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Cases Chapter 3 - FA
Cases Chapter 3 - FA
Vodafone Group plc. Vodafone is based in the United Kingdom. Selected data from
Vodafone’s 2012 annual report follows (pounds in millions).
In its 2012 annual report, Vodafone states, “Our leading performance is based on 3 core
strengths . . . . The successful implementation of our strategy to generate liquidity or free cash
flow from non-controlled interests.”
Instructions
(a) Compute the percentage change in sales, operating profit, net cash flow, and net earnings
from year to year for the years presented.
(b) Evaluate Vodafone’s performance. Which trend seems most favorable ? Which trend
seems least favorable? What are the implications of these trends for Vodafone’s strategy ?
Explain.
The Amato Theater is nearing the end of the year and is preparing for a meeting with its
bankers to discuss the renewal of a loan. The accounts listed appeared in the December 31,
2015, trial balance as follows :
Debit Credit
Prepaid Advertising £ 6,000
Equipment 192,000
Accumulated Depreciation—Equipment £ 60,000
Notes Payable 90,000
Unearned Service Revenue 17,500
Service Revenue 360,000
Advertising Expense 18,680
Salaries and Wages Expense 67,600
Interest Expense 1,400
Analysis
Determine Amato’s income before and after recording the adjusting entries. Use your
analysis to explain why Amato’s bankers should be willing to wait for Amato to complete its
year-end adjustment process before making a decision on the loan renewal.
Principles
Although Amato’s bankers are willing to wait for the adjustment process to be completed
before they receive financial information, they would like to receive financial reports more
frequently than annually or even quarterly. What trade-offs, in terms of relevance and faithful
representation, are inherent is preparing financial statements for shorter accounting time
periods ?
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