In a recent year Garvey Corporation had net income of $100,000, interest expense of
$20,000, and tax expense of $30,000. What was Garvey Corporation’s times interest
earned for the year?
a.5.00
b.6.00
c.6.50
d.7.50
The gross profit rate is computed by dividing gross profit by
a.sales revenue.
b.cost of goods sold.
c.net sales.
d.operating expenses.
The following partial amortization schedule is available for Courtney Company who
sold $500,000, five-year, 10% bonds on January 1, 2014 for $520,000 and uses annual
straight-line amortization.
Which of the following amounts should be shown in cell (i)?
a.$52,000
b.$54,000
c.$50,000
d.$10,000
The following information is from the Income Statement of the Dirt Poor Laundry
Service:
The entry to close the Service Revenue account includes a:
a.debit to Service Revenue for $5,500.
b.credit to Service Revenue for $5,500.
c.debit to Income Summary for $5,500.
d.debit to Retained Earnings for $5,500.
Conley Company purchased equipment for $60,000 on January 1, 2012, and will use
the double-declining-balance method of depreciation. It is estimated that the equipment
will have a 5-year life and a $3,000 salvage value at the end of its useful life. The
amount of depreciation expense recognized in the year 2014 will be
a.$8,640.
b.$13,680.
c.$14,400.
d.$8,208.
Use the following data to determine the total dollar amount of assets to be classified as
property, plant, and equipment.
a.$270,000
b.$250,000
c.$180,000
d.$210,000
The following information is related to December 31, 2013 balances.
During 2014 sales on account were $580,000 and collections on account were
$344,000. Also during 2014 the company wrote off $32,000 in uncollectible accounts.
An analysis of outstanding receivable accounts at year end indicated that bad debts
should be estimated at $216,000. The change in the cash realizable value from the
balance at 12/31/13 to 12/31/14 was a
a.$200,000 increase.
b.$236,000 increase.
c.$168,000 increase.
d.$204,000 increase.
A company€s past experience indicates that 60% of its credit sales are collected in the
month of sale, 30% in the next month, and 5% in the second month after the sale; the
remainder is never collected. Budgeted credit sales were:
The cash inflow in the month of June is expected to be
a.$226,000.
b.$171,000.
c.$180,000.
d.$216,000.
The financial statements of the Nelson Manufacturing Company reports net sales of
$300,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year
and end of year, respectively. What is the accounts receivable turnover for Nelson?
a.3.8 times
b.6 times
c.10.0 times
d.7.5 times
Which one of the following would not be considered a liquidity ratio?
a.Current ratio
b.Inventory turnover
c.Current cash debt coverage
d.Return on assets
Racer Corporation’s December 31, 2014 balance sheet showed the following:
Racer’s total stockholders’ equity was
a.$73,520,000.
b.$62,480,000.
c.$72,680,000.
d.$71,840,000.
Listed below are seven errors or problems that might occur in the processing of cash
transactions. Also shown is a list of internal control principles. Evaluate each possible
error and cite a principle that is listed that would reduce the probability of the error
occurring. If none of the principles given will correct the problem, write “None.” If you
think more than one principle is appropriate, list all principles that apply.
Possible Errors or Problems
Internal Control Principles
Hanover Lighting had a beginning inventory of 15 units at a cost of $7 per unit on
August 1. During the month, the following purchases and sales were made.
Hanover uses a periodic inventory system.
Instructions: Determine ending inventory and cost of goods sold under:
1)FIFO
2)LIFO
1)FIFO:
Ending inventory = $_____________; cost of goods sold = $____________.
2)LIFO:
Ending inventory = $_____________; cost of goods sold = $____________.
For each item listed below, enter a code letter in the blank space to indicate the
allocation terminology for the item. Use the following codes for your answer.
A – Amortization D – Depreciation N – None of these
A $150,000 bond with a quoted priced of 102 ¼ is sold for $153,375.
The statement of cash flows is the only required financial statement that is not prepared
from an adjusted trial balance. What are the sources of information for preparing a
statement of cash flows? Explain how the accrual basis of accounting affects the
statement of cash flows.
The following stockholders’ equity accounts, arranged alphabetically, are in the ledger
of Marvel Corporation at December 31, 2014.
Instructions
Prepare the stockholders’ equity section of the balance sheet at December 31, 2014.
Assuming a statement of cash flows is prepared using the indirect method, indicate the
reporting of the transactions and events listed below by major categories on the
statement. Use the following code letters to indicate the appropriate category under
which the item would appear on the statement of cash flows.
Prepare an income statement and a retained earnings statement, for the month of
October, 2014 and a balance sheet at October 31, 2014 for the medical practice of Linda
Denny, MD, from the items listed below.
Identify the internal control procedures applicable to cash disbursements followed by
Tolan Company in each of the following cases.
