments, and receivables: ($9,288 million + $2,186 million + $1,154 million) ÷ $12,256 million = 1.03.
Instructor key: b. Quick ratio December 31, 2023: ($9,288 million + $2,186 million + $1,154 million) ÷ $12,256 million = 1.03. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2023 10-K.
Question 5
Calculate the quick (acid-test) ratio as of December 31, 2022 (round the result to two decimal places). Hint: Use the same formula in question 4. Did the December 31, 2023 quick (acid test) ratio increase or decrease from the December 31, 2022 ratio? (Select one. 1 point.)
Error: Reversing the comparison. The 2022 ratio is right, but 1.03 (2023) against 1.28 (2022) means the ratio decreased.
Error: Leaving out short-term investments. This leaves out short-term investments ($2,800 million at December 31, 2022). ($9,492 million + $2,800 million + $1,040 million) ÷ $10,378 million = 1.28.
Keyed answer. December 31, 2022: ($9,492 million + $2,800 million + $1,040 million) ÷ $10,378 million = 1.28. The ratio decreased to 1.03 at December 31, 2023.
Error: Leaving out short-term investments and reversing the comparison. This leaves out short-term investments and reverses the comparison. ($9,492 million + $2,800 million + $1,040 million) ÷ $10,378 million = 1.28, and the ratio decreased to 1.03.
Instructor key: c. Quick ratio December 31, 2022: ($9,492 million + $2,800 million + $1,040 million) ÷ $10,378 million = 1.28; 2023 ratio 1.03, so it decreased. Where to find it: Consolidated Balance Sheet, page 1 of the shortened fiscal 2023 10-K.
Score for this assignment
RW5-2 Oracle Corporation: fiscal 2015 version
Learning Objectives: 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
Oracle Corporation (ticker NYSE: ORCL)
RW5-2 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of ORCL and retrieve the Oracle Corporation Form 10-K (annual report) for the year ended May 31, 2015. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-2: Oracle Corporation Real World Reporting Tutorial(6:27)
This tutorial works through these same questions with an older Form 10-K. Every question uses Oracle’s fiscal 2013 10-K. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather Oracle Corporation financial statements and notes (Form 10-K).
The first question is: Locate the year-end balance for the item in the financial statements called “Trade receivables, net of allowances for doubtful accounts” on the consolidated balance sheets. How does its balance on the specified date compare to the prior year-end balance?
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at Oracle’s financial statements as of the date specified. However, for this tutorial, we will look at the Oracle consolidated financial statements as of May 31, 2013.
Receivables are assets and will be shown on the consolidated balance sheet. As shown in the box, Oracle’s “trade receivables, net of allowances for doubtful accounts” is $6,049 million as of May 31, 2013. In the prior year, it was $6,377 million. Therefore, the May 31, 2013, balance decreased from the prior year.
The second question is: What is the balance of the Company’s allowance for doubtful accounts at the specified date? How does it compare to the prior year? Hint: See the consolidated balance sheets.
Some companies will disclose their allowance for doubtful accounts on the balance sheet. If it is not in that location, typically it will be included in the notes to the consolidated financial statements.
As shown here, as of May 31, 2013, Oracle’s allowance for doubtful accounts is $6,049 million. In the prior year, it was $6,377 million. Therefore, the May 31, 2013, allowance for doubtful accounts balance decreased from the prior year.
The third question is: Calculate the Company’s accounts receivable turnover for the year ended specified date (round to two decimal places).
To calculate the Oracle accounts receivable turnover for the year, we will use the formula: Accounts receivable turnover = net credit sales divided by average net accounts receivable.
First, we need to find the net credit sales for the year. Net sales can be found on the consolidated statements of operations. As you can see here, Oracle uses the term “total revenues” instead of “net credit sales”. As shown, Oracle’s total revenues are $37,180 million.
Next, we need to find the average net accounts receivable. This information can be found the consolidated balance sheet. Oracle uses the term “trade receivables” instead of “average net accounts receivable,” so we will use the “trade receivables balances, net of allowances for doubtful accounts” for 2013 and 2012. As shown, these numbers are $6,049 and $6,377, respectively. To find the average net accounts receivable, we add these amounts for 2012 and 2013, then divide by 2 to find an average of $6,213.
To calculate accounts receivable turnover, we must divide net credit sales ($37,180) by average net accounts receivable ($6,213), which equals 5.98.
This means that for the year, Oracle’s accounts receivable turned over approximately 6 times. In other words, this means that the company converted its average accounts receivables to cash approximately 6 times during the year ended May 31, 2013.
The fourth question is: Calculate the Days sales outstanding (DSO) for the year ended specified date (round to two decimal places).
To demonstrate how to answer this question, we will continue using Oracle’s financial statements as of May 31, 2013.
The formula for Days sales outstanding (DSO) is: DSO = 365 / accounts receivable turnover. In Question 3, we found that Oracle’s accounts receivable turnover in 2013 was 5.98. 365 divided by 5.98 equals a DSO of 61.04.
This means that the company collected its outstanding receivables in approximately 61 days for the year ended May 31, 2013.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
Locate the year-end balance for the item in the financial statements called “Trade receivables, net of allowances for doubtful accounts” on the consolidated balance sheets. How does its balance on May 31, 2015 compare to the prior year-end balance? (Select one. 1 point.)
Error: Reading the columns in reverse order. This reads the columns in reverse. Oracle’s first column is May 31, 2015 ($5,618 million); the second is May 31, 2014 ($6,087 million).
Keyed answer. The balance sheet shows trade receivables, net, of $5,618 million at May 31, 2015 and $6,087 million at May 31, 2014.
Error: Adding back the allowance (gross receivables). These add the allowance back ($285 million and $306 million). The question asks for the balance net of the allowance: $5,618 million at May 31, 2015.
Error: Reporting the allowance instead of the receivable. These are the allowance amounts in the caption, not the receivables balance. Trade receivables, net: $5,618 million at May 31, 2015.
Instructor key: b. Trade receivables, net: $5,618 million (May 31, 2015), $6,087 million (May 31, 2014); decreased. Where to find it: Consolidated Balance Sheets (receivables line and its caption), page 4 of the shortened fiscal 2015 10-K.
Question 2
What is the balance of the Company’s allowance for doubtful accounts as of May 31, 2015? How does it compare to the prior year? (Select one. 1 point.)
Hint: See the consolidated balance sheets.
Error: Reading the amounts in reverse order. This reads the two caption amounts in reverse. The first amount is May 31, 2015 ($285 million).
Error: Reporting net receivables instead of the allowance. These are the trade receivables balances, net of the allowance. The allowance itself is in the caption: $285 million at May 31, 2015.
Error: Expecting an “immaterial” disclosure like Southwest’s. Oracle reports the allowance in the balance sheet caption: $285 million at May 31, 2015.
Keyed answer. The balance sheet caption reads “net of allowances for doubtful accounts of $285 and $306 as of May 31, 2015 and May 31, 2014” (in millions).
Instructor key: d. Allowance: $285 million (May 31, 2015), $306 million (May 31, 2014); decreased. Where to find it: Consolidated Balance Sheets (receivables line and its caption), page 4 of the shortened fiscal 2015 10-K.
Question 3
Calculate the Company’s accounts receivable turnover for the year ended May 31, 2015 (round to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Accounts receivable turnover =Net credit salesAverage net accounts receivable
Note: Use the Company’s “Total revenues” for net credit sales.
Keyed answer. Total revenues $38,226 million ÷ average net receivables $5,852.5 million = 6.53.
Error: Using the ending balance instead of the average. The denominator is average net receivables, $5,852.5 million, not the ending balance. $38,226 million ÷ $5,852.5 million = 6.53.
Error: Not dividing by 2 for the average. Average receivables = ($5,618 million + $6,087 million) ÷ 2 = $5,852.5 million. $38,226 million ÷ $5,852.5 million = 6.53.
Error: Using gross receivables (adding back the allowance). Use receivables net of the allowance: average $5,852.5 million. $38,226 million ÷ $5,852.5 million = 6.53.
Instructor key: a. Turnover: $38,226 million ÷ (($5,618 million + $6,087 million) ÷ 2 = $5,852.5 million) = 6.53. Where to find it: Consolidated Statements of Operations, page 5, and balance sheet, page 4.
Question 4
Calculate the Days sales outstanding (DSO) for the year ended May 31, 2015 (round to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Days sales outstanding (DSO) =365Accounts receivable turnover
Error: Using a 360-day year. The textbook formula uses 365 days: 365 ÷ 6.53 = 55.90.
Error: Carrying forward a turnover without dividing by 2 for the average. 3.27 is the turnover without halving the receivables total. 365 ÷ 6.53 = 55.90.
Error: Carrying forward a turnover based on gross receivables. 6.22 is the turnover with the allowance added back. 365 ÷ 6.53 = 55.90.
Instructor key: c. DSO: 365 ÷ 6.53 = 55.90 (turnover rounded to two places first, as in the tutorial). Where to find it: Uses the turnover from Question 3.
Score for this assignment
RW5-2 Oracle Corporation: fiscal 2017 version
Learning Objectives: 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
Oracle Corporation (ticker NYSE: ORCL)
RW5-2 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of ORCL and retrieve the Oracle Corporation Form 10-K (annual report) for the year ended May 31, 2017. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-2: Oracle Corporation Real World Reporting Tutorial(6:27)
This tutorial works through these same questions with an older Form 10-K. Every question uses Oracle’s fiscal 2013 10-K. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather Oracle Corporation financial statements and notes (Form 10-K).
The first question is: Locate the year-end balance for the item in the financial statements called “Trade receivables, net of allowances for doubtful accounts” on the consolidated balance sheets. How does its balance on the specified date compare to the prior year-end balance?
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at Oracle’s financial statements as of the date specified. However, for this tutorial, we will look at the Oracle consolidated financial statements as of May 31, 2013.
Receivables are assets and will be shown on the consolidated balance sheet. As shown in the box, Oracle’s “trade receivables, net of allowances for doubtful accounts” is $6,049 million as of May 31, 2013. In the prior year, it was $6,377 million. Therefore, the May 31, 2013, balance decreased from the prior year.
The second question is: What is the balance of the Company’s allowance for doubtful accounts at the specified date? How does it compare to the prior year? Hint: See the consolidated balance sheets.
Some companies will disclose their allowance for doubtful accounts on the balance sheet. If it is not in that location, typically it will be included in the notes to the consolidated financial statements.
As shown here, as of May 31, 2013, Oracle’s allowance for doubtful accounts is $6,049 million. In the prior year, it was $6,377 million. Therefore, the May 31, 2013, allowance for doubtful accounts balance decreased from the prior year.
The third question is: Calculate the Company’s accounts receivable turnover for the year ended specified date (round to two decimal places).
To calculate the Oracle accounts receivable turnover for the year, we will use the formula: Accounts receivable turnover = net credit sales divided by average net accounts receivable.
First, we need to find the net credit sales for the year. Net sales can be found on the consolidated statements of operations. As you can see here, Oracle uses the term “total revenues” instead of “net credit sales”. As shown, Oracle’s total revenues are $37,180 million.
Next, we need to find the average net accounts receivable. This information can be found the consolidated balance sheet. Oracle uses the term “trade receivables” instead of “average net accounts receivable,” so we will use the “trade receivables balances, net of allowances for doubtful accounts” for 2013 and 2012. As shown, these numbers are $6,049 and $6,377, respectively. To find the average net accounts receivable, we add these amounts for 2012 and 2013, then divide by 2 to find an average of $6,213.
To calculate accounts receivable turnover, we must divide net credit sales ($37,180) by average net accounts receivable ($6,213), which equals 5.98.
This means that for the year, Oracle’s accounts receivable turned over approximately 6 times. In other words, this means that the company converted its average accounts receivables to cash approximately 6 times during the year ended May 31, 2013.
The fourth question is: Calculate the Days sales outstanding (DSO) for the year ended specified date (round to two decimal places).
To demonstrate how to answer this question, we will continue using Oracle’s financial statements as of May 31, 2013.
The formula for Days sales outstanding (DSO) is: DSO = 365 / accounts receivable turnover. In Question 3, we found that Oracle’s accounts receivable turnover in 2013 was 5.98. 365 divided by 5.98 equals a DSO of 61.04.
This means that the company collected its outstanding receivables in approximately 61 days for the year ended May 31, 2013.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
Locate the year-end balance for the item in the financial statements called “Trade receivables, net of allowances for doubtful accounts” on the consolidated balance sheets. How does its balance on May 31, 2017 compare to the prior year-end balance? (Select one. 1 point.)
Error: Reading the columns in reverse order. This reads the columns in reverse. Oracle’s first column is May 31, 2017 ($5,300 million); the second is May 31, 2016 ($5,385 million).
Keyed answer. The balance sheet shows trade receivables, net, of $5,300 million at May 31, 2017 and $5,385 million at May 31, 2016.
Error: Adding back the allowance (gross receivables). These add the allowance back ($319 million and $327 million). The question asks for the balance net of the allowance: $5,300 million at May 31, 2017.
Error: Reporting the allowance instead of the receivable. These are the allowance amounts in the caption, not the receivables balance. Trade receivables, net: $5,300 million at May 31, 2017.
Instructor key: b. Trade receivables, net: $5,300 million (May 31, 2017), $5,385 million (May 31, 2016); decreased. Where to find it: Consolidated Balance Sheets (receivables line and its caption), page 4 of the shortened fiscal 2017 10-K.
Question 2
What is the balance of the Company’s allowance for doubtful accounts as of May 31, 2017? How does it compare to the prior year? (Select one. 1 point.)
Hint: See the consolidated balance sheets.
Error: Reading the amounts in reverse order. This reads the two caption amounts in reverse. The first amount is May 31, 2017 ($319 million).
Error: Reporting net receivables instead of the allowance. These are the trade receivables balances, net of the allowance. The allowance itself is in the caption: $319 million at May 31, 2017.
Error: Expecting an “immaterial” disclosure like Southwest’s. Oracle reports the allowance in the balance sheet caption: $319 million at May 31, 2017.
Keyed answer. The balance sheet caption reads “net of allowances for doubtful accounts of $319 and $327 as of May 31, 2017 and May 31, 2016” (in millions).
Instructor key: d. Allowance: $319 million (May 31, 2017), $327 million (May 31, 2016); decreased. Where to find it: Consolidated Balance Sheets (receivables line and its caption), page 4 of the shortened fiscal 2017 10-K.
Question 3
Calculate the Company’s accounts receivable turnover for the year ended May 31, 2017 (round to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Accounts receivable turnover =Net credit salesAverage net accounts receivable
Note: Use the Company’s “Total revenues” for net credit sales.
Keyed answer. Total revenues $37,728 million ÷ average net receivables $5,342.5 million = 7.06.
Error: Using the ending balance instead of the average. The denominator is average net receivables, $5,342.5 million, not the ending balance. $37,728 million ÷ $5,342.5 million = 7.06.
Error: Not dividing by 2 for the average. Average receivables = ($5,300 million + $5,385 million) ÷ 2 = $5,342.5 million. $37,728 million ÷ $5,342.5 million = 7.06.
Error: Using gross receivables (adding back the allowance). Use receivables net of the allowance: average $5,342.5 million. $37,728 million ÷ $5,342.5 million = 7.06.
Instructor key: a. Turnover: $37,728 million ÷ (($5,300 million + $5,385 million) ÷ 2 = $5,342.5 million) = 7.06. Where to find it: Consolidated Statements of Operations, page 5, and balance sheet, page 4.
Question 4
Calculate the Days sales outstanding (DSO) for the year ended May 31, 2017 (round to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Days sales outstanding (DSO) =365Accounts receivable turnover
Error: Using a 360-day year. The textbook formula uses 365 days: 365 ÷ 7.06 = 51.70.
Error: Carrying forward a turnover without dividing by 2 for the average. 3.53 is the turnover without halving the receivables total. 365 ÷ 7.06 = 51.70.
Error: Carrying forward a turnover based on gross receivables. 6.66 is the turnover with the allowance added back. 365 ÷ 7.06 = 51.70.
Instructor key: c. DSO: 365 ÷ 7.06 = 51.70 (turnover rounded to two places first, as in the tutorial). Where to find it: Uses the turnover from Question 3.
Score for this assignment
RW5-2 Oracle Corporation: fiscal 2019 version
Learning Objectives: 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
Oracle Corporation (ticker NYSE: ORCL)
RW5-2 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of ORCL and retrieve the Oracle Corporation Form 10-K (annual report) for the year ended May 31, 2019. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-2: Oracle Corporation Real World Reporting Tutorial(6:27)
This tutorial works through these same questions with an older Form 10-K. Every question uses Oracle’s fiscal 2013 10-K. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather Oracle Corporation financial statements and notes (Form 10-K).
The first question is: Locate the year-end balance for the item in the financial statements called “Trade receivables, net of allowances for doubtful accounts” on the consolidated balance sheets. How does its balance on the specified date compare to the prior year-end balance?
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at Oracle’s financial statements as of the date specified. However, for this tutorial, we will look at the Oracle consolidated financial statements as of May 31, 2013.
Receivables are assets and will be shown on the consolidated balance sheet. As shown in the box, Oracle’s “trade receivables, net of allowances for doubtful accounts” is $6,049 million as of May 31, 2013. In the prior year, it was $6,377 million. Therefore, the May 31, 2013, balance decreased from the prior year.
The second question is: What is the balance of the Company’s allowance for doubtful accounts at the specified date? How does it compare to the prior year? Hint: See the consolidated balance sheets.
Some companies will disclose their allowance for doubtful accounts on the balance sheet. If it is not in that location, typically it will be included in the notes to the consolidated financial statements.
As shown here, as of May 31, 2013, Oracle’s allowance for doubtful accounts is $6,049 million. In the prior year, it was $6,377 million. Therefore, the May 31, 2013, allowance for doubtful accounts balance decreased from the prior year.
The third question is: Calculate the Company’s accounts receivable turnover for the year ended specified date (round to two decimal places).
To calculate the Oracle accounts receivable turnover for the year, we will use the formula: Accounts receivable turnover = net credit sales divided by average net accounts receivable.
First, we need to find the net credit sales for the year. Net sales can be found on the consolidated statements of operations. As you can see here, Oracle uses the term “total revenues” instead of “net credit sales”. As shown, Oracle’s total revenues are $37,180 million.
Next, we need to find the average net accounts receivable. This information can be found the consolidated balance sheet. Oracle uses the term “trade receivables” instead of “average net accounts receivable,” so we will use the “trade receivables balances, net of allowances for doubtful accounts” for 2013 and 2012. As shown, these numbers are $6,049 and $6,377, respectively. To find the average net accounts receivable, we add these amounts for 2012 and 2013, then divide by 2 to find an average of $6,213.
To calculate accounts receivable turnover, we must divide net credit sales ($37,180) by average net accounts receivable ($6,213), which equals 5.98.
This means that for the year, Oracle’s accounts receivable turned over approximately 6 times. In other words, this means that the company converted its average accounts receivables to cash approximately 6 times during the year ended May 31, 2013.
The fourth question is: Calculate the Days sales outstanding (DSO) for the year ended specified date (round to two decimal places).
To demonstrate how to answer this question, we will continue using Oracle’s financial statements as of May 31, 2013.
The formula for Days sales outstanding (DSO) is: DSO = 365 / accounts receivable turnover. In Question 3, we found that Oracle’s accounts receivable turnover in 2013 was 5.98. 365 divided by 5.98 equals a DSO of 61.04.
This means that the company collected its outstanding receivables in approximately 61 days for the year ended May 31, 2013.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
Locate the year-end balance for the item in the financial statements called “Trade receivables, net of allowances for doubtful accounts” on the consolidated balance sheets. How does its balance on May 31, 2019 compare to the prior year-end balance? (Select one. 1 point.)
Error: Reading the columns in reverse order. This reads the columns in reverse. Oracle’s first column is May 31, 2019 ($5,134 million); the second is May 31, 2018 ($5,136 million).
Keyed answer. The balance sheet shows trade receivables, net, of $5,134 million at May 31, 2019 and $5,136 million at May 31, 2018.
Error: Adding back the allowance (gross receivables). These add the allowance back ($371 million and $370 million). The question asks for the balance net of the allowance: $5,134 million at May 31, 2019.
Error: Reporting the allowance instead of the receivable. These are the allowance amounts in the caption, not the receivables balance. Trade receivables, net: $5,134 million at May 31, 2019.
Instructor key: b. Trade receivables, net: $5,134 million (May 31, 2019), $5,136 million (May 31, 2018); decreased. Where to find it: Consolidated Balance Sheets (receivables line and its caption), page 4 of the shortened fiscal 2019 10-K.
Question 2
What is the balance of the Company’s allowance for doubtful accounts as of May 31, 2019? How does it compare to the prior year? (Select one. 1 point.)
Hint: See the consolidated balance sheets.
Error: Reading the amounts in reverse order. This reads the two caption amounts in reverse. The first amount is May 31, 2019 ($371 million).
Error: Reporting net receivables instead of the allowance. These are the trade receivables balances, net of the allowance. The allowance itself is in the caption: $371 million at May 31, 2019.
Error: Expecting an “immaterial” disclosure like Southwest’s. Oracle reports the allowance in the balance sheet caption: $371 million at May 31, 2019.
Keyed answer. The balance sheet caption reads “net of allowances for doubtful accounts of $371 and $370 as of May 31, 2019 and May 31, 2018” (in millions).
Instructor key: d. Allowance: $371 million (May 31, 2019), $370 million (May 31, 2018); increased. Where to find it: Consolidated Balance Sheets (receivables line and its caption), page 4 of the shortened fiscal 2019 10-K.
Question 3
Calculate the Company’s accounts receivable turnover for the year ended May 31, 2019 (round to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Accounts receivable turnover =Net credit salesAverage net accounts receivable
Note: Use the Company’s “Total revenues” for net credit sales.
Keyed answer. Total revenues $39,506 million ÷ average net receivables $5,135 million = 7.69.
Error: Not dividing by 2 for the average. Average receivables = ($5,134 million + $5,136 million) ÷ 2 = $5,135 million. $39,506 million ÷ $5,135 million = 7.69.
Error: Using gross receivables (adding back the allowance). Use receivables net of the allowance: average $5,135 million. $39,506 million ÷ $5,135 million = 7.69.
Error: Inverting the ratio. Turnover is revenues ÷ average receivables: $39,506 million ÷ $5,135 million = 7.69.
Instructor key: a. Turnover: $39,506 million ÷ (($5,134 million + $5,136 million) ÷ 2 = $5,135 million) = 7.69. Where to find it: Consolidated Statements of Operations, page 5, and balance sheet, page 4.
Question 4
Calculate the Days sales outstanding (DSO) for the year ended May 31, 2019 (round to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Days sales outstanding (DSO) =365Accounts receivable turnover
Error: Using a 360-day year. The textbook formula uses 365 days: 365 ÷ 7.69 = 47.46.
Error: Carrying forward a turnover without dividing by 2 for the average. 3.85 is the turnover without halving the receivables total. 365 ÷ 7.69 = 47.46.
Error: Carrying forward a turnover based on gross receivables. 7.18 is the turnover with the allowance added back. 365 ÷ 7.69 = 47.46.
Instructor key: c. DSO: 365 ÷ 7.69 = 47.46 (turnover rounded to two places first, as in the tutorial). Where to find it: Uses the turnover from Question 3.
Score for this assignment
RW5-2 Oracle Corporation: fiscal 2021 version (the default shown in the demo)
Learning Objectives: 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
Oracle Corporation (ticker NYSE: ORCL)
RW5-2 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of ORCL and retrieve the Oracle Corporation Form 10-K (annual report) for the year ended May 31, 2021. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-2: Oracle Corporation Real World Reporting Tutorial(6:27)
This tutorial works through these same questions with an older Form 10-K. Every question uses Oracle’s fiscal 2013 10-K. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather Oracle Corporation financial statements and notes (Form 10-K).
The first question is: Locate the year-end balance for the item in the financial statements called “Trade receivables, net of allowances for doubtful accounts” on the consolidated balance sheets. How does its balance on the specified date compare to the prior year-end balance?
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at Oracle’s financial statements as of the date specified. However, for this tutorial, we will look at the Oracle consolidated financial statements as of May 31, 2013.
Receivables are assets and will be shown on the consolidated balance sheet. As shown in the box, Oracle’s “trade receivables, net of allowances for doubtful accounts” is $6,049 million as of May 31, 2013. In the prior year, it was $6,377 million. Therefore, the May 31, 2013, balance decreased from the prior year.
The second question is: What is the balance of the Company’s allowance for doubtful accounts at the specified date? How does it compare to the prior year? Hint: See the consolidated balance sheets.
Some companies will disclose their allowance for doubtful accounts on the balance sheet. If it is not in that location, typically it will be included in the notes to the consolidated financial statements.
As shown here, as of May 31, 2013, Oracle’s allowance for doubtful accounts is $6,049 million. In the prior year, it was $6,377 million. Therefore, the May 31, 2013, allowance for doubtful accounts balance decreased from the prior year.
The third question is: Calculate the Company’s accounts receivable turnover for the year ended specified date (round to two decimal places).
To calculate the Oracle accounts receivable turnover for the year, we will use the formula: Accounts receivable turnover = net credit sales divided by average net accounts receivable.
First, we need to find the net credit sales for the year. Net sales can be found on the consolidated statements of operations. As you can see here, Oracle uses the term “total revenues” instead of “net credit sales”. As shown, Oracle’s total revenues are $37,180 million.
Next, we need to find the average net accounts receivable. This information can be found the consolidated balance sheet. Oracle uses the term “trade receivables” instead of “average net accounts receivable,” so we will use the “trade receivables balances, net of allowances for doubtful accounts” for 2013 and 2012. As shown, these numbers are $6,049 and $6,377, respectively. To find the average net accounts receivable, we add these amounts for 2012 and 2013, then divide by 2 to find an average of $6,213.
To calculate accounts receivable turnover, we must divide net credit sales ($37,180) by average net accounts receivable ($6,213), which equals 5.98.
This means that for the year, Oracle’s accounts receivable turned over approximately 6 times. In other words, this means that the company converted its average accounts receivables to cash approximately 6 times during the year ended May 31, 2013.
The fourth question is: Calculate the Days sales outstanding (DSO) for the year ended specified date (round to two decimal places).
To demonstrate how to answer this question, we will continue using Oracle’s financial statements as of May 31, 2013.
The formula for Days sales outstanding (DSO) is: DSO = 365 / accounts receivable turnover. In Question 3, we found that Oracle’s accounts receivable turnover in 2013 was 5.98. 365 divided by 5.98 equals a DSO of 61.04.
This means that the company collected its outstanding receivables in approximately 61 days for the year ended May 31, 2013.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
Locate the year-end balance for the item in the financial statements called “Trade receivables, net of allowances for doubtful accounts” on the consolidated balance sheets. How does its balance on May 31, 2021 compare to the prior year-end balance? (Select one. 1 point.)
Error: Reading the columns in reverse order. This reads the columns in reverse. Oracle’s first column is May 31, 2021 ($5,409 million); the second is May 31, 2020 ($5,551 million).
Keyed answer. The balance sheet shows trade receivables, net, of $5,409 million at May 31, 2021 and $5,551 million at May 31, 2020.
Error: Adding back the allowance (gross receivables). These add the allowance back ($373 million and $409 million). The question asks for the balance net of the allowance: $5,409 million at May 31, 2021.
Error: Reporting the allowance instead of the receivable. These are the allowance amounts in the caption, not the receivables balance. Trade receivables, net: $5,409 million at May 31, 2021.
Instructor key: b. Trade receivables, net: $5,409 million (May 31, 2021), $5,551 million (May 31, 2020); decreased. Where to find it: Consolidated Balance Sheets (receivables line and its caption), page 5 of the shortened fiscal 2021 10-K.
Question 2
What is the balance of the Company’s allowance for doubtful accounts as of May 31, 2021? How does it compare to the prior year? (Select one. 1 point.)
Hint: See the consolidated balance sheets.
Error: Reading the amounts in reverse order. This reads the two caption amounts in reverse. The first amount is May 31, 2021 ($373 million).
Error: Reporting net receivables instead of the allowance. These are the trade receivables balances, net of the allowance. The allowance itself is in the caption: $373 million at May 31, 2021.
Error: Expecting an “immaterial” disclosure like Southwest’s. Oracle reports the allowance in the balance sheet caption: $373 million at May 31, 2021.
Keyed answer. The balance sheet caption reads “net of allowances for doubtful accounts of $373 and $409 as of May 31, 2021 and May 31, 2020” (in millions).
Instructor key: d. Allowance: $373 million (May 31, 2021), $409 million (May 31, 2020); decreased. Where to find it: Consolidated Balance Sheets (receivables line and its caption), page 5 of the shortened fiscal 2021 10-K.
Question 3
Calculate the Company’s accounts receivable turnover for the year ended May 31, 2021 (round to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Accounts receivable turnover =Net credit salesAverage net accounts receivable
Note: Use the Company’s “Total revenues” for net credit sales.
Keyed answer. Total revenues $40,479 million ÷ average net receivables $5,480 million = 7.39.
Error: Using the ending balance instead of the average. The denominator is average net receivables, $5,480 million, not the ending balance. $40,479 million ÷ $5,480 million = 7.39.
Error: Not dividing by 2 for the average. Average receivables = ($5,409 million + $5,551 million) ÷ 2 = $5,480 million. $40,479 million ÷ $5,480 million = 7.39.
Error: Using gross receivables (adding back the allowance). Use receivables net of the allowance: average $5,480 million. $40,479 million ÷ $5,480 million = 7.39.
Instructor key: a. Turnover: $40,479 million ÷ (($5,409 million + $5,551 million) ÷ 2 = $5,480 million) = 7.39. Where to find it: Consolidated Statements of Operations, page 6, and balance sheet, page 5.
Question 4
Calculate the Days sales outstanding (DSO) for the year ended May 31, 2021 (round to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Days sales outstanding (DSO) =365Accounts receivable turnover
Error: Using a 360-day year. The textbook formula uses 365 days: 365 ÷ 7.39 = 49.39.
Error: Carrying forward a turnover without dividing by 2 for the average. 3.69 is the turnover without halving the receivables total. 365 ÷ 7.39 = 49.39.
Error: Carrying forward a turnover based on gross receivables. 6.89 is the turnover with the allowance added back. 365 ÷ 7.39 = 49.39.
Instructor key: c. DSO: 365 ÷ 7.39 = 49.39 (turnover rounded to two places first, as in the tutorial). Where to find it: Uses the turnover from Question 3.
Score for this assignment
RW5-2 Oracle Corporation: fiscal 2023 version
Learning Objectives: 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
Oracle Corporation (ticker NYSE: ORCL)
RW5-2 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of ORCL and retrieve the Oracle Corporation Form 10-K (annual report) for the year ended May 31, 2023. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-2: Oracle Corporation Real World Reporting Tutorial(6:27)
This tutorial works through these same questions with an older Form 10-K. Every question uses Oracle’s fiscal 2013 10-K. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather Oracle Corporation financial statements and notes (Form 10-K).
The first question is: Locate the year-end balance for the item in the financial statements called “Trade receivables, net of allowances for doubtful accounts” on the consolidated balance sheets. How does its balance on the specified date compare to the prior year-end balance?
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at Oracle’s financial statements as of the date specified. However, for this tutorial, we will look at the Oracle consolidated financial statements as of May 31, 2013.
Receivables are assets and will be shown on the consolidated balance sheet. As shown in the box, Oracle’s “trade receivables, net of allowances for doubtful accounts” is $6,049 million as of May 31, 2013. In the prior year, it was $6,377 million. Therefore, the May 31, 2013, balance decreased from the prior year.
The second question is: What is the balance of the Company’s allowance for doubtful accounts at the specified date? How does it compare to the prior year? Hint: See the consolidated balance sheets.
Some companies will disclose their allowance for doubtful accounts on the balance sheet. If it is not in that location, typically it will be included in the notes to the consolidated financial statements.
As shown here, as of May 31, 2013, Oracle’s allowance for doubtful accounts is $6,049 million. In the prior year, it was $6,377 million. Therefore, the May 31, 2013, allowance for doubtful accounts balance decreased from the prior year.
The third question is: Calculate the Company’s accounts receivable turnover for the year ended specified date (round to two decimal places).
To calculate the Oracle accounts receivable turnover for the year, we will use the formula: Accounts receivable turnover = net credit sales divided by average net accounts receivable.
First, we need to find the net credit sales for the year. Net sales can be found on the consolidated statements of operations. As you can see here, Oracle uses the term “total revenues” instead of “net credit sales”. As shown, Oracle’s total revenues are $37,180 million.
Next, we need to find the average net accounts receivable. This information can be found the consolidated balance sheet. Oracle uses the term “trade receivables” instead of “average net accounts receivable,” so we will use the “trade receivables balances, net of allowances for doubtful accounts” for 2013 and 2012. As shown, these numbers are $6,049 and $6,377, respectively. To find the average net accounts receivable, we add these amounts for 2012 and 2013, then divide by 2 to find an average of $6,213.
To calculate accounts receivable turnover, we must divide net credit sales ($37,180) by average net accounts receivable ($6,213), which equals 5.98.
This means that for the year, Oracle’s accounts receivable turned over approximately 6 times. In other words, this means that the company converted its average accounts receivables to cash approximately 6 times during the year ended May 31, 2013.
The fourth question is: Calculate the Days sales outstanding (DSO) for the year ended specified date (round to two decimal places).
To demonstrate how to answer this question, we will continue using Oracle’s financial statements as of May 31, 2013.
The formula for Days sales outstanding (DSO) is: DSO = 365 / accounts receivable turnover. In Question 3, we found that Oracle’s accounts receivable turnover in 2013 was 5.98. 365 divided by 5.98 equals a DSO of 61.04.
This means that the company collected its outstanding receivables in approximately 61 days for the year ended May 31, 2013.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
Locate the year-end balance for the item in the financial statements called “Trade receivables, net of allowances for credit losses” on the consolidated balance sheets. How does its balance on May 31, 2023 compare to the prior year-end balance? (Select one. 1 point.)
Error: Reading the columns in reverse order. This reads the columns in reverse. Oracle’s first column is May 31, 2023 ($6,915 million); the second is May 31, 2022 ($5,953 million).
Keyed answer. The balance sheet shows trade receivables, net, of $6,915 million at May 31, 2023 and $5,953 million at May 31, 2022.
Error: Adding back the allowance (gross receivables). These add the allowance back ($428 million and $362 million). The question asks for the balance net of the allowance: $6,915 million at May 31, 2023.
Error: Reporting the allowance instead of the receivable. These are the allowance amounts in the caption, not the receivables balance. Trade receivables, net: $6,915 million at May 31, 2023.
Instructor key: b. Trade receivables, net: $6,915 million (May 31, 2023), $5,953 million (May 31, 2022); increased. Where to find it: Consolidated Balance Sheets (receivables line and its caption), page 5 of the shortened fiscal 2023 10-K.
Question 2
What is the balance of the Company’s allowance for credit losses as of May 31, 2023? How does it compare to the prior year? (Select one. 1 point.)
Hint: See the consolidated balance sheets.
Error: Reading the amounts in reverse order. This reads the two caption amounts in reverse. The first amount is May 31, 2023 ($428 million).
Error: Reporting net receivables instead of the allowance. These are the trade receivables balances, net of the allowance. The allowance itself is in the caption: $428 million at May 31, 2023.
Error: Expecting an “immaterial” disclosure like Southwest’s. Oracle reports the allowance in the balance sheet caption: $428 million at May 31, 2023.
Keyed answer. The balance sheet caption reads “net of allowances for credit losses of $428 and $362 as of May 31, 2023 and May 31, 2022” (in millions).
Instructor key: d. Allowance: $428 million (May 31, 2023), $362 million (May 31, 2022); increased. Where to find it: Consolidated Balance Sheets (receivables line and its caption), page 5 of the shortened fiscal 2023 10-K.
Question 3
Calculate the Company’s accounts receivable turnover for the year ended May 31, 2023 (round to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Accounts receivable turnover =Net credit salesAverage net accounts receivable
Note: Use the Company’s “Total revenues” for net credit sales.
Keyed answer. Total revenues $49,954 million ÷ average net receivables $6,434 million = 7.76.
Error: Using the ending balance instead of the average. The denominator is average net receivables, $6,434 million, not the ending balance. $49,954 million ÷ $6,434 million = 7.76.
Error: Not dividing by 2 for the average. Average receivables = ($6,915 million + $5,953 million) ÷ 2 = $6,434 million. $49,954 million ÷ $6,434 million = 7.76.
Error: Using gross receivables (adding back the allowance). Use receivables net of the allowance: average $6,434 million. $49,954 million ÷ $6,434 million = 7.76.
Instructor key: a. Turnover: $49,954 million ÷ (($6,915 million + $5,953 million) ÷ 2 = $6,434 million) = 7.76. Where to find it: Consolidated Statements of Operations, page 6, and balance sheet, page 5.
Question 4
Calculate the Days sales outstanding (DSO) for the year ended May 31, 2023 (round to two decimal places). (Select one. 1 point.)
Hint: Use the formula as shown in the textbook:
Days sales outstanding (DSO) =365Accounts receivable turnover
Error: Using a 360-day year. The textbook formula uses 365 days: 365 ÷ 7.76 = 47.04.
Error: Carrying forward a turnover without dividing by 2 for the average. 3.88 is the turnover without halving the receivables total. 365 ÷ 7.76 = 47.04.
Error: Carrying forward a turnover based on gross receivables. 7.31 is the turnover with the allowance added back. 365 ÷ 7.76 = 47.04.
Instructor key: c. DSO: 365 ÷ 7.76 = 47.04 (turnover rounded to two places first, as in the tutorial). Where to find it: Uses the turnover from Question 3.
Score for this assignment
RW5-3 The J. M. Smucker Company: fiscal 2015 version
Learning Objectives: 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
The J. M. Smucker Company (ticker NYSE: SJM)
RW5-3 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of SJM and retrieve The J. M. Smucker Company Form 10-K (annual report) for the year ended April 30, 2015. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-3: The J. M. Smucker Company Real World Reporting Tutorial(5:56)
This tutorial works through these same questions with an older Form 10-K. Every question uses Smucker’s fiscal 2013 10-K. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather J. M. Smucker Company financial statements and notes (Form 10-K).
The first question is: Locate the year-end balance for the item in the financial statements called “Trade receivables - net” on the consolidated balance sheets. How does its balance on the specified date compare to the prior year-end balance?
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at J. M. Smucker’s financial statements as of the date specified. However, for this tutorial, we will look at the J.M. Smucker consolidated balance sheets for 2013 and 2012.
For certain years of reporting, Smucker has a two page consolidated balance sheet. The Company lists the assets on one page and the liabilities and shareholders’ equity on a second page. As of April 30, 2013, the company used the terminology “Trade receivables, less allowance for doubtful accounts.” (In more recent years, they changed this terminology to “Trade receivables - net.”) As shown in the box, the balance of the net trade receivables is $313.7 million as of April 30, 2013. In the prior year, it was $347.5 million. Therefore, there was a decrease from 2012 to 2013.
The second question is: What is the dollar amount of the reserve for credit loss (or allowance for doubtful accounts) at the specified date? How does its balance on the specified date compare to the prior year-end balance?
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
J.M. Smucker’s does not disclose this allowance on the face of its balance sheet. Instead, In note 1 to Consolidated Financial Statements, the company provides details of its receivables, such as how the allowance is determined and the balances as of each year end. As shown in the highlighted text, as of April 30, 2013, the allowance for doubtful accounts is $1.3 million. In the prior year, it was $1.7 million. Therefore, there was a decrease in the allowance for doubtful accounts.
Note that in more recent years, Smucker changed its terminology from “allowance for doubtful accounts” to “reserve for credit loss.”
The third question is: Calculate the current ratio as of the specified date (round the result to two decimals places).
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
To calculate Smucker’s current ratio, we must divide Smucker’s total current assets by total current liabilities. We can obtain the total current assets and total current liabilities from the consolidated balance sheet.
As shown, Smucker’s total current assets in 2013 were $1,595.2 million; its total current liabilities were $596.8 million, as shown. Dividing these two numbers results in a current ratio of 2.67.
The fourth question is: Calculate the current ratio as of the specified prior year date (round the result to two decimal places). Hint: Use the same formula in question 3. Did the current year current ratio increase or decrease from the prior year ratio?
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
Now, we will follow the same steps from Question 3 to calculate Smucker’s current ratio for 2012. In 2012, Smucker’s total current assets were $1,643.5 million, and its total current liabilities were $616.9 million. Dividing these two numbers results in a current ratio of 2.66.
In question 3, we found that Smucker’s current ratio was 2.67 in 2013. Therefore, Smucker’s current ratio in 2013 increased slightly from the 2012 ratio.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
Locate the year-end balance for the item in the financial statements called “Trade receivables, less allowance for doubtful accounts” on the consolidated balance sheets. How does its balance on April 30, 2015 compare to the prior year-end balance? (Select one. 1 point.)
Error: Reading the columns in reverse order. This reads the columns in reverse. Smucker’s first column is April 30, 2015 ($430.1 million).
Error: Adding back the allowance (gross receivables). These add back the allowance for doubtful accounts ($1.0 million and $0.9 million). The balance sheet line is net: $430.1 million at April 30, 2015.
Error: Reporting one customer’s receivable from the notes. These are the amounts due from Walmart, from the note on major customers (page 19). The balance sheet line is $430.1 million at April 30, 2015.
Keyed answer. The balance sheet shows trade receivables, less allowance for doubtful accounts of $430.1 million at April 30, 2015 and $309.4 million at April 30, 2014.
Instructor key: d. Trade receivables, less allowance for doubtful accounts: $430.1 million (April 30, 2015), $309.4 million (April 30, 2014); increased. Where to find it: Consolidated Balance Sheets, page 6 (assets) and page 7 (liabilities) of the shortened fiscal 2015 10-K.
Question 2
What is the dollar amount of the reserve for credit loss (or allowance for doubtful accounts) at April 30, 2015? How does its balance on April 30, 2015 compare to the prior year-end balance? (Select one. 1 point.)
Hint: See Note 1 to Consolidated Financial Statements.
Error: Reading the amounts in reverse order. This reads the two amounts in reverse. Note 1 lists April 30, 2015 first ($1.0 million).
Keyed answer. Note 1: at April 30, 2015 and 2014, the allowance for doubtful accounts was $1.0 million and $0.9 million, respectively.
Error: Reporting net receivables instead of the allowance. These are the trade receivables balances. The allowance for doubtful accounts is in Note 1: $1.0 million at April 30, 2015.
Error: Stopping at the balance sheet. Smucker does not show the amount on the balance sheet, but Note 1 gives it: $1.0 million at April 30, 2015.
Instructor key: b. Allowance for doubtful accounts: $1.0 million (April 30, 2015), $0.9 million (April 30, 2014); increased. Where to find it: Note 1, “Trade Receivables,” page 11 of the shortened fiscal 2015 10-K.
Question 3
Calculate the current ratio as of April 30, 2015 (round the result to two decimal places). (Select one. 1 point.)
Hint: Use the formula for current ratio as shown in the textbook:
Current ratio =Total current assetsTotal current liabilities
Error: Using the prior-year column. 1.74 is the April 30, 2014 ratio. For April 30, 2015: $2,052.3 million ÷ $1,022.6 million = 2.01.
Error: Mixing columns across the two balance sheet pages. This divides 2015 current assets by 2014 current liabilities ($885.8 million). Use the 2015 column on both: $2,052.3 million ÷ $1,022.6 million = 2.01.
Keyed answer. $2,052.3 million ÷ $1,022.6 million = 2.01.
Error: Inverting the ratio. The current ratio is current assets ÷ current liabilities: $2,052.3 million ÷ $1,022.6 million = 2.01.
Instructor key: c. Current ratio April 30, 2015: $2,052.3 million ÷ $1,022.6 million = 2.01. Where to find it: Consolidated Balance Sheets, page 6 (assets) and page 7 (liabilities) of the shortened fiscal 2015 10-K.
Question 4
Calculate the current ratio as of April 30, 2014 (round the result to two decimal places). Hint: Use the same formula in question 3. Did the April 30, 2015 current ratio increase or decrease from the April 30, 2014 ratio? (Select one. 1 point.)
Keyed answer. April 30, 2014: $1,539.1 million ÷ $885.8 million = 1.74. It increased to 2.01 at April 30, 2015.
Error: Reversing the comparison. The 2014 ratio is right, but 2.01 (2015) against 1.74 (2014) means the ratio increased.
Error: Mixing columns across the two balance sheet pages. This divides 2014 current assets by 2015 current liabilities. Use the 2014 column on both pages: $1,539.1 million ÷ $885.8 million = 1.74.
Error: Mixing columns and reversing the comparison. This mixes columns and reverses the comparison. $1,539.1 million ÷ $885.8 million = 1.74, and the ratio increased to 2.01.
Instructor key: a. Current ratio April 30, 2014: $1,539.1 million ÷ $885.8 million = 1.74; 2015 ratio 2.01, so it increased. Where to find it: Consolidated Balance Sheets, page 6 (assets) and page 7 (liabilities) of the shortened fiscal 2015 10-K.
Score for this assignment
RW5-3 The J. M. Smucker Company: fiscal 2017 version
Learning Objectives: 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
The J. M. Smucker Company (ticker NYSE: SJM)
RW5-3 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of SJM and retrieve The J. M. Smucker Company Form 10-K (annual report) for the year ended April 30, 2017. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-3: The J. M. Smucker Company Real World Reporting Tutorial(5:56)
This tutorial works through these same questions with an older Form 10-K. Every question uses Smucker’s fiscal 2013 10-K. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather J. M. Smucker Company financial statements and notes (Form 10-K).
The first question is: Locate the year-end balance for the item in the financial statements called “Trade receivables - net” on the consolidated balance sheets. How does its balance on the specified date compare to the prior year-end balance?
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at J. M. Smucker’s financial statements as of the date specified. However, for this tutorial, we will look at the J.M. Smucker consolidated balance sheets for 2013 and 2012.
For certain years of reporting, Smucker has a two page consolidated balance sheet. The Company lists the assets on one page and the liabilities and shareholders’ equity on a second page. As of April 30, 2013, the company used the terminology “Trade receivables, less allowance for doubtful accounts.” (In more recent years, they changed this terminology to “Trade receivables - net.”) As shown in the box, the balance of the net trade receivables is $313.7 million as of April 30, 2013. In the prior year, it was $347.5 million. Therefore, there was a decrease from 2012 to 2013.
The second question is: What is the dollar amount of the reserve for credit loss (or allowance for doubtful accounts) at the specified date? How does its balance on the specified date compare to the prior year-end balance?
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
J.M. Smucker’s does not disclose this allowance on the face of its balance sheet. Instead, In note 1 to Consolidated Financial Statements, the company provides details of its receivables, such as how the allowance is determined and the balances as of each year end. As shown in the highlighted text, as of April 30, 2013, the allowance for doubtful accounts is $1.3 million. In the prior year, it was $1.7 million. Therefore, there was a decrease in the allowance for doubtful accounts.
Note that in more recent years, Smucker changed its terminology from “allowance for doubtful accounts” to “reserve for credit loss.”
The third question is: Calculate the current ratio as of the specified date (round the result to two decimals places).
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
To calculate Smucker’s current ratio, we must divide Smucker’s total current assets by total current liabilities. We can obtain the total current assets and total current liabilities from the consolidated balance sheet.
As shown, Smucker’s total current assets in 2013 were $1,595.2 million; its total current liabilities were $596.8 million, as shown. Dividing these two numbers results in a current ratio of 2.67.
The fourth question is: Calculate the current ratio as of the specified prior year date (round the result to two decimal places). Hint: Use the same formula in question 3. Did the current year current ratio increase or decrease from the prior year ratio?
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
Now, we will follow the same steps from Question 3 to calculate Smucker’s current ratio for 2012. In 2012, Smucker’s total current assets were $1,643.5 million, and its total current liabilities were $616.9 million. Dividing these two numbers results in a current ratio of 2.66.
In question 3, we found that Smucker’s current ratio was 2.67 in 2013. Therefore, Smucker’s current ratio in 2013 increased slightly from the 2012 ratio.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
Locate the year-end balance for the item in the financial statements called “Trade receivables, less allowance for doubtful accounts” on the consolidated balance sheets. How does its balance on April 30, 2017 compare to the prior year-end balance? (Select one. 1 point.)
Error: Reading the columns in reverse order. This reads the columns in reverse. Smucker’s first column is April 30, 2017 ($438.7 million).
Error: Adding back the allowance (gross receivables). These add back the allowance for doubtful accounts ($1.6 million and $1.1 million). The balance sheet line is net: $438.7 million at April 30, 2017.
Error: Reporting one customer’s receivable from the notes. These are the amounts due from Walmart, from the note on major customers (page 21). The balance sheet line is $438.7 million at April 30, 2017.
Keyed answer. The balance sheet shows trade receivables, less allowance for doubtful accounts of $438.7 million at April 30, 2017 and $450.1 million at April 30, 2016.
Instructor key: d. Trade receivables, less allowance for doubtful accounts: $438.7 million (April 30, 2017), $450.1 million (April 30, 2016); decreased. Where to find it: Consolidated Balance Sheets, page 7 (assets) and page 8 (liabilities) of the shortened fiscal 2017 10-K.
Question 2
What is the dollar amount of the reserve for credit loss (or allowance for doubtful accounts) at April 30, 2017? How does its balance on April 30, 2017 compare to the prior year-end balance? (Select one. 1 point.)
Hint: See Note 1 to Consolidated Financial Statements.
Error: Reading the amounts in reverse order. This reads the two amounts in reverse. Note 1 lists April 30, 2017 first ($1.6 million).
Keyed answer. Note 1: at April 30, 2017 and 2016, the allowance for doubtful accounts was $1.6 million and $1.1 million, respectively.
Error: Reporting net receivables instead of the allowance. These are the trade receivables balances. The allowance for doubtful accounts is in Note 1: $1.6 million at April 30, 2017.
Error: Stopping at the balance sheet. Smucker does not show the amount on the balance sheet, but Note 1 gives it: $1.6 million at April 30, 2017.
Instructor key: b. Allowance for doubtful accounts: $1.6 million (April 30, 2017), $1.1 million (April 30, 2016); increased. Where to find it: Note 1, “Trade Receivables,” page 13 of the shortened fiscal 2017 10-K.
Question 3
Calculate the current ratio as of April 30, 2017 (round the result to two decimal places). (Select one. 1 point.)
Hint: Use the formula for current ratio as shown in the textbook:
Current ratio =Total current assetsTotal current liabilities
Error: Using the prior-year column. 1.30 is the April 30, 2016 ratio. For April 30, 2017: $1,641.8 million ÷ $1,832.6 million = 0.90.
Error: Mixing columns across the two balance sheet pages. This divides 2017 current assets by 2016 current liabilities ($1,213.0 million). Use the 2017 column on both: $1,641.8 million ÷ $1,832.6 million = 0.90.
Keyed answer. $1,641.8 million ÷ $1,832.6 million = 0.90.
Error: Inverting the ratio. The current ratio is current assets ÷ current liabilities: $1,641.8 million ÷ $1,832.6 million = 0.90.
Instructor key: c. Current ratio April 30, 2017: $1,641.8 million ÷ $1,832.6 million = 0.90. Where to find it: Consolidated Balance Sheets, page 7 (assets) and page 8 (liabilities) of the shortened fiscal 2017 10-K.
Question 4
Calculate the current ratio as of April 30, 2016 (round the result to two decimal places). Hint: Use the same formula in question 3. Did the April 30, 2017 current ratio increase or decrease from the April 30, 2016 ratio? (Select one. 1 point.)
Keyed answer. April 30, 2016: $1,573.4 million ÷ $1,213.0 million = 1.30. It decreased to 0.90 at April 30, 2017.
Error: Reversing the comparison. The 2016 ratio is right, but 0.90 (2017) against 1.30 (2016) means the ratio decreased.
Error: Mixing columns across the two balance sheet pages. This divides 2016 current assets by 2017 current liabilities. Use the 2016 column on both pages: $1,573.4 million ÷ $1,213.0 million = 1.30.
Error: Mixing columns and reversing the comparison. This mixes columns and reverses the comparison. $1,573.4 million ÷ $1,213.0 million = 1.30, and the ratio decreased to 0.90.
Instructor key: a. Current ratio April 30, 2016: $1,573.4 million ÷ $1,213.0 million = 1.30; 2017 ratio 0.90, so it decreased. Where to find it: Consolidated Balance Sheets, page 7 (assets) and page 8 (liabilities) of the shortened fiscal 2017 10-K.
Score for this assignment
RW5-3 The J. M. Smucker Company: fiscal 2019 version
Learning Objectives: 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
The J. M. Smucker Company (ticker NYSE: SJM)
RW5-3 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of SJM and retrieve The J. M. Smucker Company Form 10-K (annual report) for the year ended April 30, 2019. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-3: The J. M. Smucker Company Real World Reporting Tutorial(5:56)
This tutorial works through these same questions with an older Form 10-K. Every question uses Smucker’s fiscal 2013 10-K. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather J. M. Smucker Company financial statements and notes (Form 10-K).
The first question is: Locate the year-end balance for the item in the financial statements called “Trade receivables - net” on the consolidated balance sheets. How does its balance on the specified date compare to the prior year-end balance?
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at J. M. Smucker’s financial statements as of the date specified. However, for this tutorial, we will look at the J.M. Smucker consolidated balance sheets for 2013 and 2012.
For certain years of reporting, Smucker has a two page consolidated balance sheet. The Company lists the assets on one page and the liabilities and shareholders’ equity on a second page. As of April 30, 2013, the company used the terminology “Trade receivables, less allowance for doubtful accounts.” (In more recent years, they changed this terminology to “Trade receivables - net.”) As shown in the box, the balance of the net trade receivables is $313.7 million as of April 30, 2013. In the prior year, it was $347.5 million. Therefore, there was a decrease from 2012 to 2013.
The second question is: What is the dollar amount of the reserve for credit loss (or allowance for doubtful accounts) at the specified date? How does its balance on the specified date compare to the prior year-end balance?
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
J.M. Smucker’s does not disclose this allowance on the face of its balance sheet. Instead, In note 1 to Consolidated Financial Statements, the company provides details of its receivables, such as how the allowance is determined and the balances as of each year end. As shown in the highlighted text, as of April 30, 2013, the allowance for doubtful accounts is $1.3 million. In the prior year, it was $1.7 million. Therefore, there was a decrease in the allowance for doubtful accounts.
Note that in more recent years, Smucker changed its terminology from “allowance for doubtful accounts” to “reserve for credit loss.”
The third question is: Calculate the current ratio as of the specified date (round the result to two decimals places).
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
To calculate Smucker’s current ratio, we must divide Smucker’s total current assets by total current liabilities. We can obtain the total current assets and total current liabilities from the consolidated balance sheet.
As shown, Smucker’s total current assets in 2013 were $1,595.2 million; its total current liabilities were $596.8 million, as shown. Dividing these two numbers results in a current ratio of 2.67.
The fourth question is: Calculate the current ratio as of the specified prior year date (round the result to two decimal places). Hint: Use the same formula in question 3. Did the current year current ratio increase or decrease from the prior year ratio?
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
Now, we will follow the same steps from Question 3 to calculate Smucker’s current ratio for 2012. In 2012, Smucker’s total current assets were $1,643.5 million, and its total current liabilities were $616.9 million. Dividing these two numbers results in a current ratio of 2.66.
In question 3, we found that Smucker’s current ratio was 2.67 in 2013. Therefore, Smucker’s current ratio in 2013 increased slightly from the 2012 ratio.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
Locate the year-end balance for the item in the financial statements called “Trade receivables, less allowance for doubtful accounts” on the consolidated balance sheets. How does its balance on April 30, 2019 compare to the prior year-end balance? (Select one. 1 point.)
Error: Reading the columns in reverse order. This reads the columns in reverse. Smucker’s first column is April 30, 2019 ($503.8 million).
Error: Adding back the allowance (gross receivables). These add back the allowance for doubtful accounts ($1.8 million and $1.1 million). The balance sheet line is net: $503.8 million at April 30, 2019.
Error: Reporting one customer’s receivable from the notes. These are the amounts due from Walmart, from the note on major customers (page 21). The balance sheet line is $503.8 million at April 30, 2019.
Keyed answer. The balance sheet shows trade receivables, less allowance for doubtful accounts of $503.8 million at April 30, 2019 and $385.6 million at April 30, 2018.
Instructor key: d. Trade receivables, less allowance for doubtful accounts: $503.8 million (April 30, 2019), $385.6 million (April 30, 2018); increased. Where to find it: Consolidated Balance Sheets, page 7 of the shortened fiscal 2019 10-K.
Question 2
What is the dollar amount of the reserve for credit loss (or allowance for doubtful accounts) at April 30, 2019? How does its balance on April 30, 2019 compare to the prior year-end balance? (Select one. 1 point.)
Hint: See Note 1 to Consolidated Financial Statements.
Error: Reading the amounts in reverse order. This reads the two amounts in reverse. Note 1 lists April 30, 2019 first ($1.8 million).
Keyed answer. Note 1: at April 30, 2019 and 2018, the allowance for doubtful accounts was $1.8 million and $1.1 million, respectively.
Error: Reporting net receivables instead of the allowance. These are the trade receivables balances. The allowance for doubtful accounts is in Note 1: $1.8 million at April 30, 2019.
Error: Stopping at the balance sheet. Smucker does not show the amount on the balance sheet, but Note 1 gives it: $1.8 million at April 30, 2019.
Instructor key: b. Allowance for doubtful accounts: $1.8 million (April 30, 2019), $1.1 million (April 30, 2018); increased. Where to find it: Note 1, “Trade Receivables,” page 13 of the shortened fiscal 2019 10-K.
Question 3
Calculate the current ratio as of April 30, 2019 (round the result to two decimal places). (Select one. 1 point.)
Hint: Use the formula for current ratio as shown in the textbook:
Current ratio =Total current assetsTotal current liabilities
Error: Using the prior-year column. 1.50 is the April 30, 2018 ratio. For April 30, 2019: $1,625.2 million ÷ $2,341.5 million = 0.69.
Error: Mixing columns across the two balance sheet pages. This divides 2019 current assets by 2018 current liabilities ($1,033.8 million). Use the 2019 column on both: $1,625.2 million ÷ $2,341.5 million = 0.69.
Keyed answer. $1,625.2 million ÷ $2,341.5 million = 0.69.
Error: Inverting the ratio. The current ratio is current assets ÷ current liabilities: $1,625.2 million ÷ $2,341.5 million = 0.69.
Instructor key: c. Current ratio April 30, 2019: $1,625.2 million ÷ $2,341.5 million = 0.69. Where to find it: Consolidated Balance Sheets, page 7 of the shortened fiscal 2019 10-K.
Question 4
Calculate the current ratio as of April 30, 2018 (round the result to two decimal places). Hint: Use the same formula in question 3. Did the April 30, 2019 current ratio increase or decrease from the April 30, 2018 ratio? (Select one. 1 point.)
Keyed answer. April 30, 2018: $1,555.0 million ÷ $1,033.8 million = 1.50. It decreased to 0.69 at April 30, 2019.
Error: Reversing the comparison. The 2018 ratio is right, but 0.69 (2019) against 1.50 (2018) means the ratio decreased.
Error: Mixing columns across the two balance sheet pages. This divides 2018 current assets by 2019 current liabilities. Use the 2018 column on both pages: $1,555.0 million ÷ $1,033.8 million = 1.50.
Error: Mixing columns and reversing the comparison. This mixes columns and reverses the comparison. $1,555.0 million ÷ $1,033.8 million = 1.50, and the ratio decreased to 0.69.
Instructor key: a. Current ratio April 30, 2018: $1,555.0 million ÷ $1,033.8 million = 1.50; 2019 ratio 0.69, so it decreased. Where to find it: Consolidated Balance Sheets, page 7 of the shortened fiscal 2019 10-K.
Score for this assignment
RW5-3 The J. M. Smucker Company: fiscal 2021 version (the default shown in the demo)
Learning Objectives: 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
The J. M. Smucker Company (ticker NYSE: SJM)
RW5-3 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of SJM and retrieve The J. M. Smucker Company Form 10-K (annual report) for the year ended April 30, 2021. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-3: The J. M. Smucker Company Real World Reporting Tutorial(5:56)
This tutorial works through these same questions with an older Form 10-K. Every question uses Smucker’s fiscal 2013 10-K. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather J. M. Smucker Company financial statements and notes (Form 10-K).
The first question is: Locate the year-end balance for the item in the financial statements called “Trade receivables - net” on the consolidated balance sheets. How does its balance on the specified date compare to the prior year-end balance?
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at J. M. Smucker’s financial statements as of the date specified. However, for this tutorial, we will look at the J.M. Smucker consolidated balance sheets for 2013 and 2012.
For certain years of reporting, Smucker has a two page consolidated balance sheet. The Company lists the assets on one page and the liabilities and shareholders’ equity on a second page. As of April 30, 2013, the company used the terminology “Trade receivables, less allowance for doubtful accounts.” (In more recent years, they changed this terminology to “Trade receivables - net.”) As shown in the box, the balance of the net trade receivables is $313.7 million as of April 30, 2013. In the prior year, it was $347.5 million. Therefore, there was a decrease from 2012 to 2013.
The second question is: What is the dollar amount of the reserve for credit loss (or allowance for doubtful accounts) at the specified date? How does its balance on the specified date compare to the prior year-end balance?
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
J.M. Smucker’s does not disclose this allowance on the face of its balance sheet. Instead, In note 1 to Consolidated Financial Statements, the company provides details of its receivables, such as how the allowance is determined and the balances as of each year end. As shown in the highlighted text, as of April 30, 2013, the allowance for doubtful accounts is $1.3 million. In the prior year, it was $1.7 million. Therefore, there was a decrease in the allowance for doubtful accounts.
Note that in more recent years, Smucker changed its terminology from “allowance for doubtful accounts” to “reserve for credit loss.”
The third question is: Calculate the current ratio as of the specified date (round the result to two decimals places).
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
To calculate Smucker’s current ratio, we must divide Smucker’s total current assets by total current liabilities. We can obtain the total current assets and total current liabilities from the consolidated balance sheet.
As shown, Smucker’s total current assets in 2013 were $1,595.2 million; its total current liabilities were $596.8 million, as shown. Dividing these two numbers results in a current ratio of 2.67.
The fourth question is: Calculate the current ratio as of the specified prior year date (round the result to two decimal places). Hint: Use the same formula in question 3. Did the current year current ratio increase or decrease from the prior year ratio?
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
Now, we will follow the same steps from Question 3 to calculate Smucker’s current ratio for 2012. In 2012, Smucker’s total current assets were $1,643.5 million, and its total current liabilities were $616.9 million. Dividing these two numbers results in a current ratio of 2.66.
In question 3, we found that Smucker’s current ratio was 2.67 in 2013. Therefore, Smucker’s current ratio in 2013 increased slightly from the 2012 ratio.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
Locate the year-end balance for the item in the financial statements called “Trade receivables – net” on the consolidated balance sheets. How does its balance on April 30, 2021 compare to the prior year-end balance? (Select one. 1 point.)
Error: Reading the columns in reverse order. This reads the columns in reverse. Smucker’s first column is April 30, 2021 ($533.7 million).
Error: Adding back the allowance (gross receivables). These add back the reserve for credit loss ($2.4 million and $3.0 million). The balance sheet line is net: $533.7 million at April 30, 2021.
Error: Reporting one customer’s receivable from the notes. These are the amounts due from Walmart, from the note on major customers (page 22). The balance sheet line is $533.7 million at April 30, 2021.
Keyed answer. The balance sheet shows trade receivables – net of $533.7 million at April 30, 2021 and $551.4 million at April 30, 2020.
Instructor key: d. Trade receivables – net: $533.7 million (April 30, 2021), $551.4 million (April 30, 2020); decreased. Where to find it: Consolidated Balance Sheets, page 9 of the shortened fiscal 2021 10-K.
Question 2
What is the dollar amount of the reserve for credit loss (or allowance for doubtful accounts) at April 30, 2021? How does its balance on April 30, 2021 compare to the prior year-end balance? (Select one. 1 point.)
Hint: See Note 1 to Consolidated Financial Statements.
Error: Reading the amounts in reverse order. This reads the two amounts in reverse. Note 1 lists April 30, 2021 first ($2.4 million).
Keyed answer. Note 1: at April 30, 2021 and 2020, the reserve for credit loss was $2.4 million and $3.0 million, respectively.
Error: Reporting net receivables instead of the allowance. These are the trade receivables balances. The reserve for credit loss is in Note 1: $2.4 million at April 30, 2021.
Error: Stopping at the balance sheet. Smucker does not show the amount on the balance sheet, but Note 1 gives it: $2.4 million at April 30, 2021.
Instructor key: b. Reserve for credit loss: $2.4 million (April 30, 2021), $3.0 million (April 30, 2020); decreased. Where to find it: Note 1, “Trade Receivables,” page 14 of the shortened fiscal 2021 10-K.
Question 3
Calculate the current ratio as of April 30, 2021 (round the result to two decimal places). (Select one. 1 point.)
Hint: Use the formula for current ratio as shown in the textbook:
Current ratio =Total current assetsTotal current liabilities
Error: Using the prior-year column. 1.24 is the April 30, 2020 ratio. For April 30, 2021: $1,941.7 million ÷ $2,867.5 million = 0.68.
Error: Mixing columns across the two balance sheet pages. This divides 2021 current assets by 2020 current liabilities ($1,587.1 million). Use the 2021 column on both: $1,941.7 million ÷ $2,867.5 million = 0.68.
Keyed answer. $1,941.7 million ÷ $2,867.5 million = 0.68.
Error: Inverting the ratio. The current ratio is current assets ÷ current liabilities: $1,941.7 million ÷ $2,867.5 million = 0.68.
Instructor key: c. Current ratio April 30, 2021: $1,941.7 million ÷ $2,867.5 million = 0.68. Where to find it: Consolidated Balance Sheets, page 9 of the shortened fiscal 2021 10-K.
Question 4
Calculate the current ratio as of April 30, 2020 (round the result to two decimal places). Hint: Use the same formula in question 3. Did the April 30, 2021 current ratio increase or decrease from the April 30, 2020 ratio? (Select one. 1 point.)
Keyed answer. April 30, 2020: $1,972.7 million ÷ $1,587.1 million = 1.24. It decreased to 0.68 at April 30, 2021.
Error: Reversing the comparison. The 2020 ratio is right, but 0.68 (2021) against 1.24 (2020) means the ratio decreased.
Error: Mixing columns across the two balance sheet pages. This divides 2020 current assets by 2021 current liabilities. Use the 2020 column on both pages: $1,972.7 million ÷ $1,587.1 million = 1.24.
Error: Mixing columns and reversing the comparison. This mixes columns and reverses the comparison. $1,972.7 million ÷ $1,587.1 million = 1.24, and the ratio decreased to 0.68.
Instructor key: a. Current ratio April 30, 2020: $1,972.7 million ÷ $1,587.1 million = 1.24; 2021 ratio 0.68, so it decreased. Where to find it: Consolidated Balance Sheets, page 9 of the shortened fiscal 2021 10-K.
Score for this assignment
RW5-3 The J. M. Smucker Company: fiscal 2023 version
Learning Objectives: 5-3 Evaluate collectability of accounts receivable 5-5 Evaluate liquidity and asset management using ratios Availability: Homework Origin: Publisher
Real World Reporting
The J. M. Smucker Company (ticker NYSE: SJM)
RW5-3 Using EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) at www.sec.gov/edgar, search for the company’s ticker symbol of SJM and retrieve The J. M. Smucker Company Form 10-K (annual report) for the year ended April 30, 2023. Locate Item 8, Financial Statements and Supplementary Data (the link to Item 8 is usually on the second page of the Form 10-K.) Answer the following questions:
Help Me Solve This: RWR5-3: The J. M. Smucker Company Real World Reporting Tutorial(5:56)
This tutorial works through these same questions with an older Form 10-K. Every question uses Smucker’s fiscal 2013 10-K. Your answers must come from the fiscal year in your assignment.
Tutorial narration (instructor view)
Welcome to this Real World Reporting Tutorial, where we will look at a real-world company and its associated financial reporting.
In this tutorial, we will be covering how to answer questions about a company’s financial position using Form 10-Ks. In most cases, we will demonstrate how to answer the question using the company’s Form 10-K from several years ago. However, if using an old Form 10-K from the company would result in the same answer as the current year, we will instead use a different company as an example.
Gather J. M. Smucker Company financial statements and notes (Form 10-K).
The first question is: Locate the year-end balance for the item in the financial statements called “Trade receivables - net” on the consolidated balance sheets. How does its balance on the specified date compare to the prior year-end balance?
Remember: In this tutorial, I will be showing you how to answer each question using different companies and fiscal years than you have been assigned. You can follow along as I show you how to answer each question, but you will still need to answer each question for the company and fiscal year that is specified in your assignment. The financial statements used in this tutorial cannot be used to answer the questions you have been assigned.
When you answer this question, you will need to look at J. M. Smucker’s financial statements as of the date specified. However, for this tutorial, we will look at the J.M. Smucker consolidated balance sheets for 2013 and 2012.
For certain years of reporting, Smucker has a two page consolidated balance sheet. The Company lists the assets on one page and the liabilities and shareholders’ equity on a second page. As of April 30, 2013, the company used the terminology “Trade receivables, less allowance for doubtful accounts.” (In more recent years, they changed this terminology to “Trade receivables - net.”) As shown in the box, the balance of the net trade receivables is $313.7 million as of April 30, 2013. In the prior year, it was $347.5 million. Therefore, there was a decrease from 2012 to 2013.
The second question is: What is the dollar amount of the reserve for credit loss (or allowance for doubtful accounts) at the specified date? How does its balance on the specified date compare to the prior year-end balance?
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
J.M. Smucker’s does not disclose this allowance on the face of its balance sheet. Instead, In note 1 to Consolidated Financial Statements, the company provides details of its receivables, such as how the allowance is determined and the balances as of each year end. As shown in the highlighted text, as of April 30, 2013, the allowance for doubtful accounts is $1.3 million. In the prior year, it was $1.7 million. Therefore, there was a decrease in the allowance for doubtful accounts.
Note that in more recent years, Smucker changed its terminology from “allowance for doubtful accounts” to “reserve for credit loss.”
The third question is: Calculate the current ratio as of the specified date (round the result to two decimals places).
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
To calculate Smucker’s current ratio, we must divide Smucker’s total current assets by total current liabilities. We can obtain the total current assets and total current liabilities from the consolidated balance sheet.
As shown, Smucker’s total current assets in 2013 were $1,595.2 million; its total current liabilities were $596.8 million, as shown. Dividing these two numbers results in a current ratio of 2.67.
The fourth question is: Calculate the current ratio as of the specified prior year date (round the result to two decimal places). Hint: Use the same formula in question 3. Did the current year current ratio increase or decrease from the prior year ratio?
To demonstrate how to answer this question, we will again look at J. M. Smucker’s financial statements as of April 30, 2013.
Now, we will follow the same steps from Question 3 to calculate Smucker’s current ratio for 2012. In 2012, Smucker’s total current assets were $1,643.5 million, and its total current liabilities were $616.9 million. Dividing these two numbers results in a current ratio of 2.66.
In question 3, we found that Smucker’s current ratio was 2.67 in 2013. Therefore, Smucker’s current ratio in 2013 increased slightly from the 2012 ratio.
Now it is your turn. Take what you learned in this tutorial video and apply it to the company and fiscal year that is in your assignment. This video has been created and narrated by Dr. Wendy Tietz.
Question 1
Locate the year-end balance for the item in the financial statements called “Trade receivables – net” on the consolidated balance sheets. How does its balance on April 30, 2023 compare to the prior year-end balance? (Select one. 1 point.)
Error: Reading the columns in reverse order. This reads the columns in reverse. Smucker’s first column is April 30, 2023 ($597.6 million).
Error: Adding back the allowance (gross receivables). These add back the reserve for credit loss ($2.3 million and $2.3 million). The balance sheet line is net: $597.6 million at April 30, 2023.
Error: Reporting one customer’s receivable from the notes. These are the amounts due from Walmart, from the note on major customers (page 22). The balance sheet line is $597.6 million at April 30, 2023.
Keyed answer. The balance sheet shows trade receivables – net of $597.6 million at April 30, 2023 and $524.7 million at April 30, 2022.
Instructor key: d. Trade receivables – net: $597.6 million (April 30, 2023), $524.7 million (April 30, 2022); increased. Where to find it: Consolidated Balance Sheets, page 9 of the shortened fiscal 2023 10-K.
Question 2
What is the dollar amount of the reserve for credit loss (or allowance for doubtful accounts) at April 30, 2023? How does its balance on April 30, 2023 compare to the prior year-end balance? (Select one. 1 point.)
Hint: See Note 1 to Consolidated Financial Statements.
Error: Missing that one amount covers both dates. Note 1 gives one amount for both dates: “At April 30, 2023 and 2022, the reserve for credit loss was $2.3.” The balance did not change.
Keyed answer. Note 1: at April 30, 2023 and 2022, the reserve for credit loss was $2.3 million.
Error: Reporting net receivables instead of the allowance. These are the trade receivables balances. The reserve for credit loss is in Note 1: $2.3 million at April 30, 2023.
Error: Stopping at the balance sheet. Smucker does not show the amount on the balance sheet, but Note 1 gives it: $2.3 million at April 30, 2023.
Instructor key: b. Reserve for credit loss: $2.3 million (April 30, 2023), $2.3 million (April 30, 2022); did not change. Where to find it: Note 1, “Trade Receivables,” page 15 of the shortened fiscal 2023 10-K.
Question 3
Calculate the current ratio as of April 30, 2023 (round the result to two decimal places). (Select one. 1 point.)
Hint: Use the formula for current ratio as shown in the textbook:
Current ratio =Total current assetsTotal current liabilities
Error: Using the prior-year column. 1.03 is the April 30, 2022 ratio. For April 30, 2023: $2,858.7 million ÷ $1,986.7 million = 1.44.
Error: Mixing columns across the two balance sheet pages. This divides 2023 current assets by 2022 current liabilities ($1,952.8 million). Use the 2023 column on both: $2,858.7 million ÷ $1,986.7 million = 1.44.
Keyed answer. $2,858.7 million ÷ $1,986.7 million = 1.44.
Error: Inverting the ratio. The current ratio is current assets ÷ current liabilities: $2,858.7 million ÷ $1,986.7 million = 1.44.
Instructor key: c. Current ratio April 30, 2023: $2,858.7 million ÷ $1,986.7 million = 1.44. Where to find it: Consolidated Balance Sheets, page 9 of the shortened fiscal 2023 10-K.
Question 4
Calculate the current ratio as of April 30, 2022 (round the result to two decimal places). Hint: Use the same formula in question 3. Did the April 30, 2023 current ratio increase or decrease from the April 30, 2022 ratio? (Select one. 1 point.)
Keyed answer. April 30, 2022: $2,010.1 million ÷ $1,952.8 million = 1.03. It increased to 1.44 at April 30, 2023.
Error: Reversing the comparison. The 2022 ratio is right, but 1.44 (2023) against 1.03 (2022) means the ratio increased.
Error: Mixing columns across the two balance sheet pages. This divides 2022 current assets by 2023 current liabilities. Use the 2022 column on both pages: $2,010.1 million ÷ $1,952.8 million = 1.03.
Error: Mixing columns and reversing the comparison. This mixes columns and reverses the comparison. $2,010.1 million ÷ $1,952.8 million = 1.03, and the ratio increased to 1.44.
Instructor key: a. Current ratio April 30, 2022: $2,010.1 million ÷ $1,952.8 million = 1.03; 2023 ratio 1.44, so it increased. Where to find it: Consolidated Balance Sheets, page 9 of the shortened fiscal 2023 10-K.