Use the information above to answer the following question. Which of the following
would be shown on B. Darin’s horizontal analysis when calculating percentage changes
from the prior year to the current year?
A) An increase in sales revenue of 23%
B) An increase in gross profit of 41.5%
C) An increase in interest expense of 100%
D) An increase in net income of 57%
A company originally issues 180,000 shares of stock at a price of $22; one year later the
stock price is $40 per share, the number of outstanding shares is unchanged, and the
company’s net income for the year is $230,400. The P/E ratio at the end of the recent
year is:
A) 0.0002.
B) 24.22.
C) 31.25.
D) 0.0001.
Which of the following misstatements would cause the debt-to-assets ratio to be
overstated?
A) Capitalizing costs that should have been expensed as assets.
B) Failing to adjust for depreciation in the current period.
C) Failing to accrue income taxes of the current period.
D) Failing to accrue interest earned of the current period.
Which of the following would be classified as an investing activity on the statement of
cash flows?
A) Cash received from sale of land
B) Cash paid for interest
C) Cash received from stock issuance
D) Cash dividends paid
During the month, a company uses up $4,000 of supplies. At the end of the month, the
related adjusting journal entry would result in a(n):
A) decrease in an asset and an equal decrease in expenses.
B) increase in an asset and an equal increase in expenses.
C) decrease in an asset and an equal increase in expenses.
D) increase in an asset and a decrease in expenses.
The advantages of the direct method include all of the following except:
A) it allows for more detailed analysis of operating cash flows.
B) it provides more information than the indirect method to relate cash inflows and
outflows.
C) it allows for more reliable prediction of future cash flows.
D) comparisons between companies are facilitated since most U.S. companies use the
direct method.
If Company A has a debt-to-assets ratio of 0.73 while Company B has a debt-to-assets
ratio of 0.45, which of the following statements is correct?
A) Stockholders own a smaller proportion of Company A than Company B.
B) Company A must make less profit than Company B.
C) Creditors own a smaller proportion of Company A than Company B.
D) Company A must have fewer assets than Company B.
Which of the following statements about when cash dividends can be paid is not
correct?
A) The Retained Earnings account must have an accumulated balance sufficient to
cover the amount of the dividends to be paid.
B) The Cash account must have a balance sufficient to pay the dividends.
C) The board of directors must have declared the dividend before it can be paid.
D) Loan covenants cannot restrict the payment of dividends.
Houghton Company began business on January 1, 2015 by issuing all of its 1,000,000
authorized shares of its $1 par value common stock for $20 per share. On June 30,
Houghton declared a cash dividend of $1 per share to stockholders of record on July 31.
Houghton paid the cash dividend on August 30. On November 1, Houghton reacquired
200,000 of its own shares of stock for $25 per share. On December 22, Houghton resold
100,000 of these shares for $30 per share.
Required:
Part a. Prepare all of the necessary journal entries to record the events described above.
Part b. Prepare the stockholders’ equity section of the balance sheet as of December 31,
2015 assuming that the net income for the year was $3,000,000.
Use the information above to answer the following question. What journal entry should
be recorded by Flynn Company for the NSF check returned?
Flynn Company’s monthly bank statement showed the ending balance of cash of
$18,500. The bank reconciliation for the period showed an adjustment for a deposit in
transit of $1,500, outstanding checks of $2,000, a NSF check of $700, bank service
charges of $30 and the EFT from a customer in payment of the customer’s account of
$1,500.
A). Debit Accounts Receivable and credit Cash for $700
B). Debit Cash and credit Accounts Receivable for $700
C) Debit Cash and credit Accounts Payable for $700
D) No journal entry is necessary for this item.
When the direct method is used to determine the cash flows from operating activities,
other operating expenses are converted into cash outflows by:
A) adding changes in prepaid expenses and accrued liabilities to other expenses.
B) subtracting increases in prepaid expenses and subtracting decreases in accrued
liabilities from other expenses.
C) adding increases in prepaid expenses and adding decreases in accrued liabilities to
other expenses.
D) subtracting changes in prepaid expenses and accrued liabilities from other expenses.
A current dividend preference means that:
A) preferred stockholders are paid current dividends before common stockholders are
paid dividends.
B) unpaid dividends to preferred stockholders accumulate and must be paid before
common stockholders receive dividends.
C) preferred stockholders are paid their full fixed dividend rate each period as long as
the company is in operation.
D) unpaid cash dividends to preferred stockholders must be replaced with stock
dividends during the current period.
Which of the following terms does not mean the same as the others?
A) Tangible assets
B) Fixed assets
C) Property, plant, and equipment
D) Long-lived assets