Which of the following costs should be recorded as an expense?
A.Administrative employee salaries
B.Depreciation of manufacturing equipment
C.Insurance for the factory building
D.All of these are expenses.
The following balance sheet information was provided by Western Company:
Assuming 2014 net credit sales totaled $270,000, what was the company’s average days
to collect receivables? (Use 365 days in a year. Do not round your intermediate
calculations.)
A.18.25 days
B.47.31 days
C.16.22 days
D.20.28 days
Indicate whether each of the following statements is true or false.
_____ a) Use of residual income to evaluate managers of an investment center may
avoid some of the suboptimization that can occur with use of return on investment as a
performance measure.
_____ b) Residual income is stated as an absolute amount, not a ratio or percentage.
_____ c) One disadvantage with residual income as a measure of performance is that it
causes larger divisions to appear to do better than smaller divisions.
_____ d) A balanced score card includes various nonfinancial performance measures
but no financial performance measures.
_____ e) The balanced scorecard is a holistic approach to evaluating management and
division performance.
Benson Company declared and paid a cash dividend totaling $500,000 on its common
stock. As a result of this transaction, the company’s debt to assets ratio will:
A.Decrease.
B.Increase.
C.Remain the same.
D.Cannot be determined.
The capital account balances for Donald & Hanes LLP on January 1, 2013, were as
follows:
Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The
partners agreed to admit May to the partnership with a 35% interest in partnership
capital and net income. May invested $100,000 cash, and no goodwill was recognized.
What is the balance of May’s capital account after the new partnership is created?
A.$84,000.
B.$100,000.
C.$140,000.
D.$176,000.
E.$200,000.
A partnership began its first year of operations with the following capital balances:
Young, Capital: $143,000
Eaton, Capital: $104,000
Thurman, Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the
following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to
Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of
the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman,
respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of
$52,000 in the second year.
What was the balance in Eaton’s Capital account at the end of the second year?
A.$133,380.
B.$84,760.
C.$105,690.
D.$132,860.
E.$71,760.
Lawyer’s fees incurred during a reorganization are accounted for as:
A.an expense.
B.an intangible asset, Reorganization Cost, which would normally be amortized over a
five-year period.
C.additional paid-in capital.
D.retained earnings.
E.a prepaid asset until the entity emerges from reorganization.
A company mistakenly recorded a cash purchase of land as an expense. As a result of
this error
A.Assets were understated and equity was overstated.
B.Assets and equity were understated.
C.Assets and equity were overstated.
D.Assets were overstated and equity was understated.
Earnings before interest and taxes divided by interest expense is the formula for which
of these analytical measures?
A.Debt to assets ratio
B.Earnings per share
C.Return on investment
D.Number of times interest is earned
During 2013, Chi Company earned $950 of cash revenue, paid $600 of cash expenses,
and paid a $100 cash dividend to its owners. Based on this information alone,
A.net income amounted to $350.
B.total assets increased by $250.
C.cash inflow from operating activities was $350.
D.all of these are correct.
Tocca Co. collected a $5,000 cash advance from a customer on November 1, 2013 for
work to be performed over a six-month period beginning on that date. If the year-end
adjustment is properly recorded, what will be the effect on Tocca’s 2013 financial
statements?
A.Increase assets and increase liabilities
B.Increase assets and increase revenues
C.Decrease liabilities and increase revenues
D.No effect
Cherryhill and Hace had been partners for several years, and they decided to admit
Quincy to the partnership. The accountant for the partnership believed that the
dissolved partnership and the newly formed partnership were two separate entities.
What method would the accountant have used for recording the admission of Quincy to
the partnership?
A.the bonus method.
B.the equity method.
C.the goodwill method.
D.the proportionate method.
E.the cost method.
The following accounts and balances were drawn from the records of Hoover Company
on December 31, 2013:
The amount of retained earnings as of January 1, 2014 was:
A.$1,475.
B.$1,800.
C.$975.
D.$1,225.
For a manufacturing company, product costs include all of the following except:
A.indirect material costs.
B.warehousing costs.
C.direct labor costs.
D.All of these are product costs.
On December 31, 2013, Houston Company’s total current assets were $560,000 and its
total current liabilities were $420,000. On January 1, 2014, Houston issued a long-term
note to a bank for $30,000 cash.
Required:
(a) Compute Houston’s working capital before and after issuing the note payable.
(b) Compute Houston’s current ratio before and after issuing the note payable. Round
your answer to two decimal places.