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1) Accounting information users need reports about the economic activities and
condition of businesses.
2) Methods that ignore present value in capital investment analysis include the internal
rate of return method.
3) When long-term investments in bonds are sold before their maturity date, the seller
deducts any accrued interest since the last interest payment date from the selling price.
4) If 50,000 shares are authorized, 41,000 shares are issued, and 2,000 shares are
reacquired, the number of outstanding shares is 43,000.
5) The depreciable cost of a building is the same as its acquisition cost.
6) In rate of return on investment analysis, the investment turnover component focuses
on efficiency in the use of assets and indicates the rate at which sales are being
generated for each dollar of invested assets.
7) Budgets are normally used only by profit-making businesses.
8) Product costs are also referred to as inventoriable costs.
9) Under the perpetual inventory system, when a sale is made, both the sale and cost of
merchandise sold are recorded.
10) One of the differences in accounting for a process costing system compared to a job
order system is that the amounts used to transfer goods from one department to the next
comes from the cost of production report instead of job cost cards.
11) A deficit in Retained Earnings is reported in the stockholders' equity section of the
balance sheet.
12) Financial accounting information is used more often for long-term operating
decisions and non-financial information is used more often for day-to-day decisions.
13) The estimated amount of depreciation on equipment for the current year is $5,300.
Journalize the adjusting entry to record the depreciation.
14) Warmfeet manufactures comforters. Assume the estimated inventories on January 1,
2012, for finished goods, work in process, and materials were $51,000, $28,000 and
$33,000 respectively. Also assume the desired inventories on December 31, 2012, for
finished goods, work in process, and materials were $48,000, $35,000 and $29,000
respectively. Direct material purchases were $555,000. Direct labor was $252,000 for
the year. Factory overhead was $176,000. Prepare a cost of goods sold budget for
Warmfeet, Inc.
15) Using the following information, prepare the Stockholders Equity section of the
balance sheet. Seventy thousand shares of common stock are authorized and 7,000
shares have been reacquired.
16) The current assets and current liabilities for Kolbie Company and Newton Company
are shown as follows at the end of 2012.
*These represent prepaid expenses and other non-quick current assets.
Required:
(1) Determine the quick ratio for both companies. Round to two decimal places.
(2) Interpret the quick ratio difference between the two companies.
17) Dorman Company reported the following data:
Prepare the Cash Flows from Operating Activities section of the statement of cash flows
using the indirect method.
