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From the following list, select the proper section from the statement of cashflows in whi
ch it would beclassified.
a. Working capital will increase
b. Working capital will decrease
c. Working capital will not change
Borrowed cash using a six-month note
A subsidiary is a separate legal entity that is owned or controlled by another entity.
a. True
b. False
When making a general journal entry, there can only be one debit and one credit.
a. True
b. False
Listed below are selected accounts from the financial statements of Bargain Mart for
the year ended December 31, 2014. In the blank space provided for each account,
indicate what type of account it is, its normal balance, and the debit/credit rules for
increasing and decreasing it. Use the following abbreviations for your answers:
Type of Account Normal Balance Rule to Increase Rule to Decrease
Accumulated Depreciation
a. increases when the monthly adjustment for depreciation is recognized.
b. decreases when the monthly adjustment for depreciation is recognized.
c. is reported on the income statement with the expense accounts.
d. is allocated as an expense during future periods.
Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1,
2015. The amounts below are related to the equipment purchase. Match the items below
and explain why each revenue expenditure is not capitalized.
a. This item should be included as part of the cost of the equipment.
b. This item should be considered a revenue expenditure.
The company financed the equipment purchase with a bank loan. Interest of $3,000 was
paid on the loan during 2015.
Which of the following statements does not describe the responsibilities of a company's
internal audit staff?
a. Internal auditors ensure that the company's financial statements have been presented
fairly.
b. Internal auditors focus on the efficiency with which the organization is run.
c. Internal auditors help ensure that the company's policies and procedures are followed.
d. Internal auditors prepare the report of management to the company's stockholders.
When using the direct method, how is the sale of long-term investments for cash
reported on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
On May 1, the Chris Company borrowed $30,000 from the Third Street Bank on a
1-year, 6% note. If the company keeps its records on a calendar year, an entry is needed
on December 31 to increase
a. Interest Expense, $600.
b. Interest Expense, $1,800.
c. Interest Payable, $900.
d. Interest Payable, $1,200.
Most businesses have an operating cycle of less than one year.
a. True
b. False
The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Barton
Company has just purchased a machine with a cost of $100,000, and signed a note
agreeing to pay the manufacturer equal annual amounts of $17,400. If the current rate
of interest is 8%, how many equal annual payments will be made?
a. 6
b. 8
c. 10
d. 12
Presented below are selected data from the accounting records for Micco's Gift Store
for 2014.
A) Calculate the net income or loss for 2014. B) Explain how the amount from part "A"
will affect the financial position of Micco's Gift Store. C) Is the company profitable?
Explain your answer.
The accounting life of intangible assets is determined by
a. their legal lives.
b. their useful lives.
c. their legal lives or useful lives, whichever is shorter.
d. the tax life mandated by the IRS.
None of the Stockholders' Equity accounts are affected by the stock split.
a. True
b. False
Which internal control procedure is followed when a physical count of inventory is
performed in a perpetual inventory system?
a. Segregation of duties
b. Safeguarding assets and records
c. Independent verifications
d. Proper authorizations
The documentation with the bank statement shows a debit memo for bank service
charges. Based on this, what possible entry would be made in the company's accounts?
a. debit Miscellaneous Administrative Expense; credit Cash
b. debit Cash; credit Other Income
c. debit Cash; credit Accounts Payable
d. debit Accounts Payable; credit Cash
a. A liability resulting from the signing of a promissory note.
b. A measure of how long it takes to collect receivables.
c. A written promise to repay a definite sum of money on demand or at a fixed or
determinable date in the future.
d. The length of time a note is outstanding, that is, the period of time between the date it
is issued and the date it matures.
e. The party that will receive the money from a promissory note at some future date.
f. The process of selling a promissory note.
g. The date the promissory note is due.
h. The amount of cash the maker is to pay the payee on the maturity date of the note.
i. The difference between the principal amount of the note and its maturity value.
j. An asset resulting from the acceptance of a promissory note from another company.
k. Securities issued by corporations and governmental bodies as a form of borrowing.
l. Securities issued by corporations as a form of ownership in the business.
m. The party that agrees to repay the money for a promissory note at some future date.
n. The amount of cash received, or the fair value of the products or services received,
by the maker when a promissory note is issued.
Principal
a. Explain what the dividend payout ratio is and which firms typically have a high ratio
and which firms may have the lowest.b. Many firms operate at a dividend payout ratio
of less than 50%. Why do many firms not pay a larger percentage of income as
dividends?
Here is a list of accounts and their balances that appear on the Thomas Company's
income statement and balance sheet.
REQUIRED:
Identify which of these are:
(a) Assets
(b) Liabilities
(c) Expenses
(d) Revenues
Assume the current ratio for Horizon Surf Supplies is 2 to 1. If the company purchased
supplies on credit, the effect of this transaction is to:
a. increase the current ratio
b. decrease the current ratio
c. have no effect on the current ratio
d. decrease cash
A bond payable is dated January 1, 2015, and is issued on that date. The face value of
the bond is $120,000, and the face rate of interest is 6%. The bond pays interest
semiannually. The bond will mature in five years. REQUIRED: 1> What will be the
issue price of the bond if the market rate of interest is 6% at the time of issuance?
2> What will be the issue price of the bond if the market rate of interest is 10% at the
time of issuance?
Explain what costs are included in the acquisition cost of operating assets.
Fort Corp. began the year with a balance in its Income Taxes Payable account of
$23,000. The year-end balance in the account was $28,000. The company uses the
indirect method in the Operating Activities section of the statement of cash flows.
Therefore, it presents the amount of income taxes paid at the bottom of the statement as
a supplemental disclosure. The amount of taxes paid during the year was $25,000. What
amount of income tax expense will appear on Fort's income statement?
What is the difference between simple interest and compound interest? Is the amount of
interest higher or lower when the interest is simple rather than compound?
are cash and other assets that are reasonably expected to be realized in cash during the
normal operating cycle of the business.
Learning Tree, Inc. The following data is available for one of the products sold by
Learning Tree, Inc., which uses the perpetual inventory system:
Refer to the data for Learning Tree, Inc.
If the LIFO method is used, what is the amount assigned to cost of goods sold for the
2,500 units sold on May 10?
Terms of 2/10, n30 mean that if the discount is not taken, full payment is due within
___________________________ days.
If the market rate of interest is greater than the face rate, then the bonds are issued at
a(n)
________________________.
The following account balances are taken from the records of Clarke Inc., a wholesaler:
REQUIRED:
1> Compute Clarke's inventory turnover ratio for 2016 and 2015.
2> Compute the number of days' sales in inventory for 2016 and 2015. Assume 360
days in a year.
3> Comment on your answers in (1) and (2) relative to the company's management of
inventory over the two years.
What problems do you see in its inventory management?
Review the consolidated balance sheets of Backkus Metal Company. REQUIRED:
Which one of the liabilities shown in the balance sheets is used in the calculation of the
debt-to-equity ratio? If we can assume that the stockholders' equity total remained
relatively constant for the two years, how would the ratio change (increase/decrease)
from 2014 to 2015? What would this say about the company's financial position?
