Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments
of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed
to (1) interest of 10% of the beginning capital balance each year, (2) annual
compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss
in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was
$150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use
every month during 2012 and 2013.
What was the total capital balance for the partnership at December 31, 2013?
A.$852,000
B.$780,000
C.$708,000
D.$744,000
E.$594,000
As of December 31, 2013, Gant Corporation had a current ratio of 1.29, quick ratio of
1.05, and working capital of $18,000. The company uses a perpetual inventory system
and sells merchandise for more than it cost. On January 1, 2014, Gant issued common
stock for $10,000 cash. Which of the following statement is true?
A.Gant’s current ratio will decrease.
B.Gant’s current ratio will increase.
C.Gant’s quick ratio will decrease.
D.Gant’s working capital will decrease.
On a statement of financial affairs, a company’s assets should be valued at
A.historical cost.
B.net realizable value, if lower than historical cost.
C.replacement cost.
D.net realizable value, if higher than historical cost.
E.net realizable value, whether higher or lower than historical cost.
Gonzales Company collected $18,000 on September 1, 2013 from a customer for
services to be provided over a one-year period beginning on that date. How much
revenue would Gonzales Company report related to this contract on its income
statement for the year ended December 31, 2013? How much would it report as cash
flows from operating activities for 2013?
A.$6,000; $6,000
B.$6,000; $18,000
C.$18,000; $18,000
D.$0; $18,000
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 amount of liabilities on La Paz’s 2013 balance sheet was
A.$900.
B.$500.
C.($1,300).
D.$240.
George Company has the opportunity to purchase an asset that costs $40,000. The asset
is expected to increase net income by $10,000 per year. Depreciation expense will be
$5,000 per year. Based on this information the payback period is:
A.4 years.
B.2.5 years.
C.2.67 years.
D.8 years.
Which one of the following is not a background requirement for any IASB members?
A.Audit.
B.Tax.
C.Financial statement preparation.
D.Academia.
E.Financial statement user.
Retained Earnings at the beginning and ending of the accounting period was $300 and
$700, respectively. If revenues were $1,100 and dividends paid to stockholders were
$200, expenses for the period must have been
A.$500.
B.$400.
C.$900.
D.$700.
Knoell Company paid its sales employees $15,000 in sales commissions. What impact
will this transaction have on the firm’s working capital?
A.No impact
B.Increase it
C.Decrease it
D.Not enough information is provided to answer the question.
Seth Morrison is considering alternative proposals that involve different amounts of
investments. To compare different size investment proposals, it may be helpful for
Sarah to prepare a relative ranking of the proposals by using a(n):
A.present value index.
B.net present value.
C.internal rate of return.
D.none of these answers is correct.
Which one of the following forms is used when companies have filed with the SEC for
less than 36 months but are not large enough to file form S-3?
A.S-1.
B.S-4.
C.S-11.
D.S-8.
E.S-3.
The process by which management evaluates long-term investment decisions involving
long term operational assets is called:
A.capital investment analysis.
B.activity based management.
C.strategic business analysis.
D.fixed cost analysis.
Which financial statement matches asset increases from operating a business with asset
decreases from operating the business?
A.Balance sheet.
B.Statement of changes in equity.
C.Statement of cash flows.
D.Income statement.
Generro Company is considering the purchase of equipment that would cost $36,000
and offer annual cash inflows of $10,500 over its useful life of 5 years. Assuming a
desired rate of return of 12%, is the project acceptable?
A.No, since the negative net present value indicates the investment will yield a rate of
return below the desired rate of return.
B.Yes, since the investment will generate $52,500 in future cash flows, which is greater
than the purchase cost of $36,000.
C.Yes, since the positive net present value indicates the investment will earn a rate of
return greater than 12%.
D.The answer cannot be determined.
Which one of the following forms is used in connection with registration of securities
of a small reporting company with $25 million of annual revenues and of $25 million of
voting securities held by non-affiliates?
A.S-8.
B.S-11.
C.S-4.
D.S-1.
E.S-3.
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 the balance in Young’s Capital account at the end of the first year?
A.$120,900.
B.$118,300.
C.$126,100.
D.$80,600.
E.$111,500.
Which of the following items appears in the investing activities section of the statement
of cash flows?
A.Cash outflow for the purchase of a computer.
B.Cash inflow from the issuance of common stock.
C.Cash outflow for the payment of dividends.
D.Cash inflow from interest revenue.
Filings with the SEC are divided generally into two broad categories:
A.Registration statements and perpetual filings.
B.Reconciliation statements and periodic filings.
C.Registration statements and periodic filings.
D.Registration filings and reconciliation statements.
E.Reconciliation filings and perpetual filings.
The accounting principle that guides accountants, when faced with a recognition
dilemma, to choose the alternative that produces the lowest net income is referred to as
A.the matching principle.
B.internal control.
C.conservatism.
D.materiality.
A letter of comments would be issued by the SEC
A.to request clarification of a registration statement.
B.to convey your pertinent comments to the SEC.
C.in response to a company’s filing of Form 8-K.
D.after receiving the company’s Form 10-K.
E.to indicate that a registration statement has been approved.