The useful life of an asset is always measured in units of time, such as years or months.
Net income is based on estimates.
The list of account names and reference numbers that the company will use when
accounting for transactions is called the chart of accounts.
Maya Company’s purchase of 100 shares of Labrador Inc. common stock would be
reported as a financing activity on its statement of cash flows.
Use the information above to answer the following question. What is the amount of
Total Liabilities on the Balance Sheet?
A company’s trial balance included the following account balances:
A) $240,116.
B) $37,308.
C) $35,599.
D) $20,916.
Your company uses the again of accounts receivable method. Net credit sales are
unchanged from last year, the year-end balance in Accounts Receivable is unchanged
from the previous year’s ending balance, and there were no write-offs during the current
year. The company previously averaged about 20% of its total accounts receivable in
the “over 90 days past due” category and now has 35% in this category at the end of the
current year. The dollar amount of the adjustment to record Bad Debt Expense in the
current year:
A) decline, thus increasing the ending balance of the Allowance for Doubtful Accounts
account.
B) increase, thus increasing the ending balance of the Allowance for Doubtful Accounts
account.
C) decline, thus reducing the ending balance of the Allowance for Doubtful Accounts
account.
D) increase, thus reducing the ending balance of the Allowance for Doubtful Accounts
account.
On March 3, Year 3, your company purchases supplies on account for $4,000. Payment
is due on April 2, Year 3.
Required:
Part a. Is this an accounting transaction on March 3, Year 3? Why or why not?
Part b. When this transaction is recorded, what accounts are affected and by how much
each?
Assets are listed on a classified balance sheet:
A) in alphabetical order.
B) from the largest dollar amount to the lowest dollar amount.
C) beginning with noncurrent assets and ending with current assets.
D) beginning with current assets and starting with Cash.
Which of the following would be classified as an operating activity on the statement of
cash flows using the direct method?
A) Cash dividends paid
B) Cash received from selling equipment
C) Cash paid to retire bonds payable at maturity
D) Cash received from accounts receivable collections
A building has a 10-year useful life and a residual value equal to 10% of the building’s
original cost. If the double-declining balance method is used, what depreciation rate
would be used?
A) 9%
B) 10%
C) 18%
D) 20%
The primary objective of external financial reporting is to:
A) enhance the ability of the company to acquire financial capital from external
sources.
B) accurately provide financial results for tax purposes.
C) comply with external regulations and requirements of government and professional
associations.
D) provide useful information to decision makers, especially investors and creditors.
A piece of equipment with a cost of $130,000 and accumulated depreciation of $85,000
is sold for $50,000 cash. The amount that should be reported as a cash inflow from
investing activities is:
A) $50,000.
B) $5,000.
C) $45,000.
D) $0; this transaction is a financing activity.
Which of the following statements about the unadjusted trial balance is not correct?
A) trial balance is an internal report used to determine whether total debits equal total
credits.
B) A trial balance lists every account name in one column, usually in the order of assets,
liabilities, stockholders’ equity, revenues and expenses.
C) A trial balance shows the ending balances obtained from the ledger listed in either
the debit or credit column.
D) You can assume that no errors were made in the recording of transactions if total
debits equal total credits on the unadjusted trial balance.
If Sales are $850,000 and the beginning and ending balances of Accounts Receivable
are $43,000 and $48,000, respectively, the cash collected from customers is:
A) $850,000.
B) $802,000.
C) $845,000.
D) $855,000.
Which of the following ratios is used to evaluate a company’s liquidity?
A) Debt-to-assets ratio
B) Fixed asset turnover ratio
C) Return on equity ratio
D) Current ratio
Use the information above to answer the following question. As a result of these
transactions, what is the amount of the increase to the Cash account?
The following transactions occurred during July:
1) Received $800 cash for services performed during July.
2) Received $5,000 cash from the issuance of common stock to owners.
3) Received $400 from a customer as payment for services performed during June.
4) Billed $3,500 to customers for services performed on account in July.
5) Borrowed $2,500 from the bank and signed a promissory note.
6) Received $1,000 from a customer for services to be performed during August.
A) $9,700.
B) $13,200.
C) $2,200.
D) $7,200.
Which of the following ratios is used to evaluate solvency?
A) Earnings per share (EPS)
B) Fixed asset turnover
C) Debt-to-assets
D) Current ratio
The inventory turnover ratio is calculated as:
A) cost of goods sold divided by sales.
B) cost of goods sold divided by average inventory.
C) ending inventory divided by cost of goods sold.
D) average inventory divided by cost of goods sold.
If the calculation of cash flows from operating activities starts with net income, the
company:
A) is using the net income method.
B) will remove the effects of all noncash items included in the calculation of net
income.
C) is using the direct method.
D) will add all noncash items not included in the calculation of net income.
A corporate charter specifies that the company may issue up to 20 million shares of
stock. The company sells 12 million shares to investors and later buys back 3 million
shares. The current number of shares of treasury stock after these transactions have
been accounted for is: A) 3 million shares.
B) 8 million shares.
C) 9 million shares.
D) 17 million shares.