The accounts receivable turnover ratio is a measure of how well a company manages its
receivables.
a. True
b. False
On January 2, 2015, Lawn 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%. What is the carrying value of the bonds at the end of ten
years before the final maturity payment is made?
a. $574,540
b. $525,000
c. $500,000
d. $425,460
The following set of items describes activities completed by a company in collecting
cash for merchandise sales. For each activity, identify whether or not the activity
adheres to or violates sound internal control procedures. An employee in the accounting
department records cash receipts from customers and prepares a bank deposit slip.
a. Adheres to sound internal control procedures
b. Violates sound internal control procedures
c. Neither strengthens nor violates internal control
Operating, investing, and financing activities affect certain balance sheet accounts.
Which of the following statements is true?
a. Operating activities primarily involve transactions which affect noncurrent assets.
b. Investing activities primarily involve U.S. government securities and long-term
productive assets.
c. Financing activities primarily involve transactions which affect current liabilities.
d. Different balance sheet accounts are affected depending on whether the direct or
indirect method is used.
Presented below are selected data from the financial statements of Ripple Company for
2016, 2015, and 2014.
A) Calculate Ripple’s inventory turnover ratio for 2016 and 2015. B) How many days
would it take to sell the entire inventory at December 31, 2016? At December 31, 2015?
Assume 360 days in a year. C) What problems do you see in the company’s inventory
management?
An annuity is a series of equal payments made at equal intervals in the future.
a. True
b. False
Fortune Company has 10 delivery trucks that became fully depreciated in the prior year.
Fortune will continue charging the same amount of depreciation as before so that there
will be no decrease in expenses.
a. True
b. False
Wagner’s Bookstore acquires a 6% $12,000 certificate of deposit on September 1. The
term of the CD is six months. At that time, all principal and accrued interest will be paid
in cash. Indicate the effect on the financial statements at December 31.
a. Interest Receivable increases $240, Interest Revenue increases $240
b. Interest Receivable increases $360, Interest Revenue increases $360
c. Interest Receivable increases $480, Interest Revenue increases $480
d. Interest Receivable increases $720, Interest Revenue increases $720
The following information comes from the records of Morton Corporation. Assume no
additional investment by owners when answering the following questions:
A) What is the amount of owners’ equity at January 1, 2014? __________________ B)
What is the amount of liabilities at December 31, 2014? __________________ C)
Assume that the company declared and paid dividends of $22,000 during the year. How
much net income did it earn during the year? D) Assume that the company paid no
dividends during the year. Without looking at the income statement, how can you tell if
the company is profitable or not?
Match each of the following terms related to interest and time value of money
calculations to their appropriate definition.
a. Time value of money
b. Simple interest
c. Compound interest
d. Future value of a single amount
e. Present value of a single amount
f. Annuity
g. Future value of an annuity
h. Present value of an annuity
The amount that will be accumulated in the future when one amount is invested at the
present time and accrues interest until the future time.
Why is the use of the U.S. dollar as a unit of measure for financial statement data in the
U.S. widely accepted?
a. U.S. dollar remains stable over a long period of time.
b. U.S. dollar is universally recognized as a reliable financial measure.
c. U.S. dollar is the medium of monetary exchange in the U.S.
d. U.S. dollar is required for financial statement presentation by the FASB and SEC.
Match the selected items from a classified balance sheet and multiple-step income state
ment to the section in which they would appear on the classified balance sheetor the inc
ome statement.
a. Current Assets (balance sheet)
b. Property, Plant, & Equipment (balance sheet)
c. Current Liabilities (balance sheet)
d. Long-term Liabilities (balance sheet)
e. Stockholders’ Equity (balance sheet)
f. Operating Revenue (income statement)
g. Operating Expenses (income statement)
h. Other Revenue & Expenses (income statement)
i. Income Taxes (income statement)
Interest expense
Select the account that would be increased to show each of the following costs.
a. Land
b. Land Improvements
c. Buildings
d. Machinery and Equipment
e. An Expense Account
The costs paid to clear land
To which of the following entities must a company report if it sells its stock on the
organized stock market?
a. American Institute of Certified Public Accountants (AICPA)
b. American Accounting Association (AAA)
c. International Accounting Standards Board (IASB)
d. Securities and Exchange Commission (SEC)
Pilot Company reported the following information for 2015 and 2016.
How much cash was paid for insurance during 2016?
a. $13,300
b. $14,200
c. $15,100
d. $15,700
Each account has a normal balance. For the following list of accounts, indicate whether
the normal balance of each is a debit or a credit.
a. Debit
b. Credit
Office Supplies
Utah Corp.Use the following selected data and additional information from the records
of Utah Corp. to answer the questions that follow.Balance Sheet Data
2016 2015
Additional information:
(1) Equipment with a cost of $15,000 and a book value of $3,000 was sold for $5,000
during 2016.
(2) Common stock was issued to retire bonds payable during 2016.
(3) The only items affecting retained earnings in 2016 were net income and dividends
declared and paid.
Review the data for Utah Corp.REQUIRED:
(A) What amount was paid to retire bonds payable during 2016?
(B) How would the transaction to retire bonds by issuing common stock be reported on
the statement of cash flows for 2016 for Utah Corp.?
Identify where each of the following accounts would be reported on CocaÂCola’s
financial statements.
a. Balance Sheet-Property, Plant, and Equipment
b. Balance Sheet-Intangible Assets
c. Balance Sheet-Current Assets
d. Balance Sheet-Other Assets
e. Income Statement-Operating Section
f. Income Statement-Other Revenue and Expense Section
g. Statement of Cash Flows
Research and development costs
Which combination of ratios will best analyze Stetson’s income statement performance?
a. Earnings per share, gross profit, and profit margin ratio
b. Gross profit ratio, return on common stockholders’ equity ratio, debt-to-equity ratio
c. Debt-to-equity ratio, gross profit ratio, and profit margin ratio
d. Current ratio, gross profit ratio, and return on common stockholders’ equity ratio
Select the correct revenue recognition principle for each of the following.
a. Recognize revenue over the passage of time.
b. Recognize revenue when the customer takes possession of the product.
c. Recognize revenue when cash is collected.
d. Recognize revenue when service is performed.
Interest
The names of the four major types of adjusting entries are,
_________________________, _________________________, and
_________________________.
Select the best answer from the list below to complete statements 131-141 that follow.
A ________________ allows the firm to eliminate a class of stock by paying the
stockholders a specified amount.
Apply the time value of money in the following independent situations:
1> Jason Marx deposited $29,500 in the bank on January 1, 1998, at an interest rate of
12% compounded annually. How much has accumulated in the account by January1,
2015?
2> June Cunningham deposited $54,200 in the bank on January 1, 2005. On January 2,
2015, this deposit has accumulated to $106,611. Interest is compounded annually on the
account. What rate of interest did June earn on the deposit?
Digital Forces
Selected data from the financial statements for Digital Forces is presented below.
Refer to the financial statement information for Digital Forces. Determine the dollar
amount of cost of goods purchased for Digital Forces for 2015.
Explain what amount is recorded in the Additional Paid-in Capital account when stock
is issued.