For the statement of cash flows, companies are required to classify their cash activities
into three categories: operating, investing, and borrowing.
a. True
b. False
To review the current market price of the stock, one should review the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. none of these; it is not on the financial statements.
Determine the net income (loss) for the period.
a. Net Loss $5,570
b. Net Income $3,180
c. Net Loss $790
d. Net Income $2,390
Lowen Homes, Inc. pays its sales personnel 6% commission of the selling price of each
home. During November of 2015, sales people sold $18,400,000 of homes. During
December, 2015, sales people sold $20,050,000 of homes. Because its policy is to pay
commissions only in the month after the sales, Lowen paid commissions during
December for November, 2015. During January of 2016, Stitt paid its sales people
commissions for December, 2015. A) If the cash basis of accounting is used, how much
is reported commission expense on Lowen Homes’ income statement for December of
2015? B) If the accrual basis of accounting is used, how much is reported as
commission expense on Lowen Homes’ December income statement for 2015?
Someone to whom a company has a debt is known as an investor.
a. True
b. False
The current balance sheet of Handyman Inc. reports total assets of $20 million, total
liabilities of $2 million, and owners’ equity of $18 million. Handyman Inc. is
considering several financing possibilities in order to expand operations. What is the
additional amount that Handyman Inc. can borrow and not exceed a debt to equity ratio
of 0.3?
a. $5.4 million
b. $3.4 million
c. $5.5 million
d. $4.0 million
External users of accounting information include present and potential stockholders,
bankers and other creditors, and management.
a. True
b. False
Identify which of the following would be recorded as external events, recorded as
internal events, or not recorded.
a. Internal event
b. External event
c. Not recordedThe company takes a count of the raw materials inventory.
Nordic Exports Inc. reported net income of $150,000 for 2015, but its cash balance
decreased $40,000. Which financial statement should Nordic Exports’ management
refer to for an explanation of this situation?
a. Balance Sheet
b. Income Statement
c. Statement of Retained Earnings
d. Statement of Cash Flows
Because discontinued segments of a business will not be part of the company’s future
operations, discontinued operations are disclosed separately on the income statement.
a. True
b. False
On January 2, 2015, Garage Master Construction, Inc. issued $500,000, 10-year bonds
for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8%
and the market rate is 6%.The interest expense on the bonds at June 30, 2015 is
a. $ 2,764.
b. $17,236.
c. $20,000.
d. $22,764.
If bonds were initially issued at a premium, the carrying value of the bonds on the
issuer’s books will
a. decrease as the bonds approach their maturity date.
b. increase as the bonds approach their maturity date.
c. remain constant throughout the bonds’ life.
d. fluctuate throughout the bonds’ life.
Becca Corp. purchased supplies at a cost of $5,200 during 2014. At January 1, 2015,
supplies on hand were $1,600. During the year, the company used $4,000 of supplies.
Becca’s accounting year ends on December 31. A) What is the effect on the accounting
equation of the adjusting entry that is prepared at December 31, 2015? B) Under the
accrual basis of accounting, how much is Supplies Expense for 2015? C) How much
should be reported on the December 31, 2015, balance sheet for Supplies? D) What
type of adjustment was made in part A?
Which of the following statements is true?
a. Investments in commercial paper or U.S. Treasury bills must be treated as cash
equivalents.
b. Investments in stock cannot be treated as cash equivalents because they are not
convertible into a known amount of cash.
c. Investments which are convertible into a known amount of cash and mature within
three months after the balance sheet date are treated as cash equivalents.
d. Investments in money market accounts cannot be treated as cash equivalents because
they do not have a specific maturity date.
Refer to the information for Carlton, Inc. How much is cost of goods sold for 2015?
If a company reports a net loss for the year, is it still possible that cash could actually
increase during the year? Explain your answer.
What is the operating cycle of a business? How does this impact the classification of
assets into current and noncurrent categories?
Balance Sheet Accounts
(all accounts have normal balances)
(in millions)Refer to the account information for Auto Designs, Inc.
REQUIRED: Compute the total current liabilities for the years 2015 and 2014.
Calculate the percentage change in the total current liabilities.
Discount on Bonds Payable is shown on the balance sheet as a(n).
The ability of a company to pay its debt as it comes due relates to.