U.S. financial reporting follows the IASB framework for decision usefulness.
Under the FIFO method, ending inventory is valued based on the oldest unit costs.
The investing section of the Statement of Cash Flows includes the sale of fixed assets
for cash.
Net income appears on the income statement and balance sheet.
An ordinary annuity is a series of different cash flows to take place at the end of
successive periods.
Just because a certain number of shares are authorized does not mean that a company
will ever offer that many shares to potential investors.
The cost of goods available for sale is determined by taking the cost of inventory
purchased during the year combined with the cost of goods sold.
On February 27, 20X9, Best Appliances Ever agreed to sell 60 refrigerators to a local
home construction company. The sales contract stated that the normal selling price of
the refrigerators was $500 each, but a 4% trade discount was given due to the size of
the order. The terms of the sales are 2/10, n/30. The refrigerators are to be delivered on
March 20, 20X9. The invoice was dated March 20, 20X9. The customer paid the
appropriate amount on March 28.
A. What is the gross revenue that Best Appliances Ever should recognize for the month
ending March 31, 20X9?
B. What is the net revenue that Best Appliances Ever should recognize for the month
ending March 31, 20X9?
If a company calls a bond early and the carrying value of the bond is less than the cash
received by the investor for the bond, the difference for the issuing company
A) decreases bonds payable.
B) increases bonds payable.
C) is not recognized.
D) is a gain.
E) is a loss.
Cash payments to suppliers would appear on a statement of cash flows using the direct
method as a(n)
A) financing activity.
B) operating activity.
C) investing activity.
D) debt activity.
E) equity activity.
Thompson Manufacturing sold inventory to a customer for $400. The customer used a
VISA bank card, which charges Thompson a 3% fee. The company uses the periodic
inventory system. What asset results from this sale?
A) Accounts Receivable of $388
B) Cash of $400
C) Cash of $388
D) Sales of $388
E) Accounts Receivable of $400
Following is a list of selected financial data for a series of companies:
| Per-share Data | Ratios and Percentages
Company | Price Earnings Dividends | P-E Dividend-yield Dividend-payout
Jacobs | $50 $1.75 A | B C 30%
Simons | $35 D $2.25 | E F 40%
Russell | G $5.25 $1.75 | 12.0 I J
1. Compute the missing figures and identify the company with
a. the highest dividend-yield.
b. the highest dividend-payout percentage.
c. the lowest market price relative to earnings.
2. Assume that you know nothing about any of these companies other than the data
given and the computations you have made from the data. If you were interested in
receiving dividend income, which company would you choose as
a. the most attractive investment? Why?
b. the least attractive investment? Why?
When stock is sold, the difference between the total amount the company receives and
the par value is called
A) stated value.
B) par value.
C) additional paid-in capital.
D) stockholders’ equity value.
E) common stock.
The bank reconciliation is
A) only required when a company suspects fraud.
B) supplied as a bank courtesy.
C) needed because the IRS requires it for cash-basis companies.
D) an important part of internal control.
E) usually reported in a company footnote.
Given the following information, determine the gross profit.
A) $20,000
B) $ 16,000
C) $ 184,000
D) $156,000
E) $170,000
Footnotes are
A) included in the audit report.
B) an integral part of financial statement information.
C) an appendix to the letter from corporate management.
D) at the bottom of the report of the independent auditors.
E) explanatory information in the statement of management’s responsibility for
preparation of financial statements.
For each example, write the qualitative characteristic(s) or accounting term that best
corresponds.
a. A company that uses a different inventory method every year is not following this
characteristic of financial information.
b. An error of $100 of revenue for Sherry’s Dairy King versus $100 of revenue for
McDonald’s.
c. Record revenue when it is earned and record expenses when incurred regardless of
when cash changes hands.
d. A parent corporation, a subsidiary, and a retail store are examples of this concept.
e. The SEC requires companies with publicly traded securities to file financial reports
with the SEC quarterly.
f. Three auditors count the same amount of cash.