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Beatrice Equipment Beatrice Equipment sells merchandise only on credit. For the year
ended December 31, 2014, the following data is available:
Refer to Beatrice Equipment. Assume that Beatrice Equipment estimates bad debts on
an aging analysis, and the aging schedule indicates that
$28,000 of the December 31, 2014 accounts receivable will be uncollectible. A) What
amount will Beatrice Equipment recognize as bad debts expense for 2014? B) How
much is the net realizable value of the receivables to be reported on Beatrice
Equipment's balance sheet at December 31, 2014?
Credit terms of n/30 mean that the net amount of the invoice, less any returns or
allowances, is due within 30 days of the date of the invoice.
a. True
b. False
Which one of the following is considered a financing activity?
a. The payment of interest on a note payable to the bank
b. Selling products to customers
c. Paying wages to employees
d. The payment of a cash dividend
a. A liability resulting from the signing of a promissory note.
b. A measure of how long it takes to collect receivables.
c. A written promise to repay a definite sum of money on demand or at a fixed or
determinable date in the future.
d. The length of time a note is outstanding, that is, the period of time between the date it
is issued and the date it matures.
e. The party that will receive the money from a promissory note at some future date.
f. The process of selling a promissory note.
g. The date the promissory note is due.
h. The amount of cash the maker is to pay the payee on the maturity date of the note.
i. The difference between the principal amount of the note and its maturity value.
j. An asset resulting from the acceptance of a promissory note from another company.
k. Securities issued by corporations and governmental bodies as a form of borrowing.
l. Securities issued by corporations as a form of ownership in the business.
m. The party that agrees to repay the money for a promissory note at some future date.
n. The amount of cash received, or the fair value of the products or services received,
by the maker when a promissory note is issued.
Interest
Which one of the following is considered one of the six most important categories of
internal control procedures?
a. Computerized accounting systems
b. The board of directors
c. Proper authorizations
d. Verification by government agencies
For what reason might retailers like Target select an accounting period that ends on or
near the end of January?
a. The company originally started business operations on that date.
b. Business activity has reached a slow period that is suited to the preparation of its
financial statements at the end of the year.
c. The company's CPAs are attempting to spread out the workload.
d. The Internal Revenue Service requires merchandise companies to select such a date
for their fiscal year.
Carpet World Inc. reported the following information for 2015 and 2016.
If Carpet World uses the indirect method to prepare the operating activities section of
the statement of cash flows, what amount will be reported as net cash inflow from
operating activities for 2016?
a. $64,000
b. $66,000
c. $68,000
d. $70,000
Accumulated depreciation is increased when depreciation is recognized.
a. True
b. False
Failure to record the earned portion of unearned revenue would result in which of the
following?
a. Net income being understated
b. No effect on total liabilities
c. Stockholders' equity being overstated
d. Total assets being understated
Match the most probable matching method to the costs listed below.
a. Directly match a specific revenue.
b. Indirectly match with the period during which it will provide revenue.
c. Immediately recognize because no future benefits are expected.
Warehouse used for storing inventory goods
Which one of the following statements is false ?
a. The inventory account is updated after every sale and after every merchandise
purchase under the perpetual inventory system.
b. The inventory account is updated only at the end of the accounting period under the
periodic inventory system.
c. A cost of goods sold account is updated after each sale of merchandise under the
periodic inventory system.
d. A purchases account is used only under the periodic inventory system.
During 2014, the accounts receivable turnover rate for Cordner Company increased
from 10 to 14 times per year. Which one of the following statements is the most likely
explanation for the change?
a. The company's credit department has followed up with customers whose account
balances are past due in order to generate quicker collections.
b. The company has decreased sales to its most credit worthy customers.
c. The company has increased the amount of time customers have to pay their accounts
before they are past due.
d. The company has extended credit to more risky customers in order to increase sales.
The general ledger is sometimes called the book of original entry because it is the
accounting record where transactions are first recorded.
a. True
b. False
The difference between the principal amount of a note and its maturity value is called.
Stream Media Inc. and Techtronics are competitors in the same industry. The following
information was summarized from a recent annual report of StreamMediaInc.:
(In millions)
Receivables:
The following information was summarized from a recent annual report of Techtronics:
REQUIRED:
1> Calculate the accounts receivable turnover ratios for Stream Media and Techtronics
for the most recent year.
2> Calculate the average collection period, in days, for both companies for the most
recent year. Comment on the reasonableness of the collection periods for these
companies considering the nature of their business.
3> Which company appears to be performing better? What other information should
you consider in determining how these companies are performing?
All liabilities that are not classified as current liabilities are classified as.
Grenada Corporation Use the note on Disclosure of Leases for the Grenada Corporation
to answer the questions that follow. The Corporation leases office, warehouse and
showroom space, retail stores and office equipment under operating leases, which
expire no later than 2029. The Corporation normalizes fixed escalations in rental
expense under its operating leases. Minimum annual rentals under non-cancelable
operating leases, excluding operating cost escalations and contingent rental amounts
based upon retail sales, are payable as follows: Fiscal year ending March 31,
Rent expense was $12,551,000; $8,911,000; and $5,768,000 for the years ended March
31, 2014, 2013, and 2012 respectively.
Review the information for Grenada Corporation. REQUIRED:
(1) What are the two types of leases that a company can have? Describe each briefly.
(2) Does the note disclosure show evidence of the two types of leases?
is the process of transferring an amount from the bond discount or premium to interest
expense each time period to adjust interest expense.
Crystal, Inc.
Crystal, Inc. reported $52,000 of net income for 2014. Crystal's balance sheet at
December 31, 2014 includes the following amounts:
Read the information about Crystal, Inc. Has Crystal been profitable since it began
operations? How do you know?
