Prices are declining; income taxes are higher with this method.
Identify which inventory costing method achieves the effect listed in the following items.
(Choices may be used more than once.)
a. FIFO method c. Average cost method
b. LIFO method d. Specific identification method
A company’s unadjusted bank balance is $3,000. Outstanding checks amount to $500
and deposits in transit total $300. Based on this information alone, what is the
company’s adjusted cash balance for the purpose of preparing a bank reconciliation?
a. $3,200
b. $3,300
c. $2,800
d. $2,700
Which one of the following is not an external user of financial statements?
a. Internal Revenue Service
b. creditors
c. stockholders
d. the Company’s President
Treasure Distributors, Inc. had no investments in short-term marketable securities prior
to 2012. During 2012, the company engaged in the following investment transactions:
At the end of 2012, the Toledo Company stock had a market value of $18 per share. A)
Prepare journal entries for the three transactions assuming the stock is classified as
trading securities.
B) Prepare the journal entry, if required, to recognize the investment’s year-end market
value. What is the income statement effect of the entry, if any?
C) How will this investment be reported on the company’s balance sheet at December
31, 2012?
D) Determine the realized gain or loss if Treasure Distributors, Inc. sells the remaining
Toledo Company stock for $18.50 per share in early 2013.
Method of accounting for all investments in debt securities that are classified as
held-to-maturity securities
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
Par value represents the
a. arbitrary amount that establishes a minimum price for the stock when it is first issued.
b. current market price of the stock.
c. amount for which any treasury shares have been acquired by the corporation.
d. amount for which treasury shares may be reissued.
Refer to Fabulous Creations. The company recorded depreciation expense of $344
million for 2012. Calculate the following ratios for 2013.
A twenty-year lease obligation would appear on the balance sheet as
a. current asset.
b. long-term liability.
c. long-term asset.
d. stockholders’ equity.
When using the indirect method to determine operating cash flows, how is the issuing
of stock for cash shown on the Statement of Cash Flows?
a. operating activity
b. investing activity
c. financing activity
d. non cash investing and financing activity
e. not reported on the statement of cash flows
When the amount for a debit entry in a journal is transferred to a specific account in the
general ledger, it must be posted as a
a. debit to the account in the general ledger.
b. credit to the account in the general ledger.
c. total amount, without regard to debit or credit, since the general ledger accounts do
not have spaces for debit and credit entries.
d. decrease to the account in the general ledger.
What are the effects on the accounting equation from the purchase of a short-term
investment?
a. Assets and stockholders’ equity increase.
b. No effects; assets increase and decrease by the same amount.
c. Assets and liabilities decrease.
d. Stockholders’ equity increases and liabilities decrease.
If the acquisition cost exceeds the current value of the net assets (assets minus
liabilities) acquired, the investor must also be purchasing an intangible asset arising
from attributes that are not separable from the business-such as customer satisfaction,
product quality, skilled employees, and business location.
The excess of the investor’s acquisition cost over the current value of the investee’s
identifiable net assets is recorded as an intangible asset called ____________________.
The key to being classified as a cash equivalent is that the amount must be available to
pay debts within a year’s time or less.
Collections of accounts receivable are considered to be cash equivalents.
A company with a capital structure that shifts more toward debt financing will appear to
be in a stronger position to pay interest and any principal amount that may be maturing
by using its cash flows generated by operating activities.
Refer to Rhodes Bakery. Calculate the following asset efficiency ratios for 2015 and
2014: Accounts Receivable Turnover Ratio, Inventory Turnover Ratio, and Asset
Turnover Ratio. Also determine the Operating Cycle. Round your answers to two
decimal places. Comment on the company’s asset efficiency ratios.
Rhodes Bakery
The balance sheet taken from the company’s 2015 10-K is provided below:
A portion of the company’s income statements are shown below. At December 31, 2013,
Accounts Receivable, Inventories, and Total Assets were $18,500, $6,500, and
$325,000, respectively.
The return on equity ratio measures the profit earned by a company through the use of
capital supplied by its bondholders.
During periods of declining purchase prices, LIFO produces the lowest amount of
ending inventory relative to the other inventory costing methods.
Federal excise taxes payable is not a current liability.