The Stockholders’ Equity section of the balance sheet for Grant Corp. at the end of 2016
appears as follows:
Net income for the year was $1,250,000. Dividends were declared and paid on the
preferred shares during the year, and a quarterly dividend of $0.30 per share was
declared and paid each quarter on the common shares. The closing market price for the
common shares on December 31, 2016, was $24.72 per share.REQUIRED:1> Compute
the following ratios for the common stock:
a. Earnings per share
b. Price/earnings ratio
c. Dividend payout ratio
d. Dividend yield ratio
2> Assume that you are an investment adviser. What other information would you want
to have before advising a client regarding the purchase of Grant stock?
Glitch Company incurred the following costs during 2014 and 2015: a. Research and
development costing $40,000 was conducted on a new product to sell in future years. A
product was successfully developed, and a patent for it was granted during 2014. Glitch
is unsure of the period benefited by the research, but believes the product will result in
increased sales over the next five years.
b. Legal costs and application fees of $25,000 for the 20-year patent were incurred on
January 1, 2014.
c. A patent infringement suit was successfully defended at a cost of $24,000. Assume
that all costs were incurred on January 1, 2015.
Using different depreciation methods for book purposes versus tax purposes for the
same asset is
a. not allowed since the amount can only be calculated one way or the other, not both.
b. the direct result of the differing goals of financial and tax accounting.
c. contrary to GAAP.
d. against the Internal Revenue Code, and as such, against the law.
Latahmer Corporation is reconciling its May bank account. For each item listed, state
how it would be handled on the bank reconciliation.
a. Addition to bank balance
b. Subtraction from bank balance
c. Addition to book balance
d. Subtraction from book balance
e. Would not appear on the May reconciliation
Procedures concerned with safeguarding the assets or the reliability of financial
statements.
Which balance sheet accounts are most affected by investing activities?
a. Current assets and current liabilities
b. Long-term assets
c. Long-term liabilities
d. Stockholders’ equity
When bonds are issued by a company, the accounting entry shows an
a. increase in liabilities and a decrease in stockholders’ equity.
b. increase in liabilities and an increase in stockholders’ equity.
c. increase in assets and an increase in liabilities.
d. increase in assets and an increase in stockholders’ equity.
For each of the following sentences, select the phrase or group of words that best
completes the statement.
a. Earnings per share
b. Dividend yield ratio
c. Dividend payout ratio
d. Leverage
e. Return on assets ratio
f. Return on common stockholders’ equity ratio
g. Debt-to-equity ratio
h. Price/earnings ratio
A measure of a company’s success in earning a return for all providers of capital.
A trial balance is the listing of each account and its balance at a specific point in time.
a. True
b. False
Blecker Corp. made cash sales to customers. What effect does this transaction have on
the accounting equation?
a. Liabilities increase and stockholders’ equity increases.
b. There is no effect on the accounting equation as one asset account increases while
another asset account decreases.
c. Assets increase and liabilities increase.
d. Assets increase and stockholders’ equity increases.
A debit is a negative entry.
a. True
b. False
How would deposits in transit be dealt with in a bank reconciliation?
a. added to company’s book balance
b. deducted from company’s book balance
c. added to bank statement balance
d. deducted from bank statement balance
Themethod most nearly approximates replacement cost of inventory on the balance
sheet.
Income statements for Maltese Corp. for the past two years are as follows:
(amounts in thousands of dollars)
REQUIRED:
1> Prepare common-size comparative income statements for the two years for Maltese
Corp.
2> What observations can you make about the common-size statements? List at least
four observations.
3> Prepare comparative income statements for Maltese Corp., including columns for
the dollars and for the percentage increase or decrease in each item on the statement.
4> Assume that you are interested in identifying reasons for the changes in selling and
administrative expenses and income tax expense. Explain where you would look to find
additional information about the change.
What is meant by “cash equivalents”?
In 2002, Congress passed theAct to bring reform to corporate accountability and
stewardship in the wake of a number of major corporate scandals.
At December 31, 2014, an amount due on December 31, 2015, would be classified as
a(n) _______________________ liability.