The financial statements are prepared after
a. business transactions are recorded.
b. adjustments are recorded.
c. the accounts are closed.
d. the adjusted trial balance is prepared.
The Discount on Bonds Payable account is shown on the balance sheet as
a. an asset.
b. an expense.
c. a long-term liability.
d. a contra-liability account that reduces the bond to market value at the issue date.
Which of the following is not a current reporting requirement for a statement that
reports changes in cash over a period of time?
a. This statement must classify cash flows into three categories: operating, investing,
and financing activities.
b. Cash equivalents must be combined with cash in preparing this statement.
c. Working capital may be used as a substitute for cash in preparing this statement.
d. The title for this statement is “Statement of Cash Flows.”
Select the incorrect statement from the following:
a. The financial statements for a 100% asset acquisition will be different from the
consolidated financial statements for a 100% stock acquisition.
b. Business combinations usually, but not always, transfer ownership of the acquired
business entity from one stockholder group to another.
c. Purchased assets are recorded at their current value to the purchaser, without regard
to their recorded value to the seller.
d. The excess of acquisition cost over the current value of the investee’s identifiable net
assets is recorded as goodwill.
On January 1, 2013, a company buys equipment for $666,633 with a 14% installment
note to pay off the debt with 6 semiannual payments over three years. The payments are
$139,857. Required:
Which of the following ratios is used to analyze a company’s asset efficiency?
a. return on assets
b. inventory turnover ratio
c. earnings per share
d. debt-to-total assets ratio
Which of the following would be generally viewed as a negative change?
a. Earnings per share increases.
b. The debt-to-total assets ratio decreases.
c. The acid test ratio increases.
d. The return on common equity decreases.
A company sold equipment at a loss. What is the impact on the balance sheet of
removing the equipment account and its related accumulated depreciation account?
a. reduces total assets
b. increases total assets
c. has no effect on total assets
d. increase total assets and decrease total equity
Cash
Several items from the financial statements of Fireside Tires are listed. Use the
following choices to identify the type of account for each item listed. (Choices may be
used more than once.)
a. Assets
b. Liabilities
c. Revenues
d. Expenses
e. Stockholders’ Equity
A company’s accounts receivable balance after posting net collections from customers
for 2013 is $150,000. Management feels that uncollected accounts should be based on
the following aging of accounts receivable and uncollected percentages. There are
$100,000 that are 1-30 past due at 2% and $50,000 that are 31 to 60 days past due at
10%. The net realizable value of the accounts receivable is
a. $147,500
b. $148,000
c. $150,000
d. $143,000
What is the name for a person who lends funds to a business entity and expects
repayment with interest?
a. creditor
b. owner
c. proprietor
d. stockholder
Refer to Labor Finders, Inc. The company’s 2015 dividend payout ratio is reported as
Labor Finders, Inc.
Selected data from the company’s financial statements are presented below:
a. 2.67%.
b. 2.80%.
c. 26.67%.
d. 28.00%.
Term used to refer to the left side of an account.
Match the following terms with their correct definition.
a. Account f. Debit
b. Accounting cycle g. Event
c. Chart of accounts h. General ledger
d. Cost vs. benefit i. Journal
e. Credit j. Trial balance
Refer to Gainesville Truck Center. When the company journal entry is recorded for the
payment of these wages and related liabilities, which of the following statements is true
regarding the impact on the accounting equation?
Gainesville Truck Center This company has a weekly payroll of $10,000 for its
employees who work Monday through Friday. Federal and state income taxes are
withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld
at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In
addition, the federal and state unemployment taxes are applied at rates of 2% and 5%,
respectively. The company’s year-end is December 31. a. Both assets and liabilities will
decrease.
b. Assets, liabilities, and stockholders’ equity will all decrease.
c. Assets and stockholders’ equity will decrease, while liabilities will increase.
d. Both assets and liabilities will increase.
On April 1, 2013, a company established a petty cash fund for $300. By the end of the
month, the petty cash custodian requested reimbursement of $225 for the following
expenditures from the fund:
Record the entries to a) establish the petty cash fund; and b) replenish the fund and
recognize expenses at the end of April.
Because the four financial statements are interrelated (i.e., there is a natural progression
from one financial statement to another), the balance sheet should be prepared first.
The use of a ______________ provides a means of systematically analyzing changes in
the balance sheet amounts, along with the information from the income statement and
any additional information, to produce the statement of cash flows.
Shareholders holding the shares on this date are the ones who receive any dividends
that have been declared.
Refer to Regency Lighting. Complete a common size horizontal analysis of the current
assets section of the balance sheet for 2015. Your answers should be expressed as
percentages and rounded to one decimal place. Provide a short explanation of this
analysis.
Regency Lighting
The current assets section of the company’s two most recent balance sheets are
presented below:
The market value of a bond is determined by calculating its present value, which is
based on the face amount, the number of periods, and the market rate of interest.
If a company made a payment on account, then assets and liabilities would both
decrease.
FASB allows companies to use different depreciation methods so they can capture
declining service potential of an operating asset.