1) Iowa Industries Inc.
Selected data from the financial statements of Iowa Industries Inc. for the years ended
December 31, 2014 and 2013, are presented below. Also, certain assumptions are
presented. Use these data and assumptions to answer the questions that follow.
Assumptions:
Review the data and assumptions for Iowa Industries Inc.
REQUIRED:
(A) What was the cost of the investments purchased during 2014?
(B) What was the amount paid to retire long-term debt during 2014?
2) An example of a current liability that must be accrued is
A.accounts payable
B.current maturity of long-term debt
C.revenue received in advance
D.income taxes payable
3) Which of the following statements is trueregarding the multiple-step income
statement?
A.The multiple-step income statement is used only by companies that sell products, not
those that provide services
B.The multiple-step income statement is helpful in determining a company’s working
capital
C.The multiple-step income statement reports the same net income as the single-step
income statement
D.The multiple-step income statement is required under generally accepted accounting
principles
4) Verilux Company sold merchandise to Flight Corp. on November 1, 2014, for
$10,000. Verilux accepted a promissory note from Flight Corp. for $10,000. The note
has a term of 5 months and a stated interest rate of 7%. Veriluxs accounting period ends
on December 31, 2014.
What amount should Verilux recognize as interest revenue on December 31, 2014?
A.$ -0-
B.$ 116.67
C.$ 291.67
D.$ 280.00
5) Which of the following is the most serious limitation to financial statement analysis
of publicly traded companies?
A.Some companies dont use GAAP.
B.Inflation can distort comparisons between years.
C.Some companies report nonoperating items such as extraordinary gains and losses,
while others do not.
D.Different industries use different account names.
6) Guinther & Sons, Inc.
Guinther & Sons, Inc. a retailer of mens clothing, earned a net profit of $77,000 for
2014. The balance sheet for Guinther & Sons includes the following items:
Read the information for Guinther & Sons. Calculate the total amount of current assets
for Guinther & Sons.
A.$ 100,000
B.$ 147,000
C.$ 150,000
D.$ 249,000
7) A trial balance is a(an)
A.optional financial statement used only by accountants
B.device used to prove the equality of debits and credits in the general ledger
C.list of accounts and their balances taken from the chart of accounts
D.financial statement which can be used in place of a balance sheet
8) Which of the following considerations is most important for a stockholder when
evaluating whether to purchase stock in a company?
A.Will earnings per share be distributed to stockholders?
B.Will the company earn a fair return on the amount invested by the stockholders?
C.Will the key ratios be reported on the balance sheet?
D.Will cash flows from operations exceed the amount of net income for the period?
9) For which of the following is the current ratio most useful?
A.In evaluating a companys liquidity
B.In evaluating a companys solvency
C.In evaluating a companys profitability
D.In evaluating a companys probability
10) The equity method of accounting for an investment is used when a company
purchases
A.More than 20% of the debt securities of a second company
B.100% of the debt securities of a second company
C.15% of the equity securities of a second company
D.More than 20% of the equity securities of a second company
11) Which one of the following is an investing activity of a business?
A.Paying for purchases of inventory
B.Issuing stock for cash
C.Borrowing money from a bank
D.Purchasing a manufacturing plant for cash
12) Given below are the accounts from Surf Corporation’s ledger accounts after
adjustments have been posted at December 31, 2014.
13) [APPENDIX] Which of the following statements regarding partnerships is true?
A.Partnerships must register with the federal government
B.Partnerships pay taxes to the IRS
C.Partners must register with the state government
D.Partners must abide by the separate entity concept and keep their personal assets
separate from the partnership assets
14) Select the financial statement on which the user would most likely find the answer
to the question given.
15) The following information is taken from Harvey Companys balance sheet at
December 31, 2014:
REQUIRED: Using the information provided for Harvey Company, answer the
following questions:
16) Which of the following inventory costing methods is prohibited under IFRS?
A.FIFO
B.Weighted-average
C.LIFO
D.Perpetual
17) Readers.com uses a perpetual inventory system.
If Readers.com uses the moving average method, how much is ending inventory on
February 28?
A.$300
B.$306
C.$312
D.$318
18) The 2014 income statement of Nasir Inc. shows operating revenues of $135,800,
selling expenses of $40,310, general and administrative expenses of $33,990, interest
expense of $880, and income tax expense of $13,090. Nasirs stockholders equity was
$250,000 at the beginning of the year and $345,000 at the end of the year. The company
has 10,000 shares of stock outstanding at December 31, 2014.
REQUIRED: Compute Nasirs profit margin. What other information would you need
in order to comment on whether this ratio is favorable?
19) Peterson Corporations partial income statement is as follows:
Required
Determine the profit margin. Would you invest in Peterson Corporation? Explain your
answer.
20) ____________________ is the process of writing off the cost of tangible assets and
____________________ is the process of writing off the cost of intangible assets.
21) On August 16, 2014, Fenchurch Corp. purchases 6,000 shares of common stock in
Markham Inc. at a market price of $17 per share. In addition, Fenchurch pays brokerage
fees of $2,000. On October 21, 2014, Fenchurch sells the Markham stock for $12 per
share.
REQUIRED:
Identify and analyze the effects of Fenchurchs investment beginning with the purchase
of the common stock on August 16, 2014, and the sale on October 21, 2014.
22) ____________________ is the quality of accounting information that allows a user
to compare two or more accounting periods for a single company.
23) A(n) _________________ is a form the accounting department uses before making
payment to document the accuracy of all information about a purchase.
24) The 2014 income statement of Cigmar Enterprises shows operating revenues of
$120,500, selling expenses of $35,200, general and administrative expenses of $29,900,
interest expense of $1,500, and income tax expense of $10,520. Cigmars stockholders
equity was $280,000 at the beginning of the year and $320,000 at the end of the year.
The company has 20,000 shares of stock outstanding at December 31, 2014.
REQUIRED: Compute Cigmars profit margin. What other information would you need
in order to comment on whether this ratio is favorable?