AC 871 Quiz 3 | Course Paper

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Checks received from customers are considered to be cash in the company’s books.

a. True

b. False

Use the following codes to indicate how the cash flow effect, if any, of each transaction

or event would be reported on a statement of cash flows if the operating activities

section is prepared using the indirect method.

a. Operating activity-add to net income

b. Operating activity-deduct from net income

c. Inflow from investing activity

d. Outflow from investing activity

e. Inflow from financing activity

f. Outflow from financing activity

g. Noncash investing and financing activity

h. Not reported on statement of cash flows

Declared cash dividends.

GAAP require that research and development costs to develop a new product be

a. capitalized in the patents account.

b. expensed in the period incurred.

c. capitalized in the research and development costs account.

d. amortized over the expected economic life of the new product.

Preferred stock receives first preference on voting rights.

a. True

b. False

Which of the following is an addition to net income when the indirect method is used?

a. an increase in inventory

b. a loss on sale of equipment

c. a decrease in accounts payable

d. an increase in accounts receivable

Match the following business forms with their characteristics below.

a. Sole proprietorship

b. Partnership

c. Corporation

Need an agreement about contributions to the business

Presented below are several accounts from the financial statements of Eagle, Inc. for the

year ended December 31, 2015: 1> Cash

2> Accounts Receivable

3> Prepaid Expenses

4> Accounts Payable

5> Common Stock

6> Sales

7> Selling Expenses

8> Administrative Expenses

9> Interest Expense

10> Income Taxes Expense Each of these accounts has been assigned an identification

number which you will use as answers for the transactions described below. Enter the

account number(s) in the blank spaces under the headings DEBIT and CREDIT to

indicate the accounts debited and credited when each transaction is recorded in a

general journal.

The profit margin ratio reflects the amount of income for each dollar of sales.

a. True

b. False

Dali Company has 15,000 shares of stock authorized at January 1. Dali issues 4,500

shares to the stockholders during the year and then the company repurchases 1,500

shares as treasury stock. Based on this information, how many shares are outstanding at

December 31?

a. 15,000

b. 18,000

c. 4,500

d. 3,000

Cost of goods available for sale is equal to beginning inventory less cost of goods sold.

a. True

b. False

Vegan Company reported the following: Common stock, $5 par, 200,000 shares

authorized, 50,000 shares issued and outstanding What is the effect of issuing 2,000

shares of common stock in exchange for land with valued by a realtor at $36,000 if the

common stock sells for $12 per share and is regularly traded?

a. The Land account increases by $24,000.

b. Retained Earnings decreases by $10,000.

c. Common Stock increases by $36,000.

d. Additional Paid-in Capital – Common increases by $24,000.

According to the IRS’s LIFO conformity rule, a company that chooses LIFO to report

net income to its shareholders may not use LIFO in preparing its income tax return.

a. True

b. False

The equality of debits and credits in a trial balance means that all entries were correctly

posted to the accounts.

a. True

b. False

Which one of the following categories on a statement of cash flows is used to report the

cash flow effects of buying and selling property, plant, and equipment?

a. Operating Activities

b. Investing Activities

c. Financing Activities

d. Profit Activities

Moonbeam Gift Shop’s inventory turned over six times during the year. Similar gift

shops have an inventory turnover equal to twelve times per year. What explains

Moonbeam’s state of inventory management?

a. Moonbeam sold too much inventory during the year.

b. Moonbeam needs to increase sales and decrease the amount of inventory on hand.

c. Moonbeam is performing twice as well as its competitors.

d. Moonbeam should increase the amount of goods on hand to accommodate the

additional inventory demand.

Which of the following statements is true regarding vertical analysis?

a. Common-size financial statements can be used to compare businesses of different

sizes.

b. Vertical analysis can only be used with balance sheet accounts.

c. Vertical analysis can only be used with income statement accounts.

d. Vertical analysis can only be used with retained earnings accounts.

Good quality information should be bothand present a.

Which one of the following is not a cash equivalent?

a. 30-day certificate of deposit

b. 60-day commercial paper

c. 90-day U.S. treasury bill

d. 180-day note issued by a local or state government

The solution to this problem requires time value of money calculations. Reference to

Tables 9-1 through 9-4 in the text is necessary to complete the calculations. If the

interest factor used to calculate the future value of $1 at 6% for 5 periods is 1.338, then

the present value of $1 at 6% for 5 periods is

a. 1.338 x 1.338.

b. 1/1.338.

c. 1/(1.338 x 1.338).

d. 0.338.

Brooke Accounting Services collected $15,000 from a customer on June 1 and agreed

to provide accounting services during the next six months. Brooke expects to provide

an equal amount of services each month. REQUIRED:

1> Prepare the journal entry for the receipt of the customer deposit on June 1.

2> Prepare the adjusting entry on June 30.

3> What will be the effect on net income for June if the entry in (2) is not recorded?

Springfield Company’s comparative balance sheets included inventory of $89,700 at

December 31, 2015, and $73,300 at December 31, 2016 Springfield’s comparative

balance sheets also included accounts payable of $54,400 at December 31, 2015, and

$38,100 at December 31, 2016. Springfield’s accounts payable balances are composed

solely of amounts due to suppliers for purchases of inventory on account. Cost of goods

sold, as reported by Springfield on its 2016 income statement, amounted to $750,800.

What is the amount of cash payments for inventory that Springfield will report in the

Operating Activities section of its 2016 statement of cash flows assuming that the direct

method is used?

McDonald’s Corporation is the largest food service organization in the world. The

proper handling of cash and food is important to the profitability of McDonald’s. Based

on your personal knowledge of McDonald’s and the internal control concepts and

procedures described in the textbook, answer the following questions. REQUIRED:

Describe procedures that you believe McDonald’s may use to control the purchase and

payment of food products.

The date that a promissory note is due is the.

What is treasury stock? How is it reported on the financial statements?

Learning Tree, Inc. The following data is available for one of the products sold by

Learning Tree, Inc., which uses the perpetual inventory system:

Refer to the data for Learning Tree, Inc.

If the moving average method is used, what is the amount assigned to the ending

inventory on May 30?

Theis a subset of the board of directors that acts as a direct contact between the

stockholders and the independent accounting firm.

Starlight Associates, Inc. recorded salary expense of $100,000 in 2015. However,

additional salaries of $5,000 had been earned, but not paid or recorded at December 31,

2015. After the adjustments are recorded and posted at December 31, 2015, the

balances in the Salaries Expense and Salaries Payable accounts will be:

Acquisition cost is also referred to as:.

At December 31, 2015, Ashland Company has the following amounts on its financial

statements: