Which of the following statements about cash flows from investing activities is correct?
A) The proceeds from sales of investments are reported as cash inflows from investing
activities.
B) Cash flows from investing activities are calculated by making adjustments to net
income.
C) Cash paid to acquire long-lived assets is reported as a cash inflow from investing
activities.
D) Cash received from issuing a long-term payable is reported as a cash inflow from
investing activities.
Use the information above to answer the following question. What is the total amount
of current liabilities?
A) $649,540.
B) $4,059,625.
C) $771,920.
D) $799,540.
The Pet Sitters, Inc. entered into the following transactions during the month of
January.
A. Purchased supplies for $5,000 cash.
B. Paid $4,480 for salaries and wages for the month of January.
C. Paid $480 in advance for February rent.
D. Provided $12,000 in services on account.
E. Paid $800 on accounts payable.
F. Received $210 from customers as deposits for future pet sitting services.
G. Received a bill for $1,500 from the plumber who repaired a broken pipe in the
restrooms, but will not pay the bill until February.
H. Purchased equipment for cash of $780.
Required:
Prepare journal entries to record the transactions identified among activities (A) through
(H).
Which of the following measures would assist in assessing the solvency of a company?
A) Debt-to-assets
B) Fixed asset turnover
C) Return on equity
D) Current ratio
Countryside Corporation uses the allowance method. Countryside writes off a $350
customer account balance when it becomes clear that the customer will never pay.
Countryside Corporation should debit:
A) Bad Debt Expense and credit Accounts Receivable for $350.
B) Allowance for Doubtful Accounts and credit Accounts Receivable for $350.
C) Bad Debt Expense and credit Cash for $350.
D) Accounts Receivable and credit Bad Debt Expense for $350.
Contributed capital totals $30,000, Retained Earnings equals $65,000, Treasury Stock
equals $18,000, and Common Stock equals $10,000. If the company does not have any
accumulated other comprehensive income (loss), stockholders’ equity, what is the total
amount of stockholders’ equity?
A) $113,000
B) $77,000
C) $123,000
D) $87,000
Which of the following statements about a multistep income statement is not correct?
A) Income before income taxes = Net income + Income tax expense
B) Depreciation is subtracted in the calculation of core operating results.
C) Income from operations = Income before income tax expense + Other revenues
(expenses), net
D) Income from operations = Net income + Income tax expense – Other revenues
(expenses), net
Which of the following statements about a stock split is correct?
A) A stock split decreases Retained Earnings.
B) Stock splits do not require a journal entry.
C) Stock splits are the same as stock dividends.
D) Stock splits increase the par value per share.
Use the information above to answer the question below. The company uses the indirect
method in preparing the statement of cash flows. What is the amount of depreciation
expense that will be reported in the operating activities section of the statement?
A) $4,000
B) $11,000
C) $7,000
D) $10,000
Company X has net sales revenue of $436,000, cost of goods sold of $343,000, and net
income of $3,000. If interest expense is $10,000 and income tax expense is $1,000, the
times interest earned ratio is closest to:
A) 1.4.
B) 0.33.
C) 1.3.
D) 0.40.
Use the information above to answer the following question. What is the missing
amount for Notes Payable?
A) $207,100.
B) $437,800.
C) $1,439,200.
D) $3,347,700.
Your company converted an existing account receivable in the amount of $5,000 to a
note receivable to allow an extended payment period. The note is due in one year and
includes an annual interest rate of 5%, The customer repays the principal at the maturity
date. The entry to record the receipt of the principal includes a debit to:
A) Cash and credit to Notes Receivable.
B) Notes Receivable and credit to Accounts Receivable.
C) Cash and credit to Interest Receivable.
D) Notes Receivable and credit to Cash.
Recording an adjusting journal entry to recognize depreciation would cause which of
the following?
A) An increase in assets, an increase in liabilities, and a decrease in expenses
B) A decrease in assets, an increase in liabilities, and an increase in expenses
C) An increase in liabilities, an increase in expenses, and a decrease in stockholders’
equity
D) A decrease in assets, a decrease in stockholders’ equity, and an increase in expenses
On January 1, 2016, Trueblood, Inc. purchased a piece of machinery for use in
operations. The total acquisition cost was $33,000. The machine has an estimated useful
life of three years and a residual value of $3,000. Assume that units produced by the
machine will total 16,000 during 2016, 23,000 during 2017, and 21,000 during 2018.
Required:
Part a. Use this information to complete the following table.
Part b. On January 1, 2017, the machine was rebuilt at a cost of $7,000. After it was
rebuilt, the total estimated life of the machine was increased to five years (from the
original estimate of three years) and the residual value to $6,000 (from $3,000). Assume
that the company chose the straight-line method for depreciation. Compute the annual
depreciation expense after the change in estimates.
Part c. Prepare the adjusting entry to record the depreciation expense for the year ended
December 31, 2017.
Part d. On December 31, 2018, the machine was sold for $7,500. Compute the book
value on that date.
Part e. Prepare the journal entry to record the sale.
On the last day of the month, a company receives $8,000 of cash from customers. Of
that amount, $1,000 was for services performed and $7,000 represented payments on
account. The journal entry to record the $8,000 cash receipt would include a debit to:
A) Accounts Receivable for $7,000, a debit to Service Revenue for $1,000, and a credit
for $8,000 to Cash.
B) Cash for $8,000, a credit to Accounts Receivable for $7,000, and a credit to Service
Revenue for $1,000.
C) Accounts Receivable for $7,000, a debit to Unearned Revenue for $1,000, and a
credit to Cash for $8,000.
D) Cash for $8,000, a debit to Service Revenue for $1,000, and a credit to Accounts
Receivable for $7,000.
Use the information above to answer the following question. Gross profit would be:
A) $35,000.
B) $37,000.
C) $41,000.
D) $71,000.
Net income refers to the:
A) difference between what was earned and the costs incurred during a period.
B) difference between the cash received and the cash paid out during a period.
C) difference between what is owned and what is owed at a point in time.
D) change in the value of the company during a period.
Which of the following statements about the Price/Earnings ratio is notcorrect?
A) The Price/Earnings ratio indicates how much investors are willing to pay for a share
of a company’s stock as a multiple of current earnings.
B) A high Price/Earnings ratio may mean that investors have pushed the price of the
stock up in anticipation of higher future net income.
C) If EPS decreases and there is no change in the market price of the stock, the
Price/Earnings ratio will decrease.
D) If the market price of the stock increases and there is no change in EPS, the
Price/Earnings ratio will increase.
A check that was outstanding on last period’s bank reconciliation was not among the
cancelled checks returned by the bank this period. In preparing the bank reconciliation
for this period, the amount of this check should be
A) added to the bank balance of cash.
B) ignored in preparing this period’s bank reconciliation.
C) deducted from the bank balance of cash.
D) deducted from the company’s balance of cash.