A company purchased inventory on credit. The effect of this transaction is that the
a. earnings per share decreased.
b. earnings per share increased.
c. working capital increased.
d. debt-to-equity ratio increased.
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. Cost of goods sold is 42.1% of net sales for 2015.
b. Gross profit is 57.9% of net sales for 2015.
c. Cost of goods sold decreased 23.8% from 2014 to 2015.
d. Inventory decreased $4,000 or 20% during 2014.
Check written on the company’s account in May that does not appear on the bank
statement
The accountant for a local manufacturing company is reconciling the company’s bank
account for May. For each item listed, state how it would be handled on a bank
reconciliation. (Choices may be used more than once.)
a. Addition to bank balance
b. Subtraction from bank balance
c. Addition to company balance
d. Subtraction from company balance
e. Not included on the reconciliation
Two friends decide to launch a new business by investing $25,000 each in Hot Spot
Tanning. They are given shares of stock as evidence of their ownership interest. What
effect does this transaction have on the accounting equation?
a. Assets and liabilities increase.
b. Assets and contributed capital increase.
c. Liabilities increase and retained earnings decrease.
d. Assets and liabilities decrease.
Refer to Rapid Sign Corporation. What is the stock repurchase payout ratio for 2015?
Rapid Sign Corporation
Selected data from the financial statements are presented below:
a. 63.8%
b. 51.7%
c. 35.1%
d. 0
Situation where the investor owns over 50% of the outstanding common stock and is
therefore deemed to own the investee
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
Cash sales are made.
Select the choice that describes the type of transaction and whether it should be
recorded in the accounting system. (Choices may be used more than once.)
a. External event to be recorded as a transaction
b. Internal event to be recorded as a transaction
c. Event which should not be recognized in the accounting system
Cost of completed, unsold items.
Match the inventory-related accounts to costs that may be included in inventories for
retailers and manufacturers.
a. merchandise inventory d. finished goods
b. raw materials e. cost of goods sold
c. work-in-process
What is the impact on the accounting equation of recording the accrual of interest
expense?
a. Both assets and liabilities decrease.
b. Both assets and stockholders’ equity decrease.
c. Liabilities decrease and stockholders’ equity increases.
d. Liabilities increase and stockholders’ equity decreases.
The account which records differences between amounts of cash deposited and amounts
from the cash register tapes is called
a. petty cash.
b. cash over and short.
c. cash equivalents.
d. discrepancy expense.
Deal Corp. prepares monthly bank reconciliations of its checking account balance. The
bank statement for December 2013 indicated the following:
An analysis of canceled checks and deposits and the records of Deal revealed the
following items:
The correct amount of check # 267 is $340, but it was recorded as a cash disbursement
of $430. The check was issued to pay for merchandise purchased. The check was
written correctly and appeared on the bank statement correctly. A) Prepare a bank
reconciliation in proper form for December 31, 2013.
B) What amount would Deal report its cash balance on its December 31, 2013, balance
sheet?
C) What adjusting entries will Deal record as a result of this bank reconciliation
process?
On January 1, 2013, Kitchen Concepts, Inc. issued five-year, $10,000,000, 9 percent
notes at 98 ($9,800,000). The discount at the time of issuance was $200,000. Interest is
paid semiannually on June 30, and December 31. Required: A) Provide the journal
entry to record the issuance of the bonds on January 1, 2013.
B) What journal entry would have to be recorded each June 30 and December 31
assuming the use of straight line amortization?
C) Give the journal entry to record the repayment of the loan principal on December 31,
2017.
Refer to Fireworks City. Determine the asset turnover ratio for 2013.
Fireworks City Information for 2013 and 2012 is presented below for this company
which uses the straight-line depreciation method.
a. 7.84 times
b. 1.60 times
c. 4.00 times
d. 4.55 times
Several accounts from the financial statements of Hotlanta Promotions, Inc. are listed
below. In the two columns provided for answers, indicate the type of account and the
normal account balance. Use the following identification codes for your answers:
Indicates that the earnings process is substantially complete.
Match each statement to the item listed below
a. Accounts receivable e. Notes receivable
b. Aging method f. Realized
c. Allowance for Doubtful Accounts g. Securitization
d. Earned
Which of the following statements is true regarding horizontal analysis?
a. It can only be used with balance sheet accounts.
b. It can only be used with income statement accounts.
c. It expresses each financial statement line item as a percent of the largest amount on
the statement.
d. It expresses each financial statement line item as a percent of an earlier year amount.
The ___________________ is a chronological record of all transactions entered into by
a business.
An internal control activity that separates responsibilities so that no one person handles
all the tasks for a particular activity is referred to as ____________________.
The lower of cost or market (LCM) rule violates the historical cost principle.
When merchandise is sold FOB destination, the seller is responsible for the shipping
costs.
What is the matching principle? How does it relate to the revenue recognition process?
Refer to Kids R Kids Company. The total long-term liabilities at December 31, 2013,
are (in thousands):
Kids R Kids Company
Selected data from the comparative financial statements are provided below:
Because it tends to provide the most reliable measure of activity, all assets are reported
on the balance sheet at their fair market values.