A company has property, plant, and equipment of $500,000, current liabilities of
$70,000, and long-term liabilities are $300,000. If the company’s current ratio is 3.0,
what are current assets?
a. $900,000
b. $690,000
c. $430,000
d. $210,000
A company has $8,000 in cash, $9,250 in accounts receivable, and $19,500 in
inventory. If current liabilities are $14,350, then the quick ratio will be
a. 5.0.
b. 2.6.
c. 2.0.
d. 1.2.
Fields of Green, a turf farm, purchased equipment at the beginning of 2012 for
$175,000. In addition, the company paid $6,000 for delivery of the equipment and
$4,000 for set up charges. The equipment has an estimated residual value of $5,000 and
an estimated life of 10 years or 50,000 hours of operation. The equipment was operated
for 5,200 hours in 2012 and 5,000 hours in 2013.
A) Compute the depreciation expense for 2012 using the:
– straight line method;
– units-of-production method;
– double-declining-balance method
B) Compute the book value of the equipment on December 31, 2013, assuming the use
of:
– straight line method;
– units-of-production method; and
– double-declining-balance method
C) Which method of depreciation produces the greatest total amount of depreciation?
D) Which method of depreciation is considered accelerated?
E) What are the advantages of using an accelerated depreciation method as compared to
the straight-line method?
A certain company started business on January 1, 2013 with assets of $1,000,000 and
stockholders’ equity of $565,000. By the end of the year, assets increased by $100,000
and liabilities decreased by $150,000. Other than net income or loss, the only change in
stockholders’ equity was dividends of $50,000.
Refer to the information provided for Satoor, Inc. When the buyer records the payment
on July 15th, its journal entry will include
a. a decrease to Purchases for $15,000.
b. an increase to Inventory for $14,850.
c. a decrease to Cash for $15,000.
d. a decrease to Accounts Payable for $15,000.
Which of the following procedures is incorrectfor establishing and maintaining a petty
cash fund?
a. A check is prepared for a small, fixed amount; when the check is cashed, the money
is entrusted to a petty cash custodian.
b. The company must obtain the cash needed for the fund and record an entry for the
establishment of the fund.
c. When appropriate documentation is presented, cash payments are made from the
fund; the petty cash custodian retains the documentation.
d. When the petty cash fund needs to be replenished, an entry is recorded to recognize
an increase in the petty cash account.
Chris Hines invested $12,000 in a municipal bond. The bond pays 8% interest and
matures in 3 years. How much money will Chris have at maturity?
a. $22,211,16
b. $15,116.52
c. $36,960.00
d. $38,596.80
Which inventory costing method results in the highest inventory balance during a
period of rising purchase prices?
a. weighted average cost
b. FIFO
c. LIFO
d. Both FIFO and LIFO result in the same inventory balance.
Refer to HVAC Service. Based on these transactions, what is the total amount of
expense that should be reported on the company’s income statement for the month?
a. $350
b. $2,500
c. $2,850
d. $3,000
Refer to A&B Foods. If the company uses 4% of net credit sales to estimate its bad
debts, what will be the balance in the Allowance for Doubtful Accounts account after
the adjustment for bad debts?
a. $ 50,000
b. $103,000
c. $ 78,000
d. $ 75,000
All of the following are acceptable for financial accounting purposes except
a. specific identification.
b. FIFO.
c. LIFO.
d. retail cost.
Refer to Kids R Kids Company.
A) The total liabilities at December 31, 2013, are (in thousands):
B) The debt-to-equity ratio at December 31, 2013, is:
During the bank reconciliation process, an accountant identified an error. A check
written for $20 to pay a supplier for goods purchased on credit was erroneously
recorded in the company’s records for $200. Which of the following entries would
correct this error?
a. Cash 180
Accounts Payable 180
b. Cash 180
Accounts Receivable 180
c. Account Receivable 180
Accounts Payable 180
d. None of these, as the error should be corrected by the supplier’s personnel
Refer to Labor Finders, Inc. The company’s 2015 total payout ratio is reported as
a. 94.67%.
b. 105.19%.
c. 28.00%.
d. 9.47%.
When using the direct method to determine operating cash flows, how is the payment of
a cash dividend shown on the Statement of Cash Flows?
a. operating activity
b. investing activity
c. financing activity
d. noncash investing and financing activity
e. not reported on the statement of cash flows
Which financial statement would you analyze to assess a firm’s operating performance
for the past year?
a. Balance Sheet
b. Statement of Retained Earnings
c. Income Statement
d. Statement of Public Accounting
The system of accounting in which there are at least two accounts affected in every
transaction so that the accounting equation stays in balance is called
a. debit.
b. credit.
c. double-entry.
d. full disclosure.
Income statement accounts are also known as which of the following?
a. temporary accounts
b. real accounts
c. permanent accounts
d. asset accounts
Which of the following would appear on the balance sheet as a current liability?
a. A loss that could be expected upon the occurrence of a strike by employees.
b. Potential damages from the risk of explosions in a fireworks factory.
c. Payments that are likely to occur for pension benefits to employees.
d. A possible loss from a threatened lawsuit.
Happy Heights Country Club
Selected accounts at July 31 are provided below:
CASH UNEARNED TUITION
REVENUE
7/1 bal. 12,000 | | 7/3
1,000
7/3 1,000 | |
7/5 3,600 | |
7/7 1,800 |
|
ACCOUNTS RECEIVABLE MEMBERSHIP
REVENUE
7/2 3,600 | 7/7 1,800 | 7/2 3,600
| | 7/5 3,600
| |
Refer to Happy Heights Country Club
b. On which date did the country club sell a club membership on account?
a. July 2nd
b. July 3rd
c. July 5th
d. July 7th
Cost of goods sold is equal to
a. the total amount of merchandise purchased during the year.
b. the cost of merchandise purchased plus transportation costs less ending inventory.
c. the cost of merchandise purchased plus transportation costs plus beginning inventory
minus purchase returns and allowances and purchased discounts minus ending
inventory.
d. the cost of merchandise purchased plus transportation costs plus beginning inventory
minus purchase returns and allowances and purchase discounts.
Refer to Abundant Returns. The firm estimates that bad debts could be 2% of net sales.
A) What amount will the company recognize as bad debts expense for the year?
B) Assume that the company has a balance of Accounts Receivable of $108,900, and an
Allowance for Doubtful Accounts of $820. What will be the net realizable value once
the adjustment from (Part A) is made?
Assume that a company has a cash ratio of .45. Recording the estimated warranties
expense on the period’s sales would cause the cash ratio to
a. decrease.
b. increase.
c. be unchanged since the effects offset one another.
d. be unchanged since it has no impact on any current asset or liability accounts.
The following unadjusted account balance was taken from the accounting records at
December 31, 2013:
LaFarge North America
The following information relates to this company’s stockholders’ equity accounts:
Common Stock, $7 par, 200,000 shares authorized $700,000
Paid-in Capital in Excess of Par–Common Stock 160,000
Retained Earnings ??
Treasury Stock, 2,000 shares at cost 15,000
Total Stockholders’ Equity $975,000
Refer to LaFarge North America. What is the amount of retained earnings?
a. $ 98,000
b. $114,000
c. $130,000
d. $860,000
Which of the following combinations of ratios will best analyze a company’s income
statement performance?
a. gross profit percentage, return on common equity, and debt-to-equity
b. gross profit percentage, earnings per share, and net profit margin percentage
c. gross profit percentage, current ratio, and return on common equity
d. gross profit percentage, net profit margin percentage, and debt-to-equity
Refer to Rainsoft Company. Which of the following statements is true regarding the
company’s liquidity?
a. Based on the current ratio and operating cash flow ratio, the company appears to be
in a worse position to pay its current obligations at the end of 2015 compared to 2014.
b. The quick ratio decreased from 2014 to 2015.
c. The operating cash flow ratio increased from 2014 to 2015.
d. Based on the quick ratio and cash ratio, the company appears to be in a better
position to pay its current obligations at the end of 2015 compared to 2014.
Which of the following types of information is not set forth within the corporate
charter?
a. Name and purpose of the corporation.
b. Names of those responsible for incorporating the business.
c. Dates of future dividend distributions.
d. Provisions describing how stock may be issued.
A company borrowed $500,000 on a one-year, 10% note on October 1, 2013, with
interest and principal to be paid at maturity. How much interest should be reported on
the income statement for the year ending December 31, 2014?
a. $50,000
b. $75,000
c. $150,000
d. $37,500
Refer to General Lighting. What is the amount of the accounts receivable as a result of
this transaction?
a. $ 36,000
b. $600,000
c. $636,000
d. $150,000
The key to being classified as a cash equivalent is that the amount must be available to
pay debts within a year’s time or less.
Treasury stock is reported as a reduction of stockholders’ equity.
Adjusting entries are recorded at the end of each accounting period so that net income is
accurately reflected in the financial statements for the period.
For assets, expenses, and dividend accounts, a credit will _______ the balance in the
account.
Private corporations typically issue their stock to management and employees rather
than the general public.
Refer to Mary Kay Cosmetics. Prepare the operating activities section of a statement of
cash flows for 2014 assuming the use of the indirect method of determining net cash
flow from operating activities.
Accumulated depreciation is a contra asset account.
What is the relationship between the book value of a plant asset, the market value of the
plant asset, and the salvage value of a plant asset? Explain.
The future value of a single amount is the original cash flow plus simple interest as of a
specific future date.
The proceeds from advance ticket sales for a concert to be held next month should be
recorded as a current liability.
Business process risk assessment is designed to identify, analyze, and manage possible
threats to the organization’s success concerning ____________________ forces such as
resource allocations.
Describe the relationship between the depreciation method chosen and income taxes
paid in the early years of asset life.
Refer to the partial balance sheet presented above for Glass Doctor. Compute the
following liquidity ratios for 2014 and 2013:
Current Ratio
Quick Ratio
Cash Ratio
Operating Cash Flow Ratio
Assume that Glass Doctor’s statement of cash flows presented cash flows from
operating activities of $204.6 million and $201.1 million for the years ended December
31, 2014 and 2015, respectively. Comment on the direction and significance of the
change in the ratios from 2013 to 2014.
During periods of stable purchase prices, FIFO produces the highest ending inventory
relative to the other inventory costing methods.
____________________ documents provide the evidence needed in an accounting
system to record a transaction.
Refer to Baloon-E-Tunes. Prepare the long-term asset section of the balance sheet at
December 31, 2013. You may omit the heading. Why are these amounts classified as
“long-term”?
Public companies file their annual reports on Form ____________________.
A contingent liability must be recognized in the accounting records if it
____________________ and a reasonable estimate of the loss can be made.