Chapter 05 – Communicating and Interpreting Accounting Information
46. Contributed capital consists of which of the following two accounts?
47. Which of the following are the criteria used to determine whether an item is
extraordinary?
Chapter 05 – Communicating and Interpreting Accounting Information
48. Which of the following journal entries is correct when common stock is sold for cash at a
price greater than par value?
49. Which of the following statements is false?
Chapter 05 – Communicating and Interpreting Accounting Information
50. Which of the following is true about gross profit (gross margin)?
51. Which of the following best describes income from operations?
Chapter 05 – Communicating and Interpreting Accounting Information
52. The Callie Company has provided the following information:
• Operating expenses were $231,000;
• Cost of goods sold was $376,000;
• Net sales were $940,000;
• Interest expense was $32,000;
• Gain on sale of a building was $76,000;
• Income tax expense was $151,000.
What was Callie’s gross profit?
Chapter 05 – Communicating and Interpreting Accounting Information
53. The Callie Company has provided the following information:
• Operating expenses were $231,000;
• Cost of goods sold was $376,000;
• Net sales were $940,000;
• Interest expense was $32,000;
• Gain on sale of a building was $76,000;
• Income tax expense was $151,000.
What was Callie’s income from operations?
Chapter 05 – Communicating and Interpreting Accounting Information
54. The Callie Company has provided the following information:
• Operating expenses were $231,000;
• Cost of goods sold was $376,000;
• Net sales were $940,000;
• Interest expense was $32,000;
• Gain on sale of a building was $76,000;
• Income tax expense was $151,000.
What was Callie’s income before taxes?
55. Which of the following is not reported as an operating expense on the income statement?
Chapter 05 – Communicating and Interpreting Accounting Information
56. The Nellie Company has provided the following information:
• Operating expenses were $115,000;
• Gross profit was $629,000;
• Cost of goods sold was $470,000
• Interest expense was $17,000;
• Extraordinary loss was $29,000;
• Income tax expense was $199,000.
What was Nellie’s operating income?
Chapter 05 – Communicating and Interpreting Accounting Information
57. The Nellie Company has provided the following information:
• Operating expenses were $115,000;
• Gross profit was $629,000;
• Cost of goods sold was $470,000
• Interest expense was $17,000;
• Extraordinary loss was $29,000;
• Income tax expense was $199,000.
What was Nellie’s income before taxes?
Chapter 05 – Communicating and Interpreting Accounting Information
58. The Willie Company has provided the following information:
• Operating expenses were $345,000;
• Income from operations was $215,000;
• Net sales were $1,100,000;
• Interest expense was $71,000;
• Discontinued operations loss was $87,000;
• Income tax expense was $58,000.
What was Willie’s cost of gross profit?
Chapter 05 – Communicating and Interpreting Accounting Information
59. The Willie Company has provided the following information:
• Operating expenses were $345,000;
• Income from operations was $215,000;
• Net sales were $1,100,000;
• Interest expense was $71,000;
• Discontinued operations loss was $87,000;
• Income tax expense was $58,000.
What was Willie’s income before taxes?
60. Which of the following would not be a component of income from operations?
Chapter 05 – Communicating and Interpreting Accounting Information
61. Which of the following statements regarding earnings per share is false?
62. Which of the following would not typically be disclosed in the notes to the financial
statements?
Chapter 05 – Communicating and Interpreting Accounting Information
63. Which of the following statements is false?
64. In which of the following classifications would cash dividend payments to stockholders be
reported?
Chapter 05 – Communicating and Interpreting Accounting Information
65. A company issued 1,000 shares of $10 par value common stock in exchange for $15,000.
Which of the following correctly describes the impact of this transaction on the financial
statements?
66. Where are stock issues in exchange for cash reported on a statement of cash flows?
Chapter 05 – Communicating and Interpreting Accounting Information
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67. Where are acquisitions of previously issued stock for cash reported on a statement of cash
flows?
68. Which of the following statements is false when a company sells inventory costing $700
for $1,200?
Chapter 05 – Communicating and Interpreting Accounting Information
69. Which of the following statements is false when a company sells inventory costing $900
for $1,500 cash?
70. Superior has provided the following information for its recent year of operation:
• The common stock account balance at the beginning of the year was $20,000 and the year-
end balance was $25,000.
• The additional paid-in capital account balance increased $2,500 during the year.
• The retained earnings balance at the beginning of the year was $75,000 and the year-end
balance was $91,000.
• Net income was $26,000.
How much were Superior’s dividend declarations during its recent year of operation?
Chapter 05 – Communicating and Interpreting Accounting Information
71. Superior has provided the following information for its recent year of operation:
• The common stock account balance at the beginning of the year was $20,000 and the year-
end balance was $25,000.
• The additional paid-in capital account balance increased $2,500 during the year.
• The retained earnings balance at the beginning of the year was $75,000 and the year-end
balance was $91,000.
• Net income was $26,000.
How much did Superior sell its common stock for during the year?
Chapter 05 – Communicating and Interpreting Accounting Information
72. Huron has provided the following year-end balances:
• Cash, $25,000
• Patents, $7,900
• Accounts receivable, $9,300
• Property, plant, and equipment, $98,700
• Prepaid insurance, $3,600
• Accumulated depreciation, $10,000
• Inventory, $37,000
• Trademarks, $12,600
• Goodwill, $11,000
How much are Huron’s current assets?
Chapter 05 – Communicating and Interpreting Accounting Information
73. Huron has provided the following year-end balances:
• Cash, $25,000
• Patents, $7,900
• Accounts receivable, $9,300
• Property, plant, and equipment, $98,700
• Prepaid insurance, $3,600
• Accumulated depreciation, $10,000
• Inventory, $37,000
• Trademarks, $12,600
• Goodwill, $11,000
How much are Huron’s net noncurrent assets?
Chapter 05 – Communicating and Interpreting Accounting Information
74. Which of the following would not be included on an income statement?
75. Which of the following would not be included within the operations section of a cash flow
statement?
Chapter 05 – Communicating and Interpreting Accounting Information
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76. Which of the following would not be added to net income in the determination of net cash
flow from operations?
77. Which of the following statements is true?