Stockholders prefer to invest in preferred stock because
a. preferred stock confers preferred voting rights.
b. preferred stock can always be converted to common stock if they desire.
c. the dividends are generally increased each year.
d. the dividends are paid on preferred stock before they are paid on common stock.
Carnival Bakery borrowed $500,000 from Front Street Bank. Carnival then hired a
contractor to build a new cookie distribution outlet. In which section of Carnival’s
statement of cash flows would you find information that indicated that Carnival
acquired the new cookie distribution outlet?
a. Operating Activities
b. Investing Activities
c. Financing Activities
d. Profit Activities
During 2014, Wimbrow Images reported $60,000 of net income and generated $80,000
of cash from operations. During the year, Wimbrow Images paid $15,000 to purchase a
new delivery truck and also paid dividends in the amount of $30,000. Wimbrow Images
borrowed $40,000 cash from the bank. At the beginning of the year, cash amounted to
$50,000. A) Prepare a statement of cash flows for the year ended December 31, 2014.
B) How much more cash does Wimbrow Images have available at the end of the year
than at the beginning? C) Why is there a difference between net income and cash flows
from operations?
When will bonds sell at a discount?
a. The credit standing of the issuing company is not as good as other companies in a
similar line of business.
b. The face rate of interest is less than the market rate of interest at the time of issue.
c. The face rate of interest is more than the market rate of interest at the time of issue.
d. The issuing company will be able to retire the bonds at less than face at maturity.
Which balance sheet accounts are most affected by operating activities?
a. Current assets and current liabilities
b. Long-term assets
c. Long-term liabilities
d. Stockholders’ equity
From the following list, identify each item as operating (O), investing (I), financing (F),
or not separately reported on the statement of cash flows (N).
a. Operating-O
b. Investing-I
c. Financing-F
d. Not separately reported-N
Issuance of common stock for equipment
In an operating lease, the lessee has acquired sufficient rights of ownership and control
of the property to be considered its owner.
a. True
b. False
Apple Company had terms of net 60 days for customers. The number of days’ sales in
accounts receivable for Apple was 42 days. Apple is efficient in the collection of its
receivables.
a. True
b. False
The following transactions occurred during March, the first month of operations for
Canyon Products, Inc.: 1> Issued 50,000 shares of capital stock in exchange for
$600,000 cash
2> Purchased land for $400,000, using a $150,000 cash down payment and signing a
note payable for the balance.
3> Made a $60,000 cash payment on the note payable from the purchase of land.
4> Purchased equipment on credit from Burton, Inc. for $63,000. What is the balance in
the Cash account at the end of March?
a. $810,000
b. $210,000
c. $600,000
d. $390,000
The quality of accounting information that makes it comprehensible to those willing to
spend the necessary time is consistency.
a. True
b. False
Explain the differences between the cash and accrual basis of accounting and how the
adjusting process fits in.
The stockholders’ equity section of the balance sheet for Scuba Gear Corporation
appeared as follows before its recent stock dividend:
Scuba Gear declared a 10% stock dividend when the market price per share was $8.
After the stock dividend was distributed, the components of the stockholders’ equity
section were:
Refer to the data for Slammer Sports. If bad debts are estimated at 1% of net sales, how
much will Slammer Sports report as bad debts expense for 2014?
include any amount that has been incurred due to the passage of time, but not paid as of
the balance sheet date.
Cyprus Corp. received a 7%, 6-month promissory note with a face amount of $8,000
from the Mustafa Company for the sale of merchandise on May 1, 2014. Cyprus’
accounting yearÂend is December 31. REQUIRED : Identify the maturity date of the
note.
An amount recorded as an increase in the company’s cash account at month-end, but
which has not yet been reflected on the bank statement is called a(n).
Twilight Corp. began the year with a balance in its Income Taxes Payable account of
$13,000. The year-end balance in the account was $18,000. The company uses the
indirect method in the Operating Activities section of the statement of cash flows.
Therefore, it presents the amount of income taxes paid at the bottom of the statement as
a supplemental disclosure. The amount of taxes paid during the year was $15,000.
REQUIRED:
What amount of income tax expense will appear on Twilight’s income statement?
