In anticipation of preparing the July bank reconciliation, the accountant gathered the
following information:
What is the company’s adjusted cash balance at July 31st?
a. $4,300
b. $4,050
c. $4,140
d. $4,500
Device that facilitates combining the financial statements of the investor and investee
companies
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
Select the incorrect statement from the following:
a. The financial statements for a 100% asset acquisition will be different from the
consolidated financial statements for a 100% stock acquisition.
b. Business combinations usually, but not always, transfer ownership of the acquired
business entity from one stockholder group to another.
c. Purchased assets are recorded at their current value to the purchaser, without regard
to their recorded value to the seller.
d. The excess of acquisition cost over the current value of the investee’s identifiable net
assets is recorded as goodwill.
Use the following selected financial information to answer the questions that follow.
A) Calculate this company’s inventory turnover ratio for 2015 and 2014.
B) Determine the number of days it would take to turn over the entire inventory at
December 31, 2015 and 2014.
C) What problems are apparent with the company’s inventory management?
Refer to Rags to Riches. Which of the following would result from a horizontal analysis
of the company’s income statement?
Rags to Riches
Selected data from the financial statements are provided below:
a. Net sales in 2015 increased to 140.74% of the 2014 amount.
b. Gross profit is 57.9% of net sales for 2015.
c. Accounts receivable is 13.3% of total assets in 2015.
d. The accounts receivable turnover ratio is 7.76 in 2015.
A company reported net income of $150,000 for 2014, but its cash balance decreased
by $40,000. Which financial statement should management refer to for an explanation
of this situation?
a. Balance Sheet
b. Income Statement
c. Statement of retained Earnings
d. Statement of Cash Flows
A company acquired land by issuing its common stock. How should this transaction be
disclosed when a statement of cash flows is prepared?
a. In a supplemental schedule of noncash investing and financing activities or in a note.
b. The acquisition of land should be reported as an investing activity and the issuance of
the stock as a financing activity.
c. In a separate section of the statement of cash flows.
d. The transaction does not need to be disclosed.
Refer to Metz Vets. Which of the following activities results in a cash outflow?
Metz Vets The company’s accountant prepared this reminder for his intern: Cash = CL –
LTL – CS – RE – NCCA – LTA
a. Decreases in noncash current assets (NCCA)
b. Decreases in long-term assets (LTA)
c. Increases in long-term liabilities (LTL)
d. Decreases in retained earnings (RE)
Recorded depreciation expenses for the year.
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. (Choices may be used more than once.)
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
Generally speaking, the lower this measure the better.
Match the terms with the descriptions provided.
a. Average days to sell inventory d. Inventory turnover ratio
b. Gross margin e. Freight-in
c. Gross profit ratio f. Freight-out
When will bonds sell at a discount?
a. The credit standing of the issuing company is not as good as other companies in a
similar line of business.
b. The stated rate of interest is less than the yield rate of interest at the time of issue.
c. The stated rate of interest is more than the yield rate of interest at the time of issue.
d. The issuing company will be able to retire the bonds at less than face at maturity.
Percentage of earnings paid out as dividends.
For each of the following sentences, select the phrase or group of words that best
completes the statement.
a. Debt-to-equity ratio
b. Dividend payout ratio
c. Dividend yield ratio
d. Earnings per share
e. Leverage
f. Return on assets ratio
g. Return on common equity ratio
h. Stock repurchase payout
The correct term for the entry made on the left side of a T-account is
a. debit.
b. credit.
c. posting.
d. journalizing.
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
A company issued $10,000,000 of bonds. Assuming the most common denomination of
bonds, the number of bonds sold was
a. 10,000.
b. 100,000.
c. 1,000,000.
d. 10,000,000.
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&B Foods
Data for the year ended December 31, 2013, are presented below.
a. $ 50,000
b. $103,000
c. $ 78,000
d. $ 75,000
You Decide Essay You are the credit manager at a large retail department store. What
steps should you take before deciding to write off a customer’s account?
To compute the return on common equity ratio, the numerator includes
____________________ minus preferred dividends, and the denominator is the average
common stockholders’ equity.
Identify and describe the four primary rights for the owners of common stock.
Any transaction or set of transactions that brings together two or more previously
separate entities to form a single accounting entity is called a ____________________.
When an expense is incurred prior to the payment of cash for that expense, an
adjustment that increases an expense account and increases a liability is prepared.