1) Port, Inc. paid a cash dividend on January 2 that had been declared prior to the end of
its fiscal year. The entry to pay the dividend will
A.increase Cash and increase Cash Dividend Payable
B.decrease Cash Dividend Payable and decrease Cash
C.decrease Retained Earnings and increase Cash Dividend Payable
D.decrease Cash Dividend Payable and increase Retained Earnings
2) A list of all asset, liability, stockholders equity, revenue, and expense accounts, along
with their assigned account numbers, which are used by a company is a(an)
A.Account
B.General Journal
C.General Ledger
D.Chart of Accounts
3) When using the indirect method, how is the issuance of stock to retire a long-term
debt shown on a statement of cash flows?
A.Operating activity
B.Investing activity
C.Financing activity
D.Noncash investing or financing activity
4) For each of the following, calculate the cost of inventory reported on the balance
sheet.
5) The following events occurred at Cute Canines Company during its first year of
business:
a. To establish the company, the two owners contributed a total of $60,000 in exchange
for common stock.
b. Grooming service revenue for the first year amounted to $175,000, of which $50,000
was on account.
c. Customers owe $15,000 at the end of the year from the services provided on account.
d. At the beginning of the year, a storage building was rented. The company was
required to sign a three-year lease for $15,000 per year and make a $3,000 refundable
security deposit. The first years lease payment and the security deposit were paid at the
beginning of the year.
e. At the beginning of the year, the company purchased a patent at a cost of $120,000
for a revolutionary system to be used for dog grooming. The patent is expected to be
useful for ten years. The company paid 20% down in cash and signed a four-year note
at the bank for the remainder.
f. Operating expenses, including amortization of the patent and rent on the storage
building, totaled $90,000 for the first year. No expenses were accrued or unpaid at the
end of the year.
g. The company declared and paid a $25,000 cash dividend at the end of the first year.
REQUIRED:
1> Prepare an income statement for the first year.
2> Prepare a statement of cash flows for the first year using the direct method in the
Operating Activities section.
3> Did the company generate more or less cash flow from operations than it earned in
net income? Explain why there is a difference.
4> Prepare a balance sheet as of the end of the first year.
6) [APPENDIX] Wabasso Corporation has made an accounting entry to record deferred
taxes as a liability resulting from temporary differences between accounting income and
taxable income. Which of the following statements is true?
A.Deferred tax will be decreased
B.Stockholders equity will be increased
C.Stockholders equity will be decreased
D.Assets will be decreased
7) Chens Department Store
Chens Department Store is a merchandising company that uses the periodic inventory
system. Selected account balances are listed below:
Refer to the account information for Chens Department Store
Calculate Chens cost of goods purchased
A.$ 84,000
B.$ 90,000
C.$ 103,000
D.$ 117,000
8) Deal Mart
The 2014 income statement of Deal Mart shows operating revenues of $130,800,
selling expenses of $37,100, general and administrative expenses of $34,900, interest
expense of $900, and income tax expense of $11,430. Deal Marts stockholders equity
was $280,000 at the beginning of the year and $320,000 at the end of the year. The
company has 20,000 shares of stock outstanding at December 31, 2014.
Read the information about Deal Mart. What is Deal Marts profit margin (to the closest
tenth of a percent)?
A.2.8
B.35.5
C.61.2
D.14.5
9) Givens Corp.
Givens Corp. is a merchandising company that uses the periodic inventory system.
Selected account balances are listed below:
Refer to information for Givens Corp.
Calculate the cost of goods sold for Givens Corp.
A.$275,000
B.$259,000
C.$241,000
D.$211,000
10) The following information was summarized from the balance sheets of the Better
Books and Tenacious Texts at December 31, 2012:
(in millions) Better Books Tenacious Texts
Cash and cash equivalents $ 5,800 $3,150
Short-term investments/marketable securities 280 210
Accounts and notes receivables, net* 3,100 4,700
Inventories 2,200 2,500
Prepaid expenses and other current assets 1,920 1,320
Total current assets $ 13,300 $11,880
Current liabilities $13,900 $ 9,800
REQUIRED:
1> Using the information provided, compute the following for each company at the end
of 2012:
a. Current ratio b. Quick ratio
2> Better Books reported cash flow from operations of $7,500 million during 2012.
Tenacious Texts reported cash flow from operations of $7,000 million. Current
liabilities reported by Better Books and Tenacious Texts at December 31, 2011, were
$13,200 million and $7,700 million, respectively. Compute the cash flow from
operations to current liabilities ratio for each company for 2012.
3> Comment briefly on the liquidity of each of these two companies. Which appears to
be more liquid?
4> What other ratios would help you more fully assess the liquidity of these companies?
11) Presented below are selected data from the financial statements of Provost Corp.
The dividend payout ratio for 2012 is
A.1.8%
B.30.0%
C.36.3%
D.38.0%
12) Business entities generally carry on:
A.Operating, investing, and financing activities
B.Operating activities, but only corporations engage in financing and investing
activities
C.Investing and operating activities, but only corporations engage in financing activities
D.Either investing or financing activities, but not both
13) Harbor City Corporations end-of-year balance sheet consisted of the following
amounts:
What amount should Harbor City report on its balance sheet for total assets?
A.$110,000
B.$155,000
C.$170,000
D.$190,000
14) A convertible bond is one where
A.the issuer can convert from a fixed interest rate to a floating one
B.the issuer can convert it from long-term to short-term
C.the issuer can retire the bond before its specified due date
D.the holder can convert the bond into common stock at a future time
15) Research and development costs are
A.treated as an expense when incurred
B.capitalized but not amortized
C.capitalized and amortized over the periods that will probably benefit from the
research and development
D.included with the cost of the patent resulting from the research and development
16) Slammer Sports
The following information is for Slammer Sports at the end of 2014:
Refer to the data for Slammer Sports.
If the aging approach is used to estimate bad debts, how much is the net realizable value
of the accounts receivable at December 31, 2014?
17) Read the information about Raponi, Inc.
Required:
Prepare the Liabilities section of the classified balance sheet, including total liabilities
balance.
18) Many firms operate at a dividend payout ratio of less than 50%. Why dont firms
pay a larger percentage of income as dividends?
19) Below are several accounts and balances from the 2013 financial statements for
Valcaria, Inc.. Prepare the intangible asset section of the companys balance sheet, as
well as a partial income statement in the space provided below using the accounts
provided.
20) For each of the following intangible assets, indicate the amount of amortization
expense that should be recorded for the year 2014 and the amount of accumulated
amortization on the balance sheet as of December 31, 2014
.
21) ____________________ controls within a company are more concerned with
efficient operations and the adherence to management policies than with the accurate
reporting of financial information.
22) What is the relationship between the depreciation method chosen and income taxes
paid in the early years? Explain.
23) Cory Harper, a newly hired accountant, wanted to impress his boss, so he stayed
late one night to analyze the office supplies expense account. He determined the cost by
month, for the past 12 months, of each of the following: computer paper, copy paper,
fax paper, pencils and pens, note pads, postage, corrections supplies, stationery, and
miscellaneous items. Why do companies not include information of this nature in
published financial statements?