If the balance of prepaid insurance was the same on January 1, 2014, and December 31,
2014, then the insurance expense must have been ____________________ the cash
payments made for insurance during the year.
Distinguish between capital and revenue expenditures.
How efficiently a company is using the resources at its disposal is called
____________________.
For a capital lease, the lessee must record both an asset and a liability. The amount of
the asset is subsequently reduced by the process of ____________________.
Distinguish between stock warrants and stock options.
A company has a note payable that is due on December 31, 2013. In its December 31,
2012, balance sheet, this note payable should be classified as a(n)
____________________.
A company borrowed $50,000 on November 1, 2012, at 9% interest. The interest and
principal are due on October 31, 2013.
Prepare the company’s journal entries on November 1, 2012, December 31, 2012, and
October 31, 2013.
The ____________ basis of accounting recognizes revenue when it is received
regardless of when the revenue is earned.
The Statement of Cash Flows is considered to be a good indicator of current cash
inflows and outflows.
The Cash account is never part of an adjusting entry.
Three measures of liquidity include working capital, the acid test ratio, and the current
ratio.
Explain some internal control procedures that a fast food restaurant like McDonald’s
may use to control cash receipts.
Refer to Rhodes Bakery. Calculate the following debt management ratios for 2015 and
2014: Times Interest Earned Ratio, Long-Term Debt-to-Equity Ratio, Debt-to-Equity
Ratio, Long-Term Debt-to-Assets Ratio, and Debt-to-Assets Ratio. Income from
operations were $65,000 and $49,000 and interest expense was $26,000 and $1,750 for
2015 and 2014, respectively. Round your answers to two decimal places. Comment on
the company’s debt management.
Refer to Aardvark Resale. Can the company use the direct write-off method rather than
the allowance method to account for bad debts expense? Explain why or why not.