# Accounting Analysis Balance Reconciliation Questions

1. ACCOUNTING ANALYSIS: BALANCE RECONCILIATIONS Note: The following questions relate to Company MATSON during fiscal year 2018. Please see the 10-K for 2018. A. Using the T-account technique described in class, reconcile the beginning and ending balances of Property, Plant, and Equipment, Net for Company Matson. Show any remaining unexplained variations for each account. 2. MODELING FINANCIAL STATEMENTS AND ESTIMATING FAIR VALUE Note: The following are mostly conceptual questions that look at the logic behind financial forecasting models. A. Explain how one might forecast cost of sales for the company. What is an important accounting principle that justifies this forecasting approach? B. Explain how one might forecast the balance of inventories and compute purchases to inventory. C. Explain how one might forecast the balance of net accounts receivable and compute collections from customers. D. Explain how one might forecast capital expenditures.

E. What is an important source of information for understanding and forecasting the effective tax rate? F. Write a practical Excel formula for a diagnostic test for whether the balance sheet equation holds. G. What does it mean to “hardwire” a model, and why is this practice problematic? H. Why do we have to allow “circularity”, or iterative calculations in a model such as eVal? I. Write formulas used to compute fair value based on the RIM and the DCF models. J. Why did we fix the terminal value of sales growth at about 3%/year for all companies we studied? K. How can eVal estimate value using only ten years’ worth of assumptions? L. Why can’t eVal compute the WACC without our help in a trial and error process? 1

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