If Pratt Company issues 5,000 shares of $5 par value common stock for $210,000, the
account
a.Common Stock will be credited for $185,000.
b.Paid-in Capital in Excess of Par Value will be credited for $210,000.
c.Paid-in Capital in Excess of Par Value will be credited for $235,000.
d.Cash will be debited for $210,000.
Ron’s Quik Shop bought equipment for $70,000 on January 1, 2013. Ron estimated the
useful life to be 5 years with no salvage value, and the straight-line method of
depreciation will be used. On January 1, 2014, Ron decides that the business will use
the equipment for a total of 6 years. What is the revised depreciation expense for 2014?
a.$11,200.
b.$5,600.
c.$9,333.
d$14,000.
Unearned revenues are:
a.received and recorded as liabilities before they are recognized.
b.recognized and recorded as liabilities before they are received.
c.recognized but not yet received or recorded.
d.recognized and already received and recorded.
Dandy Candy Company sold its licorice division resulting in a loss of $60,000.
Assuming a tax rate of 25%, the loss on this disposal will be reported on the income
statement at what amount?
a.$75,000
b.$15,000
c.$60,000
d.$45,000
What is a LIFO reserve?
a.The tax savings resulting when LIFO is used during periods of rising prices
b.The difference in net income when a company uses LIFO as compared to FIFO
c.The difference between the inventory value and cost of goods sold when a company
uses LIFO
d.The difference between the inventory value under LIFO and FIFO
Equipment with a cost of $320,000 has an estimated salvage value of $30,000 and an
estimated life of 4 years or 12,000 hours. It is to be depreciated by the straight-line
method. What is the amount of depreciation for the first full year, during which the
equipment was used 3,000 hours?
a.$80,000.
b.$87,500.
c.$82,500.
d.$72,500.
Grape Gratuities Company has the following inventory data:
A physical count of merchandise inventory on July 30 reveals that there are 25 units on
hand. Using the FIFO inventory method, the amount allocated to ending inventory for
July is
a.$585
b.$505
c.$535
d.$550
An analyst calculated the quality of earnings ratio for a company and determined it to
be 2.7. What does this measure indicate?
a.The company may be using more aggressive accounting techniques in order to
accelerate income recognition.
b.The company’s net income significantly exceeds its net cash provided by operating
activities.
c.The company is relatively profitable.
d.The company’s net cash provided by operating activities significantly exceeds its net
income.
Regions Inc. pays its rent of $48,000 annually on January 1 and makes monthly
adjusting entries. If the February 28 monthly adjusting entry for prepaid rent is omitted,
which of the following are true?
a.Failure to make the adjustment does not affect the February financial statements.
b.Expenses will be overstated by $4,000 and net income and stockholders’ equity will
be understated by $4,000.
c.Assets will be overstated by $8,000 and net income and stockholders’ equity will be
understated by $8,000.
d.Assets will be overstated by $4,000 and net income and stockholders’ equity will be
overstated by $4,000.
Glover Company is about to issue $3,000,000 of 5-year bonds, with a contract rate of
interest of 8%, payable semiannually. The discount rate for such securities is 10%. How
much can Glover expect to receive from the sale of these bonds?
a.$2,768,338
b.$3,000,000
c.$3,243,315
d.$3,231,660
Which type of activity is generally considered to be the best measure of a company’s
ability to continue as a going concern?
a.Cash flows from operating activities
b.Cash flows from investing activities
Presented below is information for Zales Company for the month of January 2014.
Instructions
(a)Prepare a multiple-step income statement.
(b)Calculate the profit margin and the gross profit rate.
Piper Company sells merchandise on account for $1,500 to Morton Company with
credit terms of 2/10, n/30. Morton Company returns $500 of merchandise that was
damaged, along with a check to settle the account within the discount period. What
entry does Piper Company make upon receipt of the check?
Manning Company has $1,000,000 in assets and $1,000,000 in stockholders’ equity,
with 50,000 shares outstanding the entire year. It has a return on assets ratio of 9%. In
the past year it had net income of $75,000. On January 1, 2014, it issued $300,000 in
debt at 5% and immediately repurchased 25,000 shares for $300,000. Management
expected that, had it not issued the debt, it would have again had net income of
$75,000.
Instructions
(a)Determine the Company’s net income and earnings per share for 2013 and 2014.
(Ignore taxes in your computations.)
(b)Compute the Company’s return on common stockholders’ equity for 2013 and 2014.
(c)Compute the company’s debt to assets ratio for 2013 and 2014.
Whyte Clinic purchases land for $280,000 cash. The clinic assumes $3,000 in property
taxes due on the land. The title and attorney fees totaled $2,000. The clinic had the land
graded for $4,400. What amount does Whyte Clinic record as the cost for the land?
a.$284,400.
b.$280,000.
c.$289,400.
d.$285,000.