Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments
of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed
to (1) interest of 10% of the beginning capital balance each year, (2) annual
compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss
in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was
$150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use
every month during 2012 and 2013.
What was Wasser’s capital balance at the end of 2012?
A.$150,000.
B.$160,000.
C.$165,000.
D.$213,000.
E.$201,000.
The benefits of a just-in-time system would include all of the following except:
A.increased warehousing costs.
B.reduced inventory holding costs.
C.improved customer satisfaction.
D.decrease in the number of suppliers.
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A systematic problem-solving philosophy that encourages front line workers to achieve
zero defects is known as:
A.just-in-time (JIT).
B.total quality management (TQM).
C.activity based management (ABM).
D.None of these.
Which ratio measures the percentage of company’s assets that are financed by debt?
A.Debt to assets ratio
B.Asset turnover
C.Debt to equity
D.Return on investment
Starwood Corporation has current assets of $200,000, total current liabilities of
$750,000 net credit sales of $1,300,000, beginning accounts receivable of $65,000 and
ending accounts receivable of $69,000. What is Starwood’s accounts receivable
turnover?
A.21.8 times
B.19.4 times
C.22.4 times
D.5.8 times
Theresa is considering starting a small business. She plans to purchase equipment
costing $145,000. Rent on the building used by the business will be $26,000 per year
while other operating costs will total $30,000 per year. A market research specialist
estimates that Theresa’s annual sales from the business will amount to $80,000. Theresa
plans to operate the business for 6 years. Disregarding the effects of taxes, what will be
the amount of annual net cash flow generated by the business?
A.$24,000
B.$56,000
C.$80,000
D.None of these answers is correct.
Working capital is defined as:
A.Current assets divided by current liabilities.
B.Total assets minus total liabilities.
C.Current assets less current liabilities.
D.Current liabilities divided by total liabilities.
A company sells a building to a bank in 2013 at a gain of $100,000 and immediately
leases the building back for period of five years. The lease is accounted for as an
operating lease. The building was originally purchased for $200,000 and currently had a
book value of $50,000 at the date of the sale.
Assume the seller of the building is a U.S. company that is preparing to convert from
U.S. GAAP to IFRS. At December 31, 2014, with regard to the sale and leaseback
accounting, what amount would reconcile stockholders’ equity from U.S. GAAP to
IFRS at December 31, 2014?
A.Increase $40,000.
B.Decrease $40,000.
C.Decrease $60,000.
D.Increase $60,000.
E.No amount would be necessary for reconciliation.
Dandridge Company collected cash in 2012 from a customer for services to be
performed beginning January 2013. Indicate whether each of the following statements
about this transaction is true or false.
_____ a) Dandridge’s 2012 income statement would not be affected by this transaction.
_____ b) Dandridge’s 2012 statement of cash flows would be affected by this
transaction.
_____ c) This transaction is an asset exchange transaction.
_____ d) The revenue for the services provided will be recorded in 2013.
_____ e) This transaction is considered an accrual transaction.
Thiessen Company started its business by issuing $7,000 of common stock on January
1, 2013. The company performed $18,000 of service for customers on account in 2013.
It collected $12,500 of this amount in 2013, recorded expenses on account of $14,500,
paid $11,000 of the payables owed, and paid a $300 dividend to the stockholders.
Required:
a) What is the amount of total assets at the end of 2013?
b) What is the amount of cash on hand at the end of 2013?
c) What is the net income for 2013?
d) Prepare a balance sheet for 2013.
Quincy Corp., about to be liquidated, has the following amounts for its assets and
liabilities:
The mortgage is secured by the land and building, and the note payable is secured by
the equipment. Quincy expects that the expenses of administering the liquidation will
total $40,000.
How much should the mortgage holder expect to collect from the liquidation?
A.$474,000
B.$510,000
C.$450,000
D.$480,000
E.$478,000
Vantage Corporation invested $800 cash in Tandem Company stock.
Which of the following could describe the effects of an asset source transaction on a
company’s financial statements?
A.
B.
C.
D.
The IASB and FASB are working on several joint projects. Which of the following is
not a topic of the Revenue Recognition Project?
A.Eliminate inconsistencies in existing literature.
B.Cash flow presentation of revenue.
C.Business models issues for revenue recognition.
D.Conceptual basis as framework for future issues of revenue recognition.
E.Contract-based revenue recognition.
Indicate whether each of the following statements regarding the four types of
accounting events is true or false.
_____ a) Asset use transactions involve an increase in one asset and a decrease in
another asset.
_____ b) An asset source transaction involves an increase in assets and an increase in a
corresponding claims account.
_____ c) An asset exchange transaction involves an increase in an asset and a decrease
in a claims account.
_____ d) Asset exchange transactions involve an increase in one asset and a decrease in
another asset.
_____ e) Some claims exchange transactions involve an increase in a liability account
and a decrease in an equity account.
Classify each of the following transactions for the purpose of the statement of cash
flows as operating activities (OA), investing activities (IA), financing activities (FA), or
not reported on the statement of cash flows (NA).
1) _____ Made adjusting entry to accrue salary expense at the end of the year
2) _____ Borrowed funds from the bank
3) _____ Paid rent for the month
4) _____ Paid cash to settle accounts payable
5) _____ Issued common stock for $30,000 cash
6) _____ Collected accounts receivable
7) _____ Paid cash to acquire land
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 Young’s total share of net loss for the first year?
A.$3,900 loss.
B.$11,700 loss.
C.$10,400 loss.
D.$24,700 loss.
E.$9,100 loss.
Two ratios that provide insight on the relationship between credit sales and receivables
are:
A.Current ratio and inventory turnover ratio.
B.Accounts receivable turnover and average days to collect receivables.
C.Average days to collect receivables and asset turnover.
D.Accounts receivable turnover and current ratio.
During 2013, Wynona Company issued common stock to stockholders for $12,000,
purchased land for $3,200 cash, and paid cash dividends of $1,000 to the company’s
owners. Enter each of these three events into the horizontal financial statements model,
below. Indicate dollar amounts of increases and decreases. For cash flows, show
whether they are operating activities (OA), investing activities (IA), or financing
activities (FA).
On October 1, 2014, Balkan, Inc. accepted from another corporation a 1-year note
receivable in the amount of $15,000, with an interest rate of 6%. How did this
transaction affect Balkan’s financial statements?
A.Option A
B.Option B
C.Option C
D.Option D
Langdon Company is considering purchasing a capital investment that is expected to
provide annual cash inflows of $10,000 per year for 3 years. Assuming that Langdon’s
required rate of return is 8%, what is the present value of these cash inflows? (Do not
round PV factors and intermediate calculations. Round your final answer to the nearest
dollar.)
A.$24,018
B.$24,869
C.$33,121
D.$25,771
As of December 31, 2013, Gant Corporation had a current ratio of 1.29, quick ratio of
1.05, and working capital of $18,000. The company uses a perpetual inventory system
and sells merchandise for more than it cost. On January 1, 2014, Gant recorded cost of
goods sold of $4,100. As a result of this transaction, Gant’s quick ratio will:
A.Decrease.
B.Increase.
C.Remain the same.
D.Cannot be determined.
What were the major objectives of the Treaty of Rome?
Name the two broad categories of filings with the SEC.
The ABCD Partnership has the following balance sheet at January 1, 2012, prior to the
admission of new partner, Eden.
Eden contributed $124,000 in cash to the business to receive a 20% interest in the
partnership. Goodwill was to be recorded. The four original partners shared all profits
and losses equally. After Eden made his investment, what were the individual capital
balances?
Norr and Caylor established a partnership on January 1, 2012. Norr invested cash of
$100,000 and Caylor invested $30,000 in cash and equipment with a book value of
$40,000 and fair value of $50,000. For both partners, the beginning capital balance was
to equal the initial investment. Norr and Caylor agreed to the following procedure for
sharing profits and losses:
– 12% interest on the yearly beginning capital balance
– $10 per hour of work that can be billed to the partnership’s clients
– the remainder divided in a 3:2 ratio
The Articles of Partnership specified that each partner should withdraw no more than
$1,000 per month.
For 2012, the partnership’s income was $70,000. Norr had 1,000 billable hours, and
Caylor worked 1,400 billable hours. In 2013, the partnership’s income was $24,000, and
Norr and Caylor worked 800 and 1,200 billable hours respectively. Each partner
withdrew $1,000 per month throughout 2012 and 2013.
Determine the balance in both capital accounts at the end of 2013 to the nearest dollar.
What is the fraud triangle? Which element of the fraud triangle is most closely
connected with internal controls?
Brown and Green are forming a business as partners. If they do not create a formal
written partnership agreement, what risks are they exposing themselves to?
What is meant by the term “global GAAP”? How does it impact U.S. companies? What
body is responsible for setting global standards?
Indicate how each of the following transactions affect assets by entering + for increase,
– for decrease, or NA if total assets are not affected.
_______ 1) Issued stock to investors.
_______ 2) Borrowed cash from the bank.
_______ 3) Provided services for cash.
_______ 4) Purchased land for cash.
_______ 5) Paid operating expenses.
_______ 6) Paid cash dividend to the stockholders.
_______ 7) Repaid the bank loan.
How has the Sarbanes-Oxley Act of 2002 changed the role of the audit committee?
The major providers of financing in some countries are stockholders, while other
countries predominantly use banks as the main financing source. What difference does
it make to accounting disclosures in comparing a company from one of each of those
countries?