The classified balance sheet for a company reported current assets of $1,623,850, total
liabilities of $799,540, Common Stock of $1,000,000, and Retained Earnings of
$130,260. The current ratio was 2.5.
Use the information above to answer the following question. What is the total amount
of current liabilities?
A) $649,540.
B) $4,059,625.
C) $771,920.
D) $799,540.
Use the information above to answer the following question. The company would
report net cash provided by (used in) financing activities of:
A) $(2,500).
B) $2,000.
C) $5,000.
D) $6,000.
Choose the appropriate letter to match the characteristics with the type of company. A
given characteristic may match more than one type of company.
CHARACTERISTIC
1> ________ Issues shares of stock that are traded on a stock exchange such as the
NYSE
2> ________ The owners of the business are personally liable for the debts of the
company
3> ________ Shares of stock must be purchased directly from current owners
4> ________ Can raise more financial capital by selling stock to the greatest number of
investors
5> ________ The easiest form of business to start
6> ________ The business ceases to exist upon the departure of one of the owners
7> ________ The owners pay taxes on the profits of the business
TYPE OF COMPANY
A. Partnership
B. Publicly traded corporation
C. Privately traded corporation
D. Sole Proprietorship
A company issues 1 million shares of common stock with a par value of $0.02 for $15 a
share. The entry to record this transaction includes a debit to Cash for:
A) $20,000 and a credit to Common Stock for $20,000.
B) $15,000,000 and a credit to Common Stock for $15,000,000.
C) $15,000,000, a credit to Common Stock for $20,000, and a credit to Additional
Paid-in Capital for $14,980,000.
D) $20,000, a debit to Capital Receivable for $14,980,000, a credit to Common Stock
for $20,000, and a credit to Additional Paid-in Capital for $14,980,000.
A company lends its supplier $150,000 for 3 years at a 6% annual interest rate. Interest
payments are to be made twice a year. Each interest payment will be for:
A) $9,000
B) $13,500
C) $4,500
D) $27,000
A company receives $102,000 when it issues a bond with a face value of $100,000 and
a stated interest rate of 7%. Which of the following statements is correct?
A) The entry to record the issuance will include a credit to Bonds Payable for $102,000.
B) The market interest rate is 7%.
C) The annual interest expense is $7,000.
D) The carrying value of the bonds will be $100,000 at maturity.
The straight-line depreciation method and the double-declining-balance depreciation
method:
A) produce the same total depreciation over the asset’s useful life
B) produce the same amount of depreciation expense each year.
C) produce the same book value each year.
D) are the only acceptable methods of depreciation for financial reporting.
Investors are often interested in the amount of net income distributed as dividends.
Where would investors look for this information in the company’s annual report?
A) Statement of retained earnings
B) Balance sheet
C) Notes to the financial statements
D) Income statement
When it paid its rent in advance, a company recorded Prepaid Rent. As of the end of the
accounting year, the prepayment had expired. If no adjustment is made to record this
expiration, which of the following will occur?
A) Assets will be understated and expenses will be overstated.
B) Assets will be overstated and expenses will be understated.
C) Assets and expenses will be overstated.
D) Assets and expenses will be understated.
Flynn Company uses a perpetual inventory system and reported $500,000 of inventory
at the beginning of the month based on a physical count of inventory. During the month,
the company bought $45,000 of inventory and sold inventory that had cost $30,000. At
the end of the month, the physical count of inventory shows $510,000 on hand. How
much shrinkage occurred during the month?
A) $35,000
B) $25,000
C) $5,000
D) $10,000