FIN 135 Quiz 1 | Course Paper

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The result of using the effective interest method of amortization for bond discounts is

that the

a. interest expense for each amortization period is constant.

b. effective interest rate for each amortization period is constant.

c. amount of interest expense decreases each period.

d. cash interest payment is greater than the interest expense.

Current ratio Indicate the type of each ratio listed. (Choices may be used more than

once.)

a. Liquidity ratio

b. Debt management ratio

c. Asset efficiency ratio

d. Profitability ratio

e. Stockholder ratio

Declared stock dividends.

Use the following codes to indicate how the cash flow effect, if any, of each transaction

would be reported on a statement of cash flows if the operating activities section is

prepared using the direct method. (Choices may be used more than once.)

a. Inflow from operating activity

b. Outflow from operating activity

c. Inflow from investing activity

d. Outflow from investing activity

e. Inflow from financing activity

f. Outflow from financing activity

g. Noncash investing and financing activity

h. Not reported on statement of cash flows

Amounts collected from cash and credit customers is deposited in the company’s bank

account.

Select the choice that describes the type of transaction and whether it should be

recorded in the accounting system. (Choices may be used more than once.)

a. External event to be recorded as a transaction

b. Internal event to be recorded as a transaction

c. Event which should not be recognized in the accounting system

Which of the following best describes the term “expenses”?

a. The cost of assets used in the investing activities of a business.

b. The amount of interest or claim that the owners have in the business.

c. The future economic resources of a business entity.

d. The cost of assets used in the operations of a business.

Form that companies must file with the SEC to announce major events that are

important to investors and creditors.

Match the term with its correct definition.

Paid for merchandise outside of the discount period.

Deeter Company, which sells auto parts, uses a perpetual inventory system. Identify the

effects on the accounting equation. (Choices may be used more than once.)

a. Increase in assets and liabilities

b. Decrease in assets and liabilities

c. Increase in assets and stockholders’ equity

d. Decrease in assets and stockholders’ equity

e. Increase in liabilities and decrease in stockholders’ equity

f. Decrease in liabilities and increase in stockholders’ equity

A cookie company includes one premium coupon in every cookie package. Upon

returning 10 such coupons to the company, the customer will be sent a free cookie jar.

In a recent year, the company sold 200,000 packages of cookies for $1 per package. It is

estimated that 20% of the coupons will be redeemed. If the cookie jars cost the

company $3 each, what amount of liability should be recorded?

a. $ 6,000

b. $ 12,000

c. $120,000

d. $200,000

When the present value of an annuity is calculated, which of the following is not

required?

a. The number of cash flows.

b. The interest of discount rate per period.

c. The future value of the cash flows.

d. The amount of each repeating cash flow.

When using the indirect method to determine operating cash flows, 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

e. not reported on the statement of cash flows

A company bought machinery on January 1, 2011, for $200,000. On January 2, 2013,

the machinery had a book value of $100,000. It is estimated that the machine will

generate future cash flows of $70,000 and its current fair value is $60,000. How much

impairment loss should be recorded?

a. $0

b. $30,000

c. $40,000

d. $100,000

Depreciation on a building is recorded

For each transaction select the type of adjustment that would be required. (Choices

may be used more than once.)

a. Deferred (prepaid) expense

b. Deferred (unearned) revenue

c. Accrued expense

d. Accrued revenue

A check returned by a bank because the issuer’s cash account balance could not cover

the check is called a(n)

a. outstanding check.

b. canceled check

c. certified check

d. NSF check

Refer to Hesson Properties. What journal entry is required to record the utility bill?

Hesson Properties, Inc.

The following transactions occurred during June:

a. Utilities Expense 300 Cash 300

b. Accounts Receivable 300 Utilities Expense 300

c. Utilities Expense 300 Accounts Payable 300

d. Cash 300 Utilities Expense 300

Another term for Short Term Investments is

a. inventories.

b. accounts receivable.

c. contributed capital.

d. marketable securities.

Any transaction or set of transactions that brings together two or more previously

separate entities to form a single accounting entity

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

What type of entry is made to create a credit balance in the Estimated Warranty

Liability account on the balance sheet? What account would be debited in this entry?

Return on assets is computed by adding the after-tax interest expense to net income,

then dividing by the average total assets.

How efficiently a company is using the resources at its disposal is called

____________________.

Refer to Maritime Marine Services. What was the cost of the property, plant and

equipment which was disposed of during 2014?

Maritime Marine Services

Selected data from the financial statements for the years ended December 31, 2014 and

2013, are presented below:

The following additional information was obtained from the company’s records:

Acceptable current ratios vary from industry to industry, but a general rule of thumb is

that a current ratio greater than ____________________ is appropriate.

Refer to Mary Kay Cosmetics. What amount was paid to retire bonds payable during

2014?

Mary Kay Cosmetics

Selected data and additional information from the company’s records are presented

below:

Additional information:

Refer to King Cotton Company. What are the total long-term liabilities for each of the

two years presented?

King Cotton Company

The liabilities section of the company’s most recent consolidated balance sheets is

provided below: