FIN 545 Quiz 2 | Course Paper

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For the following items Questions 220-227, indicate whether each should be (a)

included or (b) excluded from the line item titled Cash and cash equivalents on the

balance sheet.

a.Included

b.Excluded

Petty cash

Read the information about Parachute Country Club.

Assuming that there are no other transactions, how much was owed to the club by the

membership on August 8th? a. $1,800

b. $1,300

c.$ 900

d.$ 500

Use the following codes to indicate how the cash flow effect, if any, of each transaction

or event would be reported on a statement of cash flows if the operating activities

section is prepared using the indirect method.

a.Operating activity-add to net income

b.Operating activity-deduct from net income

c.Inflow from investing activity

d.Outflow from investing activity

e.Inflow from financing activity

f.Outflow from financing activity

g.Noncash investing and financing activity

h.Not reported on statement of cash flows

Obtained a long-term bank loan.

A trial balance is a financial statement.

a.True

b.False

Select the ratio that each statement below most properly satisfies.

a.Dividend yield ratio

b.Cash flow from operations to capital expenditures ratio

c.Debt service coverage ratio

d.Return on common stockholders’ equity ratio

e.Times interest earned ratio

f.Asset turnover ratio

g.Debt-to-equity ratio

h.Dividend payout ratio

i.Price/earnings ratio

The relationship between dividends and the market price of a company’s stock

Given below is a list of items that may be reported on a statement of cash flows.

Identify each as one of the following using the indirect method:

a.Operating

b.Investing

c.Financing

d.Not separately reported on a statement of cash flows

Depreciation expense

Match the costs that might be included as part of the cost of inventory to the listed

accounting treatment.

a.Add to inventory cost

b.Subtract from inventory cost

c.Not an inventory cost

Cost of storing the goods before they are sold to customers

Select the financial statement on which the user would most likely find the answer to

the question given. (Select all that apply.)

Did the company purchase any intangible assets during the year?

a.Income statement

b.Balance sheet

c.Statement of cash flows

d.Statement of retained earnings

Select the term from the list below that matches each of the following six descriptions.

a.Interest

b.Maturity value

c.Principal

d.Payee

e.Discounting

f.Term

g.Recourse

h.Implicit

i.Maker

The difference between the principal amount of the note and its maturity value

Cash interest payment is computed annually when a bond is issued for other than its

face value. For a bond issued at a discount, how will this component change as the bond

approaches maturity?

a.Decrease

b.Increase

c.Remain constant

d.Not enough information given to decide.

On November 1, 2014, Chancellor Co. borrowed $80,000 from State Bank and signed a

12%, six-month note payable, all due at maturity. The interest on this loan is stated

separately. At December 31, 2014, the adjustment for this note includes:

a.an increase to Notes Payable for $1,600.

b.an increase to Interest Payable for $1,600.

c.an increase to Interest Expense for $3,200.

d.a decrease to Cash for $4,800.

Refer to the transactions for Krenshaw Rentals.

Based on the October 15 transaction, Farmer’s Electric will record which of the

following in its accounting records?

a.A credit in Accounts Payable for $150.

b.A credit in Accounts Receivable for $150.

c.A debit in Accounts Payable for $150.

d.A debit in Accounts Receivable for $150.

Match the following choices to the listed situation.

a.a deferred expense

b.a deferred revenue

c.an accrued liability

d.an accrued asset

A warehouse building was acquired for cash

For each of the following accounts, indicate whether it is a balance sheet account or an

income statement account.

a.Balance sheet account

b.Income statement account

Income Taxes Expense

Match the selected items from a classified balance sheet and multiple-step income

statement to the section in which they would appear on the classified balance sheet or

the income statement.

a.Current Assets (balance sheet)

b.Property, Plant, & Equipment (balance sheet)

c.Current Liabilities (balance sheet)

d.Long-term Liabilities (balance sheet)

e.Stockholders’ Equity (balance sheet)

f.Operating Revenue (income statement)

g.Operating Expenses (income statement)

h.Other Revenue & Expenses (income statement)

i.Income Taxes (income statement)

Income taxes payable

Federal income tax rules allow businesses to use different inventory costing methods

for tax reporting and financial reporting with one exception. Which of the following

situations is not allowed by federal income tax rules?

Caron Industries received authorization on December 31, 2014, to issue $7,000,000

face value of 6%, 10-year bonds. The interest payment dates are June 30 and December

31. All the bonds were issued at par, plus accrued interest, April 1, 2015. The bonds are

callable by Caron at any time at 102.

REQUIRED:

Caron exercises the call provision and retires one-half of the bond issue on July, 1,

2017. Identify the accounting equation effects to record this transaction on July 1, 2017.

July 1, 2017 To record retirement of $3,500,000-face-value bonds, originally issued at

par, at 102.

Given below are several accounts and balances from Carrier Corporation’s 2015

financial statements. Prepare the Property, Plant, and Equipment section of the balance

sheet and a partial income statement in the space provided below using the accounts

provided.

If the market value that you paid for a car is known and the annual payment and number

of payments is known, the table factor to help find the interest rate can be calculated by

dividing.

A departure from the cost basis of accounting may be necessary when theof the

inventory is less than its cost to the company.