1) Owners of Thibeau Industries, Carl and Stefanie, are sent a dividend check from the
company. For this transaction, what is the effect on the accounting equation for Thibeau
Industries?
A.Assets decrease and stockholders equity decreases
B.Assets increase and stockholders equity increases
C.Liabilities increase and stockholders equity decreases
D.Liabilities increase and stockholders equity decreases
2) Which of the following statements is false regarding a credit memorandum?
A.A credit memorandum is added to the balance per the companys books
B.A credit memorandum could be issued for interest earned on checking balances
C.A credit memorandum is issued when the bank collects a note for the customer
D.A credit memorandum is subtracted from the balance per the companys books
3) Mallick Corp. reported the following information for 2013 and 2014.
How much cash was collected from customers during 2014?
A.$741,000
B.$745,000
C.$749,000
D.$753,000
4) Bonds are sold at a premium if the
A.issuing company has a better reputation than other companies in the same business
B.market rate of interest was less than the face rate at the time of issue
C.market rate of interest was more than the face rate at the time of issue
D.company will have to pay a premium to retire the bonds
5) Carlton, Inc. presented the following information in a note to its financial statements
for the year ending December 31, 2012:
The company has a loan agreement with Beachside Bank that states:
1. The current ratio should remain at least 2.0 to 1 at all times.
2. The debt-to-equity ratio should not exceed .7 to 1 at any time.
3. The times-interest-earned should be 5.0 or better.
4. The inventory,turnover should be 4.0 or better.
The ratios at year-end are: current ratio, 2.3 to 1; debt-to-equity ratio, .6 to 1;
times-interest-earned, 7.1; and inventory-turnover, 3.7. Which of the following
statements is true?
A.Carlton was in default because of the inventory turnover.
B.Carlton was in default because of the current ratio.
C.Carlton was in default because of the debt-to-equity ratio.
D.Carlton was in default because of the times-interest-earned.
6) The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
If Ying has $5,000 to invest and wants to have $10,000 at the end of 9 years, what
compounded interest rate must she get on her money (assume annual compounding)?
A.5%
B.6%
C.7%
D.8%
7) Lucky Company purchased a truck at a cost of $12,000 in 2009. As of January 1,
2014, depreciation of $10,000 had been recorded on this asset. Depreciation expense for
2014 is $2,000. After the adjustments are recorded and posted at December 31, 2014,
what is the carrying value of the truck?
A.$ 2,000
B.$ 5,500
C.$12,000
D.$ -0-
8) Flake Company accepted a check from Ramos Company as payment for services
rendered by Flake Company. Later Flakes bank statement revealed that Ramos check
was an NSF check. Recognizing the NSF check on Flakes books would act to:
A.Decrease total assets
B.Decrease total owners equity
C.Both a. and b.
D.Have no effect on Total Assets
9) The cost of goods sold is
A.Purchases less beginning inventory plus ending inventory
B.Reported on the balance sheet in the inventory account
C.Goods available for sale less ending inventory
D.Equal to the amount of inventory on hand at the end of the accounting period
10) Paint Company
Following are selected data from Paint Companys financial statements.
Refer to the Paint Company data.
The cash flow from operations to capital expenditures ratio for 2012 is an indicator that
Paint Company
A.has been effectively able to use operations to finance its acquisitions of productive
assets.
B.has increased profits by $13,000
C.has decreased cash, but is offset by the increase in net income
D.has net income that is more than it would have been had dividends of $30,000 been
paid.
11) The following information is available from the balance sheets at the end of 2012
and 2011 for Riverside Company:
Net income for 2012 and 2011 was $340,000 and $300,000, respectively. Answer the
following:
12) The financial statement that summarizes the operating, investing, and financing
activities of a business over a period of time is the
___________________________________.
13) St. Petersburg Corporation
Use the information obtained from the comparative financial statements included in the
St. Petersburg Corporation’s 2012 annual report that is presented below to answer the
questions that follow. All amounts are in thousands of dollars.
Refer to the financial information for St. Petersburg Corporation.
REQUIRED:
During 2012, has St. Petersburg successfully employed favorable leverage based on the
average cost of capital? What action should the company take?
14) What rational is used in order to determine if an amount is ‘cash’?
15) Brooke Accounting Services collected $15,000 from a customer on June 1 and
agreed to provide accounting services during the next six months. Brooke expects to
provide an equal amount of services each month.
REQUIRED:
1> Identify and analyze the effect of the transaction for the receipt of the customer
deposit on June 1.
2> Identify and analyze the effect of the adjustment on June 30.
3> What will be the effect on net income for June if the adjustment in (2) is not made?
16) If a company discounts a note at a bank, but still is contingently liable for the
maturity value, then the note was discounted with ____________________.
17) Slammer Sports
The following information is for Slammer Sports at the end of 2014:
Refer to the data for Slammer Sports.
Assume that the net realizable value is $170,000 after the adjustment for bad debts in
2014. How much is the net realizable value of accounts receivable after a customer’s
account of $2,500 is written off? Explain why.
18) You just purchased an automobile for $19,450 and must decide how to pay for it.
Your local bank has granted you a five-year loan. Annual payments on the loan will be
made at the end of each year and the amount of the loan payments, which include
principal and interest, is $5,000 per year. What is the interest rate that is being charged
on the loan?