Tampa Corporation’s balance sheet showed the following amounts for their liabilities
and stockholders’ equity accounts: Current Liabilities, $20,000; Bonds Payable,
$60,000; Lease Obligations, $12,000; and Deferred Income Taxes, $2,000. Total
stockholders’ equity was $42,000. The debt-to-equity ratio is
a. 0.45
b. 0.58
c. 1.76
d. 2.24
Use the information below for Focal Point Corp. for 2015 and 2016 to answer the
following question.
Assume that there were no retained earnings transactions other than those dealing with
dividends and net income. How much dividends did Focal Point declare during 2016?
a. $ 95,000
b. $105,000
c. $140,000
d. $150,000
When using the direct method, how is the purchase of equipment for cash shown on the
statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
A company with a capital structure that shifts more toward debt financing will appear to
be in a stronger position to pay interest and any principal amount that may be maturing
by using its cash flows generated by operating activities.
a. True
b. False
Pharma Corp.
The data presented below for Pharma Corp. is for the year ended December 31, 2015:
See the data for Pharma Corp. If Pharma Corp. estimates its bad debt to be 1% of net
credit sales, what will be the balance in the Allowance for Doubtful Accounts account
after the adjustment for bad debts?
a. $12,400
b. $13,700
c. $14,000
d. $15,000
Financial accounting is the branch of accounting concerned with communication with
internal management.
a. True
b. False
Klein’s Shoe Company uses a perpetual inventory system. The beginning balance in its
inventory account is $1,500 and the ending balance is $1,000. Cost of goods sold is
$6,500. What was the amount of inventory purchased during the year?
a. $ 500
b. $6,000
c. $7,000
d. $7,500
The percentage of net credit sales approach for recognizing bad debts considers any
existing balance in Allowance for Doubtful Accounts.
a. True
b. False
Tracy, Inc.
Tracy, Inc. adjusts its books each month but closes its books at the end of the year. The
trial balance at July 31 before adjustments is as follows:
Refer to the trial balance of Tracy, Inc.On July 1, Tracy paid four months in advance for
insurance. Which of the following is included in the adjusting entry at July 31?
a. A debit to Prepaid Insurance for $780
b. A credit to Prepaid Insurance for $2,340
c. A debit to Prepaid Insurance for $2,340
d. A credit to Prepaid Insurance for $780
Costs incurred for purchases of merchandise result in an asset, Merchandise Inventory,
and are eventually matched with revenue at the time the product is sold.
a. True
b. False
Use the selected data from the consolidated statements of cash flows for Vancouver
Corporation for the years ended December 31, 2016 and 2015, to answer the questions
that follow.
REQUIRED:
(A) What method does Vancouver use to calculate the net cash provided by operating
activities?
(B) In 2016, why are depreciation and amortization expenses added back to net income
in the operating activities section of the statement of cash flows?
Select the financial statement on which the user would most likely find the answer to
the question given.
a. Income statement
b. Balance sheet
c. Statement of cash flows
d. Statement of retained earnings What amount of cash was used for to purchase
property, plant, and equipment during the year?
In the stockholders’ equity section of a classified balance sheet, a distinction is made
between amounts invested by owners and amounts accumulated from business earnings.
a. True
b. False
When a bank pays interest or collects an amount owed to a company by one of the
bank’s customers, the bank issues a debit memorandum.
a. True
b. False
CarWorks Company has 100,000 authorized shares of $4 par common stock. The
company issued 40,000 shares at $8. Subsequently, CarWorks declared a 2% stock
dividend on a date when the market price was $11 a share. What is the amount
transferred from the retained earnings account to paid-in capital accounts as a result of
the stock dividend?
a. $8,800
b. $4,800
c. $3,200
d. $6,400
Significant differences exist in terms on financial statements around the world. For
example, another name for what we know as Contingent Liabilities in the U.S. is:
a. Share Capital
b. Capital Reserves
c. Provisions for Other Risks
d. Deferred Income