1) The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
Barton Company has just purchased a machine with a cost of $100,000, and signed a
note agreeing to pay the manufacturer equal annual amounts of $17,400. If the current
rate of interest is 8%, how many equal annual payments will be made?
A.6
B.8
C.10
D.12
2) Newco Publishing Company purchased equipment at the beginning of 2014 for
$200,000. The company decided to depreciate the equipment over an 8-year period
using the straight-line method. The company estimated the equipment’s residual value
at $20,000. Recording depreciation expense for 2014 will have which of the following
effects on the accounting equation?
A.increase Depreciation Expense and increase Accumulated Depreciation for $25,000
B.increase Accumulated Depreciation and decrease Equipment for $25,000
C.increase Depreciation Expense and decrease Equipment for $22,500
D.increase Depreciation Expense and increase Accumulated Depreciation for $22,500
3) Which financial statement would you analyze to determine if a company distributed
any of its profits to its shareholders?
A.Balance Sheet
B.Statement of Retained Earnings
C.Income Statement
D.Statement of Public Accounting
4) The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
If a company wishes to accumulate $500,000 in 20 years at 5% by making equal yearly
deposits into an account, calculation of the deposits is an application of the
A.future value of a single amount
B.present value of a single amount
C.future value of an annuity
D.present value of an annuity
5) Americana Corporation
The data below is for Americana Corporation for 2014.
Refer to the data for Americana Corporation.
If the aging approach is used to estimate bad debts, what amount should be recorded as
bad debt expense for 2014?
A.$8,000
B.$8,100
C.$8,700
D.$8,900
6) The following stockholders’ equity section of Petal Pusher Company’s balance sheet
appeared at December 31, 2012.
Answer the following:
7) The Stockholders’ Equity section of the balance sheet of Sea Turtle Company reveals
the following information:
There have been two issues of stock since the corporation began business. The average
issue price per share of stock was
A.$ 3.00
B.$17.00
C.$20.00
D.Not enough information to determine
8) Presented below is the operating activities section of the statement of cash flows for
Feline Friends Corp. for 2012:
Which method of preparing the operating activities section has Feline used?
A.The direct method
B.The indirect method
C.Either method
D.Cannot be determined without further information
9) If bonds were initially issued at a discount, the interest expense on the bonds
calculated using the effective interest method will
A.decrease as the bonds approach their maturity date
B.increase as the bonds approach their maturity date
C.remain constant throughout the bonds life
D.fluctuate throughout the bonds life
10) Which of the following statements is true regarding the two allowance methods
used to account for bad debts?
A.The percentage of net credit sales approach takes into account the existing balance in
the Allowance for Doubtful Accounts account
B.The direct write-off method takes into account the existing balance in the Allowance
for Doubtful Accounts account
C.The percentage of accounts receivable approach takes into account the existing
balance in the Allowance for Doubtful Accounts account
D.The direct write-off method does a better job of matching revenues and expenses
11) The following items were reported on the balance sheets and income statement for
Infantini Corp.:
How would the change in accounts payable be reported in the operating activities
section of the statement of cash flows under the indirect method?
A.As an addition to operating expenses
B.As a deduction from operating expenses
C.As an addition to net income
D.As a deduction from net income
12) On May 1, the Chris Company borrowed $30,000 from the Third Street Bank on a
1-year, 6% note. If the company keeps its records on a calendar year, which of the
following increasing effects is needed on December 31?
A.Interest Expense, $600
B.Interest Expense, $1,800
C.Interest Payable, $900
D.Interest Payable, $1,200
13) Mobile Designs, Inc.
Use the selected data from the comparative financial statements for Mobile Designs,
Inc. to answer the questions that follow.
Mobile Designs, Inc.
Balance Sheet Accounts
(all accounts have normal balances)
(in millions)
Refer to the account information for Mobile Designs, Inc.
REQUIRED:
(1) Calculate percentage changes in accounts payable and income taxes payable. Give a
possible explanation for the changes in these accounts.
(2) By how much did Mobile Designs long-term and short-term borrowings change
from 2012 to 2013? Give a possible explanation for the change in debt. What other
financial statement would be useful in analyzing the change in borrowings? Why?
14) Under the ______________________________, a company reports its major
classes of gross cash receipts and cash payments in the operating activities section of
the statement of cash flows.
15) The Stockholders Equity section of the balance sheet for Brompton Construction
Company at the end of 2014 is as follows:
The lower portion of the 2014 income statement indicates the following:
Assume that the number of shares outstanding did not change during the year.
Required:
1> Compute earnings per share before extraordinary items.
2> Compute earnings per share after the extraordinary loss.
3> Which of the two EPS ratios is more useful to management? Explain your answer.
Would your answer be different if the ratios were to be used by an outsider, like a
potential stockholder? Why or why not?
16) Jacks Jungle Fun, Inc. is a manufacturer of children’s outdoor play equipment. The
factory foreman determines when orders for materials are necessary. The orders are sent
to the purchasing department that places orders with the vendors recommended by the
factory foreman. When the materials are received, they are delivered directly to a
central storeroom without counting what has been received. When invoices are received
for the materials purchased, they are sent to the accounting department for payment.
The accounting department compares the invoices with purchase orders. If the two
documents are in agreement, the invoice is approved for payment. The accounting
department prepares the checks that are signed by the company treasurer.
Recommend improvements in the company’s procedures for purchasing and paying for
purchases of materials that will provide better internal control over purchases and
payment for those purchases.
17) [APPENDIX] What are the advantages of organizing a company as a corporation
instead of a partnership or sole proprietorship?
18) Use the comparative financial statements of Penny Company for the year ended
December 31, 2012 to answer the following question(s).
Penny Company
Statement of Stockholders Equity
for the Year Ended December 31, 2012
REQUIRED:
(1) What is the primary cause of the change in Pennys stockholders’ equity from
January 1, 2012 to December 31, 2012?
(2) Did Penny declare dividends during 2012? How do you know? Which items would
be included as part of comprehensive income, if any?
19) Assume that a company is experiencing increasing inventory prices and prepares its
financial statements in accordance with IFRS. Which costing method should it use to
pay the least amount of taxes? Explain your answer.