Refer to Labor Finders, Inc. The company’s 2015 earnings per share is reported as
Labor Finders, Inc.
Selected data from the company’s financial statements are presented below:
a. $1.08
b. $1.20
c. $1.30
d. $1.43
Liquidity analysis is required to
a. evaluate a company’s profitability.
b. assess a company’s ability to pay its current liabilities.
c. be reported in the financial statements for all publicly-traded companies.
d. provide information about a company’s capital structure.
Which balance sheet accounts are most affected by investing activities?
a. Current assets and current liabilities.
b. Long-term assets.
c. Long-term liabilities.
d. Stockholders’ equity.
Contains the auditor’s opinion as to whether the financial statements fairly present the
company’s financial position and results of operations
Match each statement to the item listed below.
a. Audit report
b. Fiscal year
c. Financial statements
d. Management’s discussion and analysis
e. Notes to the financial statements
Refer to Lanthier’s Heating & Air. On June 5, 2014, the company issued 2,400 shares of
common stock for $20 per share. What effect does the entry to record the stock issuance
have on total stockholders’ equity?
Lanthier’s Heating & Air
This company began business on June 1, 2014. The articles of incorporation authorize
issuance of 10,000 shares of $2 par common stock and 5,000 shares of $8 par 6%
cumulative preferred stock. a. increase of $4,800
b. decrease of $4,800
c. increase of $48,000
d. decrease of $48,000
Which of the following transactions affects total liabilities?
a. Equipment is purchased for cash.
b. Services are provided for a customer for credit.
c. Payment is made on a bank loan.
d. Common stock is issued.
The legal owner of a leased asset. Match these terms with their definitions.
a. Bond i. Lessor
b. Contract, coupon, stated rate j. Leverage
c. Discount k. Long-term debt
d. Effective interest rate method l. Market rate, yield
e. Face value, par value, principal m. Maturity
f. Interest amortization n. Premium
g. Lease o. Straight-line method
h. Lessee
Form that represents the company’s annual report by providing a comprehensive
overview of the corporation’s business and financial condition, including audited
financial statements.
Match the term with its correct definition.
Earnings per share is an indication of how much
a. cash the company has for each share of outstanding common stock.
b. the company earned for each share of outstanding common stock.
c. the company paid as dividends for each share of common stock held by stockholders.
d. the company earned for each share of outstanding common and preferred stock.
One way analysts measure the ability of a company to meet its obligations is to
calculate the times interest earned ratio for any outstanding debt the company may
have. How would a company with $100,000 of outstanding bonds paying 8.5%
annually and income before interest and taxes of $50,000, calculate the interest
coverage (accrual basis) ratio?
a. Income before interest and taxes divided by the interest expense.
b. Income before interest and taxes divided by carrying value of the bonds outstanding.
c. Income before interest and taxes divided by the face value on bonds.
d. Face value of the bonds divided by income before interest and taxes.
A company’s current ratio is 1.5, what is the effect of obtaining land by issuing shares
of stock?
a. increase
b. decrease
c. no change
d. Unable to determine with this limited information.
Explain the meaning or significance of the following ratios:
Refer to Holiday Marina. Identify the transactions that the bookkeeper recorded
incorrectly in the journal. Prepare the journal entry that the bookkeeper should have
made for each transaction that you identify as being made incorrectly.
Refer to Fantasy Cruise Lines. What will be the book value of the ship at the end of its
useful life?
Fantasy Cruise Lines On January 1, 2013, the company purchased a ship for
$1,000,000. It has a 10-year useful life and a residual value of $100,000. The company
uses the double-declining-balance method. a. $ -0-
b. $100,000
c. $200,000
d. Need more information to determine this answer.
Retained Earnings
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.)
Providing services for customers for cash
Several transactions are listed. Use the choices to identify the effect on the accounting
equation for each transaction listed. (Choices may be used more than once.)
a. Assets and liabilities increase
b. Assets and contributed capital increase
c. Assets and retained earnings increase
d. Two asset accounts are impacted, but there is no net effect on total assets
e. Assets and liabilities decrease
f. Assets and retained earnings decrease
g. Liabilities increase and retained earnings decrease
h. Liabilities decrease and retained earnings increase
A Premium on Bonds Payable account would appear on the balance sheet as
a. an increase to a long-term liability.
b. revenue.
c. long-term asset.
d. contra liability.
The following unadjusted amounts were taken from a company’s accounting records at
December 31, 2013: Note Payable, 6%, 4-month, dated December 1, 2013, for
$500,000
Note Receivable, 12%, 6-month, dated October 1, 2013, for $400,000
Which method of preparing the operating activities section of a statement of cash flows
adjusts net income to remove the effects of deferrals and accruals for revenues and
expenses?
a. the direct method
b. the indirect method
c. Both the direct and indirect methods.
d. Neither the direct method nor the indirect method.
If technology changes rapidly, a firm should
a. expense plant assets immediately because of the uncertainty of future benefits.
b. depreciate plant assets over long periods of time.
c. consider an accelerated rate of depreciation.
d. use the straight-line method of depreciation as it is the easiest.
Refer to Hatcher Tool Service. Set up T-accounts and post each transaction to the
T-accounts.
Hatcher Tool Service
The following transactions occurred during June 2013:
Refer to McCullow Investment Group. What is meant by the term “cash flow
adequacy”? What other financial information would be necessary in order to make a
determination of the cash flow adequacy for these three companies? McCullow
Investment Group
One of the firm’s financial analysts is assessing the performance of three particular
companies whose cash flow statements for the last three years are presented below:
A primary advantage of the allowance method to account for bad debts is that it
supports the matching principle.
“You Decide” Essay You are an entrepreneur about to open a coffee and internet cafe
near your college campus. You have decided to accept cash and credit and will use
college student employees. While you plan to be at the shop during most hours that the
business will be open, you have made one of the student employees your assistant
manager to manage in your absence. Describe at least five procedures that you might
use to provide adequate internal control over cash and credit sales and bank deposits.
For a company’s reported financial information to be useful, what four qualities must be
present? Explain these four qualities.
The three aspects of return on equity (ROE) recognized by DuPont analysis are the net
profit margin percentage, the ____________________ ratio, and leverage.
For any given contingent liability, a company must choose between recording it on the
accounting records or disclosing it in the footnotes to the financial statements
Form 8-K is the “current report“companies must file with the SEC to announce major
events that are important to investors and creditors.
The accountant prepared the firm’s bank reconciliation and noted several reconciling
items as listed below. Indicate whether the firm should add or subtract each item below
on its balance of cash or on its bank balance.
