The quality of earnings ratio is calculated as net income divided by net cash provided
by operating activities.
Analysis of the changes in all of the noncash balance sheet accounts will explain the
change in the Cash account.
Materiality is a company-specific aspect of faithful representation.
The change in cash is equal to the change in liabilities less the change in equity plus the
change in noncash assets.
In the statement of cash flows, Net cash provided by operating activities indicates the
cash-generating capability of the company.
Accrued revenues are revenues that have been recognized but not yet recorded.
The inventory turnover is calculated as cost of goods sold divided by ending inventory.
The interest on a $10,000, 6%, 60-day note receivable is
a.$680.
b.$100.
c.$200.
d.$300.
Seaver Company received a notice with its bank statement that the bank had collected a
note receivable for $18,000 plus $600 of interest. The bank had credited these amounts
to Seaver’s account less a collection fee of $30. Seaver Company had already accrued
the interest for this note on its books.
(a)How will these items affect Seaver Company’s bank reconciliation?
(b)Prepare the journal entry that Seaver Company will make to record this information
on its books.
A company just began business and made the following four inventory purchases in
June:
A physical count of merchandise inventory on June 30 reveals that there are 200 units
on hand. Using the average-cost method, the amount allocated to the ending inventory
on June 30 is
a.$1,134
b.$1,180
c.$1,100
d.$1,120
Mike Geary, the controller of Shellhammer Company, has reviewed the expected useful
lives and salvage values of selected depreciable assets at the beginning of 2014. Here
are his findings:
All assets are depreciated by the straight-line method. Shellhammer Company uses a
calendar year in preparing annual financial statements. After discussion, management
has agreed to accept Mike’s proposed changes. (The “Proposed” useful life is total life,
not remaining life.)
Instructions
(a)Compute the revised annual depreciation on each asset in 2014. (Show
computations.)
(b)Prepare the entry (or entries) to record depreciation on the building in 2014.
Snug-As-A-Bug Blankets has the following inventory data:
Assuming that a perpetual inventory system is used, what is ending inventory (rounded)
under the average cost method for July?
a.$2,750
b.$2,784
c.$2,406.
d.$2,772
What is the most common abuse by managers in achieving increased earnings in order
to cope with the pressures from Wall Street?
a.Selling more shares of stock than authorized
b.Capitalizing expenses that should be expensed
c.Under reporting liabilities
d.Improper recognition of revenue
A company has the following assets:
The total amount reported under Property, Plant, and Equipment would be
a.$59,400,000.
b.$47,000,000.
c.$57,000,000.
d.$49,400,000.
A credit sale of $1,900 is made on April 25, terms 2/10, net/30, on which a return of
$100 is granted on April 28. What amount is received as payment in full on May 4?
a.$1,764
b.$1,862
c.$1,900
d$1,800
If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest
annually would sell at an amount
a.less than face value.
b.equal to face value.
c.greater than face value.
d.that cannot be determined.
What does the full disclosure principle require?
a.Companies must allow investors and creditors to examine their accounting records.
b.Companies must disclose all circumstances and events that may affect decisions made
by investors and other users.
c.Companies must disclose the true value of all resources owned by the company and
all amounts owed to creditors.
d.Companies must disclose all transactions as part of their complete set of financial
statements.
Winrow Company received proceeds of $565,500 on 10-year, 8% bonds issued on
January 1, 2013. The bonds had a face value of $400,000, pay interest annually on
December 31st, and have a call price of 101. Winrow uses the straight-line method of
amortization. What is the carrying value of the bonds on January 1, 2015?
a.$600,000
b.$572,400
c.$593,100
d.$568,950
During the year, Megan’s Pet Shop’s merchandise inventory decreased by $60,000. If
the company’s cost of goods sold for the year was $900,000, purchases would have
been
a.$960,000.
b.$840,000.
c.$780,000.
d.Unable to determine.
Suppose you have a winning lottery ticket and you are given the option of accepting
$7,000,000 three years from now or taking the present value of the $7,000,000 now.
The sponsor of the prize uses a 6% discount rate. If you elect to receive the present
value of the prize now, the amount you will receive is
a.$5,877,340.
b.$6,046,880.
c.$6,230,000.
d.$7,000,000.
Using the following balance sheet and income statement data, what is the debt to assets
ratio?
Average common shares outstanding was 10,000.
a.26 percent
b.13 percent
c.65 percent
d.35 percent
Schofield Retailers accepted $60,000 of Silver Bank MasterCard credit card charges for
merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry
to record this transaction by Schofield Retailers will include a credit to Sales Revenue
of $60,000 and a debit(s) to
a.Cash for $57,600 and Service Charge Expense for $2,400.
b.Accounts receivable for $57,600 and Service Charge Expense for $2,400.
c.Cash for $60,000.
d.Accounts Receivable for $60,000.
International standards are referred to as
a.IFRS.
b.GAAP.
c.IASB.
d.FASB.
The following information was available for Bowyer Company at December 31, 2014:
beginning inventory $90,000; ending inventory $70,000; cost of goods sold $880,000;
and sales $1,200,000. Bowyer’s days in inventory in 2014 was
a.24.3 days.
b.33.2 days.
c.29 days.
d.37.2 days.
A company purchased land for $84,000 cash. Real estate brokers’ commission was
$5,000 and $7,000 was spent for demolishing an old building on the land before
construction of a new building could start. Proceeds from salvage of the demolished
building was $1,200. Under the historical cost principle, the cost of land would be
recorded at
a.$94,800.
b.$84,000.
c.$89,800.
d.$96,000.
For each entry below make a correcting entry if necessary. If the entry given is correct,
then state “No entry required.”
(a)The $70 cost of repairing a printer was charged to Equipment.
(b)The $5,500 cost of a major engine overhaul was debited to Maintenance and Repairs
Expense. The overhaul is expected to increase the operating efficiency of the truck.
(c)The $6,000 closing costs associated with the acquisition of land were debited to
Operating Expenses.
(d)A $300 charge for transportation expenses on new equipment purchased was debited
to Freight-In.
A 90-day note dated June 30, 2014, would mature on:
a.September 30, 2014.
b.September 27, 2014.
c.September 28, 2014.
d.September 29, 2014.
The following information is available for Nichols Company for the month of February:
expected cash receipts $40,000; expected cash disbursements $44,000; cash balance
February 1, $11,000. Management wishes to maintain a minimum cash balance of
$10,000. Prepare a basic cash budget for the month of February.
Sanders Enterprises reported the following information for 2014:
Instructions: Compute each of the following ratios:
(1)Gross profit rate
(2)Inventory turnover
(3)Days in inventory
(4)Profit margin
Given the following information, determine the three missing amounts labeled as A, B,
and C.
Using the following selected items from the comparative balance sheet of Kato
Company, illustrate horizontal and vertical analysis.
The financial statements of Appalachian Mountain Company appear below:
The following additional data were provided:
1>Dividends declared and paid were $16,000.
2>During the year equipment was sold for $12,000 cash. This equipment cost $28,000
originally and had a book value of $12,000 at the time of sale.
3>All depreciation expense is in the selling expense category.
4>All sales and purchases are on account.
5>Accounts payable pertain to merchandise suppliers.
6>All operating expenses except for depreciation were paid in cash.
Instructions
Prepare a statement of cash flows for Appalachian Mountain Company using the direct
method.
The times interest earned is calculated by dividing ___________________ before
__________________ and __________________ by interest expense.
Prepare journal entries to record the following transactions entered into by the Merando
Company:
Indicate in the blank spaces below, the section of the balance sheet where the following
items are reported. Use the following code to identify your answer.
