What is a difference between the profit margin and the gross profit rate?
a.None, these are interchangeable terms.
b.The gross profit rate is computed by dividing net sales by gross profit and the profit
margin is computed by dividing net sales by net income.
c.The gross profit rate will normally be higher than the profit margin ratio.
d.A profit margin of 7% means that 7 cents of each net sales dollar ends up in net
income and a gross profit rate of 7% means that the cost of the goods were 7% of the
selling price.
The following information pertains to Blue Flower Company. Assume that all balance
sheet amounts represent both average and ending balance figures. Assume that all sales
were on credit.
What is the current cash debt coverage ratio for this company?
a.0.67 times
b.1.5 times
c.0.27 times
d.0.44 times
The interest on a $7,000, 6%, 60-day note receivable is
a.$35.
b.$420
c.$210.
d.$70.
Jackson Company recorded the following cash transactions for the year:
Paid $135,000 for salaries.
Paid $60,000 to purchase office equipment.
Paid $15,000 for utilities.
Paid $6,000 in dividends.
Collected $245,000 from customers.
What was Jackson’s net cash provided by operating activities?
a.$95,000
b.$35,000
c.$110,000
d.$89,000
If Indiana Ink, Inc. has net sales of $400,000 and cost of goods sold of $300,000,
Indiana Ink’s gross profit rate is
a.75%.
b.33%
c.25%.
d.100%.
Financial information is presented below:
The gross profit rate would be
a..68
b..39
c..32
d..34
Classify each of these items as an asset (A), liability (L), or stockholders’ equity (SE).
_____1> Accounts receivable
_____2> Accounts payable
_____3> Common stock
_____4> Supplies
_____5> Retained earnings
_____6> Cash
_____7>Notes payable
_____8> Equipment
A machine costing $132,000 was destroyed when it caught fire. At the date of the fire,
the accumulated depreciation on the machine was $60,000. An insurance check for
$150,000 was received based on the replacement cost of the machine. The entry to
record the insurance proceeds and the disposition of the machine will include a
a.gain on disposal of $18,000.
b.credit to the Equipment account for $72,000.
c.credit to the Accumulated Depreciation account for $60,000.
d.gain on disposal of $78,000.
A review of the ledger of Weakly Service Co. at December 31, 2014, produces the
following data pertaining to the preparation of annual adjusting entries:
(a)Notes Payable $80,000: This is a 9-month note, dated September 1, 2014, with a 9%
interest rate.
(b)Prepaid Rent $648,000. The company rents offices throughout the Midwest. During
2014 it signed 10 leases as shown below:
(c)Unearned Service Revenue $171,000. During 2014 the company entered into 13
monthly service contracts with clients. The clients prepaid for the services to be
provided over the contract period in an even manner.
Instructions:
Prepare the adjusting entries at December 31, 2014. Show all computations.
The best interpretation of the word €credit€ is the
a.offset side of an account.
b.increase side of an account.
c.right side of an account.
d.decrease side of an account.
A corporation purchases 20,000 shares of its own $10 par common stock for $25 per
share, recording it at cost. What will be the effect on total stockholders’ equity?
a.Increase by $200,000.
b.Decrease by $500,000.
c.Increase by $500,000.
d.Decrease by $200,000.
The asset turnover measures
a.how often a company replaces its assets.
b.how efficiently a company uses its assets to generate sales.
c.the portion of the assets that have been financed by creditors.
d.the overall rate of return on assets.
An asset was purchased for $300,000. It had an estimated salvage value of $60,000 and
an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is
revised to $48,000 but the estimated useful life is unchanged. Assuming straight-line
depreciation, depreciation expense in Year 6 would be
a.$36,000.
b.$26,400.
c.$18,000.
d.$25,200.
Benedict Company compiled the following financial information as of December 31,
2014:
Benedict’s assets on December 31, 2014 are
a.$940,000.
b.$680,000.
c.$320,000.
d.$380,000.
(a)Which company is doing the best job of managing its accounts receivable? Why? Be
sure to support your answer with computations.
(b)What are your concerns about these companies?
Lan Enterprises uses a periodic inventory system for buckets it sells. It had a beginning
inventory on April 1 of 80 units at a cost of $6 per unit. During April, the following
purchases and sales were made.
Instructions: Compute the April 30 ending inventory and April cost of goods sold
under (a) average cost, (b) FIFO, and (c) LIFO. Provide appropriate supporting
calculations.
(1)Average – Ending Inventory = $_________;Cost of Goods Sold = $_________.
(2)FIFO – Ending Inventory = $_________;Cost of Goods Sold = $_________.
(3)LIFO – Ending Inventory = $_________;Cost of Goods Sold = $_________.
The maturity value of a $40,000, 12%, 3-month note receivable is
a.$41,200.
b.$40,480.
c.$44,800.
d.$40,400.
During 2014 Wheeler Inc. had sales on account of $528,000, cash sales of $216,000,
and collections on account of $336,000. In addition, they collected $5,800 which had
been written off as uncollectible in 2013. As a result of these transactions the change in
the accounts receivable indicates a
a.$402,200 increase.
b.$192,000 increase.
c.$186,200 increase.
d.$408,000 increase.
Douglas Company has a $51,000 note that carries an annual interest rate of 10%. If the
amount of the total interest on the note is equal to $3,400, then what is the duration of
the note in months?
a.6 months
b.4 months
c.12 months
d.8 months
On July 1, 2014, Linden Company purchased the copyright to Norman Computer
Tutorials for $140,000. It is estimated that the copyright will have a useful life of 5
years. The amount of amortization expense recognized for the year 2014 would be
a.$28,000.
b.$13,125.
c.$25,900.
d.$14,000.
Crowder Corporation recorded the return of $200 of goods originally sold on credit to
Discount Industries. Using the periodic inventory approach, Crowder would record this
transaction as:
The bank statement for Cates Company indicates a balance of $1,730 on June 30. The
cash balance per books had a balance of $799 on this date. The following information
pertains to the bank transactions for the company.
Instructions
Prepare a bank reconciliation for June 30.
Prepare any adjusting entries necessary as a result of the bank reconciliation.
The Downtown Company accumulates the following adjustment data at December 31
Ritchey Corporation has the following capital stock outstanding at December 31, 2014:
The preferred stock was issued at $125 per share. The common stock was issued at an
average per share price of $14.
Instructions
Prepare the paid-in capital section of the balance sheet at December 31, 2014.
Instructions: Prepare journal entries to record the following events. Round amounts to
the nearest whole dollar:
If Hanalia Collision has a fiscal year end at June 30, how much is the net realizable
value of the note on that date?
Using the following information, prepare a bank reconciliation for Hintz Company for
July 31, 2014.
The bank statement balance is $3,506.
The cash account balance is $3,930
Outstanding checks totaled $1,285.
Deposits in transit are $1,670.
The bank service charge is $30.
A check for $98 for supplies was recorded as $89 in the ledger.
From the following list of selected accounts taken from the records of Schmidt Clinic,
identify those that would appear on the balance sheet.
Instructions: Each of the events below may have an effect on the statement of cash
flows. Designate how the event should be reported within the statement of cash flows
using the codes provided below. Codes may be used more than once, or not at all.
Events
1)Collected amounts past due from customers
2)Converted bonds payable into common stock
3)Paid the utility bill
4)Issued checks to employees
5)Issued a note payable for cash
6)Paid dividends to stockholders
7)Paid an account payable
8)Sold an old delivery truck for cash at book value
9)Paid interest due on a long-term loan
10)Paid cash for 40% interest in another company