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Dividends in arrears are reported as current liabilities on the balance sheet.
The higher the receivables turnover, the slower accounts receivable are being collected.
If a company reports net income on the income statement, then the statement of cash
flows will report the same amount as cash flows from operating activities for the period.
When a company reissues (or sells) shares of its treasury stock at an amount different
than its cost, it reports a gain or a loss on the sale.
Cash equivalents are short-term, highly liquid investments purchased within one year of
maturity.
When duties are properly segregated, the accounting department should compare the
cash in the register with the cash count sheet.
The allowance method for uncollectible accounts conforms to the expense recognition
principle.
A declining fixed asset turnover ratio can be caused by acquiring additional assets in the
current period in anticipation of increased revenue in the future.
If total assets increase, then either total liabilities or total stockholders' equity must also
increase.
Factoring refers to an arrangement in which a company sells its receivables to another
company and receives cash immediately.
When credit card sales occur, the seller may receive cash immediately, or within a few
days, depending upon the specific credit card program being used.
Assuming no additions, replacements, or extraordinary repairs, the book value of a
long-lived asset declines over time.
The statement of cash flows explains the difference between the beginning and ending
balances of cash and cash equivalents.
Use the information above to answer the following question. What is the net cash flows
provided by (used in) financing activities?
A) $620,000
B) $410,000
C) $610,000
D) $490,000
The following is a listing of all of the income statement accounts for Mulberry Street
Sportswear as they appear on the adjusted trial balance as of December 31.
Required:
Part a. Prepare a multistep income statement.
Part b. Compute the gross profit percentage.
Two years ago, your company bought $40,000 in bonds from another company. This
month, it sold half of those bonds for $20,640 and purchased the common stock of
another company for $1,000. On the statement of cash flows for this accounting period,
your company would report a net cash:
A) outflow of $19,640 from investing activities.
B) inflow of $19,640 from investing activities.
C) inflow of $20,640 from investing activities.
D) outflow of $20,640 from investing activities.
One of the major advantages of making adjustments in order to improve the quality of
financial statements is that they:
A) ensure that revenues and expenses are recognized during the period they are earned
and incurred.
B) ensure that all estimates of future activities are eliminated from consideration.
C) ensure that revenues and expenses are recognized conservatively during the period
in which they are paid.
D) provide an opportunity to manipulate the numbers to the best advantage of the
reporting company.
A company uses the direct write-off method. The company writes off a $3,000 customer
account balance when it becomes clear that the particular customer will never pay.
What is the journal entry that would be prepared to record this write-off?
A) Debit Bad Debt Expense and credit Accounts Receivable for $3,000
B) Debit Allowance for Doubtful Accounts and credit Bad Debt Expense for $3,000
C) Debit Bad Debt Expense and credit Allowance for Doubtful Accounts for $3,000
D) Debit Accounts Receivable and credit Bad Debt Expense for $3,000
Company A uses an accelerated depreciation method while Company B uses the
straight-line method. All other things being equal, during the first few years of the
asset's use, Company A will show which of the following compared to Company B?
A) Higher asset values and higher net income
B) Lower asset values and higher net income
C) Higher asset values and lower net income
D) Lower asset values and lower net income
Labrador Inc. has the following information available for the current year:
What was the amount of write-offs during the year?
A) $62,000
B) $0
C) $55,000
D) $40,000
Earnings per share (EPS) can be affected by all of the following except:
A) how the company chose to finance its operations.
B) the method of depreciation.
C) the inventory costing method.
D) classification of debt as current or long-term.
One major difference between deferral and accrual adjustments is that deferral
adjustments:
A) involve previously recorded assets and liabilities and accrual adjustments involve
previously unrecorded assets and liabilities.
B) are made after financial statements are prepared and accrual adjustments are made
before financial statements are prepared.
C) are made annually and accrual adjustments are made monthly.
D) are influenced by estimates of future events and accrual adjustments are not.
Which of the following statements about Retained Earnings is correct?
A) Retained Earnings represents cash available to pay dividends to stockholders.
B) Retained Earnings cannot be restricted by loan covenants.
C) Retained Earnings generally consists of cumulative net income less any net losses
and dividends since inception.
D) Retained Earnings is reduced by the par value of the common stock that is issued.
When the amount of a contingent liability can be reasonably estimated and its
likelihood is probable, the company should:
A) include a description in the notes to the financial statements.
B) record the estimated amount of the liability times the probability of its occurrence.
C) record the estimated amount of the liability on the balance sheet.
D) exclude the information about the contingent liability from its financial statements
and notes.
Which of the following ratios is used to evaluate solvency?
A) Fixed asset turnover ratio
B) Days to sell ratio
C) Current ratio
D) Times interest earned
In its most basic form, the earnings per share ratio is calculated as:
A) dividends paid on common stock divided by the average number of outstanding
common shares.
B) the difference between net income and preferred dividends divided by the average
number of outstanding common shares.
C) total dividends paid divided by the average number of total stock shares.
D) net income divided by average stockholders' equity.
Which of the following would eventually cause Retained Earnings to decrease?
A) Receiving contributions from investors
B) Earning unearned revenue
C) Billing customers for services provided
D) Using up supplies
If Cost of Goods Sold is $145,000 and the beginning and ending Inventory balances are
$18,000 and $13,000, respectively, inventory purchases equal:
A) $145,000.
B) $140,000.
C) $150,000.
D) $132,000.
Which of the following would generally be considered an operating revenue or
expense?
A) Income from renting out extra warehouse space
B) Interest on a note payable
C) Dividends earned on an investment is another company's stock
D) Depreciation
Urban Outsiders has a building that originally cost $375,000. The company expects to
be able to sell the facility for $107,000 at the end of its useful life. The balance of the
related Accumulated Depreciation account is $258,000. The residual value of the
facility is:
A) $117,000.
B) $151,000.
C) $268,000.
D) $107,000.
Which of the following statements about the adjusted and post-closing trial balances is
correct?
A) The adjusted trial balance is prepared after the financial statements to verify that the
numbers are accurate.
B) The primary purpose of the post-closing trial balance is to see whether revenues are
greater than expenses.
C) The post-closing trial balance is a check that the accounting records are still in
balance after posting all closing entries to the accounts.
D) The post-closing trial balance debit column total is the amount to be shown as Total
Assets on the Balance Sheet.
Company A uses the FIFO inventory method and Company B uses the LIFO method. If
prices are rising and there are no other significant differences between the companies,
which of the following is correct?
A) Company A will report a higher current ratio and lower earnings per share than
Company B.
B) Company A will report a higher current ratio and higher earnings per share than
Company B.
C) Company A will report a lower current ratio and higher earnings per share than
Company B.
D) Company A will report a lower current ratio and lower earnings per shares than
Company B.
The following information is available for the Tierney Company for the month of
November.
On November 30, after all transactions have been recorded, the balance in the
company's Cash account has a balance of $27,202.
The company's bank statement shows a balance on November 30 of $29,279.
Outstanding checks at November 30 include check #3030 in the amount of $1,525 and
check #3556 in the amount of $1,459.
Included with the bank statement was a credit memo in the amount of $770 for an EFT
in payment of a customer's account.
The bank deducted $67 for an NSF check from a customer deposited on November 22.
A deposit placed in the bank's night depository on November 30 totaled $1,675 and did
not appear on the bank statement.
Examination of the checks on the bank statement with the entries in the accounting
records reveals that check #3445 for the payment of an account payable was correctly
written for $2,450, but was recorded in the accounting records as $2,540.
Included with the bank statement was a debit memorandum in the amount of $25 for
bank service charges.
Required:
Prepare the journal entries for the items that would appear on the company's bank
reconciliation as of November 30. (Do not prepare the bank reconciliation.)
Indicate whether a debit (dr) or credit (cr) would be used to increase each of the
following accounts.
1)_____ Prepaid Rent
2) _____ Sales Revenue
3) _____ Salaries and Wages Expense
4)_____ Service Revenue
5) _____ Unearned Revenue
6)_____ Accounts Receivable
7) _____ Retained Earnings
8)_____ Supplies Expense
Assume that sales discounts in the current year exceed sales discounts in the prior year.
Assume that nothing else changes.
Required:
Determine the impact of an increase in sales discounts on the company's gross profit
percentage (that is, whether it will increase, decrease, or not be affected). Include a
simple example to prove your answer.
Marble Corporation had the following balances in its stockholders' equity accounts at
December 31, 2015:
The following transactions occurred during 2016:
Required:
Based on the above information, prepare a statement of stockholders' equity for 2016.
Maple Industries Inc. deposits all cash receipts on the day when they are received and it
makes all cash payments by check. At the close of business on December 31, its Cash
account shows a debit balance of $18,303. The company's bank statement as of June 30
shows an ending cash balance of $15,921. The following information was also
available.
-Outstanding checks as of December 31 total $2,261.
Included with the bank statement was a debit memo in the amount of $35 for service
charges.
-Check No. 2519, listed with the canceled checks, was correctly drawn for $805 in
payment of a utility bill on December 16. The company mistakenly recorded it with a
debit to Utilities -Expense and a credit to Cash in the amount of $850.
-The December 31 cash receipts of $3,425 were placed in the bank's night depository
after banking hours and were not recorded on the December 31 bank statement.
The bank deducted $1,228 for an NSF check from a customer deposited on December
10.
Required:
Prepare the bank reconciliation as of December 31.
Listed below are components of several transactions. In the blank to the left indicate
whether a debit (dr) or credit (cr) would be required to record the component of the
transaction.
_____ (1) Increase in Cash.
_____ (2) Increase in Accounts Payable.
_____ (3) Decrease in Notes Payable.
_____ (4) Increase in Inventory.
_____ (5) Increase in Common Stock.
_____ (6) Decrease in Equipment.
Complete the table below by placing "X's" in the correct columns to identify the: (1)
type of asset and (2) appropriate method of allocating the existing costs that were
already recorded.
A company paid $17,000 for a vehicle that had an estimated useful life of 4 years, total
capacity of 100,000 miles, and a residual value of $1,000. After 2 full years of using the
vehicle (20,000 miles in Year 1 and 27,000 miles in Year 2), the company sold the
vehicle for $6,000 and reported a loss on disposal of $3,480.
Required:
Determine the method of depreciation that was used by the company. (Show your work
using all three methods.)
A company provided the following information:
There was no change in contributed capital and there were no dividends declared in the
current year.
Required:
Calculate the return on equity ratio.
