Return on common stockholders’ equity is computed by dividing net income by ending
stockholders’ equity.
Answer:
In computing cash payments for operating expenses, a decrease in prepaid expenses is
______________ and an increase in accrued expenses payable is ______________ to
(from) operating expenses, exclusive of depreciation.
Answer:
Mike Stephenson, the president and CEO of Earth Systems, Inc., a waste
management firm, was recently hospitalized, suffering from exhaustion and
a heart ailment. Immediately prior to his hospitalization, Earth Systems had
experienced a sharp decline in its stock price, and trading activity became
almost nonexistent. The primary reason for this was concern expressed in
the media over a new untested waste management system implemented by
the company. Mr. Stephenson had been unwilling to submit the procedure
to testing before implementation, but he reluctantly agreed to limited tests
after the system was operational. No problems have been identified by the
tests to date.
The other members of management called a meeting to determine what
they should do. Roger Carlson, the marketing manager, suggested that the
company purchase a large number of shares of treasury stock. In that way,
investors might notice that activity had picked up, and might decide to buy
some more shares. This plan would use up most of the company’s available
cash, so that there will be no money available for a cash dividend. Earth
Systems has paid cash dividends every quarter for over ten years.
1> Is Mr. Carlson’s suggestion ethical? Explain.
2> Is it ethical to discontinue the cash dividend? Explain.
Answer:
______________, _______________, and _______________ have debit normal
account balances whereas _______________, ________________, and
________________ have credit normal account balances.
Answer:
At September 1, the balance sheet accounts for Stanley’s Restaurant were as follows:
The following transactions occurred during the next two days:
The company issued additional shares of stock for $22,000 cash in the business. The
accounts payable were paid in full. (No payment was made on the notes payable.)
Instructions
Prepare a balance sheet at September 1, 2015.
Answer:
Treasury stock should not be classified as a current asset.
Answer:
With the exception of land, plant assets experience a ______________ in service
potential over their useful lives.
Answer:
Accountants record both internal and external transactions.
Answer: