A partnership began its first year of operations with the following capital balances:
Young, Capital: $143,000
Eaton, Capital: $104,000
Thurman, Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the
following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to
Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of
the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman,
respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of
$52,000 in the second year.
What was Thurman’s total share of net loss for the first year?
A.$3,900 loss.
B.$11,700 loss.
C.$10,400 loss.
D.$24,700 loss.
E.$9,100 loss.
Morrisey Company has two investment opportunities. Both investments cost $5,500
and will provide the same total future cash inflows. The cash receipt schedule for each
investment is given below:
The net present value of Investment II assuming an 8% minimum rate of return would
be which of the following amounts? (Do not round your PV factors and intermediate
calculations. Round your answer to nearest whole dollar.)
A.$6,492
B.$992
C.$5,880
D.$380
If Boyd Company reported assets of $500 and liabilities of $200, Boyd’s total claims
totaled
A.$300.
B.$500.
C.$700.
D.none of these.
Which resource provider typically receives first priority when resources are divided as
part of a business’s liquidation?
A.The company’s managers
B.Stockholders
C.Creditors
D.Owners
A company that was to be liquidated had the following liabilities:
The company had the following assets:
Total unsecured non-priority liabilities are calculated to be what amount?
La Paz Company engaged in the following transactions during 2012, its first year in
operation: (Assume all transactions are cash transactions)
1) Acquired $3,000 cash from issuing common stock.
2) Borrowed $2,200 from a bank.
3) Earned $3,100 of revenues.
4) Incurred $2,400 in expenses.
5) Paid dividends of $400.
La Paz Company engaged in the following transactions during 2013:
1) Acquired an additional $500 cash from the issue of common stock.
2) Repaid $1,300 of its debt to the bank.
3) Earned revenues, $4,500.
4) Incurred expenses of $2,750.
5) Paid dividends of $640.
The net cash flow from financing activities on La Paz’s 2013 statement of cash flows
was
A.$1,440 inflow.
B.$1,440 outflow.
C.$500 inflow.
D.$140 outflow.
Net income divided by sales is the formula for which of these analytical measures?
A.Return on assets
B.Return on equity
C.Earnings per share
D.Net margin
Which of the following statements about financial statement analysis is incorrect?
A.In horizontal percentage analysis, an item from the financial statements is expressed
as a percentage of the same item from a previous year’s financial statements.
B.Vertical analysis compares two or more financial statement items within the same
time period.
C.Horizontal analysis for several years can be done by choosing one year as a base year
and calculating increases or decreases in relation to that year.
D.The reason behind a financial statement ratio or percentage analysis result is usually
self evident and does not require further study or analysis.
On its balance sheet, a company undergoing reorganization should
A.report its assets at fair value, so that financial statement users can estimate whether
creditors’ claims will be met.
B.report its assets at net realizable value because there is reason to doubt that the
organization is a going concern.
C.report its assets as pledged or free.
D.report its assets at current replacement cost.
E.continue to report its assets at book value.
Freed Company paid $500 cash for salary expenses. Which of the following choices
accurately reflects how this event affects the company’s financial statements?
A.
B.
C.
D.
Which information is not contained in the prospectus of the registration statement?
A.financial statements reviewed by an independent CPA.
B.an explanation of the intended use of the proceeds.
C.a description of the risks associated with the securities.
D.a description of the business of the registrant.
E.a description of the properties of the registrant.
Jack Grimes started a consulting business, Grimes Consulting, on January 1, 2013 by
issuing $7,000 of common stock. In addition, the following events occurred in 2013.
Provided services on account, $25,500.
Paid cash for $11,500 in operating expenses.
Collected $9,000 of the revenue that was previously recorded on account.
Paid a cash dividend of $4,000 to the stockholders.
Required:
a) Show the effects of the above transactions on the accounting equation.
b) Prepare an income statement and statement of cash flows for 2013.
Revenue on account amounted to $3,000. Cash collections of accounts receivable
amounted to $2,700. Cash paid for expenses was $2,500. The amount of employee
salaries accrued at the end of the year was $300. Cash flow from operating activities
was
A.$200.
B.$300.
C.$500.
D.None of these.
The following balance sheet information is provided for Santana Company for 2014:
What is the company’s debt to equity ratio?
A.42%
B.130%
C.43%
D.77%
The year-end financial statements of Greenway Company contained the following
elements and corresponding amounts: Assets = $20,000; Liabilities = ?; Common Stock
= $5,000; Revenue = $11,000; Dividends = $750; Beginning Retained Earnings =
$3,750; Ending Retained Earnings = $7,000.
The amount of liabilities reported on the end-of-period balance sheet was
A.$10,750.
B.$11,250.
C.$8,000.
D.$8,750.
A company incurs research and development costs of $200,000 in 2013 of which
$50,000 of these costs relate to development activities because certain criteria have
been met which suggest that an intangible asset has been created.
What amount should be recognized as research and development expense in 2013 using
U.S. GAAP?
A.$50,000.
B.$150,000.
C.$200,000.
D.$0.
E.$250,000.
Benchmarking involves the identification of the best practices used by world-class
competitors. Discuss the following widely recognized best practices: activity-based
management and just in time inventory.
If the total equity claimed by owners of Ping Construction is $50,000 and liabilities are
$25,000, what are total assets?
A careless accountant splattered spaghetti sauce on Kitchen Company’s balance sheet.
The balance sheet with its missing amounts is provided below:
Kitchen Company’s working capital is $138,000.
Required:
Compute the missing amounts. Record your answers in the following table:
Neighbors Company is considering the purchase of new equipment that will cost
$130,000. The equipment will save the company $38,000 per year in cash operating
costs. The equipment has an estimated useful life of five years and a zero expected
salvage value. The company’s cost of capital is 10%.
Required:
1) Ignoring income taxes, compute the net present value and internal rate of return.
Round net present value to the nearest dollar and round internal rate of return to the
nearest whole percent.
2) Should the equipment be purchased? Why or why not?
What information is included on the statement of realization and liquidation?