Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and
$30,000 respectively. The partners share profits and losses 20%, 40%, and 40%
respectively.
Anne retires and is paid $80,000 based on the terms of the original partnership
agreement. If the bonus method is used, what is the capital of the remaining partners?
A.Donald, $40,000; Todd, $30,000
B.Donald, $30,000; Todd, $10,000
C.Donald, $50,000; Todd, $50,000
D.Donald, $24,000; Todd, $18,000
Milton Company has total current assets of $46,000, including inventory of $10,000,
and current liabilities of $20,000. The company’s current ratio is:
A.0.4
B.1.8
C.2.8
D.2.3
All of the following are downstream costs except:
A.packaging costs
B.advertising
C.research and development
D.sales commissions
The difference between an ordinary annuity and an annuity due is:
A.an ordinary annuity represents a present value and an annuity due represents a future
value.
B.an ordinary annuity represents a future value and an annuity due represents a present
value.
C.an ordinary annuity assumes the cash flows occur at the beginning of the period and
an annuity due assumes the cash flows occur at the end of the period.
D. an ordinary annuity assumes the cash flows occur at the end of the period and an
annuity due assumes the cash flows occur at the beginning of the period.
A company sells a building to a bank in 2013 at a gain of $100,000 and immediately
leases the building back for period of five years. The lease is accounted for as an
operating lease. The building was originally purchased for $200,000 and currently had a
book value of $50,000 at the date of the sale.
As a result of the sale and leaseback transaction in 2013, what is the difference between
income using U.S. GAAP and IFRS in 2013?
A.U.S. GAAP income is $80,000 higher.
B.U.S. GAAP income is $100,000 higher.
C.IFRS income is $50,000 lower.
D.IFRS income is $100,000 lower.
E.IFRS income is $80,000 higher.
The disadvantages of the partnership form of business organization, compared to
corporations, include
A.the legal requirements for formation.
B.unlimited liability for the partners.
C.the requirement for the partnership to pay income taxes.
D.the extent of governmental regulation.
E.the complexity of operations.
During 2013, XYZ Company issued common stock to stockholders for $10,000;
purchased land for $2,000 cash; provided services to customers for $8,000; paid cash
operating expenses of $6,200; and paid cash dividends of $1,000 to the company’s
owners. Enter each of these events into the horizontal financial statements model,
below. Indicate dollar amounts of increases and decreases. For cash flows, show
whether they are operating activities (OA), investing activities (IA), or financing
activities (FA).
A company sells a building to a bank in 2013 at a gain of $100,000 and immediately
leases the building back for period of five years. The lease is accounted for as an
operating lease. The building was originally purchased for $200,000 and currently had a
book value of $50,000 at the date of the sale.
What amount should be recognized in 2013 as a gain on the sale using U.S. GAAP?
A.$20,000.
B.$50,000.
C.$100,000.
D.$150,000.
E.$200,000.
Which of the following statements concerning manufacturing costs is incorrect?
A.All salaries incurred by the sales department are expensed as incurred.
B.Direct labor costs are recorded initially in an inventory account.
C.Depreciation on manufacturing equipment is a period cost.
D.The cost of direct materials can be readily traced to products.
Convergence of accounting standards would not occur by:
A.FASB adopting an existing IASB standard.
B.IASB adopting an existing FASB standard.
C.IASB issuing a new standard.
D.IASB and FASB jointly developing a new standard.
E.IASB and FASB each issuing a similar but not identical standard.
All of the following are considered to be measures of a company’s short-term
debt-paying ability except:
A.Current ratio.
B.Earnings per share.
C.Inventory turnover.
D.Average collection period.
Short-term creditors are usually most interested in assessing:
A.Liquidity.
B.Solvency.
C.Managerial effectiveness.
D.Profitability.
Indicate whether each of the following statements is true or false.
_____ a) Managerial performance can be evaluated by comparing actual amounts with
standard amounts.
_____ b) Differences between standard and actual amounts are called variances.
_____ c) When actual results are compared to a flexible budget based on actual volume
of activity, any variances result from differences between standard and actual per unit
amounts.
_____ d) If the actual sales price per unit is higher than the standard, a company’s sales
price variance is unfavorable.
_____ e) Differences between flexible budget costs and revenues and the actual results
are volume variances.
Hampton Company is trying to decide whether to seek liquidation or reorganization.
Hampton has provided the following balance sheet:
Additional information is as follows:
– The investments are currently worth $13,000.
– It is estimated that $32,000 of the accounts receivable are collectible.
– The inventory can be sold for $74,000.
– The prepaid expenses and the intangible assets have no net realizable value.
– The land and building are currently valued at $250,000.
– The equipment can be sold for $60,000.
– Administrative expenses (not yet recorded) are estimated to be $12,500.
– Accrued expenses include $17,000 of salaries payable ($11,000 to one employee and
$3,000 each to two other employees).
– Accrued expenses include $7,000 of unpaid payroll taxes.
Compute the amount of total liabilities with priority.
Omicron Company is considering purchasing equipment that would cost $60,000 and
have a useful life of 5 years. The equipment is expected to provide net cash inflows of
$16,000 per year. Omicron’s cost of capital is 12%.
Required:
Estimate the internal rate of return for this capital investment. Is this an acceptable
investment?
Pierce Company is considering the purchase of new equipment that will cost $150,000.
The equipment will save the company $48,000 per year in cash operating costs. The
equipment has an estimated useful life of five years and no expected salvage value. The
company’s cost of capital is 12%.
Required:
1) Assuming the company is subject to a 40% tax rate, compute the net present value.
2) Compute the amount of the annual depreciation tax shield provided by the new
equipment.
3) Should the equipment be purchased? Why or why not?
For what events or conditions should the Articles of Partnership make provision?
What part do management accountants play in corporate governance?
Why was the Public Utility Holding Company Act of 1935 created?
Hampton Company is trying to decide whether to seek liquidation or reorganization.
Hampton has provided the following balance sheet:
Additional information is as follows:
– The investments are currently worth $13,000.
– It is estimated that $32,000 of the accounts receivable are collectible.
– The inventory can be sold for $74,000.
– The prepaid expenses and the intangible assets have no net realizable value.
– The land and building are currently valued at $250,000.
– The equipment can be sold for $60,000.
– Administrative expenses (not yet recorded) are estimated to be $12,500.
– Accrued expenses include $17,000 of salaries payable ($11,000 to one employee and
$3,000 each to two other employees).
– Accrued expenses include $7,000 of unpaid payroll taxes.
Prepare a Statement of Financial Affairs.
Give three examples of asset use transactions.