The ____________________ right provides that common stockholders may keep the
same percentage of ownership if new stock is issued.
Marvin’s Manufacturing can invest in a new process, but will need to purchase new
equipment. The cost of the equipment is $75,000 and needs to be in place in 8 years.
The company invests the money at 8% interest compounded semiannually. How much
will they need to invest in order to have $75,000 in 8 years?
The issuance of common stock in exchange for a building would appear both as a cash
inflow in the financing activities section of the cash flow statement and also as a cash
outflow in the investing activities section.
How does the definition of a current liability relate to that of a current asset?
Various financial ratios, including return ratios, are categorized as
____________________ ratios.
The company’s annual report is contained within the company’s 10-K filing with the
Securities Exchange Commission.
The three financial statements in which net income can be found are the
____________________, ____________________ and ____________________.
The relative cost of issuing debt (interest payments) is often lower than the cost of
issuing equity.
Refer to Atlantis Tropicals. Assume that the net realizable value is $210,000 after the
adjustment for bad debts in 2013. How much is the net realizable value of accounts
receivable after a customer’s account of $15,000 is written off? Explain why.
The three main business activities are financing, operating, and investing.
Once adjustments have been made, an ____________________ is prepared to ensure
the accounting equation is still in balance and to facilitate preparation of the financial
statements.
Refer to C2IT Corporation. Answer the following:
Required:
A) Determine the effect on the accounting equation of each transaction.
B) Determine the effect on the accounting equation of the necessary adjustments at
December 31 for each of the following:
1. Depreciation on the building
2. Interest on the promissory note
3. Recognition of the expired portion of the insurance
4. Depreciation on the computers
5. Cash received in advance of services provided
C) Prepare an income statement for the six months ended December 31, 2013.
C2IT has a tax rate of 30%.
GAAP has established a universal chart of accounts that is applicable to all businesses
in the United States.
No formal journal entry is required to record a stock split.
Refer to B-There Transportation. Suppose the company had a decrease in its cash
account from 2012 to 2013. Would the other current asset amounts have increased or
decreased? Explain.