FIN 182 | Course Paper

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The asset, liability, and stockholders’ equity accounts are referred to as permanent

accounts.

Adjusting entries often involve cash.

Company X issues $40 million in new stock for cash. This does not affect stockholders’

equity because as new shares are sold, the value of existing shares falls.

The decision to sell to extend credit to customers will decrease wage costs.

The general goal of horizontal analyses is to identify significant trends.

If a company factors its receivables, its receivables turnover ratio will be lower than it

would have been if the receivables had not been factored.

The payment of dividends is a financing activity on the statement of cash flows.

Inventory shrinkage is the difference between inventory recorded and inventory

counted.

According to the full disclosure principle, financial reports should present detailed

information about every transaction.

The amounts of all the accounts reported on the balance sheet can be taken from the

adjusted trial balance.

The Allowance for Doubtful Accounts account is a temporary account which is closed

to Retained Earnings at the end of the accounting period.

If earnings per share (EPS) decreases, it must mean that the company’s net income has

fallen.

When preparing the operating activities section of the statement of cash flows using the

direct method, a gain or loss from selling equipment is reported in the operating

activities section of the statement of cash flows.

In a period of rising prices, the inventory costing method that assigns a value to

inventory that approximates current cost is:

A) LIFO.

B) FIFO.

C) Weighted average.

D) Specific identification.

A company issued 10-year, 8% bonds with a face value of $200,000. Interest is paid

annually. The market rate on the issue date was 7.5% and the company received

$206,948 in cash proceeds. Which of the following statements is correct?

A) The company must pay $184,000 at maturity plus $16,000 in interest each year for

10 years.

B) The company must pay $206,948 at maturity plus $15,000 in interest each year for

10 years.

C) The company must pay $200,000 at maturity plus $16,000 in interest each year for

10 years.

D) The company must pay $200,000 at maturity plus $15,000 in interest each year for

10 years.

The following account balances are included in the adjusted trial balance of Delta Inc.

as of April 30, 2015. All of the accounts have normal balances.

Required:

Part a. Prepare an income statement.

Part b. Prepare a statement of retained earnings

On December 31, 2015, the balance in Retained Earnings is $20,000. On December 31,

2016, the balance in Retained Earnings is $19,100. During 2016, dividends of $4,000

were declared and paid. What is the amount of net income for 2016?

A) $4,900

B) $3,100

C) $900

D) $(900)

Company A has liabilities of $6,773,000 and stockholders’ equity of $3,647,000 at the

end of the current year, and sales revenue of $9,800,000 and net income of $899,080 for

the year. Company B has assets of $1,680,000 and stockholders’ equity of $978,750 at

the end of the current year, and sales revenue of $1,950,000 and net income of $351,000

for the year.

Required:

Part a. Calculate the debt-to-assets ratio for each company.

Part b. Identify the company that has greater financing risk and explain why.

A company purchased property for $100,000. The property included a building,

equipment and land. The building was appraised at $62,000, the land at $45,000, and

the equipment at $18,000 for a total appraised value of $125,000. What is the amount of

cost to be allocated to the building in the accounting records?

A) $0

B) $49,600

C) $62,000

D) $100,000

Which of the following is calculated by dividing cost of goods sold by average

inventory and then dividing this result into 365 days?

A) Inventory turnover

B) Current ratio

C) Days to collect ratio

D) Days to sell ratio

Friedman Company uses the aging of accounts receivable method. Its estimate of

uncollectible receivables resulting from the aging analysis equals $25,000. The

unadjusted credit balance in the Allowance for Doubtful Accounts account is $8,000.

What is the estimated Bad Debt Expense for the period?

A) $8,000

B) $17,000

C) $25,000

D) $33,000

Use the information above to answer the following question. What is the amount of

total assets at the end of Year 4?

A) $16,800.

B) $16,500.

C) $21,600.

D) $23,500.

When estimated useful life of an asset is revised:

A) depreciation will continue at the current rate.

B) depreciation expense reported in previous years would be changed retroactively.

C) the depreciation expense in subsequent years will be changed but previous

calculations will not be changed.

D) generally accepted accounting principles have been violated.

A company has sales revenues of $200,000 and expenses of $50,000. What is its net

profit margin?

A) 4

B) 25%

C) 75%

D) $150,000

How do debits appear in a T-account?

A) They are listed on the left side for asset accounts, but listed on the right side for

liabilities and stockholders’ equity accounts.

B) They are always listed on the right side of the account.

C) They are always listed on the left side of the account.

D) They are listed on the right side for asset accounts, but listed on the left side for

liabilities and stockholders’ equity accounts.

Steve’s Skateboards uses the periodic inventory system and had the following sales

transactions during April:

April 2 – Sold inventory to Happy Hobby Shop on credit for $4,800, terms 1/15, n/60.

The items sold had a cost of $2,700.

April 4 – Happy Hobby Shop returned inventory that had a selling price of $200. The

cost of the inventory returned was $110.

April 13 – Happy Hobby Shop paid for the inventory sold on April 2, taking any

appropriate discount earned

Required:

Prepare the journal entries to record these transactions on the books of Steven’s

Skateboards.

Sinton Inc. uses a periodic inventory system. During the current year, its beginning

inventory was $5,200 and net purchases amounted to $24,600. At the end of the year,

after counting its inventory, the company determined that the dollar valuation of its

ending inventory was $4,100.

Required:

Prepare the two journal entries that will be recorded on Stinton’s books on the last day

of the year. Include explanations.

Morey Company starts the period with 1,000 units in inventory, purchases 13,000

additional units, returns 100 units to suppliers, and has 950 in inventory at the end of

the period.

Required:

If there is no shrinkage, how many units were sold?

Define internal control and identify the objectives of internal control system.

A company had calculated net income to be $77,550 based on the unadjusted trial

balance. The following adjusting entries were then made for:

Salaries and wages owed but not yet paid of $790

Interest earned but not received from investments of $750

Prepaid insurance premiums amounting to $550 have expired

Unearned revenue in the amount of $750 has now been earned.

Required:

Determine the amount of net income (loss) that will be reported after the adjustments

are recorded.

For each of the following, indicate how the event would most likely be categorized.

EVENT

______ (1) A company sells $2 million in goods for immediate payment.

______ (2) The company uses up office supplies.

______ (3) The stock market rises 10% and the value of a company’s stock increases.

______ (4) A company pays cash to an inventor for the legal rights to produce a new

product.

______ (5) Management promises to pay workers an overtime bonus as required by

their union contract.

______ (6) A company uses up supplies to manufacture a product.

______ (7) A company receives $1 million in orders but no down payments.