Porter Company has just purchased equipment that requires annual payments of
$22,500 to be paid at the end of each of the next 4 years. The appropriate discount rate
is 15%. What is the present value of the payments?
a.$64,237
b.$90,000
c.$35,404
d.$81,107
The collection of a $600 account beyond the 2 percent discount period will result in a
a.debit to Cash for $588
b.debit to Accounts Receivable for $600
c.debit to Cash for $600
d.debit to Sales Discounts for $12
Hoosher Enterprises purchased an 18-month insurance policy on May 31, 2014 for
$7,200. The December 31, 2014 balance sheet would report Prepaid Insurance of:
a.$0 because Prepaid Insurance is reported on the Income Statement.
b.$2,800.
c.$4,400.
d.$7,200.
The inventory turnover decreased by approximately 11% from 2013 to 2014 while the
days in inventory increased by a similar amount (12%) over the same period. Both of
these changes would be considered unfavorable since it’s better to have a higher
inventory turnover ratio with a corresponding lower days in inventory. Groneman.,
Inc.’s gross profit rate increased by 6.8% from 2013 to 2014.
Burnham Company reported the following summarized annual data at the end of 2014:
Based on an ending FIFO inventory of $250,000.
The income tax rate is 30%. The controller of the company is considering a switch from
FIFO to LIFO. He has determined that on a LIFO basis, the ending inventory would
have been $205,000.
Instructions
(a)Restate the summary information on a LIFO basis.
(b)What effect, if any, would the proposed change have on Burnham’s income tax
expense, net income, and cash flows?
(c)If you were an owner of this business, what would your reaction be to this proposed
change?
The stockholders’ equity section of Piper Corporation’s balance sheet at December 31,
2013, appears below:
During 2014, the following stock transactions occurred:
Instructions
(a)Prepare the journal entries to record the above stock transactions.
(b)Prepare the stockholders’ equity section of the balance sheet for Piper Corporation at
December 31, 2014. Assume that net income for the year was $150,000 and that no
dividends were declared.
Parks Blair invested $5,000 at 8% annual interest and left the money invested without
withdrawing any of the interest for 15 years. At the end of the 15 years, Parks decided
to withdraw the accumulated amount of money. Parks has found the following values in
various tables related to the time value of money.
To the closest dollar, which amount would he withdraw, assuming that the investment
earns interest compounded annually?
a.$42,797
b.$75,000
c.$1,576
d.$15,861
A company has an ending accounts receivable balance of $900,000 and it estimates that
uncollectible accounts will be 2% of the receivable balance. If Allowance for Doubtful
Accounts has a credit balance of $2,000 prior to adjustment, its balance after adjustment
will be a credit of
a.$20,000.
b.$18,000.
c.$17,960.
d.$16,000.
On January 1, 2013, Leardon Inc. purchased equipment for $60,000. The company is
depreciating the equipment at the rate of $800 per month. At January 31, 2014, the
balance in Accumulated Depreciation is:
a.$800 debit.
b.$9,600 credit.
c.$10,400 credit.
d.$53,200 debit.
Laser Performance Inc. has the following information available (amount in thousands).
What is the cash debt coverage?
a..375 times.
b.1.33 times.
c..600 times.
d.1.625 times.
Savory Thymes, Inc. had net credit sales of $9,000,000 and cost of goods sold of
$5,250,000 for the year. The average inventory for the year amounted to $2,500,000.
The inventory turnover for the year is
a.3.2 times.
b.2.8 times.
c.2.6 times.
d.2.1 times.
Racer Corporation’s December 31, 2014 balance sheet showed the following:
Racer declared and paid a $100,000 cash dividend on December 15, 2014. If the
company’s dividends in arrears prior to that date were $24,000, Racer’s common
stockholders received
a.$76,000.
b.$36,000.
c.$44,000.
d.no dividend.
The interest on a $9,000, 10%, 1-year note receivable is
a.$9,000.
b.$75.
c.$900.
d.$9,900.
A company’s net cash provided by operating activities is approximately the same as its
net income. During which phase is this company most likely in?
a.Introductory phase
b.Maturity phase
c.Decline phase
d.Growth phase
The following ledger accounts are used by the Heartland Race Track:
Instructions:
For each of the following transactions below, prepare the journal entry (if one is
required) to record the initial transaction and then prepare the adjusting entry, if any,
required on November 30, the end of the fiscal year.
(a)On November 1, paid rent on the track facility for three months, $150,000.
(b)On November 1, sold season tickets for admission to the racetrack. The racing
season is year-round with 25 racing days each month. Season ticket sales totaled
$960,000.
(c)On November 1, borrowed $250,000 from First National Bank by issuing a 6% note
payable due in three months.
(d)On November 5, programs for 20 racing days in November, 25 racing days in
December and 15 racing days in January were printed for $3,000.
(e)The accountant for the concessions company reported that gross receipts for
November were $140,000. Ten percent is due to Heartland and will be remitted by
December 10.