Tom is saving for an engagement ring. If he deposits $500 payments into an account
(one at the end of each year) that earns 6% interest compounded annually, how much
will he have saved by the end of the 10thyear?
a. $895.42
b. $13,435.18
c. $6,590.39
d. $6,554.39
An equity kicker whereby stockholders are granted rights to purchase shares of stock in
the future. Match the terms to the definitions.
Refer to General Lighting. The price of each battery includes a $1.95 federal excise tax.
Any taxes collected must be paid to the appropriate governmental units at the end of the
quarter. Which of the following is the proper journal entry to record for the sale of the
batteries?
General Lighting During the first quarter of 2013, the company sold 4,000 batteries on
credit for $150 each plus state sales tax of 6%. a. Accounts Receivable 643,800 Sales
Revenue 600,000 Sales Tax Payable 36,000 Federal Excise Tax Payable 7,800
b. Accounts Receivable 636,000 Sales Revenue 592,200 Sales Tax Payable 36,000
Federal Excise Tax Payable 7,800
c. Accounts Receivable 636,000 Excise Tax Expense 7,800 Sales Revenue 607,800
Sales Tax Payable 36,000
d. Accounts Receivable 636,000 Sales Tax Expense 36,000 Excise Tax Expense 7,800
Sales Revenue 643,800
Fiona’s Italian Market purchased a delivery truck for deliveries for $25,000 at the
beginning of 2012. The truck has an estimated life of 5 years, and an estimated residual
value of $5,000. The company plans to use the straight-line depreciation method. At the
beginning of 2013, the company spent $4000 to replace the truck’s transmission. This
resulted in a 2-year extension of useful life, but no change in residual value. A) What
type of cost is the $4,000? Explain.
B) Calculate the asset’s book value at the end of 2012.
C) Calculate depreciation expense for 2013.
Assume that a company has an operating cash flow ratio of 0.75. Payment of accrued
wages payable would cause the operating cash flow ratio to
a. decrease.
b. increase.
c. be unchanged since the effects offset one another.
d. be unchanged since it has no impact on any current liability or operating cash flow
accounts.
A company reported a net loss of $30,000 for 2014, yet its cash balance increased
during the year. Which financial statement should management refer to for an
explanation of this situation?
a. Balance Sheet
b. Income Statement
c. Statement of Retained Earnings
d. Statement of Cash Flows
Refer to Falling Leaves Lawn Care. The company wants to use the depreciation method
that will result in the highest depreciation expense for 2013. Which method should be
used?
Falling Leaves Lawn Care This company purchased new excavating equipment at the
beginning of 2013. The equipment has a cost of $37,000, an estimated life of 5 years,
and an estimated residual value of $7,000. A full year’s depreciation expense is to be
recorded in 2013. The equipment was used 20,000 hours during 2012 and 24,000 hours
during 2013. The number of expected hours over 5 years is 100,000. a. straight-line
b. units-of-production
c. double-declining-balance
d. All methods create the same income in 2013.
Receiving cash from customers in advance for services to be provided next month
Several transactions are listed. Use the choices to identify the effect on the accounting
equation for each transaction listed. (Choices may be used more than once.)
a. Assets and liabilities increase
b. Assets and contributed capital increase
c. Assets and retained earnings increase
d. Two asset accounts are impacted, but there is no net effect on total assets
e. Assets and liabilities decrease
f. Assets and retained earnings decrease
g. Liabilities increase and retained earnings decrease
h. Liabilities decrease and retained earnings increase
The effectiveness of the last advertising campaign.
Provided is a list of important users of accounting information. Also provided are
descriptions of a major need for accounting information that may be experienced by the
various users. Identify the one user group that is most likely to have the need described.
(Choices may be used more than once.)
a. Investors
b. Management
c. Supplier
d. Banker
e. Government
f. Employees
g. Labor Union
h. Investors and Banker
i. Supplier and Banker
Collected cash from a customer for payment within the discount period.
Deeter Company, which sells auto parts, uses a perpetual inventory system. Identify the
effects on the accounting equation. (Choices may be used more than once.)
a. Increase in assets and liabilities
b. Decrease in assets and liabilities
c. Increase in assets and stockholders’ equity
d. Decrease in assets and stockholders’ equity
e. Increase in liabilities and decrease in stockholders’ equity
f. Decrease in liabilities and increase in stockholders’ equity
What happens to the accounting equation when the adjustment is recorded to recognize
earned revenue previously recorded as unearned revenue?
a. assets increase and liabilities increase
b. liabilities decrease and Stockholders’ equity increases
c. assets decrease and liabilities decrease
d. stockholders’ equity increases and decreases by the same amount
Royal Dunes Company is a retailer of specialty beachwear. During 2015, the company
expanded its retail business by adding 30 new retail stores. The following information is
obtained from the comparative financial statements included in the company’s 2015
Form 10-K (all amounts in $ thousands).
Using the information provided, address the following questions for both 2015 and
2014: A) What is the debt-to-equity ratio?
B) What is the times interest earned ratio?
C) What is the long-term debt-to-equity ratio, assuming that there is no current portion
of long-term debt?
D) What is the long-term debt-to-total assets ratio, assuming that there is no current
portion of long-term debt?
E) What is the debt-to-total assets ratio?
F) Comment briefly on the company’s debt management position.
Prices are rising; ending inventory best approximates replacement cost with this
method.
Identify which inventory costing method achieves the effect listed in the following items.
(Choices may be used more than once.)
a. FIFO method c. Average cost method
b. LIFO method d. Specific identification method
On June 30, a company had $1,924 in its cash account according to its general ledger.
This included a deposit of $174 that was in transit on June 30th. The June 30th bank
statement contained the following information:
Assuming outstanding checks of $338, what is the company’s adjusted cash balance at
June 30th?
a. $1,840
b. $1,880
c. $2,014
d. $2,178
Machinery is purchased on credit. What effect does this transaction have on the
accounting equation?
a. Assets and liabilities increase.
b. Assets and stockholders’ equity increase.
c. Liabilities increase and stockholders’ equity decreases.
d. Assets and liabilities decrease.
The ___________________ is a list of each active account and its debit or credit
balance at a specific point in time.
A company borrowed $50,000 on November 1, 2012, at 9% interest. The interest and
principal are due on October 31, 2013. Prepare the company’s journal entries on
November 1, 2012, December 31, 2012, and October 31, 2013.
____________________ securities are equity or debt investments that are bought and
sold frequently and are typically owned for less than one month.
An example of a current liability is the current maturity of a long-term debt.
Refer to Rhodes Bakery. Perform DuPont Analysis for 2015 and 2014, including the
three components of Return on Equity (ROE). Round your answers to two decimal
places, then comment on the company’s relative ROE from 2014 to 2015. Rhodes
Bakery
The balance sheet taken from the company’s 2015 10-K is provided below:
Additional information is available below:
At December 31, 2013, the company’s total assets and total stockholders’ equity were
$325,000 and $287,500, respectively.
Cash flows are described as either single cash flows or _______________.
An advantage of the equity method over the fair value method is that it prevents an
investor from manipulating its own income by exerting influence over the amount and
timing of investee dividends.