Which of the following statements about financing activities is not correct?
A) Cash dividends paid to a company’s stockholders are reported as cash outflows from
financing activities.
B) When a company issues stock for cash, it reports a cash inflow from financing
activities.
C) When a company repurchases stock with cash, it reports a cash outflow for financing
activities.
D) When a company repays a loan, it reports a cash inflow from financing activities.
Which of the following is an advantage of debt financing?
A) It does not have to be repaid.
B) Interest is discretionary.
C) Interest is tax deductible.
D) It reduces stockholder control.
Which of the following statements relating to restricted cash is not correct?
A) Restricted cash is not available for general use but rather restricted for a specific
purpose.
B) Restricted cash must be reported separately on the balance sheet.
C) By including restricted cash as part of the amount reported as cash and cash
equivalents, the company more clearly conveys to financial statement users the actual
amount of cash available to pay liabilities.
D) Companies are sometimes legally or contractually required to set aside cash for a
specific purpose and are not allowed to use it for day-to-day operations.
Which of the following statements about the cash basis of accounting is correct?
A) It can lead to a distorted view of the company’s financial performance.
B) It is the only acceptable method for external reporting.
C) It reports revenues when earned and expenses when incurred.
D) It is used when cash is paid at the same time as the cost is incurred, but is not used
when cash is paid before the expense is incurred.
Consider the following information:
Required:
Part a. Compute the cash provided by (used in) investing activities.
Part b. Compute the cash provided by (used in) financing activities.
Part c. If you did not use any of the items listed in parts a or b, explain why, and
indicate, if appropriate, how each item would be reported on the statement of cash
flows.
Which of the following statements about a 10-year bond issued at a discount is not
correct?
A) At the end of ten years, the balance in the Discount on Bonds Payable account will
equal zero.
B) At the end of ten years, the carrying value will equal the face value.
C) At the end of ten years, the total interest expense will reflect the market rate of
interest.
D) At the end of ten years, the total interest expense will equal the total interest paid.
The following information is available:
The receivables turnover ratio for 2016 is closest to:
A) 8.93 times
B) 8.48 times
C) 8.71 times
D) 9.14 times
Use the information above to answer the following question. If Alphabet Company uses
the FIFO method, what is the cost of its ending inventory?
A) $24
B) $42
C) $58
D) $76
Which of the following are generally recorded as liabilities on the balance sheet if the
loss can be reasonably estimated?
A) Remote likelihood liabilities
B) Possible contingent liabilities
C) Probable contingent liabilities
D) Immaterial contingent liabilities
A company acquired property that included land, building and equipment for a total
cost of $163,000. The land was appraised at $87,500, the building at $35,000, and the
equipment at $52,500. What should be the allocation of the total cost in the accounting
records?
A) Land $75,000; Building $30,000; Equipment $45,000
B) Land $75,000; Building $30,800; Equipment $46,200
C) Land $87,500; Building $35,000; Equipment $52,500
D) Land $81,500; Building $32,600; Equipment $48,900
On the payment date for a cash dividend, the company:
A) debits Dividends and credits Dividends Payable for the amount of the dividend.
B) debits Dividend Expense and credits Cash for the dividend amount.
C) debits Dividends Payable and credits Cash for the dividend amount.
D) establishes who will receive the dividend payment.
If a company’s earnings per share and return on equity both increase:
A) it could mean that net income is rising or it could mean that the number of
outstanding shares is falling. The first is sustainable; the second cannot be continued
indefinitely.
B) it means that the company is becoming more profitable and stockholders will see
greater returns.
C) it means that the company’s tax liability will rise in the future and cause a decline in
profitability.
D) it could mean that net income is rising or it could mean that the number of
outstanding shares is falling. In either case, stockholders can expect greater future
returns indefinitely.
Which of the following statements about cash basis accounting and accrual basis
accounting is correct?
A) If payment is received at the same time a service is provided, it does not matter
whether cash basis accounting or accrual basis accounting is used; both would record
the transaction with the same journal entry.
B) The cash basis of accounting works best when a lengthy delay exists between the
timing of cash flows and the underlying business activities to which they relate.
C) If a company receives a bill for rent for the period and decides to delay payment, the
rent will not be recorded as an expense if accrual basis accounting is used.
D) If the cash basis of accounting is used, the Unearned Revenue account is increased
when a company receives a deposit in advance of services to be performed by the
company.
Which of the following statements about bonds payable net of a discount or premium is
not correct?
A) If a company records a discount or premium with the bonds payable in a single
account called Bonds Payable, Net, it is using simplified effective-interest amortization.
B) When bonds payable are accounted for net of a discount, the initial amount recorded
in the Bonds Payable, Net account is the issue price of the bond.
C) When simplified effective-interest amortization is used, the balance in the Bonds
Payable, Net account will increase as the bond approaches the maturity date.
D) If a company issued bonds at their face value, the balance of Bonds Payable, Net
account will always be equal to the face value of the bonds as long as the bonds are
outstanding.
On January 1, 2016, a company issues 3-year bonds with a face value of $200,000 and a
stated interest rate of 8%. Because the market interest rate is higher than the stated
interest rate, the company receives $194,000 for the bond.
Required:
Part a. Determine the amount of the discount that will be amortized during the year
ending December 31, 2016.
Part b. Prepare the journal entry to record the first interest payment on December 31,
2016.
A company has net income of $5.6 million. Stockholders’ equity at the beginning of the
year is $32.55 million and, at the end of the year, it is $38.15 million. The only change
to stockholders’ equity came from net income. The return on equity ratio is
approximately:
A) 0.15.
B) 0.16.
C) 0.87.
D) 6.64.
Use the information above to answer the following question. What is the amount of
current liabilities on the classified balance sheet?
A company reported the following information at December 31, Year 1:
A) $9,450.
B) $6,950.
C) $113,540.
D) $4,500.