Ratios that focus on cash are more useful than those that focus on income in the
evaluation of the liquidity of a company.
a. True
b. False
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
Collected an account receivable
Lucky Company purchased a truck at a cost of $12,000 in 2010. As of January 1, 2015,
depreciation of $10,000 had been recorded on this asset. Depreciation expense for 2015
is $2,000. After the adjustments are recorded and posted at December 31, 2015, what is
the carrying value of the truck?
a. $ 2,000
b. $ 5,500 c. $12,000
d. $ -0-
A grocery store is an example of a wholesaler.
a. True
b. False
On January 2, 2015, Roof Master Construction, Inc. issued $500,000, 10-year bonds for
$574,540. The bonds pay interest on June 30 and December 31. The face rate is 8% and
the market rate is 6%. At the maturity date, besides an interest payment, Roof Master
would repay the bondholders
a. $574,540.
b. $520,000.
c. $500,000.
d. only the last interest payment.
If a company prepares a statement of retained earnings, net income plus dividends are
added to beginning retained earnings on this statement.
a. True
b. False
As used in accounting, the “Notes to the Financial Statements” should be:
a. Listed with the liabilities on the balance sheet
b. Omitted at the option of the company
c. Included as an integral part of the financial statements
d. Reported as expenses on the Income Statement
The Premium on Bonds Payable account is shown on the balance sheet as
a. a contra asset.
b. a reduction of an expense.
c. an addition to a long-term liability.
d. a subtraction from a long-term liability.
Iowa Industries Inc. Selected data from the financial statements of Iowa Industries Inc.
for the years ended December 31, 2016 and 2015, are presented below. Also, certain
assumptions are presented. Use these data and assumptions to answer the questions that
follow.
Assumptions:
(1) Cash additions to property, plant, and equipment during 2016 were $550.0. An
additional $86.2 of plant assets were acquired through debt in a noncash transaction.
Depreciation expense for 2016 was $343.3. Gains on disposals of property, plant and
equipment during 2016 were $27.7. (2) The cash proceeds from the sale of investments
in 2016 were $82.7. There was a $17.8 gain on the sale of the investments. (3) Proceeds
from long-term debt issued during 2016 were $167.7. (4) The issuance of common
stock totaled $28.6 in 2016. (5) During 2016, $389.4 in cash was used to purchase and
retire common stock. A total of $365.4 of the cost was recorded as an increase to
Reinvested Income. (6) Net income, dividends declared/paid, and the $365.4 amount in
(5) were the only items that affected reinvested income during 2016.
Review the data and assumptions for Iowa Industries Inc. REQUIRED:
(A) What was the cost of the property, plant and equipment which was disposed of
during 2016? (B) What was the amount of accumulated depreciation on the property,
plant and equipment disposed of during 2016? (C) Assuming that the book value of the
property, plant and equipment disposed of during 2016 was $76.9, what were the cash
proceeds from the disposal of property, plant and equipment for 2016?
Ramos Corporation employs 14 workers in its retail service center. Each employee is
paid $10 per hour and works 6 hours per day, Monday through Friday. Employees are
paid every Friday for the workweek just ending. The last payday was Friday, December
26, on which day the employees were paid through that date. A) Compute the dollar
amount of the weekly payroll. B) Determine the effect on the accounting equation of
the adjusting entry needed on
Wednesday, December 31, the last day of Ramos Corporation’s fiscal period.
Krenshaw Rentals
Use the five transactions for Krenshaw Rentals described below to answer the
question(s) that follow(s).
Refer to the transactions for Krenshaw Rentals.Based on the October 15 transaction,
Krenshaw will record which of the following in its accounting records?
a. a credit in Accounts Payable for $150.
b. a credit in Accounts Receivable for $150.
c. a debit in Accounts Payable for $150.
d. a debit in Accounts Receivable for $150.
The result of using the effective interest method of amortization of discount on bonds is
that the
a. interest expense for each amortization period is constant.
b. effective interest rate for each amortization period is constant.
c. amount of interest expense decreases each period.
d. cash interest payment is greater than the interest expense.
Indicate whether each should be (a) included or (b) excluded from the line item titled
Cash and cash equivalents on the balance sheet.
a. Included
b. Excluded
Shares of GM stock
All transactions refer to external events.
a. True
b. False
Prepare the journal entry to record each of the following independent transactions. (Use
the number of the transaction in place of a date for identification purposes.)
1> Sale of capital stock in exchange for a parcel of land; the land is appraised at
$75,000
2> Payment of $3,400 in salaries and wages
3> Payment of open account in the amount of $850
4> Issuance of a promissory note for $2,750
5> Collections on account for $689
Which of the following combinations appropriately reflects the type of accounts
represented by the Treasury Stock account and Additional PaidÂin Capital-Treasury
Stock account?
Explain the differences between a partnership and sole proprietorship. Include in your
discussion whether either is considered a separate legal entity.
Valance & Company Use the selected data from the balance sheet and cash flow
statements for Valance & Company to answer the questions that follow. Valance &
Company
Balance Sheet
(Selected Information)
(in millions)
Valance & Company
Statements of Cash Flow
(Selected Information)
(in millions)
Refer to the data for Valance & Company.
REQUIRED: (1) What current liabilities appearing on the balance sheet do not appear
in the operating activities section of the statement of cash flows? Why? (2) What
current liabilities appear in the operating activities category of Valance’s statement of
cash flows? How does the change for each year affect the cash flows from operating
activities for that year?
Explain the purpose of a trial balance and the limitation of the trial balance.