Issuing stock to obtain financing is called equity financing.
Callable bonds can be converted to stock.
Corporate income taxes cannot be calculated until all other adjustments are made.
The calculation for depletion of natural resources is similar to the calculation for
depreciation when the units-of-production method is used.
Internal controls include the policies and procedures a company implements to promote
efficient and effective operations, protect assets, enhance accounting information, and
adhere to laws and regulations.
Vertical analysis is the comparison of a company’s financial information over time.
The closing process includes a transfer of the Dividends account balance to the
Retained Earnings account.
The Sarbanes-Oxley Act (SOX) grants legal protection to €whistle-blowers. ‘
Bonds that are not backed by collateral are referred to as “debentures.”
Account titles in the chart of accounts are:
A) general purpose and do not indicate the nature of the account.
B) consistent with those used by other companies.
C) linked to account numbers.
D) the names mandated for use by the FASB.
Consider the following information:
Required:
Part a. Compute the cash provided by (used in) investing activities.
Part b. Compute the cash provided by (used in) financing activities.
Part c. If you did not use any of the items listed in parts a or b, explain why, and
indicate, if appropriate, how each item would be reported on the statement of cash
flows.
A company purchased a computer system on January 2, 2015 for $1,600,000. The
company used the straight-line depreciation method with an estimated useful life of 6
years and a residual value of $130,000. The company prepares financial statements at
December 31.
Use the information above to answer the following question. Assume the company
decides to sell the computer system on July 1, 2017 for $1,000,000. Which of the
following statements about the journal entry (or entries) required on July 1 is not
correct?
A) The depreciation expense must be recorded for 6 months, January 1 to July 1.
B) The Equipment asset account must be credited for $1,600,000 to record the sale.
C) Accumulated Depreciation is debited for $612,500 in the entry to record the sale.
D) The loss on the sale is $12,500.
When a company collects from a customer who pays within the discount period, the
company:
A) debits a contra-revenue account.
B) debits a liability account.
C) credits a liability account.
D) debits a revenue account.
Daisy Company ‘s trial balance was in balance at the end of the period and showed the
following accounts:
What is the balance of the credit column on Daisy Company ‘s trial balance?
A) $160,800.
B) $80,400.
C) $60,400.
D) $60,000.
Net income refers to the:
A) difference between what was earned and the costs incurred during a period.
B) difference between the cash received and the cash paid out during a period.
C) difference between what is owned and what is owed at a point in time.
D) change in the value of the company during a period.
The Farley Corporation starts the year with a beginning inventory of 3,000 units at $5
per unit. The company purchases 5,000 units at $4 each in February and 2,000 units at
$6 each in March. Farley sells 1,500 units during this quarter. Farley has a perpetual
inventory system and uses the FIFO inventory costing method. What is the cost of
goods sold for the quarter?
A) $6,000
B) $9,340
C) $7,500
D) $9,000
Which of the following statements about dividends is correct?
A) Companies sometimes issue stock dividends to lower the market price per share of
stock.
B) Stock dividends immediately increase the total value of the stockholders’ investment.
C) Cash dividends and stock dividends both decrease total stockholders’ equity.
D) A corporation has a legal obligation to pay dividends each year.
Charter Company, which uses the perpetual inventory method, purchases different
letters for resale. Character had a beginning inventory comprised of seven units at $4
per unit. The company purchased five units at $6 per unit in February, sold seven units
in October, and purchased two units at $7 per unit in December.
Use the information above to answer the following question. If Charter Company uses
the LIFO method, what is the cost of its ending inventory?
A) $38
B) $34
C) $44
D) $72
Typically, a profitable company that pays little or no dividends:
A) is a bad investment.
B) will reinvest profits which can lead to greater growth potential.
C) will experience relatively stable stock prices over time.
D) will appeal to investors who desire distributions of profit.
Which of the following represents a cash inflow from financing activities?
A) Issuing stock in exchange for another company’s stock.
B) Paying a bond’s face value at maturity.
C) Issuing long-term bonds at a discount.
D) Receiving interest on promissory notes.
On December 31, 2014, you count 300 tie clips in inventory. During the next quarter,
you carefully record the effect of each purchase and sale transaction on inventory. You
buy 128 tie clips during the next quarter. On March 31, 2015, you count 288 tie clips in
inventory. Which of the following is not correct?
A) Ending inventory on March 31, 2015 should be 288 tie clips.
B) Your company uses the perpetual inventory method.
C) Your company’s records would show that 140 tie clips were sold during the quarter.
D) The amount of shrinkage cannot be determined with this type of inventory system.
Use the following Year 3 data to prepare the annual income statement for Kvass, Inc.
For each of the following events, match the event with the section of the bank
reconciliation in which it is listed, if at all, and indicate the operation performed.
Torrington Inc. updates its inventory records perpetually. The company ‘s records
showed a beginning inventory of $6,200, cost of goods sold of $81,600, and ending
inventory of $12,000.
Required:
Determine the amount of inventory that was purchased during the year.
Consider the following information:
Required:
Use the indirect method to compute the amount of net cash flows provided by (used in)
operating activities.
Bluebell Company sells blue jeans. Last year, bell-bottom jeans were fashionable; this
year, boot cut jeans are in style. The company has 375 units of bell-bottom jeans with a
cost of $17 per unit and a market value of $15 per unit. The inventory also includes
1,000 units of boot cut jeans with a cost of $16 per unit and a market value of $19 per
unit.
Required:
Part a – Explain whether this situation requires an adjustment to the accounting records.
Part b – Prepare the journal entry, if any, that is required to adjust the Inventory account.
Indicate whether a debit (dr) or credit (cr) would be used to increase each of the
following accounts.
1> _____ Prepaid Rent
2>_____ Sales Revenue
3>_____ Salaries and Wages Expense
4> _____ Service Revenue
5> _____ Unearned Revenue
6>_____ Accounts Receivable
7>_____ Retained Earnings
8> _____ Supplies Expense
Marble Corporation had the following balances in its stockholders’ equity accounts at
December 31, 2015:
The following transactions occurred during 2016:
Required:
Based on the above information, prepare a statement of stockholders’ equity for 2016.
A company had 10,000 shares of common stock outstanding throughout the year. The
following information is also available:
Required:
Calculate the Price/Earnings ratio at the end of the current year.