Refer to Kalahari Limited. The semiannual cash payment on the bonds is
Kalahari Limited
On January 2, 2013, this company issued 1,000,000, 10-year bonds for $1,150,000. The
bonds pay interest on June 30 and December 31. The stated rate is 10% and the market
rate is 8%. The company plans to use the effective interest method of amortizing bond
discounts and premiums. a. $50,000.
b. $40,000.
c. $42,400.
d. $46,000.
Refer to the information provided for Aaron Corporation. Calculate the Cost of Goods
Sold.
Aaron Corporation
Aaron Corporation is a merchandising company. Selected account balances are listed
below:
a. $137,500
b. $129,500
c. $120,500
d. $105,500
Asset turnover 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.)
If a corporation declares a 2-for-1 stock split, which of the following is true?
a. A new class of stock must be authorized with twice the number of issued shares.
b. The number of outstanding shares is half the number that were previously
outstanding before the split.
c. The number of outstanding shares is twice the number that were previously
outstanding before the split.
d. The number of outstanding shares is doubled, while the number of issued shares is
reduced to half of the amount before the split.
Refer to Rainsoft Company. Assume that competitors in the industry have an average
inventory turnover ratio of 20.8 times in 2015. Rainsoft’s inventory turnover ratio for
2015 indicates that the company
Rainsoft Company
Selected data from the financial statements are provided below:
a. has too little inventory on hand at the end of 2015.
b. is pricing its products too low.
c. is selling its inventory much more quickly than the industry average.
d. may have obsolete inventory or problems with sales.
Which of the following entries properly closes a temporary account?
a. Income Summary 20,000 Service Revenue 20,000
b. Dividends 200 Retained Earnings 200
c. Accumulated Depreciation 1,600 Income Summary 1,600
d. Income Summary 400 Salaries Expense 400
Authorized stock represents the
a. number of previously issued shares that have been repurchased by the corporation.
b. number of shares that the corporation has sold.
c. number of shares that are currently held by stockholders.
d. maximum number of shares that can be issued for each class of stock.
Which of the following statements is true regarding economic events?
a. The signing of a service contract is an example of an external event that is recorded
in the accounting records.
b. Every event which affects an entity can be identified from a source document.
c. All internal and external events must be measured with sufficient reliability.
d. External events involve exchanges between an entity and another entity outside the
company.
When using the indirect method to determine operating cash flows, how would the
declaration and payment of cash dividends be shown on the Statement of Cash Flows?
a. operating activities
b. investing activities
c. financing activities
d. noncash investing and financing activity
e. not reported on the statement of cash flows.
Under this method, interest expense for the period is always the yield (i.e., effective
interest rate) times the carrying value of the bonds at the beginning of the period. Match
these terms with their definitions.
a. Bond i. Lessor
b. Contract, coupon, stated rate j. Leverage
c. Discount k. Long-term debt
d. Effective interest rate method l. Market rate, yield
e. Face value, par value, principal m. Maturity
f. Interest amortization n. Premium
g. Lease o. Straight-line method
h. Lessee
Which of the following is not a financing activity?
a. Issuing bonds for cash.
b. Selling an investment in IBM stock for cash.
c. Purchasing a company’s own stock (treasury stock) for cash.
d. Making a cash payment to repay a bank loan.
Upon reviewing Myert Company’s Statement of Cash Flows, the following was noted:
From this information, the most likely explanation is that this company is
a. using cash from operations and selling long-term assets to pay back debt.
b. using cash from operations and borrowing to purchase long-term assets.
c. using its profits to expand growth.
d. using cash from investors to provide for operations.
The step of listing the liabilities of the company in order of their time to maturity is
performed for a financial statement called ____________________.
Refer to Mary Kay Cosmetics. Prepare the operating activities section of a statement of
cash flows for 2014 assuming the use of the indirect method of determining net cash
flow from operating activities.
Mary Kay Cosmetics
Selected data and additional information from the company’s records are presented
below:
Additional information:
What is the difference between trading securities and available-for-sale securities? What
are the similarities in terms of their accounting treatment?
____________________ is the quality of accounting information that makes it
dependable in representing the events that it purports to represent.
Refer to Recovery Solutions, Inc. Calculate the return on common equity ratio for 2015
and 2014. Assume that preferred stock and total stockholders’ equity at June 30, 2013,
were $3,157 and $969,000, respectively. Recovery Solutions, Inc.
Comparative financial statements are provided below:
