On January 1, 2013, Baird Company had beginning balances as lows:
Assets = $2,250
Liabilities = $620
Common Stock = $800
During 2013, Baird paid dividends to its stockholders of $900. Given that ending
retained earnings was $600, what was Baird’s net income for the 2013 accounting
period?
A.$770
B.$830
C.$1,250
D.$500
Which of the following is not a problem caused by diverse accounting practices across
countries?
A.Preparation of consolidated financial statements.
B.Gaining access to foreign capital markets.
C.Lack of comparability of financial statements between companies in the same
country.
D.Cost and expertise required of consolidations accounting staff.
E.Need for a company to maintain multiple sets of accounting records.
In the United States, foreign companies filing annual reports with the SEC that are not
prepared in accordance with U.S. GAAP must:
A.present financial statements that comply with international GAAP.
B.conform with U.S. GAAP or present a reconciliation to U.S. GAAP.
C.have a demonstrated need for capital to be used for operations in the U.S.
D.use the U.S. dollar as their reporting currency.
E.use IFRS, or use foreign GAAP and provide a reconciliation to U.S. GAAP.
Olaf Company began 2013 with $600 in its supplies account. During the year, the
company purchased $1,700 of supplies on account. The company paid $1,500 on
accounts payable by year end. On December 31, 2013, Olaf counted $700 of supplies
on hand. Olaf’s financial statements for 2013 would show:
A.$800 of supplies; $100 of supplies expense
B.$700 of supplies; $1,600 of supplies expense
C.$700 of supplies; $1,000 of supplies expense
D.$800 of supplies; $1,700 of supplies expense
Cohen Company experienced an accounting event that affected its financial statements
as indicated below:
Which of the following accounting events could have caused these effects on Cohen’s
statements?
A.Paid a cash dividend.
B.Earned cash revenue.
C.Borrowed money from a bank.
D.Issued common stock.
Saget Company is considering the purchase of equipment that would cost $35,000 and
offer annual cash inflows of $10,500 over its useful life of 5 years. Assuming a required
rate of return of 8%, what is the net present value of this investment opportunity?
A.($6,923)
B.$17,500
C.$6,923
D.$41,923
The study of an individual item or account over several periods in the same financial
year or over many years is known as:
A.Liquidity analysis
B.Ratio analysis
C.Vertical analysis
D.Horizontal analysis
A partnership began its first year of operations with the following capital balances:
Young, Capital: $143,000
Eaton, Capital: $104,000
Thurman, Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the
following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to
Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of
the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman,
respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of
$52,000 in the second year.
What was Eaton’s total share of net income for the second year?
A.$17,160 income.
B.$4,160 income.
C.$19,760 income.
D.$17,290 income.
E. $28,080 income.
On January 1, 2014, Fleming Company borrowed $160,000 cash from the First Trust
Bank by issuing a five-year 8% term note. The principal and interest are repaid by
making annual payments beginning on December 31, 2014. The annual payment on the
loan was $40,074.
Which choice reflects the financial statement effects of Fleming Company’s cash
payment on December 31, 2014?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
Which method for evaluating capital investment proposals reduces the present value of
cash outflows from the present value of cash inflows?
A.Payback method
B.Internal rate of return
C.Net present value
D.Unadjusted rate of return
Which of the following statement is correct regarding the quick ratio?
A.The numerator for the quick ratio is current assets – inventory – accounts receivable.
B.The numerator for the quick ratio is current assets.
C.The quick ratio is also called the working capital ratio.
D.The quick ratio is a more conservative variation of the current ratio.
When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid
$80,000, although his capital account balance was only $60,000. The four partners
shared net income and losses equally. The journal entry to record the effect on John’s
capital due to Danny’s withdrawal would include:
A.$6,667 debit to John, Capital.
B.$6,667 credit to John, Capital.
C.$20,000 debit to John, Capital.
D.$5,000 debit to John, Capital.
E.$5,000 credit to John, Capital.
Giambrone Corporation began business operations and experienced the following
transactions during 2013:
1) Issued common stock for $15,000 cash.
2) Issued a $10,000, 6% 4-year note to the bank on February 1
3) Provided services to customers for $40,000 cash.
4) Paid $19,000 for operating expenses.
5) Accrued interest expense on the note.
6) Paid a $2,000 dividend to shareholders.
Required:
Record the above transactions on a horizontal statements model to reflect their effect on
Giambrone’s financial statements.
What is the dissolution of a partnership?
What are some of the reasons for the corporate scandals of 2001 and 2002?
What is the purpose of Chapter 7 of the Bankruptcy Reform Act?
What is included in Part II of a securities registration statement?
What is blue sky legislation?
What theoretical argument could be made against the recognition of goodwill when
there is a change in the ownership of a partnership?
When are expenses recognized under accrual accounting in relation to the payment of
cash?
Chico Company is considering the purchase of a new high-speed machine for its
factory. The machine will cost $160,000 and will save the company $45,000 per year in
cash operating costs. The machine has an estimated useful life of five years and no
expected salvage value. The company’s cost of capital is 12%.
Required:
1) Compute the net present value of this investment.
2) What is the maximum amount that Chico should be willing to pay for the machine?
3) What are the minimum annual cash savings that will make the machine acceptable on
a net present value basis if the purchase price is $160,000?