The asset account, Supplies, has a balance of $700 on January 1. During January, the
company purchased $16,000 of supplies on account and the liability was appropriately
recorded. A count of supplies at the end of January indicates a balance of $900. Which
one of the following is a correct amount to be reported on the company’s financial
statements for the month ending January 31?
a. Supplies Expense-$15,800
b. Supplies on Hand-$700
c. Accounts Payable-$15,800
d. Supplies Expense-$16,700
Use the equation presented below to answer the question that follows: Cash = CL + LTL
+ CS + RE -NCCA -LTA where: CL = Current liabilities
LTL = Long-term liabilities
CS = Common stock
RE = Retained earnings
NCCA = Noncash current assets
LTA = Long-term assets Which of the following activities results in a cash inflow?
a. Increases in noncash current assets (NCCA)
b. Decreases in current liabilities (CL)
c. Increases in common stock (CS)
d. Decreases in retained earnings (RE)
Match the following choices to the listed situation.
a. a deferred expense
b. a deferred revenue
c. an accrued liability
d. an accrued asset
One year’s premium on truck insurance was paid in advance
An amount that has been incurred as an expense, but has not yet been paid should be
considered an accrued liability.
a. True
b. False
On November 1, 2014, Chancellor Co. borrowed $80,000 from State Bank and signed a
12%, six-month note payable, all due at maturity. The interest on this loan is stated
separately. At December 31, 2014, the adjusting entry for this note includes a:
a. Debit to Interest Expense for $3,200.
b. Credit to Notes Payable for $1,600.
c. Credit to Cash for $4,800.
d. Credit to Interest Payable for $1,600.
Choose from the following list of account titles the one that most accurately fits the des
cription of that account or is an example of that account.An account title may be used m
ore than once or not at all.
a. Cash
b. Prepaid Asset
c. Investments
d. Taxes Payable
e. Preferred Stock
f. Accounts Receivable
g. Land
h. Accounts Payable
i. Retained Earnings
j. Notes Receivable
k. Buildings
l. Notes Payable
m. Common Stock
An amount owed by a customer
Return ratios are measures of the relationship between the
a. income earned and the investment made in the company by the various groups.
b. revenue earned and the total equity of a company.
c. total equity of a company and its cash flows for the period.
d. profitability and liquidity aspects of a company.
Debt service coverage ratio
a. Interest expense
b. Income tax expense
c. Cash flow from operations before interest and tax payments
d. Cash paid for acquisitions
e. Cash flow from operations
f. Total dividends paid
g. Interest payments
h. Principal payments on debt
Given below are several ratios. Select the accounts or amounts that would be used in
order to calculate the ratio. You will have more than one response to each ratio. Some
accounts or amounts may not be used at all. (Select all that apply.)
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. David, a
high school math teacher, wants to set up an IRA account into which he will deposit
$2,000 per year. He plans to teach for 20 more years and then retire. If the interest on
his account is 7% compounded annually, how much will be in his account when he
retires?
a. $ 4,800
b. $21,118
c. $74,458
d. $81,990
If a company must pay more for the amounts provided by creditors and preferred
stockholders than it can earn overall, as indicated by the return on assets, there will be
favorable leverage.
a. True
b. False
Presented below is a partially completed income statement of Deep Sea, Inc. for 2015.
Using the partially completed income statement for Deep Sea, Inc., determine each of
the following for 2015. A) Net Sales B) Beginning Inventory C) Ending Inventory D)
Selling, General and Administrative Expenses
What is the primary objective of financial reporting?
a. To help investors make credit decisions.
b. To help management assess cash flows.
c. To protect users from fraudulent financial information.
d. To provide useful information for decision making
Vencenzia Company reported the following information in its annual report for 2016.
Cash flows from operating activities $300,000
Capital Expenditures 225,000
Average amount of debt maturing over the next 5 years 200,000
What is the cash flow adequacy ratio for 2016 for Vencenzia Company? a. 0.38b. 1.50c.
1.88d. 7.50
Paint Company Following are selected data from Paint Company’s financial statements.
Refer to the Paint Company data. The company’s debt service coverage ratio for 2016
indicates that the
a. company’s ability to pay principal and interest to creditors has declined.
b. company has more net income available to allocate to stockholders after the payment
of debt.
c. company had significantly changes in current assets and current liabilities during the
period.
d. company generates about $2 of cash from operations to cover every $1 of debt.
The issuance of common stock in exchange for a building would appear both as a cash
inflow in the financing activities section of the cash flow statement and also as a cash
outflow in the investing activities section.
a. True
b. False
Given the following list of methods of depreciation, select the method that is best for
the situation or purpose given. (Select all that apply.) This method is used in situations
where technological advances are rapid.
a. Straight-line
b. Units-of-production
c. Double-declining-balance
d. MACRS
On December 31, 2015, Aire Dyne, Inc. reported common stock of $120,000, retained
earnings of $60,000, and total stockholders’ equity equal to $500,000. No unusual
accounts appeared in the stockholders’ equity section of its balance sheet. During the
fiscal year ended December 31, 2016, 10,000 shares of stock were sold for $40,000, of
which $10,000 represented additional paid-in capital. The company reported net income
of $85,000 and declared and paid dividends of $50,000. A) What is the par value of the
stock? B) What is the amount of the retained earnings at December 31, 2016? C)
Prepare a statement of retained earnings for Aire Dyne, Inc. for the year ended
December 31, 2016, in good form.
Which of the following statements is true?
a. If a company reports net income on its income statement, it should report an increase
in cash on its statement of cash flows.
b. If a company reports a net loss on its income statement, it should report a decrease in
cash on its statement of cash flows.
c. If a company uses the a9781285182957ccrual basis of accounting, it will improve its
cash position if it reports net income for the same period.
d. If a company uses the accrual basis of accounting, its cash balance can increase even
if it reports a net loss.
Does the Retained Earnings account that appears in the balance sheet credit column of a
work sheet reflect the beginning or the ending balance in the account? Explain.
A company generated $1,830,000 from its operating activities and spent $1,200,000 on
additions to its plant and equipment during the year. The total amount of debt that
matures in the next five years is $900,000. Compute the company’s cash flow adequacy
ratio for the year.
Caron Industries received authorization on December 31, 2014, to issue $7,000,000
face value of 6%, 10-year bonds. The interest payment dates are June 30 and December
31. All the bonds were issued at par, plus accrued interest, April 1, 2015. The bonds are
callable by Caron at any time at 102. REQUIRED: 1> What is the amount of bond
interest expense that appears in Caron’s 2015 income statement relating to these bonds?
2> What is the amount of accrued bond interest expense that appears in Caron’s balance
sheet at December 31, 2015, with respect to these bonds?
The ratio of net income to net sales is the relationship presented by theratio.
If the balance of wages payable increases during the year, then thefor the period will be
greater than the actual cash wages paid in the period.
Select the best answer from the list below to complete statements 131-141 that follow.
The amount received for each share of stock in excess of par value is.
Overton Supply reported the following information at December 31, 2015:
Answer the following questions for Overton Supply. 1) Assuming that all shares were
sold at the same price, how much did each share of common stock originally sell for? 2)
What is the total amount of contributed capital at December 31, 2015? 3) What is the
amount of the book value per share at December 31, 2015? 4) Would the book value per
share increase, decrease, or remain the same, if the company declared a 2-for-1 stock
split on December 31, 2015? Explain.
is the quality of accounting information that makes it dependable in representing the
events that it purports to represent.
Refer to the information for Carlton, Inc. How much is the cost of purchases for 2015?
On its most recent statement of cash flows, a company reported net cash provided by
operating activities of $29,000,000. Its capital expenditures for the same year were
$5,000,000. A note to the financial statements indicated that the total amount of debt
that would mature over the next eight years was $96,000,000. REQUIRED:
1>Compute the company’s cash flow adequacy ratio.
2> If you were a banker considering loaning money to this company, why would you be
interested in knowing its cash flow adequacy ratio? Would you feel comfortable making
a loan based on the ratio you computed in part (1)? Explain your answer.