In a common size balance sheet to be used in vertical analysis, the 100% amount is
a. current assets.
b. working capital.
c. total assets.
d. total stockholders’ equity.
A debit memo appeared on the May bank statement. How should this amount be treated
on the May bank reconciliation?
a. Add it to the company’s balance.
b. Add it to the bank balance.
c. Deduct it from the company’s balance.
d. Deduct it from the bank balance.
Refer to Rainsoft Company. Assume that competitors in the industry have an average
accounts receivable turnover ratio of 7.8 times in 2015. What is the company’s accounts
receivable turnover ratio for 2015?
Rainsoft Company
Selected data from the financial statements are provided below:
a. 5.26
b. 7.62
c. 7.80
d. 8.91
On January 1, 2013, a company issued $5,000,000 of 8 percent bonds at par. These
bonds are due in five years with interest payable annually on December 31. Required:
A) Record the issuance of the bonds.
B) Record the journal entry needed on December 31, 2013.
C) Record the journal entry needed on January 1, 2018.
Refer to the information provided for Dollar Town. Calculate net sales.
Dollar Town
Dollar Town is a merchandising company that uses the periodic inventory system.
Selected account balances are listed below:
a. $97,200
b. $100,200
c. $102,000
d. $105,000
Notes Payable
Several accounts from the financial records of Wynn Linders, Inc. are listed. Indicate its
normal balance and the debit/credit rules for increasing the account. (Choices may be
used more than once.)
The journal entry required to record the receipt of dividends under the fair value
method of accounting for investments includes a
a. credit to the investment account.
b. debit to the investment account.
c. credit to dividend income.
d. debit to retained earnings.
Fringe benefits For each of the types of payroll taxes and other payroll-related items
listed, indicate whether it is paid by the employee through a paycheck withholding, by
the employer, or both. (Choices may be used more than once.)
a. Employee
b. Employer
c. Both
Inventory turnover ratio
Indicate the type of each ratio listed. (Choices may be used more than once.)
a. Liquidity ratio
b. Debt management ratio
c. Asset efficiency ratio
d. Profitability ratio
e. Stockholder ratio
Taxes levied by state and local governments Match the following terms with the
appropriate definition.
a. Accrued liabilities f. Payroll taxes
b. Contingent liabilities g. Sales taxes
c. Current liabilities h. Warranty
d. Interest rate i. Withholdings
e. Liabilities
Refer to Merry Maids Company. Describe the link(s) between a statement of cash
flows, the balance sheet, and the income statement if a company uses the indirect
method to prepare the operating activities section of the statement of cash flows.
Merry Maids Company
Merry Maids Company began 2013 with a cash and cash equivalents balance of $7,670.
Consolidated statements of cash flows for the years ended December 31, 2014 and
2013, are presented below:
Cash equivalents typically appear in the long-term investments section of a balance
sheet.
In terms of the statement of cash flows, cash includes actual cash items minus certain
cash equivalents such as commercial paper, money market funds, and treasury bills.
“You Decide” Essay You are the owner and operator of a growing small business. You
would like to expand your product offerings but need $25,000 in short-term financing in
order to do so. You have an appointment to see your banker tomorrow. The banker has
asked you to bring certain financial information with you to the meeting. That
information is provided below:
Use your financial information to make a case for the loan.
What makes the analysis of a service company different than analysis of a
manufacturing company?
Stockholders’ equity is composed of two main sources: liabilities and contributed
capital.
If the investor owns over 50% of the outstanding common stock, the investor is deemed
to have control over the operating and financial policies of the investee.