Corporate income taxes cannot be calculated until all other adjustments are made.
If a company uses $100 million of its cash to pay off debt, its stockholders’ equity will
increase $100 million.
The current ratio can be used to evaluate a company’s ability to pay liabilities in the
short term, and in general, a lower ratio means better ability to pay.
The amount charged for a good or service provided to a customer on account is
recorded only after the payment is received.
The direct write-off method for uncollectible accounts is not allowed by either GAAP
or IFRS, but is required by the Internal Revenue Service (IRS) for tax purposes.
When the net cash flows from operating, investing, and financing activities are
combined to arrive at the overall net change in cash, a net decrease in cash is subtracted
from the beginning cash balance to calculate the ending cash balance.
When cash is paid before the related expense is incurred, an asset is reported on the
balance sheet.
A classified balance sheet shows a subtotal for current assets and current liabilities.
A business is obliged to repay both debt and equity financing.
Trademarks and goodwill are intangible assets that are not amortized.
If the market rate exceeds the stated interest rate, a bond will sell at a premium.
When assets are purchased as a group, the total cost must be divided up and allocated to
each asset in proportion to the market value of the assets as a whole.
When the direct write-off method is used:
A) the estimated amount of bad debts is debited to Bad Debt Expense.
B) the estimated amount of bad debts is debited to Allowance for Doubtful Accounts.
C) the estimated amount of bad debts is debited to which account Accounts Receivable.
D) bad debts are not estimated.
A company issued 8% preferred stock with a $100 par value. This means:
A) Preferred stockholders are entitled to 8% of the annual net income.
B) Only 8% of total contributed capital can be preferred stock.
C) Preferred stockholders are guaranteed a dividend.
D) The potential dividend to preferred stockholders is $8 per share per year.
A company pays salaries and wages every two weeks. Salaries and wages amount to
$100 a day and the company has a seven-day work week. On March 31, the company
pays wages for the two weeks ending March 24 and recorded the related journal entry.
The adjusting journal entry, dated March 31, to record unpaid wages and salaries owed
since March 25 will include a debit to:
A) Salaries and Wages Payable and a credit to Salaries and Wages Expense for $1,400.
B) Salaries and Wage Expense and a credit to Salaries and Wages Payable for $700.
C) Salaries and Wages Payable and a credit to Cash for $700.
D) Salaries and Wages Expense and a credit to Salaries and Wages Payable for $1,400.
Which of the following statements about a multistep income statement is correct?
A) It groups all revenues together.
B) It reports a different amount of net income than a single-step income statement.
C) It includes expenses that would not appear on a single-step income statement.
D) A key measure available on a multistep income statement is the amount of profit
earned over the cost of goods sold.
Lucia Inc. uses a perpetual inventory system. The company has a beginning inventory
of 400 units at $70 per unit. The company purchases 1,000 units in August at $72 each
and 600 units in November at $75 each. The company sells 1,000 units in September
and 900 units in December.
Required:
Calculate the company’s ending inventory and cost of goods sold using the each of
following inventory costing methods. (Round the per unit cost to two decimal places
and then round your answer to the nearest whole dollar.)
Part a. FIFO
Part b. LIFO
Part c. Weighted Average
Use the information above to answer the following question. What is subtotal of
expenses that will be reported on the income statement for the month ended January
31?
During January 2015, the first month of operations, a consulting firm had following
transactions:
1) Issued common stock to owners in exchange for $20,000 cash.
2) Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note
for $4,000.
3) Received $9,000 in cash for consulting services performed in January.
4) Purchased $1,500 of supplies on account; all of the supplies were used in January.
5) Provided consulting services on account in the amount of $16,000.
6) Paid $750 on account.
7) Paid $3,000 to employees for work performed during January.
8) Received a bill for utilities for January of $3,400; the bill remains unpaid.
A) $3,750.
B) $7,900.
C) $8,150.
D) $4,500.
Accounts Receivable had beginning balance of $4,210 and an ending balance of $3,495,
and collections on account were $9,600. What was the amount of services that were
performed on account?
A) $8,885.
B) $17,305.
C) $10,315.
D) $1,895.
Permanent accounts:
A) are not permitted under GAAP .
B) have their balances zeroed-out at the end of each accounting year.
C) do not have their year-end balance carried into the next year.
D) are Balance Sheet accounts.
Features of common stock usually include all of the following except:
A) voting rights.
B) dividends.
C) primary claim to the company’s assets in case of liquidation.
D) preemptive rights.
When the indirect method is used, if accounts receivable increases during the
accounting period, the change in accounts receivable is:
A) added to the change in the cash account.
B) subtracted from net income.
C) added to net income.
D) subtracted from the change in the cash account.
Which of the following is calculated by dividing (net income less preferred dividends)
by average common stockholders’ equity?
A) Return on assets ratio
B) Return on equity ratio
C) Earnings per share
D) Net profit margin ratio
Use the information above to answer the following question. On a common size income
statement for the year, what is the percentage that would be shown next to the dollar
amount of sales revenue?
The following information is taken from the financial statements of a company for the
current year:
A) 100%
B) 14%
C) 60%
D) Cannot be determined
Which of the following is not used to calculate the times interest earned ratio?
A) Net income.
B) Income tax expense.
C) Interest earned on investments.
D) Interest expense