The statement of cash flows reflects the revenues actually earned by the business,
regardless of whether cash has been collected.
a.True
b.False
In 2015, Morton Co.sold 150 hot air balloons at $4,000 each. The balloons carry a
5-year warranty for defects.
Morton estimates that repair costs will average 4% of the total selling price. The
estimated warranty liability at the beginning of the year was $14,000. $20,000 in claims
was actually incurred during the year to honor their warranty. What was the warranty
expense for 2015?
a. $20,000
b. $10,000
c. $24,000
d. $18,000
Match the following bond and long-term liability related terms to the appropriate
definition.
a.Long-term liability
b.Face value
c.Debenture bonds
d.Serial bonds
e.Callable bonds
f.Face rate of interest
g.Market rate of interest
h.Bond issue price
i.Premium
j.Discount
k.Effective interest method of amortization
l.Carrying value
m.Gain or loss on redemption
Bonds that are backed by the general creditworthiness of the issuer and are not backed
by specific collateral.
Match the following bond and long-term liability related terms to the appropriate
definition.
a.Long-term liability
b.Face value
c.Debenture bonds
d.Serial bonds
e.Callable bonds
f.Face rate of interest
g.Market rate of interest
h.Bond issue price
i.Premium
j.Discount
k.Effective interest method of amortization
l.Carrying value
m.Gain or loss on redemption
The total of the present value of the cash flows produced by a bond. It is calculated as
the present value of the annuity of interest payments plus the present value of the
principal.
Indicate the type of each ratio listed below.
a.Liquidity ratio
b.Solvency ratio
c.Profitability ratio
Current ratio
Wang Fitness Co. purchased a patent at the beginning of 2015 for $120,000. Economic
benefits were expected for only 12 years, but the patent’s legal life is 17 years. Also
during 2015, the company incurred research and development costs of $50,000.
A.Determine the following amounts:
1>Research and development expense for 2015
2>Patent amortization expense for 2015
B.Prepare the intangible assets section of the balance sheet at December 31, 2015.
For each transaction select the letter of the type of adjustment that would be required.
a.Deferred expense
b.Deferred revenue
c.Accrued liability
d.Accrued asset
Interest is incurred on money borrowed from the bank, but not yet paid
Flannery Company uses a worksheet to prepare its statement of cash flows. The
company also uses the indirect method for the Operating Activities section of its
statement. For each of the following changes in the balance sheet, indicate what activity
it affects and whether it is an addition or deduction.
a.Deducted from Operating activity
b.Added to Operating activity
c.Deducted from Investing activity
d.Added to Investing activity
e.Deducted from Financing activity
f.Added to Financing activity
Inventory decreased
A cash register tape would be a source document for which of the following?
a.Recording a purchase of inventory on credit
b.Recognizing a cash sale
c.Recording an invoice
d.Recording payroll
Culinary Delights Company
Use the financial statements for Culinary Delights Company to answer the questions
that follow.
Refer to the financial statements of Culinary Delights Company.
REQUIRED:
(A) Calculate Culinary Delights’ return on sales ratio for 2016 and 2015. Assume that
the income tax rate is 30%. What information is provided with this ratio?
(B) Calculate the return on common stockholders’ equity ratio for 2016 and 2015.
Stockholders’ equity at December 31, 2014, was $897,431 (in thousands). Why is the
denominator an average instead of a single amount?
Match the following characteristics with the statements about each qualitative
characteristic’s importance.
a.Consistency
b.Materiality
c.Conservatism
d.Comparability
e.Reliability
f.Relevance
g.Understandability
Those willing to spend the time should be provided with comprehensible accounting
information.
Read the information for Parachute Country Club.
On which date did the country club make a credit sale of club memberships?
a.August 2
b.August 3
c.August 5
d.August 7
A debit is a negative entry.
a.True
b.False
Match the following terms with the best definitions for questions 212 through 219.
a.Purchase requisition.
b.Receiving Report.
c.Vendor Invoice.
d.Check.
e.Control procedures.
f.Inventory count.
g.Segregation of duties.
h.Source document control.
Used to prepare a purchase order.
For each item listed, select the section of the balance sheet in which the item would be
reported.
a.Current Assets
b.Property. Plant, and Equipment
c.Current Liabilities
d.Long-term Liabilities
e.Stockholders’ Equity
Computer used within the business