Fin 198 | Course Paper

Refer to Lanthier’s Heating & Air. What is the maximum amount that can be reported

on the balance sheet for common stock and preferred stock, respectively, if all of the

stock is issued?

Lanthier’s Heating & Air

This company began business on June 1, 2014. The articles of incorporation authorize

issuance of 10,000 shares of $2 par common stock and 5,000 shares of $8 par 6%

cumulative preferred stock. Common StockPreferred Stock

a. $20,000 $ 2,400

b. $20,000 $40,000

c. $10,000 $40,000

d. $10,000 $ 2,400

Generally entitle the holder to interest.

Match each statement to the item listed below

a. Accounts receivable e. Notes receivable

b. Aging method f. Realized

c. Allowance for Doubtful Accounts g. Securitization

d. Earned

What type of account is increased with a debit but represents a decrease in retained

earnings?

a. liability

b. asset

c. revenue

d. dividends

Federal unemployment taxes For each of the types of payroll taxes and other

payroll-related items listed, indicate whether it is paid by the employee through a

paycheck withholding, by the employer, or both. (Choices may be used more than once.)

a. Employee

b. Employer

c. Both

Debt-to-equity ratio

For each ratio listed, select whether an increase or decrease in the ratio is generally

considered to be better. (Choices may be used more than once.)

Right to exclusive use of a distinctive name, phrase, or symbol Match these terms with

their correct definition.

a. Franchise e. Organizational costs

b. Intangible operating assets f. Property, plant, and equipment

c. Natural resources g. Trademark

d. Operating assets h. Voluntary disposal

Taxes paid to the government by both employees and employers Match the following

terms with the appropriate definition.

a. Accrued liabilities f. Payroll taxes

b. Contingent liabilities g. Sales taxes

c. Current liabilities h. Warranty

d. Interest rate i. Withholdings

e. Liabilities

Refer to Lakeshore Industries. What is the effect on the company’s accounting equation

of issuing 1,000 additional shares of common stock at $15 per share?

Lakeshore Industries

This company reported the following information on its recent balance sheet: Common

stock, $10 par, 100,000 shares authorized, 75,000 shares issued and outstanding a.

Assets increase $10,000.

b. Stockholders’ equity increases $15,000.

c. Stockholders’ equity increases $10,000.

d. Assets decrease $15,000.

Method of accounting for investments where the investor possesses significant

influence (20% to 50% common stock ownership) over the operating and financial

policies of the investee

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

Declared cash dividends.

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

or event would be reported on a statement of cash flows if the operating activities

section is prepared using the indirect method. (Choices may be used more than once.)

a. Operating activity-add to net income

b. Operating activity-deduct from net income

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

Which of the following is not a generally recognized internal control activity?

a. establishment of clear lines of authority to carry out specific tasks

b. preparation of bank reconciliations on a monthly basis

c. reducing the cost of hiring seasonal employees

d. limiting access to computerized accounting records

Refer to Ladder Distributors. Suppose the company reissued 1,000 shares of its treasury

stock on June 1, 2015, for $39 each. Which of the following is true regarding the entry

required to record this transaction?

Ladder Distributors

The stockholders’ equity section of the December 31, 2014, balance sheet is provided

below:

Assume that all of the 20,000 shares of stock that was issued as of December 31, 2014,

was issued for $42 per share. On March 1, 2015, the company reacquired 4,000 shares

of its common stock for $50 per share. a. A debit to treasury stock is required for

$50,000.

b. A credit to treasury stock is required for $39,000.

c. A debit to retained earnings is required for $11,000.

d. A debit to paid-in capital from treasury stock transactions is required for $3,000.

Which of the following statements is false?

a. A balance sheet reports a company’s cash balance at a specific date.

b. An income statement reports the amounts of revenue and expense on an accrual

basis.

c. A statement of retained earnings reports the amount of cash received from operating

activities and the amount of cash paid for dividends.

d. A statement of cash flows explains the changes in cash from operating, investing, and

financing activities.

At the end of 2013, the unadjusted accounting records contain the following selected

accounts and balances:

Which of the following accounts would most likely appear on the income statement of a

merchandise company, but not on the income statement of a service company?

a. cost of goods sold

b. selling expenses

c. administrative expenses

d. income tax expense

A bank reconciling item that must be subtracted from the unadjusted bank balance when

preparing a bank reconciliation

Match the following terms with their correct definition.

a. Bank reconciliation d. Outstanding check

b. Deposit in transit e. Service charges

c. Non-sufficient funds check

The statement of cash flows

a. along with the balance sheet and income statement is prepared on the accrual basis.

b. along with the balance sheet and statement of retained earnings is dated as of a

specific year end date.

c. along with the balance sheet is used to analyze liquidity.

d. ties the balance sheet to the statement of retained earnings.

Compound interest is computed on which of the following?

a. Only the original amount.

b. The original amount and any undistributed interest earned in prior periods.

c. The original amount and any distributed or undistributed interest earned in prior

periods.

d. Only the distributed and undistributed interest earned in prior periods.

On the balance sheet, the cumulative amount of plant and equipment already expensed

is reported in an account called

a. accumulated amortization.

b. accumulated depreciation.

c. amortization expense.

d. depreciation expense.

Purchased land for cash. Use the following codes to indicate how the cash flow effect, if

any, of each transaction or event would be reported on a statement of cash flows if the

operating activities section is prepared using the indirect method. (Choices may be used

more than once.)

a. Operating activity-add to net income

b. Operating activity-deduct from net income

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

Refer to Recovery Solutions, Inc. Evaluate the company’s profitability ratios for 2015

and 2014, including the gross profit percentage, operating margin percentage, net profit

margin percentage, return on assets, and return on equity. Assume that total assets and

total stockholders’ equity at June 30, 2013 were $1,250,000 and 969,000, respectively.

Also assume that the tax rate is 30% for all periods presented. Recovery Solutions, Inc.

Comparative financial statements are provided below:

Time series analysis compares a company’s financial data with industry averages.

What is meant by the term “current maturities of long-term debt” in the current

liabilities section of a balance sheet?

____________________ statements highlight differences by expressing each financial

statement item in percentage terms.

Trend analysis is another name for ____________________ analysis.

The establishment of a petty cash fund has no effect on the company’s total cash

balance.

Public companies file their annual reports on Form ____________________.

If the yield rate of interest is greater then the stated rate, then the bonds are issued at a

____________________.