Use the information above to answer the following question. What journal entry will
Brickyard make when paying the note at maturity?
A) Debit Cash and credit Notes Payable for $200,000
B) Debit Cash and credit Notes Payable for $206,000
C) Debit Notes Payable and credit Cash for $206,000
D) Debit Notes Payable and credit Cash for $200,000
Which of the following statements about the tradeoffs of extending credit is not correct?
A) Extending credit to at least some customers is necessary in a competitive market to
avoid losing sales to competitors.
B) Even if a company were to collect in full from customers, there would be other
additional costs introduced by extending credit to customers.
C) Even though additional costs are incurred if credit is extended, a company expects
that the additional revenue will be more than sufficient to offset the additional costs.
D) Even if there are no bad debts from credit sales, the delayed receipt of cash will
always increase additional costs beyond the increased revenue from the credit sales.
Generous Inc. lends Blue Inc. $40,000 on April 1 and receives a four-month, 4.5%
interest-bearing note. Generous Inc. prepares financial statements on April 30. What
adjusting entry should be made by Generous Inc. before its financial statements are
prepared?
A) Debit Note Receivable and credit Cash for $40,000
B) Debit Interest Receivable and credit Interest Revenue for $150
C) Debit Cash and credit Interest Revenue for $150
D) Debit Interest Receivable and credit Interest Revenue for $600
B-Mart has a perpetual inventory system. B-Mart sells $5,000 of blue jeans. The
customer later brings $600 of blue jeans back to B-Mart because they are defective.
Those blue jeans had a cost of $200. The customer agrees to keep the blue jeans and
B-Mart agrees to a $200 allowance. Which of the following is one of the entries that
B-Mart will use to record the return?
A) Debit Accounts Receivable for $200 and credit Inventory for $200
B) Debit Inventory for $200 and credit Accounts Receivable for $200
C) Debit Accounts Receivable for $200 and credit Sales Returns & Allowances for
$200
D) Debit Sales Returns & Allowances for $200 and credit Accounts Receivable for
$200
Consider the following information:
Required:
Part a. Calculate the debt-to-assets ratio.
Part b. Describe what the debt-to-assets ratio tells you and how to interpret it.
Part c. Calculate the times interest earned.
Part d. Comment on the results of your times interest earned analysis.
The debt-to-assets ratio is the:
A) ratio of current liabilities to current assets.
B) ratio of long term liabilities to fixed assets.
C) ratio of total liabilities to total assets.
D) proportion of short-term liabilities to total liabilities.
Use the information above to answer the following question. Which of the following is
an accurate description of the economic events involving Accounts Receivable as
documented in the T-account above?
T-account:
Partial list of account balances at the end of the year:
A) Sales to customers on account exceeded the payments received from customers on
account.
B) Payments received from customers on account exceeded the sales made to customers
on account.
C) The company paid off its debt more than it incurred new debt.
D) The company incurred more debt than it paid off.
A check is said to have cleared the bank when:
A) it is returned NSF.
B) it bounces.
C) the bank withdraws the amount of the check from the check writer’s account.
D) it is presented to a financial institution for deposit or cash.
Cash flows from investing activities include cash:
A) inflows and outflows reflecting revenues and expenses reported on the income
statement.
B) inflows from the issuance of bonds.
C) inflows from the sale of long-term investments.
D) inflows from the sale of a company’s own stock to its stockholders.
A times interest earned ratio of 11 means that the company’s:
A) net income is large enough to pay interest and taxes 11 times.
B) net cash flow from operations before taxes and interest is large enough to pay
interest and taxes 11 times.
C) net cash flow from operations is large enough to pay interest and taxes 11 times.
D) income before taxes and interest is large enough to pay interest 11 times.
A company has current assets of $450,000 and a current ratio is 2.5. Assume that the
company prepays rent for 9 months in the amount of $20,000. The current ratio after
this transaction is closest to:
A) 2.39.
B) 2.61.
C) 2.5.
D) 2.81.
Adventure Company uses the aging of accounts receivable method to estimate Bad
Debt Expense. The balance of each account receivable is aged on the basis of three
categories as follows: (1) 1-30 days old, (2) 30-90 days old, and (3) more than 90 days
old. Based on experience, management has estimated what portion of receivables of a
specific age will not be paid as follows: (1) 1%, (2) 15%, and (3) 40%, respectively.
At December 31, 2016, the unadjusted credit balance in the Allowance for Doubtful
Accounts was $100. The total Accounts Receivable in each age category were: (1) 1-30
days old, $65,000, (2) 30-90 days old, $10,000, and (3) more than 90 days old, $4,000.
Required:
Part a. Calculate the estimate of uncollectible accounts at December 31, 2016.
Part b. Prepare the appropriate adjusting entry dated December 31, 2016.
A company purchased equipment for use in the business at a cost of $12,000,
one-fourth was paid in cash, and the company signed a note for the balance. The journal
entry to record this transaction will include a:
A) debit to Notes Payable of $9,000.
B) debit to Cash of $12,000.
C) credit to Notes Payable of $9,000.
D) debit to Equipment of $3,000.
Using the indirect method, which of the following would be added to net income?
A) A decrease in Supplies
B) An increase in Prepaid Insurance
C) A decrease in Salaries and Wages Payable
D) An increase in Equipment
The Flynn Company started business by obtaining financing through debt financing and
equity financing. Which of the following statements is not correct?
A) Equity financing refers to the money obtained through owners’ contributions and
reinvestments of profit.
B) Debt financing refers to the money obtained through loans.
C) The business is obligated to repay debt financing.
D) The business is obligated to repay equity financing.
Which of the following equations is correct?
A) Change in cash = Change in noncash assets
B) Change in cash = Change in liabilities + Change in stockholders’ equity
C) Change in cash = Change in liabilities + Change in stockholders’ equity – Change in
noncash assets
D) Change cash = Change in liabilities + Change in stockholders’ equity + Change in
noncash assets
All of the following are a part of contributed capital except:
A) Common Stock.
B) Additional Paid-in Capital.
C) Preferred Stock.
D) Retained Earnings.
Choose the appropriate letter to match the term and the definition. Not all definitions
will be used.
Term
1) _____ Accrued liability
2) _____ Loan covenant
3) _____ Issue price
4) _____ Face value
5) _____ Line of credit
6) _____ Public debt offering
7) _____ Security
8) _____ Contingent liability
9) _____ Debt-to-assets ratio
Definition
A. Bond features that allow the issuer to repay the loan early.
B. A prearranged agreement that allows a company to borrow at will up to a limit.
C. This item is reported as a contra asset account.
D. The amount that the lender actually pays for a bond.
E. The cost of issuing a bond.
F. Debt features that, if violated, allow the lender to revise loan terms.
G. The total amount of money that a company owes in debt.
H. The amount a company must repay creditors when a bond matures.
I. These are liabilities that have been incurred during the period but not yet paid.
J. When a company borrows money by issuing bonds in the financial markets.
K. A bond feature that allows a creditor to seize assets if debt is not properly repaid.
L. This type of liability is uncertain; it exists only if some other condition occurs.
M. Total liabilities divided by total assets.
A company owes rent at a rate of $6,000 per month. The company pays the rent owed
on the tenth of each month for the previous month. At the end of each month, what kind
of adjustment is required?
A) An accrual adjustment
B) A closing adjustment
C) A deferral adjustment
D) No adjustment
All else being equal, if net income decreases:
A) EPS decreases and ROE increases.
B) EPS and ROE both decrease.
C) EPS increases and ROE decreases.
D) EPS and ROE both increase.