When bad debts recoveries occur, the write-off should be reversed and the collection
handled as a normal receipt on account.
The accounts receivable turnover ratio indicates how rapidly customers pay their bills.
Entries for the accrual of unrecorded expenses and the accrual of unrecorded revenues
are made prior to the associated cash flows.
Gains or losses on sales of tangible plant assets are usually measured by the difference
between the cash received and the net book value of the asset given up.
Book value is determined by adding salvage value to the cost of the asset.
Fangled Company prepared the following balance sheet:
What is the long-term-debt-to-total-capital ratio for Fangled Company at December 31,
20X3?
A) 35.82%.
B) 38.71%.
C) 63.16%.
D) 92.31%.
E) 200.00%.
Machiel Manufacturing acquired a $60,000 machine on January 1, 20X9. The machine
is estimated to have a useful life of 4 years, and a residual value of $10,000. For
units-of-production depreciation purposes, the machine is expected to produce 500,000
units. What is the depreciable value of the machine acquired by Machiel
Manufacturing?
A) $10,000
B) $50,000
C) $60,000
D) $15,000
E) Cannot be determined without additional data
Companies must include a net long-term liability on its balance sheet for pensions if
A) the pension expense is more than the pension liability.
B) the fair value of the pension obligation is more than the cash invested yearly.
C) the fair value of the pension obligation is less than the cash invested yearly.
D) the fair value of the pension fund assets are less than the pension obligations.
E) the fair value of the pension fund assets are greater than the pension obligations.
A liability is created
A) when merchandise is purchased with cash.
B) when owners invest in a company.
C) when merchandise is sold on account.
D) when salary expense is recognized before employees are paid.
E) when rent is paid in advance.
Reasons given for a company to buy back its own shares include all of the following
except:
A) to reduce the market price per share of its stock to make it more affordable to
potential investors.
B) to permanently reduce shareholder claims.
C) to temporarily hold shares for later use.
D) to decrease the likelihood that a company will be the object of a takeover bid.
E) to distribute in an employee stock purchase plan.
Fangled Company prepared the following balance sheet:
What is the debt-to-total-assets ratio for Fangled Company at December 31, 20X3?
A) 7.46%.
B) 35.82%.
C) 43.28%.
D) 100.00%.
E) 231.03%.
An adjusting entry made to record accrued interest on a note payable involves a credit
to
A) interest expense.
B) accrued interest payable.
C) interest revenue.
D) accrued interest receivable.
E) cash.
All of the following would be included in a company’s financing activities except
A) issuing equity securities.
B) purchasing treasury stock.
C) repayment of amounts borrowed.
D) borrowing cash from a bank.
E) interest payments.
The Fangled Company prepared the following income statement:
What is the interest-coverage ratio for Fangled Company at December 31, 20X3?
A) 8.33.
B) 0.25.
C) 14.00.
D) 27.50.
E) 28.50.
What is the effect on the basic accounting equation of the cash payment of accrued
interest payable previously accrued?
A) Increase assets, increase liabilities
B) Decrease assets, decrease liabilities
C) Decrease assets, increase liabilities
D) Increase liabilities, decrease stockholders’ equity
E) Decrease liabilities, increase stockholders’ equity
Solve each of the following independent cases using the present value tables.
The following are actual contracts signed by athletes:
a. $25,000,000 contract, payable at $2,500,000 per year for 10 years.
b. $25,000,000 contract, payable at $1,000,000 per year for 25 years.
c. $25,000,000 contract, payable at $1,562,500 per year for 16 years.
Determine the present value of each contract and indicate which contract you would
prefer to have. Assume a 12% interest rate.
The current portion of long-term debt represents
A) the amount of principal on long-term debt that comes due in the coming year.
B) the amount of long-term debt that appears in the noncurrent liability section of the
balance sheet.
C) the amount of interest that comes due in the coming year.
D) a short-term loan from a bank that has also granted a long-term loan.
E) the amount of principal and interest that comes due within a coming year.
Which statement is false?
A) The periodic interest payment on a bond is based upon the market rate of interest.
B) Typically when a company issues a bond, the company will sell the bonds to an
underwriter, who in turn sells the bonds to the general public.
C) The nominal rate of interest and the market rate of interest are usually different on
the date the bond is issued.
D) If a bond is sold at a price that is greater than face value, it is said to be sold at a
premium.
E) If a bond is sold at a price that is less than face value, it is said to be sold at a
discount.
Emerz Corporation had sales of $850,000, of which 20% were cash sales. As of
year-end, the balance in the Allowance for Uncollectible Accounts before adjusting for
bad debts was a $400 debit. The company estimates bad debts as 10% of ending
accounts receivable or 1.5% of credit sales. The ending balance in Accounts Receivable
is $72,000. What is the balance in the Allowance for Uncollectible Accounts if Emerz
Corporation estimates bad debts using a percentage of ending accounts receivable?
A) $6,800
B) $7,200
C) $7,600
D) $85,000
E) $84,600
Gross profit appears on a
A) single-step income statement.
B) classified balance sheet.
C) multiple-step balance sheet.
D) multiple-step income statement.
E) single-step balance sheet.
Required:
1. What is the current ratio?
2. What is the working capital?
3. What is the return on sales?
4. If the beginning stockholders’ equity balance for Logell Paper Products was $85,000,
then what is the return on stockholders’ equity?
Which financial ratio measures how much the investing public is willing to pay for a
chance to share the company’s potential earnings?
A) Earnings per share
B) Price-earnings ratio
C) Dividend-yield ratio
D) Dividend payout ratio
E) Profit margin ratio
The hierarchy (1 is top) of U.S. accounting rule-making responsibility is
A) 1. congress, 2. AICPA, 3. FASB.
B) 1. SEC, 2. IASB, 3. FASB.
C) 1. FASB, 2. IASB, 3. AICPA.
D) 1. congress, 2. SEC, 3. FASB.
E) 1. PCAOB, 2. FASB, 3. IASB.
Payne Industries can borrow money from the local bank at 14%. The company just
acquired inventory costing $2,900, which has terms of 2/10, n/30. Assuming a 365-day
year, which of the following statements is true?
A) Do not pay within the discount period since the effective annual rate of the discount
is 37.2%, while the cost to borrow money is 14%.
B) Pay within the discount period since the effective annual rate of the discount is
37.2%, while the cost to borrow money is 14%.
C) Do not pay within the discount period since the effective annual rate of the discount
is 24%, while the cost to borrow money is 14%.
D) Pay within the discount period since the effective annual rate of the discount is 24%,
while the cost to borrow money is 14%.
E) Do not pay within the discount period since the 2% discount is less than the 14%
cost to borrow money.
Mason Manufacturing had 2012 earnings of $850,000. Cash dividends per share were
$1.25. The company had an average of 350,000 shares of common stock outstanding.
The market price of the stock at the end of the year was $30 per share. What are the
earnings per share for 2012?
A) $ 1.50.
B) $24.00.
C) $ 2.43.
D) $ 21.50.
E) This cannot be determined from the information given.