A way to estimate bad debts.
Match each statement to the item listed below
a. Accounts receivable e. Notes receivable
b. Aging method f. Realized
c. Allowance for Doubtful Accounts g. Securitization
d. Earned
Mathematical extensions and footings on purchase invoices are verified before the
invoices are paid. The following set of items describes activities completed by a
company in purchasing and paying for merchandise and in collecting cash for
merchandise sales. For each activity, identify whether or not the activity adheres to or
violates sound internal control procedures. (Choices may be used more than once.)
a. Adheres to sound internal controls
b. Violates sound internal controls
c. Neither strengthens nor violates internal control
The cost of goods sold is equal to
a. purchases less beginning inventory plus ending inventory.
b. the inventory account as reported on the balance sheet.
c. the cost of goods available for sale less ending inventory.
d. the amount of inventory on hand at the end of the accounting period.
Each of the following is included in the MD&A section of a public company’s Form
10-K except
a. Material trends, events, or known uncertainties.
b. Statements about what management expects to occur in the future.
c. Management’s views of the financial condition and performance of the company.
d. Names and experience of the company’s managers, directors, and officers.
Refer to Fernbank Farms. What is the truck’s book value at December 31, 2013?
Fernbank Farms This company purchased a semi truck at the beginning of 2011 at a
cost of $100,000. The truck had an estimated life of 5 years, an estimated residual value
of $20,000, and will be depreciated using the straight-line method. On January 1, 2013,
the company made major repairs of $30,000 to the truck that extended the life 3 years.
Thus, starting with 2013, the truck has a remaining life of 5 years and a new salvage
value of $8,000. a. $68,000
b. $98,000
c. $80,000
d. $62,000
Refer to Ladder Distributors. How much should be reported on the company’s March
31, 2015, balance sheet for treasury stock?
Ladder Distributors
The stockholders’ equity section of the December 31, 2014, balance sheet is provided
below:
Assume that all of the 20,000 shares of stock that was issued as of December 31, 2014,
was issued for $42 per share. On March 1, 2015, the company reacquired 4,000 shares
of its common stock for $50 per share. a. $ 32,000
b. $128,000
c. $168,000
d. $200,000
A company issued $1,000,000 of 10% notes that resulted in interest expense of
$100,000 per year. What is the company’s net cash outflow if the effective tax rate is
40%?
a. $100,000
b. $ 60,000
c. $ 40,000
d. $160,000
Goodwill can be recorded as an asset when a(n)
a. business has above normal profitability compared to other businesses in its industry.
b. business can determine that it has created customer goodwill and name recognition.
c. offer is received to purchase the business at a price in excess of the value of the
assets.
d. business is purchased and payment is made in excess of the value of the net assets.
A company reported the following information in its annual report for 2014.
Compute the cash flow adequacy ratio for 2014.
a. 1.10
b. 2.00
c. 5.50
d. 7.50
Cash Express had no supplies on January 1 but purchased $2,581 in supplies during the
year. At December 31, supplies on hand are $1,492. What amount for supplies will be
reported on the firm’s balance sheet?
a. $0
b. $1,089
c. $1,492
d. $2,581
Current ratio For each ratio listed, select whether an increase or decrease in the ratio
is generally considered to be better. (Choices may be used more than once.)
Allgood Pet Supplies reported net credit sales of $3,200,000 and cost of goods sold of
$2,600,000 for 2013. On January 1, 2013, accounts receivable was $450,000. Amounts
owed by customers increased by $50,000 during 2013. Rounding to two decimal places,
what is the company’s accounts receivable turnover rate for 2013?
a. 5.47
b. 6.40
c. 6.74
d. 7.11
Tax returns are prepared by the company’s accountant.
Select the choice that describes the type of transaction and whether it should be
recorded in the accounting system. (Choices may be used more than once.)
a. External event to be recorded as a transaction
b. Internal event to be recorded as a transaction
c. Event which should not be recognized in the accounting system
Refer to Labor Finders, Inc. The company’s 2015 stock repurchase payout ratio is
reported as
Labor Finders, Inc.
Selected data from the company’s financial statements are presented below:
a. 6.67%.
b. 77.19%.
c. 28.00%.
d. 66.67%.
What is the name of the branch of accounting concerned with providing outside
decision makers with information to assess the amounts, timing and uncertainties of the
company’s future cash flows?
a. financial accounting
b. auditing
c. managerial accounting
d. bookkeeping
The following information comes from a balance sheet at December 31, 2015:
Answer the following questions: A) How many shares of common stock are issued?
B) How many shares of common stock are outstanding?
C) Assuming that all shares were sold at the same price, what was the original selling
price per share?
D) If the company declares a 2-for-1 stock split on December 31, 2015, describe the
resulting change, if any, in the balances in capital stock accounts and the par value of
the common stock.
Determines operating cash flow which begins with net income and then adjusts it for
noncash items. Match these terms with their correct definition.
a. Cash flow adequacy ratio
b. Cash flows from financing activities
c. Cash flows from investing activities
d. Cash flow from operating activities
e. Direct method
f. Free cash flow
g. Income statement
h. Indirect method
i. Noncash investing & financing activities
j. Statement of cash flows
“Revenues” are best described as
a. decreases in assets resulting from the sale of goods or services.
b. increases in assets resulting from the sale of products or services.
c. assets used or consumed in the sale of products or services.
d. an increase in the financing activities.
Flott Corp. purchased a machine on January 1, 2012, for $60,000. The company
decided to depreciate the machine over a 8-year period using the straight-line method.
The company estimated its residual value at $4,000. Show how the costs should be
presented on the balance sheet and income statement for the full year ended June 30,
2014. Label the statements properly.
Callable bonds may be retired by the issuer before their specified due date.
Under a periodic inventory system, the ____________________ account accumulates
the cost of inventory acquired during the period.
The cash flow adequacy ratio is defined as Free Cash Flow / Average Amount of Debt
Maturing over the Next Five Years.
Refer to King Cotton Company. Describe briefly how each of the following long-term
liabilities arises; i.e., what kind of transaction produces the resulting long-term liability?
You may want to include the appropriate journal entry (ignore amounts) in your
description.
King Cotton Company
The liabilities section of the company’s most recent consolidated balance sheets is
provided below: