Mary Kay Cosmetics
Selected data and additional information from the company’s records are presented
below:
Balance Sheet Data 2014 2013
Cash $235,000 246,000
Accounts receivable $120,000 $150,000
Inventories 56,000 50,000
Accounts payable 38,000 70,000
Salaries payable 10,000 5,000
Equipment 110,000 70,000
Accumulated depreciation 28,000 32,000
Bonds payable 100,000 200,000
Common stock 300,000 200,000
Retained earnings 76,000 40,000
Income Statement Data 2014
Net sales $920,000
Cost of goods sold 700,000
Operating expenses (excluding depreciation expense) 160,000
Net income (Includes depreciation expense and gain) 56,000
Gain on sale of equipment 4,000
Additional information:
1. Equipment with a cost of $30,000 and a book value of $18,000 was sold for
$22,000 during 2014.
2. Common stock was issued to retire bonds payable during 2014.
3. The only items affecting retained earnings in 2014 were net income and dividends
declared and paid.
Refer to Mary Kay Cosmetics. What amount of cash was collected from customers
during 2014?
The establishment of a petty cash fund has no effect on the company’s total cash
balance.
Costs incurred related to plant assets that are already in use are called revenue
expenditures if the cost increases the useful life or the asset’s productivity.
Discount on Bonds Payable is shown on the balance sheet as a
____________________.
The quick ratio is calculated as follows: (Cash + Marketable Securities + Accounts
Receivable) / Current Liabilities.
Refer to Korn Business Solutions. Write the journal entries that would be used to record
each type of lease described in the previous question.
Increases in Cash = Increases in Liabilities + Increases in Stockholders’ Equity +
Decreases in Noncash Assets.
____________________ is the name of the account credited when a corporation issues
common stock for a price greater than par.
A LIFO liquidation occurs when a company sells more units than it buys during the
period.
The length of the operating cycle is always considered to be a one year period, although
that one year doesn”t have to begin on January 1.
Both the indirect and direct method arrive at an identical amount of net cash provided
(used) by operating activities.
Accounts receivable are shown on the balance sheet at their net realizable value.
The present value of an annuity is the discounted future value of cash flows made at
regular intervals.
Although operating leases are notrecorded on the balance sheet by the lessee, they are
disclosed in the ____________________.
The basis of accounting that recognizes revenue when it is realizable and earned is
called the ____________________.