Which one of the following is not an external user of financial information?
a. Company management
b. Internal Revenue Service
c. Creditors
d. Stockholders
In the statement of cash flows, an increase in a current liability will appear as an
increase in the Financing category.
a. True
b. False
Chen’s Department Store Chen’s Department Store is a merchandising company that
uses the periodic inventory system. Selected account balances are listed below:
Refer to the account information for Chen’s Department Store. Determine Chen’s gross
profit.
a. $68,000
b. $72,000
c. $78,000
d. $85,000
With respect to the statement of cash flows,
a. retirement and repurchase of stock is a financing activity.
b. a stock split is a financing activity.
c. a stock dividend is an investing activity.
d. the declaration of a cash dividend account is an operating activity.
A LIFO liquidation occurs when a company sells fewer units than it buys during the
period.
a. True
b. False
Like sales revenue, cost of goods sold represents an inflow of assets.
a. True
b. False
Under the indirect method, a decrease in inventory is added to net income to determine
cash flow from operating activities.
a. True
b. False
Which one of the approaches for the allowance method of accounting for bad debts
emphasizes matching bad debts expense with revenue on the income statement?
a. The percentage of accounts receivable approach
b. The percentage of net credit sales approach
c. The direct write-off method
d. The uncollectible approach
The current ratio
a. is generally smaller than the quick ratio.
b. decreases when a company becomes more liquid.
c. increases when a company allows more customers to charge on account instead of
collecting cash.
d. is larger when a company is more liquid.
Guinther & Sons, Inc. Guinther & Sons, Inc. a retailer of men’s clothing, earned a net
profit of $77,000 for 2014. The balance sheet for Guinther & Sons includes the
following items:
Read the information for Guinther & Sons. Calculate the total amount of current assets
for Guinther & Sons.
a. $ 100,000
b. $ 147,000
c. $ 150,000
d. $ 249,000
Where can the amounts needed to compute the accounts receivable turnover ratio be
found?
a. The income statement
b. The balance sheet
c. The statement of cash flows
d. Both (a) and (b).
Land is not a depreciable asset, but the amount allocated to the building is subject to.
Evanston Inc. started the year with $35,000 in accounts receivable and ended the year
with $50,000 in the account. Describe how information regarding the company’s
accounts receivable should be reflected on its statement of cash flows, assuming use of
the indirect method.
The amount recognized on the Income Statement as the cost of inventory will be
recognized as a(n)
_________________________.
Derek and Kent are partners. At the beginning of the current year, Derek’s capital
account is $30,000, while Kent’s is $50,000. The partners decided to allocate income
with 10% interest on capital balances at the beginning of the period and divide the
balance equally. Net income for the current year, 2015, is $80,000. Each partner
withdrew $15,000 for personal use during the year. Determine the amount of income
that each partner will be allocated.
What is the purpose of the current ratio? How does the quick ratio differ from the
current ratio?
Explain the distinction between a note receivable and an account receivable.
Explain the difference between authorized, issued, and outstanding shares.
In the following information from the 2015 annual reports of Focal Point Industries all
figures have been rounded to millions of dollars.
REQUIRED:
(1) Describe what costs are included in each of the three types of inventories listed
above for Focal Point Industries. (2) Even though the footnote describing the inventory
costing method(s) used by Focal Point Industries is not provided above, what can you
conclude about the inventory costing method(s) used by the company?
Accountants use theto overcome the deficiencies of the direct write-off method for bad
debts.