Which of the following statements is false regarding the use of source documents?
a. Checks and deposit slips are the main source documents backing up the bank
statement.
b. Retailers may use cash register tapes to recognize sales transactions.
c. Stock certificates provide evidence of being a creditor of the company.
d. Time cards may be used as a source of information to record wages.
Refer to Dreammaker Kitchens. What is the company’s adjusted cash balance on
November 30th?
Dreammaker Kitchens The following information relates to the company’s November
bank reconciliation:
a. $12,200
b. $11,600
c. $10,700
d. $10,100
Which of the following entries properly closes a temporary account?
a. Service Revenues 20,000 Income Summary 20,000
b. Unearned Revenue 10,200 Retained Earnings 10,200
c. Accumulated Depreciation 1,600 Income Summary 1,600
d. Dividends 400 Retained Earnings 400
Purchasing a 6-month insurance policy
For each transaction provided, choose the appropriate account from the list that would
receive a debit entry as a result of the transaction. (Choices may be used more than
once.)
a. Cash
b. Accounts receivable
c. Supplies
d. Prepaid insurance
e. Land
f. Equipment
g. Accounts payable
h. Unearned revenues
i. Notes payable
j. Common stock
k. Retained earnings
l. Service revenue
m. Salary expense
n. Insurance expense
o. Utilities expense
p. Dividends
Which one of the following is an example of an accrued liability?
a. Rent that has been incurred, but have not been paid at the end of the period.
b. Equipment that will benefit several periods has been purchased.
c. An insurance policy that expires in a future period has been acquired.
d. Supplies are purchased and used over several months.
Refer to Metalcrafts, Inc. Assume that all purchases of equipment were paid with cash.
How much cash was paid to purchase equipment during 2014?
Metalcrafts Inc.
Selected information from the company’s financial records is presented below:
During 2014, the company sold equipment with a cost of $50,000 and accumulated
depreciation of $30,000. A gain of $10,000 was recognized on the sale of the
equipment. This was the only equipment sale during the year. a. $50,000
b. $200,000
c. $150,000
d. $250,000
Purchasing a building for cash
Several transactions are listed. Use the choices to identify the effect on the accounting
equation for each transaction listed. (Choices may be used more than once.)
a. Assets and liabilities increase
b. Assets and contributed capital increase
c. Assets and retained earnings increase
d. Two asset accounts are impacted, but there is no net effect on total assets
e. Assets and liabilities decrease
f. Assets and retained earnings decrease
g. Liabilities increase and retained earnings decrease
h. Liabilities decrease and retained earnings increase
Results in an immediate electronic withdrawal from the owner’s bank account when
used.
Match each statement to the item listed below
a. Bank credit card c. Sears card
b. Debit card d. American Express
Investment in the debt and stock of other companies that is expected to be held for more
than a year
Match each statement to the item listed below.
a. Current assets e. Intangible assets
b. Current liabilities f. Long-term investments
c. Gross margin g. Long-term liabilities
d. Income from operations h. Net profit margin
If a company’s current ratio is 1.5 and the current liabilities are $150,000, then the
current assets are
a. $300,000
b. $225,000
c. $100,000
d. $75,000
“You Decide” Essay
You are the chief accountant for Laureate Medical Group. The Board of Directors has
decided to distribute $1,000,000 in excess cash to common shareholders. In what ways
can this distribution be accomplished? What factors should be considered when
determining the best way?
If the December 31, 2014, balance of accounts payable is lower than the January 1,
2014, balance, then the amount of cash payments will exceed the purchases on account
for the year.
Consider the following financial statement information:
Calculate the following ratios:
– dividend yield;
– dividend payout;
– total payout; and
– stock repurchase payout.
____________________ documents provide the evidence needed in an accounting
system to record a transaction.
Refer to Goldberg Financials. What type of liability is presented in this disclosure?
Goldberg Financials The following footnote accompanied this company’s financial
statements: Note 7 – Litigation On December 2, 2012, the Company was served with a
class action complaint filed in federal court filed in Covington, Kentucky. The
complaint, captioned Bradford Haynes vs. The Company, was filed by a shareholder of
the Company on behalf of himself and other shareholders who purchased the
Company’s common stock during the period of March 31, 2011, through December 31,
2011. The plaintiff alleges that the Company violated federal securities laws by making
untrue statements of material facts and omitting material facts concerning the
Company’s construction and start-up of its new manufacturing facility in Plano, Texas.
Also named as defendants in the complaint are certain officers and directors of the
Company. The Plaintiff is seeking an unspecified amount of monetary damages. While
this action is in its preliminary stages, management believes that the allegations are
without merit and the Company intends to defend the lawsuit vigorously.
Refer to Rhodes Bakery. Calculate the following debt management ratios for 2015 and
2014: Times Interest Earned Ratio, Long-Term Debt-to-Equity Ratio, Debt-to-Equity
Ratio, Long-Term Debt-to-Assets Ratio, and Debt-to-Assets Ratio. Income from
operations were $65,000 and $49,000 and interest expense was $26,000 and $1,750 for
2015 and 2014, respectively. Round your answers to two decimal places. Comment on
the company’s debt management.
Rhodes Bakery
The balance sheet taken from the company’s 2015 10-K is provided below:
“You Decide” Essay A couple of years ago you inherited a substantial sum of money.
This morning one of your second cousins approached you about her struggling day spa
business that caters to college students. She would like to borrow $20,000 for a
state-of-the-art tanning room for her business. She assures you that the business is
steadily growing and promises that you will have your money back in six to nine
months at the latest. You are concerned about the day spa’s ability to generate sufficient
resources to repay the loan. What financial ratios can you examine to assess the
short-term liquidity of your cousin’s day spa? Provide the formula for each ratio.
An income statement provides information at one specific point in time, while the other
basic financial statements provide information on activities that occur over a period of
time.
The difference between the FIFO, LIFO, and average cost methods is that each of these
methods of inventory costing makes a specific assumption about the flow of costs.
When computing the dividend payout ratio, net income is divided by the common stock
dividends.