1) If the annual interest is 12%, but the compounding is done quarterly, then the interest
rate is 4% per period.
2) An accounting transaction is not recorded when a corporation declares and executes a
stock split.
3) When making a general journal entry, there can only be one debit and one credit.
4) A possible loss from lawsuit is not reported on the balance sheet as a current liability.
5) Cost of goods sold is the difference between costs available for sale and beginning
inventory.
6) A debit is a negative entry.
7) Japan has a greater number of differences than the U.S. between the amount of
income reported to stockholders and that reported to the taxing authorities.
8) Companies in Mexico must begin using IFRS by 2012.
9) The face rate is also called the nominal or stated rate.
10) Both U.S. GAAP and IFRS classify gains and losses that are both unusual in nature
and infrequent in occurrence as extraordinary and present them in a separate section of
the income statement.
11) Fortune Company has 10 delivery trucks that became fully depreciated in the prior
year. Fortune will continue charging the same amount of depreciation as before so that
there will be no decrease in expenses.
12) Sales Discounts is classified as what type of account?
A.an expense
B.a revenue
C.a contra-asset
D.a contra-revenue
13) On November 1, Greenfield Corporation borrowed $55,000 from a bank and signed
a 12%, 90-day note payable in the amount of $55,000. If you assume 360 days in year,
the November adjustment will:
A.Increase Interest Expense $550 and decrease Cash $550
B.Increase Discount on Notes Payable $1,100 and increase Interest Payable $1,100
C.Increase Interest Expense $550 and increase Interest Payable $550
D.Increase Interest Expense $550 and increase Notes Payable $550
14) Use the selected data from the consolidated statements of cash flows for Vancouver
Corporation for the years ended December 31, 2014 and 2013, to answer the questions
that follow.
REQUIRED:
(A) What method does Vancouver use to calculate the net cash provided by operating
activities?
(B) In 2014, why are depreciation and amortization expenses added back to net income
in the operating activities section of the statement of cash flows?
15) Which of the following invests funds into a business and is considered an owner?
A.Stockholders
B.Creditors
C.Bankers
D.Lenders
16) Which organization, in addition to the Financial Accounting Standards Board
(FASB), occasionally issues authoritative rules for financial statements?
A.The Accounting Profession
B.International Accounting Standards Board (IASB)
C.Securities and Exchange Commission (SEC)
D.Internal Revenue Service (IRS)
17) Accountants should be aware that LIFO liquidations can potentially result in which
of the following?
A.If older less costly layers are liquidated, a correspondingly lower cost of goods sold
will result
B.If older less costly layers are liquidated, a correspondingly higher gross profit will
result
C.If older less costly layers are liquidated, the company may be faced with higher taxes
for those deferred in previous periods
D.All of these could result
18) The following selected data are taken from the financial statements of Ulysses
Company:
Sales revenue $ 650,000
Cost of goods sold 300,000
Gross profit $ 350,000
Selling and administrative expense 150,000
Operating income $ 200,000
Interest expense 75,000
Income before tax $ 125,000
Income tax expense (40%) 50,000
Net income $ 75,000
Accounts payable $ 55,000
Accrued liabilities 70,000
Income taxes payable 10,000
Interest payable 25,000
Short-term loans payable 200,000
Total current liabilities $ 360,000
Long-term bonds payable $ 600,000
Preferred stock, 10%, $100 par $ 250,000
Common stock, no par 600,000
Retained earnings 550,000
Total stockholders equity $1,400,000
Total liabilities and stockholders equity $2,360,000
Required
1> Compute the following ratios for Ulysses Company:
a. Return on sales
b. Asset turnover (Assume that total assets at the beginning of the year were
$1,600,000.) Round final answers to 3 decimals.
c. Return on assets
d. Return on common stockholders equity (Assume that the only changes in
stockholders equity during the year were from the net income for the year and
dividends on the preferred stock.)
2> Comment on Ulysses use of leverage. Has it successfully employed leverage?
Explain.
19) On January 1, 2014, the Accounts Receivable and the Allowance for Uncollectible
Accounts for Darius Company carried balances of $20,000 and $550 respectively.
During the year, the company reported $70,000 of credit sales. There were $400 of
receivables written off as uncollectible in 2014. Cash collections of receivables
amounted to $74,700. The company estimates that it will be unable to collect 5% of the
year-end accounts receivable balance.
The net realizable value of receivables appearing on the 2014 balance sheet will amount
to:
A.$14,105
B.$14,155
C.$14,900
D.$15,450
20) Aleve Company purchased inventory on credit. The effect of this transaction is that
the
A.earnings per share decreased
B.working capital increased
C.debt-to-equity ratio increased
D.earnings per share increased
21) Which of the following accounts is increased by a debit entry?
A.Common Stock (Capital Stock)
B.Equipment
C.Unearned Subscription Revenue
D.Notes Payable
22) If the amount assigned to ending inventory is incorrect,
A.The balance sheet is affected, but the income statement is not
B.The income statement is affected, but the balance sheet is not
C.The balance sheet is affected, but cost of goods sold is not
D.Both the balance sheet and the income statement are affected
23) Cuisine Company received a 6-month, 6% note for $10,000 from its president on
October 1, 2014. The note is due on March 31, 2015. If Cuisines accounting period
ends on December 31, how much interest revenue should Cuisine recognize during
2014 and 2015?
2014 2015
A.$ 450 $ 150
B.$ 600 $ -0-
C.$ 300 $ 300
D.$ 150 $ 150
24) Auto Industries Company reported the following on its income statement:
If the income statement also shows interest expense equal to $80,000, what is the
companys times interest earned ratio?
A.5 times.
B.8 times.
C.5.25 times.
D.6.25 times.
25) A(n) ________________________________ is a numerical list of all of the
accounts used by an entity.
26) Discount on Bonds Payable is shown on the balance sheet as a(n)
____________________________.
27) Relative to plant assets, how can a company report a net loss for a period, and yet
still have positive cash flows from operating activities?
28) The following account balances are taken from the records of Clarke Inc., a
wholesaler:
December 31
2012 2011 2010
Merchandise inventory $ 240,000 $180,000 $150,000
Cost of goods sold $6,400,000 $9,600,000
REQUIRED:
1> Compute Clarkes inventory turnover ratio for 2012 and 2011.
2> Compute the number of days sales in inventory for 2012 and 2011. Assume 360 days
in a year.
3> Comment on your answers in (1) and (2) relative to the companys management of
inventory over the two years. What problems do you see in its inventory management?
29) Assume that Space Company purchased an asset on January 1, 2012, for $62,400.
The asset had an estimated life of eight years and an estimated residual value of $8,000.
The company used the straight-line method to depreciate the asset. On July 1, 2014, the
asset was sold for $52,000.
REQUIRED:
1> Identify and analyze the effect of the transaction needed to record depreciation for
2014. Be sure to Include all transactions necessary for the sale of the asset.
2> How should the gain or loss on the sale of the asset be presented on the income
statement?
30) 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:
Calculate the earnings per share for St. Petersburg for 2012 and 2011 assuming an
average of 100,000 common shares were outstanding during 2012 and an average of
80,000 common shares were outstanding during 2011. Explain the change as it probably
relates to the market value of the stock.
31) List the names of three companies with which you are familiar that are
manufacturers or producers. Also list the names of three companies that are retailers.
Finally, provide the names of three service providers.
32) Assume that Banker Company purchased a new machine on January 1, 2014, for
$96,000. The machine has an estimated useful life of nine years and a residual value of
$6,000. Banker has chosen to use the straight-line method of depreciation. On January
1, 2016, Banker discovered that the machine would not be useful beyond December 31,
2019, and estimated its value at that time to be $4,000.
REQUIRED:
1> Calculate the depreciation expense, accumulated depreciation, and book value of the
asset for each year 2014 to 2019.
2> Was the depreciation recorded in 2014 and 2015 wrong? If so, why was it not
corrected?
33) Overton Supply reported the following information at December 31, 2012:
Answer the following questions for Overton Supply.
34) Trend analysis is another name for ____________________ analysis.