Using the following balance sheet and income statement data, what is the current ratio?
Average common shares outstanding was 10,000.
a.2.0 : 1
b.2.6 : 1
c.0.5 : 1
d.2.9 : 1
Which of the following is considered to be an acceptable format for reporting a
company’s “income”?
a.As note disclose to the financial statements
b.As a combined statement of income and comprehensive income
c.As a separate component of operating expenses on the income statement
d.As a component on the statement of retained earnings
On March 1, 2014, Geoffrey Company acquired real estate, on which it planned to
construct a small office building, by paying $85,000 in cash. An old warehouse on the
property was demolished at a cost of $8,200; the salvaged materials were sold for
$2,200. Additional expenditures before construction began included $1,500 attorney’s
fee for work concerning the land purchase, $5,500 real estate broker’s fee, $9,100
architect’s fee, and $16,000 to put in driveways and a parking lot.
Instructions
(a)Determine the amount to be reported as the cost of the land.
(b)For each cost not used in part (a), indicate the account to be debited.
An asset was purchased for $100,000. It had an estimated salvage value of $25,000 and
an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is
revised to $20,000 but the estimated useful life is unchanged. Assuming straight-line
depreciation, depreciation expense in Year 6 would be
a.$15,000.
b.$10,625.
c.$8,500.
d.$12,500.
Serene Stereos has the following inventory data:
A physical count of merchandise inventory on November 30 reveals that there are 100
units on hand. Cost of goods sold under FIFO is
a.$438
b.$846
c.$421
d.$863
Nelson Company, organized in 2014, has these transactions related to intangible assets
in that year:
Instructions
(a)Prepare the necessary entries to record these intangibles. All costs incurred were for
cash.
(b)Make the entries as of December 31, 2014, recording any necessary amortization.
(c)Indicate what the balance should be on December 31, 2014.
Ferman Corporation had net income of $160,000 and paid dividends of $50,000 to
common stockholders and $20,000 to preferred stockholders in 2014. Ferman
Corporation’s common stockholders’ equity at the beginning and end of 2014 was
$870,000 and $1,130,000, respectively. Ferman Corporation’s payout ratio for 2014 was
a.5.0%.
b.43.8%.
c.31.3%.
d.12.5%.
The following information pertains to Marsh Company. Assume that all balance sheet
amounts represent average balance figures.
What is Marsh’s return on common stockholders’ equity?
a.12%.
b.9%.
c.7.5%.
d.6.4%.
Ando Company earns 11% on an investment that pays back $660,000 at the end of each
of the next 5 years. Ando finance department has the following values related to the
time value of money to help in its planning process and compounded interest decisions.
To the closest dollar, what is the amount Ando invested to earn the 11% rate of return?
a.$1,112,139
b.$391,677
c.$2,439,294
d.$178,577
Mantle Publications publishes a golf magazine for women. The magazine sells for
$4.00 a copy on the newsstand. Yearly subscriptions to the magazine cost $36 per year
(12 issues). During December 2013, Expert Publications sells 4,000 copies of the golf
magazine at newsstands and receives payment for 6,000 subscriptions for 2014.
Financial statements are prepared monthly.
Instructions
(a)Prepare the December 2013 journal entries to record the newsstand sales and
subscriptions received.
(b)Prepare the necessary adjusting entry on January 31, 2014. The January 2014 issue
has been mailed to subscribers.
Dobler Company uses a periodic inventory system. Details for the inventory account for
the month of January 2014 are as follows:
An end of the month (1/31/2014) inventory showed that 160 units were on hand. If the
company uses FIFO, what is the value of the ending inventory?
a.$880
b.$800
c.$868
d.$1,212
Peninsula Company reported net income of $260,000 for the year. During the year,
accounts receivable increased by $21,000, accounts payable decreased by $9,000 and
depreciation expense of $45,000 was recorded. Net cash provided by operating
activities for the year is
a.$275,000.
b.$245,000.
c.$227,000.
d.$260,000.
Which of the following is not an element of fraud in a business environment?
a.Financial pressure
b.Rationalization
c.Opportunity
d.Risk assessment
The 2014 financial statements of Harper Co. contain the following selected data (in
millions).
The debt to assets ratio is
a.46.9%.
b.44.4%.
c.2.13%.
d.6.2 times.
Dobler Company uses a periodic inventory system. Details for the inventory account for
the month of January 2014 are as follows:
An end of the month (1/31/2014) inventory showed that 160 units were on hand. If the
company uses LIFO, what is the value of the ending inventory?
a.$843
b.$800
c.$868
d.$1,280
The bank statement for Adcock Company indicates a balance of $830 on July 31. The
cash balance per books had a balance of $390 on this date. The following information
pertains to the bank transactions for the company.
Instructions
Prepare a bank reconciliation for July 31.
Prepare any adjusting entries necessary as a result of the bank reconciliation.
Patrick Corporation is authorized to issue 1,000,000 shares of $1 par value common
stock. During 2014, the company has the following stock transactions.
Instructions
Journalize the transactions for Patrick Corporation.
The 2014 income statement for Moring Company showed rent expense of $9,500 and
wages expense of $8,600. The related balance sheet account balance at year-end last
year and this year were as follows:
Calculate the following for 2014:
1>Cash paid for rent.
2>Cash paid for wages.
On October 1, Sam’s Painting Service borrows $100,000 from National Bank on a
3-month, $100,000, 4% note. The entry by Sam’s Painting Service to record payment of
the note and accrued interest on January 1 is
Given the following information, compute 2014 net income for SaraDyne Company.
On January 1, 2014, Powell Corporation issued $600,000, 5%, 5-year bonds dated
January 1, 2014, at 95. The bonds pay annual interest on January 1. The company uses
the straight-line method of amortization and has a calendar year end.
Instructions
Prepare all the journal entries that Powell Corporation would make related to this bond
issue through January 1, 2015. Be sure to indicate the date on which the entries would
be made.
Hiller Corporation manufactures electronic components for use in many consumer
products. Their raw materials are purchased literally from all over the world. Depending
on the country involved, purchase terms vary widely. Some suppliers, for example,
require full prepayment, while others are content to receive payment within six months
of receipt of the goods.
Because of this situation, Hiller never closes its books until at least ten days after month
end. In this way, it can sort out ownership of goods in transit, and document which
goods were received by month end, and which were not.
Donna Gordon, a new accountant, was asked to record about $50,000 in inventory as
having been received before month end. She argued that the shipping documents clearly
showed that the goods were actually received on the 8th of the current month. Her boss,
busy with month-end reports, curtly tells Donna to check the shipping terms. She did
so, and found the notation “FOB (free on board) shipper’s dock” on the document. She
hadn’t seen that particular notation before, but she reasoned that if the selling company
considered it shipped when it reached their dock, Hiller should consider it received
when it reached Hiller’s dock. She did not record the sale until after month end.
Required:
1>Why are accountants concerned with the timing in the recording of purchases?
Was there a violation of ethical standards here? Explain.
Better Publications, sold annual subscriptions to their magazine for $42,000 in
December, 2013. The magazine is published monthly. The new subscribers received
their first magazine in January, 2014.
1>What adjusting entry should be made in January if the subscriptions were originally
recorded as a liability?
2>What amount will be reported on the January 2014 balance sheet for Unearned
Subscription Revenue?