1) Marcus Corporation, a British firm, has an adjusted trial balance
that contained the following liability accounts at December 31,
Bonds Payable (due in 3 years) £100,000; Accounts Payable
£72,000; Notes Payable (due in 90 days) £22,500;
Accrued Salaries £4,000; Income Taxes Payable
£7,000.
Required: Prepare the current liabilities section of the statement
of financial position, using the most common IFRS sequence of
accounts presentation.
Answer:
2) When a firm constructs its own buildings or equipment, what costs
are capitalized?
Answer:
3) Many entries in Other Comprehensive Income represent changes in
fair value of the pension plan(s) that receives delayed recognition
in net income.
Answer:
4) IFRS permits firms to reverse previous impairments, up to the
amount of the original acquisition cost of the inventory, if the
circumstances that caused the inventory impairment no longer exist.
Answer:
5) Expenditures on advertising and research must be recognized as
expense in the period of expenditure, regardless of the firms
expectation of future benefits.
Answer:
6) Understanding financial reports requires an understanding of the
activities of the business. Describe at least four investing
activities that firms use to obtain the productive capacity to
carry out its business activities.
Answer:
7) The data below are from the December 31, 2013, balance sheet of the
Harrison Corporation:
|
Common stock, $50 par, 3,000 shares issued and outstanding ………………………………….. |
$150,000 |
| Paid-in capital in excess of par …………………. | 45,000 |
| Retained earnings ………………………………. | 75,000 |
During 2014, the following transactions affecting corporate
capital were recorded:
| Aug. 16 | Purchased 400 shares of treasury stock at $78 per share. |
| Oct. 23 |
Purchased 225 shares of stock at $71 per share andimmediately retired the stock. |
| Nov. 3 |
Sold 150 shares of the treasury stock purchased on Aug. 16at $81 per share. |
Assuming the cost method is used for treasury stock and
that retained earnings are to be reduced minimally in stock
reacquisition transactions, provide the entries required to record
the above transactions.
Answer:
8) Several actions that an organization may take are not recognized or
entered in the accounting records. While not entered into the
formal accounting system, several such actions are exceedingly
important to the organization.
Required:
Comment on the current and future implications that the hiring of a
new president may have on the organization’s accounting records.
Answer:
9) U.S. GAAP and IFRS require firms to treat some or all expenditures
made to internally develop brand names, customer lists, new
technologies, and other intangibles as expenses in the period of
the expenditure.
Answer:
10) FIFO is like a conveyor belt: the first items put on the conveyor
belt come off first for use or sale, while the last items put on
the conveyor belt remain there at the end of the period.
Answer:
11) Discuss the relation between net income and cash flow from
operations when interpreting the statement of cash flows.
Answer:
12) On July 1, 2013, Mecca Group purchased for cash 35 percent of the
outstanding capital stock of Wembley Studios. Both Mecca Group and
Wembley Studios have a December 31 year-end. Wembley Studios, whose
common stock is actively traded in the over-the-counter market,
reported its total net income for the year to Mecca Group and also
paid cash dividends on November 15, 2013, to Mecca Group and its
other stockholders.
How should Mecca Group report the above facts in its December 31,
2013, balance sheet and its income statement for the year then
ended? Discuss the rationale for your answer.
Answer:
13) Discuss the relations among cash flows from operating, investing,
and financing activities for firms in the introduction, growth,
mature, late maturity, and decline phases.
Answer:
14) Describe the fixed asset turnover ratio.
Answer:
15) In Year 1, a firm purchased a truck for $12,000. The estimated
salvage value was $2,000 and the estimated useful life was 10
years. In Year 4, it was determined that the salvage value would
only be $1,000 and that the truck would have a total estimated
useful life of 7 years rather than 10. Assuming the straight-line
method is used, what is the depreciation expense for Year 4 of the
truck?
A.$1,000
B.$1,750
C.$1,950
D.$2,000
E.$2,250
Answer:
16) Which of the following is/are not one of the conditions of a
capital lease?
A.transfer of ownership to the lessee at the end of the lease
term
B.transfer of ownership to the lessee appears likely because of a
“bargain” purchase option
C.lease extends for at least 70 percent of the asset’s life
D.present value of the minimum contractual lease payments equals or
exceeds 90 percent of the fair market value of the asset at the
time the lessee signs the lease
E.all of the above
Answer:
17) Fassinos Wholesale Corporation
Fassino Wholesale Corporation (Fassinos) operates discount retail
stores. To shop in a Fassinos store, customers must pay a
nonrefundable, annual membership fee in advance, using either cash
or an American Express card. A customer purchases an annual
membership from Fassinos for $120, a 20-pack of paper towels for
$10.99, and four new tires for $480. The tire purchase includes
mounting and aligning by a Fassinos tire technician at the time of
initial installation and alignment and tire rotation services for
three years afterward. The customer pays with an American Express
card.
Using the Fassinos Wholesale Corporation example, when should
Fassinos recognize the $120 membership fee as revenue?
A.Fassinos should recognize all of the membership fee ($120.00) at
the time that the annual membership fee is sold to the customer
because it is nonrefundable
B.Fassinos should recognize all of the membership fee ($120.00) one
year from the time that the annual membership fee is sold to the
customer because the membership fee has been fully earned
C.Fassinos should recognize 1/12th of the membership fee, or
$10.00, each month during the annual membership period
D.Fassinos should recognize two-thirds of the membership fee, or
$90.00, at the time that the annual membership fee is sold to the
customer because it is nonrefundable, and the other one-third of
the membership fee, or $30.00, at the end of the annual membership
period
E.Fassinos should recognize one-quarter of the membership fee, or
$30.00, at the time that the annual membership fee is sold to the
customer because it is nonrefundable, and the other three-quarters
of the membership fee, or $90.00, at the end of the annual
membership period
Answer:
18) The joint efforts of the FASB and the IASB to set forth qualitative
characteristics of financial reporting information have led to
which of the following?
A.fundamental qualitative characteristics, only
B.enhancing qualitative characteristics, only
C.pervasive constraints, only
D.fundamental qualitative characteristics, enhancing qualitative
characteristics, and pervasive constraints
E.none of the above
Answer:
19) When a firm uses the par value method to account for treasury
shares, ________________.
The par value method requires specific identification of the date
and initial proceeds of the shares repurchased, which is why firms
seldom use this method.
A.the accountant debits the Treasury StockCommon account for the
par value of the repurchased shares, debits Additional Paid-In
Capital for the difference between the original issue price of the
shares and par value, and plugs Retained Earnings for any
difference between the repurchase price and the original issue
price
B.the accountant debits the Common Stock account for the par value
of the repurchased shares, debits Additional Paid-In Capital for
the difference between the original issue price of the shares and
par value, and plugs Retained Earnings for any difference between
the repurchase price and the original issue price
C.the accountant debits the Common Stock account for the par value
of the repurchased shares, credits Additional Paid-In Capital for
the difference between the original issue price of the shares and
par value, and plugs Retained Earnings for any difference between
the repurchase price and the original issue price
D.the accountant debits the Retained Earnings account for the par
value of the repurchased shares, credits Additional Paid-In Capital
for the difference between the original issue price of the shares
and par value, and plugs Common Stock account for any difference
between the repurchase price and the original issue price
E.the accountant debits the Retained Earnings account for the par
value of the repurchased shares, debits Additional Paid-In Capital
for the difference between the original issue price of the shares
and par value, and plugs Common Stock account for any difference
between the repurchase price and the original issue price
Answer:
20) Which of the following is/are not true regarding a merchandising
firm?
A.Inventory appears on the merchandisers balance sheet initially as
an asset
B.Inventory is measured at acquisition cost
C.When a sale takes place, the firm recognizes the cost of the
inventory as an expense (cost of goods sold) on the income
statement
D.When a sale takes place, the firm recognizes the inventory
reduction on the statement of cash flows
E.All of the above are false regarding a merchandising firm
Answer:
21) Which of the following is/are true about holding gains on
assets?
A.U.S. GAAP recognizes the holding gain on the assets for the
increase in values
B.IFRS permits recognition of the holding gains under certain
circumstances
C.Under IFRS, if in a given period, an asset increases in value,
the firm does not record depreciation and amortization during that
period
D.Under U.S. GAAP, if in a given period, an asset increases in
value, the firm does not record depreciation and amortization
during that period
E.all of the above
Answer:
22) U.S. GAAP and IFRS require firms to disclose the fair value of
long-term notes and bonds in notes to the financial statements.
Fair value is
A.the amount the firm would pay to settle the debt on the date of
the balance sheet
B.the current market price in the case of items that trade in
active markets
C.the present value of the contractual cash flows discounted at a
current market interest rate that reflects all the factors that
market participants would consider, including the items credit
risk
D.all of the above
E.none of the above
Answer:
23) Warrior Dash Express Inc. owns a moving van that originally cost
$500,000 and currently has $450,000 of accumulated depreciation.
The fair value of the moving van is $120,000. Warrior Dash Express
Inc. exchanges the van plus $480,000 in cash for a new moving van
costing $600,000. The entry to record the transaction is as
follows:
A.Equipment (new van) . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 600,000
Accumulated Depreciation (old van) . . . . . . . . . .. . . . . . .
. . .450,000
Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 500,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 480,000
Gain on Trade-in of Old Van . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 70,000
B.Equipment (new van) . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 600,000
Accumulated Depreciation (old van) . . . . . . . . . .. . . . . . .
. . .450,000
Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 570,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 480,000
C.Equipment (new van) . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 600,000
Accumulated Depreciation (old van) . . . . . . . . . .. . . . . . .
. . .380,000
Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . 500,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 480,000
D.Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 500,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 480,000
Gain on Trade-in of Old Van . . . . . . . . . . . . . . . . . . . .
. . . . . . . 70,000
Equipment (new van) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 600,000
Accumulated Depreciation (old van) . . . . . . . . . . . . . . . .
. . . . . . . . . 450,000
E.Equipment (old van) . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 570,000
Cash . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . 480,000
Equipment (new van) . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 600,000
Accumulated Depreciation (old van) . . . . . . . . . .. . . . . . .
. . . . . . . . . 450,000
Answer:
24) Winner Company
Winner Company’s beginning and ending inventories for the fiscal
year ended September 30, Year 5, are
| October 1, Year 4 | September 30, Year 5 | |
| Raw materials | $15,000 | $22,000 |
| Work-in-process | 40,000 | 35,000 |
| Finished goods | 8,000 | 12,000 |
Production data for the fiscal year ended September 30,
Year 5, are
| Raw materials purchased | $80,000 | |
| Purchase discounts | 1,000 | |
| Direct labor | 100,000 | |
| Manufacturing overhead | 75,000 | |
Assume Winner Company treats all raw materials as direct
materials once they enter the production process. Thus, no raw
materials are treated as manufacturing overhead.
(CMA adapted, Dec 95 #28) Refer to the Winner Company example. Cost
of goods sold for the year ended September 30, Year 5, for Winner
Company is
A.$262,000
B.$252,000
C.$260,000
D.$248,000
E.$224,000
Answer:
25) Chambliss Company started business on January 1, Year 7 . It
recognizes revenue and expense at the time of sale for financial
reporting and uses the installment method for income tax reporting.
Under the installment method, the firm recognizes revenue when it
receives cash, and matches expenses with revenues based on the
average cost of goods sold to sales percentage for the year in
which the firm made the sale. The income tax rate is 30%. Data for
Year 7 and Year 8 as reported to shareholders, appear
below:
| Year 7 | Year 8 | |
| Net sales on account | $2,400,000 | $3,000,000 |
| Cash collections of Year 7 sales | 1,620,000 | 480,000 |
| Cash collections of Year 8 sales | – | 2,040,000 |
| Cost of merchandise sold | 1,440,000 | 1,920,000 |
| All other (period) expenses | 240,000 | 360,000 |
Required:
| a. |
Compute the amount of net income after taxes for financial reporting for Year 7 and Year 8. |
| b. |
Compute the amount of taxable income for Year 7 and Year 8. |
Answer:
26) Dividends
A.are a period cost
B.are a distribution of assets to owners
C.enter into the calculation of net income
D.appear on both the balance sheet and income statement
E.none of the above
Answer:
27) Firms must disclose in notes to the financial statements the cash
flows associated with capital leases and with operating leases for
each of the succeeding _____ years and for all years after _____
years in the aggregate.
A.two: two
B.three; three
C.four; five
D.five; five
E.six; six
Answer:
28) What is the amount of the liability that the company recognizes in
each of the following independent cases?
a. A cereal company issues coupons that can be exchanged for boxes
of cereal. It issues 1 million coupons that promise the retailer
who redeems the coupons $1 per coupon. The probability of
redemption of any one coupon is 8%.
b. A plaintiff files a lawsuit against the company. The probability
is 80% that the company will lose. If it loses, the amount of the
loss will most likely be $100,000.
Answer:
29) Under U.S. GAAP, the statement of cash flows classifies cash
expenditures for interest on debt as a(n) _____ activity and
classifies cash expenditures for dividends to shareholders as a(n)
_____ activity.
A.operating; operating
B.operating: investing
C.operating; financing
D.financing; operating
E.financing; financing
Answer:
30) What does the word marketable imply as far as marketable
securities?
A.It implies that the securities should be classified as a
temporary account
B.It implies that a firm owes money on the securities
C.It implies that the securities are considered to be goodwill
D.It implies that the firm can readily buy and sell the securities
on an exchange
E.It implies that the firm has signed a formal written contract
called an indenture
Answer:
31) Mystical Duds estimates that unsold womens clothing with a carrying
value of $500 million has minimal market value given a change in
fashion. To reflect the minimal market value of the merchandise,
Mystical Duds
A.would record an impairment loss of $500 million, reducing the
carrying value of this inventory to zero
B.would recognize zero cost of goods sold and a gross margin of
$100 million on the sale, for a net margin of -$400 (=-$500 + $100)
million over the two periods, if the firm sells the clothes for
$100 million in a subsequent accounting period
C.would record an impairment loss of $400 million, reducing the
carrying value of this inventory to $100 million
D.would recognize $100 million of cost of goods sold and a gross
margin of zero on the sale, for a net margin of -$400 (=-$500 +
$100) million over the two periods, if the firm sells the clothes
for $100 million in a subsequent accounting period, if the firm
sells the clothes for $100 million in a subsequent accounting
period
E.would record/recognize choices a and b
Answer:
32) Which inventory cost flow assumption emphasizes the balance sheet
as opposed to the income statement?
A.LIFO method
B.FIFO method
C.weighted-average method
D.acquisition cost
E.specific identification method
Answer:
33) Which of the following is/are false?
A.Firms do not necessarily recognize revenues when they receive
cash
B.Firms do not necessarily recognize expenses when they disburse
cash
C.Net income will not necessarily equal cash flow from operations
each period
D.A profitable firm will likely borrow funds in order to remain in
business, but eventually operations must generate cash to repay the
borrowing
E.None of the above are false
Answer:
34) When a firm decides that a particular customer account is
uncollectible, it removes that account by debiting the _____ and
crediting _____ This process is called writing off the account.
A.Accounts Receivable, Gross; Allowance for Uncollectibles
B.Accounts Receivable, Net; Allowance for Uncollectibles
C.Allowance for Uncollectibles; Accounts Receivable, Gross
D.Allowance for Uncollectibles; Accounts Receivable, Net
E.Bad Debt Expense; Accounts Receivable, Net
Answer:
35) Firms recognize revenue, or income, under the following
condition(s)
A.completion of the earnings process, only
B.receipt of assets from the customer, only
C.completion of the earnings process and receipt of assets from the
customer
D.receipt of cash from the customer, only
E.commencement of the earnings process, only
Answer:
36) Firms have some choice as to when they disburse cash. Firms that
delay making payments to suppliers, employees, and others during
the last several days of an accounting period
A.conserve cash and increase cash flow from operations for that
period
B.conserve cash and decrease cash flow from operations for that
period
C.do not conserve cash and increase cash flow from operations for
that period
D.do not conserve cash and decrease cash flow from operations for
that period
E.do not effect the cash balance and has no affect on cash flow
from operations for that period
Answer:
37) Gains and losses on effective cash flow hedges are reported
initially in
A.accumulated other comprehensive income
B.contributed capital
C.net income
D.an adjustment to the beginning balance of retained earnings
E.an adjustment to the ending balance of retained earnings
Answer:
38) The Canada Corporation has been using the equity method for its
100-percent owned subsidiary, Trenton Company, which has both
assets and liabilities on its balance sheet and both revenues and
expenses on its income statement. Trenton has positive cash flow
from operations. Canada now consolidates the accounts of the
Trenton Company, which it has owned 100 percent since organizing
it. Trenton has no investments of its own and regularly declares
dividends greater than zero, but less than net income.
Required:
Answer the following questions with one of these: larger, smaller,
unchanged, or insufficient (information given to answer
question).
a. What would be the effect on net income of Canada
Corporation?
b. What would be the effect on revenues, including investment
income, of Canada Corporation?
c. What would be the effect on investments of Canada
Corporation?
d. What would be the effect on assets of Canada Corporation?
e. What would be the effect on liabilities of Canada
Corporation?
f. What would be the effect on the debt/equity ratio (=
Liabilities/Total Equities)?
Answer:
39) The entry to record periodic depreciation of $4,500 on office
facilities is as follows:
A.Depreciation (or Administrative) Expense . . . . . . . . . . . .
. . . . 4,500
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 4,500
B.Accumulated Depreciation . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 4,500
Depreciation (or Administrative) Expense . . . . . . . . . . . . .
. . . . . . . . . 4,500
C.Depreciation (or Administrative) Expense . . . . . . . . . . . .
. . . . 4,500
Office Facilities . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . 4,500
D.Office Facilities . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 4,500
Depreciation (or Administrative) Expense . . . . . . . . . . . . .
. . . . . . . . . 4,500
E.none of the above
Answer:
40) Which of the following statements is/are true concerning the
statement of cash flows?
A.Cash receipts and disbursements equal revenues and expenses
B.Cash for short-term obligations must come from operations
C.The net change in cash will equal the net change in all noncash
accounts
D.All of the above are true statements concerning the statement of
cash flows
E.None of the above are true statements concerning the statement of
cash flows
Answer:
41) Upon entering in the lease agreement, capital leases require that
the lessee records
A.the leased asset, only
B.the leased asset and the lease liability
C.the lease liability, only
D.nothing because the lessor owns the property
E.the present value of future cash flows as an asset, only
Answer:
42) In U.S. GAAP, which of the following accurately describes the
effects of transactions involving investments on the statement of
cash flows using the fair value method for trading securities and
fair value hedges?
A.Realized gains and losses appear in net income. Unrealized gains
and losses appear in Other Comprehensive Income
B.Realized gains and losses appear in Other Comprehensive Income.
Unrealized gains and losses appear in net income
C.Realized gains and losses appear in Retained Earnings. Unrealized
gains and losses appear in Other Comprehensive Income
D.Realized gains and losses appear in Retained Earnings. Unrealized
gains and losses appear in net income.
E.Both realized and unrealized gains and losses appear in net income
Answer:
43) The amount borrowed initially and the market value of a note or
bond at any date subsequent to the initial borrowing equals
A.the sum of the future cash flows
B.the present value of the future, or remaining, cash flows
discounted at an appropriate interest rate
C.the future cash flows discounted at the initial market interest
rate
D.the future cash flows discounted at the subsequent market
interest rate
E.the future value of present cash flows discounted at an
appropriate interest rate
Answer:
44) The accrual basis of accounting is often contrasted with the cash
basis of accounting. Which of the following is/are true of the cash
basis of accounting?
A.The cash basis is not subject to manipulation
B.Most larger companies use the cash basis of accounting
C.The cash basis of accounting provides a strong basis to determine
the total assets of the company
D.The cash basis provides an inferior picture of operating
performance
E.All of the above are true
Answer:
45) The current price of a share of common stock reflects current
economic conditions, not the requirements of authoritative
guidance. Market-to-book-value ratios tend to be large for firms
that
A.make substantial expenditures on internally developed assets.
B.have a favorable competitive position
C.have a favorable growth potential
D.All of the above are correct
E.None of these answer choices is correct
Answer:
46) Marcoff Corporation acquires 30% of the outstanding voting common
shares of the Invicta Corporation for $600,000. Marcoff Corporation
acquires the investment in Invicta Corporation by buying previously
issued shares of Invicta Corporation from other investors.
The entry to record the acquisition is:
A.Investment in Stock of Invicta Corporation . . . . . . . . . . .
. . .600,000
Marketable Securities. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .600,000
B.Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 600,000
Marketable Securities . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 600,000
C.Investment in Stock of Invicta Corporation . . . . . . . . . . .
. . .600,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 600,000
D.Marketable Securities . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 600,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 600,000
E.Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 600,000
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 600,000
Answer:
47) Which of the following is not true regarding specific bond
provisions?
A.Firms might issue bonds based only on their credit worthiness as
an entity
B.Particular collateral might back up bonds issued by a firm
C.Unsecured borrowing might carry senior rights or subordinated
rights in the event of bankruptcy
D.Senior debt holders have a higher priority for payment in the
event of bankruptcy than subordinated (junior) unsecured
lenders
E.Common stockholders have a higher priority than unsecured
bondholders for payment in the event of bankruptcy
Answer:
48) A firm classifies liabilities which fall due within the operating
cycle, usually one year, as
A.a current liability
B.a long-term liability
C.a noncurrent asset
D.part of shareholders’ equity
E.a contingent liability
Answer:
49) Which of the following is/are true regarding minority, passive
investments?
A.An investor acquires the common stock of another entity for the
interest, dividends, and capital gains anticipated from share
ownership
B.The acquiring companys ownership percentage is sufficiently small
that it cannot control or exert significant influence over the
other company
C.U.S. GAAP and IFRS view investments of less than 20% of the
voting shares of another company as minority, passive investments
in most cases
D.An investor who intends to hold the shares for less than a year
would classify them as current assets; if the expected holding
period is longer, the investor would classify them as noncurrent
assets
E.all of the above
Answer:
50) Earnings per share is a measure of
A.cash income earned by the common shareholder
B.profitability
C.the financial viability of a firm
D.the amount of dividends that will be paid by the firm
E.how much an investor would be willing to pay for a share of
common stock
Answer:
51) An income statement connects two successive _____ through its
effect on retained earnings.
A.balance sheets
B.cash flow statements
C.cash receipts and disbursement statements
D.funds flow statements
E.financing statements
Answer:
52) (CMA adapted, Dec 90 #12) Marla, Inc. issued $6,000,000 of 12%
bonds on December 1, Year 1, due on December 1, Year 6, with
interest payable each December 1 and June 1. The bonds sold for
$5,194,770 to yield 16%. If the discount is amortized by the
effective interest method, Marla, Inc.’s interest expense for the
fiscal year ended November 30, Year 2 related to its $6,000,000
bond issue will be
A.$623,372
B.$720,000
C.$835,610
D.$881,046
E.$623,046
Answer:
53) Paula Company recognizes unrealized changes in the fair value of
available-for-sale securities in
A.net income
B.retained earnings
C.additional paid-in-capital
D.other comprehensive income, not in earnings
E.none of the above
Answer:
54) A firm desires to increase its ratio of cash flow from operations
divided by average current liabilities from its anticipated level
of 30 percent for the coming year to a more desirable level of 40
percent. Which of the following actions is consistent with this
increase?
A.increase short-term bank borrowing
B.decrease the number of days that accounts receivable are
outstanding
C.decrease the number of days accounts payable are outstanding
D.increase the number of days inventories are held
E.none of the above
Answer: