The operating cycle for all businesses is one year.
a. True
b. False
Under the double-entry system of accounting, every transaction is entered in at least
two accounts on opposite sides of T accounts.
a. True
b. False
Below are selected data from the financial statements of Moriarty Company.
The debt-to-equity ratio for 2016 is
a. increasing, which should be a major cause of concern for Moriarty Company.
b. increasing, which should be a good sign in investors’ eyes.
c. decreasing, which should be a major cause of concern for Moriarty Company.
d. decreasing, which should be a good sign in investors’ eyes.
Poole Company began business on January 1, 2015. The corporate charter authorized
issuance of 5,000 shares of $1 par value common stock, and 4,000 shares of $8 par
value, 6% cumulative preferred stock. None of the preferred shares were issued. On
July 1, Poole issued 1,000 shares of common stock in exchange for two years rent on a
retail location. The cash rental price is $2,400 per month and the rental period begins on
July 1. The correct entry to record the July 1 transaction will
a. Increase Cash, $57,600; Decrease Prepaid Rent, $57,600
b. Increase Prepaid Rent, $57,600; Increase Common Stock, $57,600
c. Increase Prepaid Rent, $57,600; Increase Common Stock, $1,000; Increase
Additional PaidÂin Capital-Common, $56,600
d. Increase Prepaid Rent, $57,600; Increase Common Stock, $5,000; Increase
Additional PaidÂin Capital-Common, $52,600
Culinary Delights CompanyUse the financial statements for Culinary Delights
Company to answer the questions that follow.
Consolidated Statement of Earnings and Retained Earning
Refer to the financial statements from Culinary Delights Company. REQUIRED:
(A) Calculate the company’s current and acid-test ratios for 2016. Would you lend this
company $4,000,000 at 10% over a one-year period? Explain. (Note: The statements
provided are in “thousands.”) (B) Suppose the company has credit terms of 20 days and
all sales are on credit. During 2016, what credit management problems does this
company have, if any? Explain
For each item listed, select the section of the balance sheet in which the item would be r
eported.
a. Current Assets
b. Property, Plant, and Equipment
c. Current Liabilities
d. Long-term Liabilities
e. Stockholders’ Equity
Land
The following items were reported on the balance sheets and income statement for
Bezos Corp.:
How would the change in accounts payable be reported in the operating activities
section of the statement of cash flows under the indirect method?
a. As an addition to operating expenses
b. As a deduction from operating expenses
c. As an addition to net income
d. As a deduction from net income
For each transaction select the letter of the type of adjustment that would be required.
a. Deferred expense
b. Deferred revenue
c. Accrued liability
d. Accrued asset
Interest is incurred on money borrowed from the bank, but not yet paid
Match the terms with the descriptions related to merchandise sales and purchases.
a. Transportation-in
b. Perpetual inventory system
c. Net purchases
d. FOB Destination
e. Cost of goods available for sale
f. Periodic inventory system
g. FOB Shipping point
h. Delivery expense
The buyer must pay the shipping costs.
A single set of accounting standards could help a U.S. company save time and money in
the acquisition of a German company.
a. True
b. False
The three distinct types of cost to a manufacturer are direct materials, direct labor, and
manufacturing overhead.
a. True
b. False
What are the effects on the accounting equation when a company makes the adjustment
to record bad debt expense using the allowance method?
a. Assets and owners’ equity increase.
b. Assets and owners’ equity decrease.
c. Assets increase and owners’ equity decreases.
d. Assets decrease and owners’ equity increases.
Trend analysis is analysis
a. of dollar changes and percentage changes over several years.
b. in which all items are presented as a percentage of one selected item on a financial
statement.
c. in which a statistic is calculated for the relationship between two items on a single
financial statement or for two items on different financial statements.
d. of all ratios that increased or decreased over past accounting periods.
A non-business entity would be particularly concerned about its
a. earnings per share
b. price/earnings ratio
c. liquidity
d. income tax rate
Louisiana Enterprises received payment from its customers for previous sales on credit.
What was the impact on its working capital?
a. Increase in working capital
b. Decrease in working capital
c. No effect on working capital
d. Unable to determine
Improv Corporation decides to redeem its $100,000 face value bonds when the carrying
value is $107,019.48. The bonds are redeemed on December 31, 2015, at 102.
REQUIRED: 1> Calculate Improv Corporation’s gain or loss on the early redemption of
the bonds.
2> What journal entry should be recorded at the time of bond redemption?
An effective system of internal control is critical to protecting a company’s investment
in three of its major assets: cash, accounts receivable, and inventory. For each asset,
describe how a company might protect that asset.
An internal or external event must beto be recognized.
_________and _________have claims to an entity’s economic resources.
Chad Darrow, CFO of your company is considering constructing a deal with Extreme
Industries, whereby stock is issued in exchange for an asset (custom extrusion
equipment valued at $400,000 by an outside appraiser). The stock to be exchanged is a
new class of preferred stock that has not yet been traded in the open market. He has
asked that you draft a memo to Marc Lyon, CEO about the valuation of the asset to be
used in the exchange. In your memo address the reporting amount for the asset and how
fair market value could be determined.