Refer to Rio Imports. The debt-to-equity ratio for 2015 is
Rio Imports
Information from the financial statements are provided below:
a. an indicator that the company’s ability to meet current interest payments to creditors
is increasing.
b. increasing slightly from 2014 to 2015.
c. an indicator that for every $1 of capital that has been provided by stockholders,
creditors provided $0.83.
d. an indicator that the company’s reliance on stockholders for funding increased from
2014 to 2015.
The going concern assumption is concerned with
a. the company’s ability to continue operations long enough to carry out its existing
obligations.
b. any information that is capable of influencing the decisions of anyone using the
financial statements.
c. measuring ongoing business activities at their exchange price at the time of the initial
external transaction.
d. offsetting management’s natural optimism by providing a prudent approach to
uncertainty in financial statement items.
Keller Company issued $1,000,000, 8%, 7 year bonds with interest payable
semiannually when the yield rate was 8%. The bonds issued at
a. $887,037.
b. $1,000,000.
c. $1,112,963.
d. This question cannot be answered without the time value of money tables.
Result when the value of securities must be written up or down to fair market value at
the balance sheet date, a process referred to as “marking to market’
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
When bonds are issued by a company, the accounting entry shows an
a. increase in liabilities and a decrease in stockholders’ equity.
b. increase in liabilities and an increase in stockholders’ equity.
c. increase in assets and an increase in liabilities.
d. increase in assets and an increase in stockholders’ equity.
Cash flows from acquiring and selling products are classified as
a. operating activities.
b. investing activities.
c. financing activities.
d. distribution activities.
Method of accounting for all investments in debt securities that are classified as
held-to-maturity securities
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
Inventory
Several items from the financial statements of Fireside Tires are listed. Use the
following choices to identify the type of account for each item listed. (Choices may be
used more than once.)
a. Assets
b. Liabilities
c. Revenues
d. Expenses
e. Stockholders’ Equity
Federal income taxes For each of the types of payroll taxes and other payroll-related
items listed, indicate whether it is paid by the employee through a paycheck
withholding, by the employer, or both. (Choices may be used more than once.)
a. Employee
b. Employer
c. Both
All of the following accounts have normal debit balances except
a. accounts receivable.
b. dividends.
c. supplies expense.
d. service revenue.
The journal entry to record the interest income from an annuity would include a
a. debit to interest income.
b. credit to interest income.
c. debit to interest expense.
d. None of the above.
The following information was reported by a catering company:
What amount would be reported in the operating activities section of the statement of
cash flows for Payments for Operating Expenses under the direct method?
a. $237,000
b. $163,000
c. $200,000
d. $292,000
Refer to Lakeshore Industries. What is the effect of a 2-for-1 stock split if the market
value of the common stock is $20 per share at the time the stock split is declared?
Lakeshore Industries
This company reported the following information on its recent balance sheet:
Common stock, $10 par, 100,000 shares authorized, 75,000 shares issued and
outstanding a. A stock split has no impact on any of the stockholders’ equity account
balances.
b. Total stockholders’ equity increases $750,000.
c. Cash increases $750,000.
d. $1,500,000 of retained earnings is transferred to the capital stock accounts.
Refer to Kids R Kids Company.
Kids R Kids Company
Selected data from the comparative financial statements are provided below:
Which of the following statements is false regarding a credit memo and its relationship
to a company’s bank reconciliation procedures?
a. It must be recorded as a credit to the balance per the customer’s records.
b. It is issued to notify a company of interest earned which needs to be recorded on the
company’s records.
c. It is issued when the bank collects a note on behalf of the company.
d. It must be recorded as a debit to the balance per the company’s records.
The chronological record in which transactions are initially recorded in the order in
which they occur is called a(n)
a. T-account.
b. Chart of Accounts.
c. Trial Balance.
d. Journal.
The following comparative financial statements for the years ended December 31, 2013
and 2012 are provided for Air Plus Company:
Answer these questions concerning the company’s receivables: A) What is the gross
amount of accounts receivable at December 31, 2013? Why is this amount different
than the amount of receivables shown in the 2012 column of the balance sheet?
B) What is the net realizable value of accounts receivable at December 31, 2013? What
does this amount represent?
C) How should accounts receivable be classified on a classified balance sheet? Why?
Refer to Rent-a-Center. What is the company’s asset turnover ratio for 2015?
Rent-a-Center
Selected data from the financial statements are provided below:
a. 0.73
b. 0.95
c. 1.3
d. 2.4
If a business has current assets of $62,000, total assets of $350,000, current liabilities of
$31,000, and total liabilities of $125,000, then its current ratio will be
a. 0.5.
b. 2.0.
c. 2.8.
d. 3.0.
Inventory is more liquid than accounts receivable because receivables must be collected
and some customers may not be willing to pay, while inventory need only be sold in a
retail store.
Refer to Aardvark Resale. Since the company has a choice of acceptable methods to
estimate bad debts, what factors should be considered in the selection?
Aardvark Resale
This company sells merchandise only on credit. For the year ended December 31, 2013,
the following data are available:
____________________ is the quality of accounting information that allows a user to
compare two or more accounting periods for a single company.
The corporation’s accumulated net income that has not been paid out as dividends is
____________________.
When plant assets are purchased in a group, each asset is debited to the respective plant
asset account for its fair market value at the time of acquisition.
____________________ activities involve long-term liabilities and stockholders’
equity.
compares a corporation’s financial statements to its primary competitors and industry
averages.
Match these terms to their correct definition
Adjusting entries are prepared using the accrual basis of accounting for preparing
financial statements.
According to the historical cost principle, assets are always carried at their current
market value.
Refer to Mary Kay Cosmetics. What amount was recorded as depreciation expense
during 2014?
Mary Kay Cosmetics
Selected data and additional information from the company’s records are presented
below:
Additional information: