Genuine Parts received a promissory note from a customer on March 1, 2015. The face
amount of the note is $8,000; the terms are 90 days and 9% interest. What is the total
amount of interest that Genuine Parts will receive when the note is paid?
a. $ 60
b. $ 90
c. $180
d. $720
Which of the following is an organization that lends funds to a business entity and
expects repayment of the funds?
a. A partner
b. A stockholder
c. An owner
d. A creditor
Which financial statement would you refer to in order to determine whether a company
owed funds to creditors?
a. Balance Sheet
b. Statement of Retained Earnings
c. Income Statement
d. Statement of Public Accounting
Three organizations important to accounting are listed below. Select the organization th
at most closely achieves the role described.
a. American Institute of Certified Public Accountants (AICPA)
b. Financial Accounting Standards Board (FASB)
c. Securities and Exchange Commission (SEC) Primarily responsible for setting
accounting standards today.
For each of the following accounts, indicate whether it is a balance sheet account or an i
ncome statement account.
a. Balance sheet account
b. Income statement account
Cash
Which of the following items will be found in a corporate annual report?
a. Company budgets
b. Notes to the financial statements
c. Selected financial data from competitor companies
d. Management’s statement that the auditors are responsible for the financial statements
Solvency is the company’s ability to pay its current debts when they become due.
a. True
b. False
Bing’s Export Co. Bing’s Export Co. purchased a new delivery truck at the beginning of
2015. The truck has a cost of $37,000, an estimated life of 5 years, and an estimated
residual value of $7,000. A full year’s depreciation expense is to be recorded in 2015.
The truck was driven 20,000 miles during 2015 and 24,000 miles during 2016. The
number of expected miles over five years is 100,000.
Refer to information about Bing’s Export Co. Bing’s Export Co. wants to use the
depreciation method that will result in the highest depreciation expense for 2015.
Which method should be used?
a. straight-line
b. units-of-production
c. double-declining-balance
d. all methods create the same income in 2015
In 2015, Boone, Inc. sold 1,000 carpets for $50 each. The carpets carry a 2-year
warranty for repairs. Boone estimates that repair costs will average 2% of the total
selling price. What is the amount that would be recorded in the warranty liability
account as a result of selling the carpets during 2015?
a. $1,000
b. $ 500
c. $ 20
d. No liability should be recorded until the carpets are returned for repairs.
The following information was summarized from the balance sheets of the Better
Books and Tenacious Texts at December 31, 2016:
REQUIRED:
1> Using the information provided, compute the following for each company at the end
of 2016:
a. Current ratio
b. Quick ratio 2> Better Books reported cash flow from operations of $7,500 million
during 2016. Tenacious Texts reported cash flow from operations of $7,000 million.
Current liabilities reported by Better Books and Tenacious Texts at December 31, 2015,
were $13,200 million and $7,700 million, respectively. Compute the cash flow from
operations to current liabilities ratio for each company for 2016. 3>. Comment briefly
on the liquidity of each of these two companies. Which appears to be more liquid? 4>
What other ratios would help you more fully assess the liquidity of these companies?
Mellon Corporation The data presented below is for Mellon Corporation for the year
ended December 31, 2015:
Refer to the data for Mellon Corporation. If Mellon uses the aging of accounts
receivable approach to estimate its bad debts, what amount will be reported as bad debt
expense for 2015?
a. $28,000
b. $31,000
c. $34,000
d. $50,000
Valor Company issued 5,000 shares of $1 par common stock for $30 per share,
providing the company with $150,000 in cash. What effect, in addition to the increase
in cash, does this transaction have on the accounting equation for Valor?
a. Common Stock increases $150,000.
b. Common Stock increases $5,000; Additional PaidÂin Capital-Common increases
$145,000.
c. Common Stock increases $5,000; Retained Earnings increases $145,000.
d. Common Stock increases $5,000; Gain on Sale of Common Stock increases
$145,000.
Bad Debts Expense is a contra account that is used to reduce accounts receivable to its
net realizable value.
a. True
b. False
From the list of accounts below, determine whether the account would be a nominal
account or a real account.
a. nominal account
b. real account
Unearned Revenue
The decrease in accounts receivable over a period results in a(n)to net income reported
in the operating activities section of the statement of cash flows using the indirect
method.
is the association of the costs incurred with the associated revenue of a period.
Comparative income statements for Gregson Inc. are as follows:
Explain the purpose of a work sheet.
A friend of yours has asked you whether off-balance-sheet financing means that the
amounts are immaterial and therefore are not reported. In a short paragraph, tell him
what off-balance-sheet financing is and why firms engage in off-balance-sheet
transactions?
Use the comparative financial statements of Penny Company for the year ended
December 31, 2015 to answer the following question. Penny Company
Statement of Stockholder’s Equity
for the Year Ended December 31, 2015
REQUIRED: Prepare a statement of retained earnings for the year ended December 31,
2015.
Hu Corporation Use the following Assets section of Hu Corporation’s balance sheets for
the years ended December 31, 2015 and 2014 to answer the questions that follow.HU
CORPORATION
Assets Section of Consolidated Balance Sheets (in millions)at December 31,
Refer to the information for Hu Corporation.
The Stockholders’ Equity section of the balance sheet for Brompton Construction
Company at the end of 2016 is as follows:
The lower portion of the 2016 income statement indicates the following:
Assume that the number of shares outstanding did not change during the year.
REQUIRED:1> Compute earnings per share before extraordinary items.
2> Compute earnings per share after the extraordinary loss.
3> Which of the two EPS ratios is more useful to management? Explain your answer.
Would your answer be different if the ratios were to be used by an outsider, like a
potential stockholder? Why or why not?
You just won the lottery. You can take your $2 million in a lump sum today, or you can
receive $220,000 per year over the next 12 years. Assuming a 6% interest rate, which
would you prefer, ignoring tax considerations?
Ais an amount deducted by customers for payment within the discount period.