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Chapter 1: Accounting as a Form of Communication
133. The concept that assumes that an entity is not in the process of liquidation is _________________________.
ANSWER:
going concern
DIFFICULTY:
Easy
REFERENCES:
pp. 22-24
LEARNING OBJECTIVES:
FACC.PONO.13.01-06 - LO: 01-06
KEYWORDS:
Bloom's: Remembering
134. The federal government agency with the ultimate authority to determine the rules in preparing statements for
companies whose stock is sold to the public is the __________________________________________________.
ANSWER:
Securities and Exchange Commission
DIFFICULTY:
Easy
REFERENCES:
pp. 25-26
LEARNING OBJECTIVES:
FACC.PONO.13.01-07 - LO: 01-07
KEYWORDS:
Bloom's: Remembering
135. The private sector group with authority to set accounting standards is the
_______________________________________________.
ANSWER:
Financial Accounting Standards Board
DIFFICULTY:
Easy
REFERENCES:
pp. 25-26
LEARNING OBJECTIVES:
FACC.PONO.13.01-07 - LO: 01-07
KEYWORDS:
Bloom's: Remembering
136. ___________________ means the presentation of information is free from bias toward a particular result.
ANSWER:
Neutrality
DIFFICULTY:
Easy
REFERENCES:
pp. 26-30
LEARNING OBJECTIVES:
FACC.PONO.13.01-08 - LO: 01-08
KEYWORDS:
Bloom's: Remembering
137. In 2002, Congress passed the ________________ Act to bring reform to corporate accountability and stewardship in
the wake of a number of major corporate scandals.
ANSWER:
Sarbanes-Oxley
DIFFICULTY:
Easy
REFERENCES:
pp. 26-30
LEARNING OBJECTIVES:
FACC.PONO.13.01-08 - LO: 01-08
KEYWORDS:
Bloom's: Remembering
138. Good quality information should be both _____________ and present a __________________.
ANSWER:
relevant
faithful representation
DIFFICULTY:
Easy
REFERENCES:
pp. 26-30
LEARNING OBJECTIVES:
FACC.PONO.13.01-08 - LO: 01-08
KEYWORDS:
Bloom's: Remembering
Chapter 1: Accounting as a Form of Communication
Matching
Match the following business forms with their characteristics below.
a.
Sole proprietorship
b.
Partnership
c.
Corporation
DIFFICULTY:
Easy
REFERENCES:
pp. 6-7
LEARNING OBJECTIVES:
FACC.PONO.13.01-02 - LO: 01-02
KEYWORDS:
Bloom's: Remembering
139. Must file articles of incorporation with the state
ANSWER:
c
140. Easy to raise large sums of money
ANSWER:
c
141. Single owner
ANSWER:
a
142. Need an agreement about contributions to the business
ANSWER:
b
143. Usually owned and operated by the same person
ANSWER:
a
144. Owned by two or more individuals
ANSWER:
b
145. Control most private resources in the U.S.
ANSWER:
c
146. A share of stock acts as evidence of ownership
ANSWER:
c
Chapter 1: Accounting as a Form of Communication
Provided below is a list of important users of accounting information. Below the list are descriptions of a major need of
each of the various users. Fill in the blank with the one user group that is most likely to have the need described to the
right of the blank. Some user groups may be used more than once or not at all.
a.
Stockholder
b.
Company management
c.
Supplier
d.
Banker
e.
Internal Revenue Service
f.
Securities and Exchange Commission
g.
Labor union
DIFFICULTY:
Moderate
REFERENCES:
pp. 11-12
LEARNING OBJECTIVES:
FACC.PONO.13.01-04 - LO: 01-04
KEYWORDS:
Bloom's: Remembering
147. The prospects for future dividend payments.
ANSWER:
a
148. The financial status of a company issuing securities to the public for the first time.
ANSWER:
f
149. The profitability of the company based upon the Internal Revenue Code.
ANSWER:
e
150. The profitability of each division of the company.
ANSWER:
b
151. The exact amount of profit on each product of the company.
ANSWER:
b
152. The company’s profitability since the last work force contract was signed.
ANSWER:
g
Chapter 1: Accounting as a Form of Communication
For each statement provided, choose the letter of the appropriate term from the list that each statement best describes.
Some terms may be used more than once, while others are not used at all.
a.
Capital stock
b.
Asset
c.
Owners’ equity
d.
Time period
e.
Dividends
f.
Economic entity concept
g.
Expense
h.
Retained earnings
i.
Cost principle
j.
Creditor
k.
Liability
l.
Revenue
m.
Going concern
n.
Monetary unit
o.
Corporation
DIFFICULTY:
Easy
REFERENCES:
pp. 14-21
pp. 22-24
pp. 11-12
LEARNING OBJECTIVES:
FACC.PONO.13.01-04 - LO: 01-04
FACC.PONO.13.01-05 - LO: 01-05
FACC.PONO.13.01-06 - LO: 01-06
KEYWORDS:
Bloom's: Remembering
153. The portion of owner’s equity that represents the net income less any dividends paid over the life of the entity.
ANSWER:
h
154. The owners’ claims on the assets of an entity.
ANSWER:
c
155. A distribution of the net income of a business to its owners.
ANSWER:
e
156. The sale of goods or the performance of services.
ANSWER:
l
157. A category on the balance sheet to indicate the owners’ direct investment in a corporation.
ANSWER:
a
158. The cost of doing business that results from the process of generating revenues.
ANSWER:
g
159. A future benefit.
ANSWER:
b
160. An artificial segment on the calendar used as a basis for preparing financial statements.
ANSWER:
d
161. The assumption that an entity is not in the process of liquidation and that it will continue indefinitely.
ANSWER:
m
162. The principle or rule that specifies the amount recorded for an asset upon acquisition.
ANSWER:
i
163. An entity that lends a company money with the expectation of repayment.
ANSWER:
j
164. Claims of the creditors against the assets of a company.
ANSWER:
k
Several items from the financial statements of Standard Tires are listed below. Use the following answer choices to
identify the type of account for each item listed. Place your answers in the space provided.
a.
Assets
b.
Liabilities
c.
Revenues
d.
Expenses
e.
Owners’ equity
DIFFICULTY:
Easy
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Remembering
165. Property, plant, and equipment
ANSWER:
a
166. Sale of tires
ANSWER:
c
167. Accounts payable
ANSWER:
b
168. Interest income
ANSWER:
c
169. Selling expenses
ANSWER:
d
170. Accounts receivable
ANSWER:
a
171. Capital stock
ANSWER:
e
172. Long-term debt
ANSWER:
b
173. Cash
ANSWER:
a
174. Retained earnings
ANSWER:
e
175. Inventories
ANSWER:
a
Three organizations important to accounting are listed below. Select the organization that most closely achieves the role
described.
a.
American Institute of Certified Public Accountants (AICPA)
b.
Financial Accounting Standards Board (FASB)
c.
Securities and Exchange Commission (SEC)
DIFFICULTY:
Moderate
REFERENCES:
pp. 25-26
LEARNING OBJECTIVES:
FACC.PONO.13.01-07 - LO: 01-07
KEYWORDS:
Bloom's: Remembering
176. Issues financial accounting concepts that are used as a guide to accounting standard setting.
ANSWER:
b
177. Has the ultimate authority to set accounting standards, but has allowed the profession to do so.
ANSWER:
c
178. Prepares and grades the Uniform CPA Examination.
ANSWER:
a
179. An agency of the federal government.
ANSWER:
c
180. Is a professional organization of certified public accountants.
ANSWER:
a
181. Primarily responsible for setting accounting standards today.
ANSWER:
b
182. Requires that publicly traded companies file annual and quarterly financial statements on a timely basis.
ANSWER:
c
Chapter 1: Accounting as a Form of Communication
Subjective Short Answer
183. Vick Corporation has been in the business of delivering small packages for local companies within the city of
Atlanta, Georgia, since 1960. The following information concerning financial activities during 2016 is available at
December 31, 2016:
Delivery revenue
$380,000
Salary and wage expense
$82,000
Dividends declared and paid
85,000
Rent expense
43,000
Buildings
140,000
Land
60,000
Accounts payable
30,000
Accounts payable
30,000
Capital stock
105,000
Retained earnings,
Water, gas, and
January 1, 2016
42,000
electricity
28,000
Notes payable
34,000
Cash
56,000
Income tax expense
18,000
A.
Prepare an income statement for the year ended December 31, 2016.
B.
If you were a bank loan officer and Vick Corporation wanted to borrow $100,000 from
your bank, would you lend the money? Explain.
C.
Calculate retained earnings at December 31, 2016.
ANSWER:
A.
Vick Corporation
Income Statement
Year Ended December 31, 2016
Revenues:
Delivery revenue
$380,000
Expenses:
Salary and wage expense
$82,000
Rent expense
43,000
Water, gas, and electricity
28,000
Income tax expense
18,000
181,000
Net income
$99,000
B.
The company appears profitable. Basing the decision solely on profitability, it appears
the company can generate operating income to enable it to repay the loan. But the
184. Meredith Corporation is in the business of providing dog and cat grooming services to customers within the city of
New York. The following information concerning financial activities during 2016 is available at December 31, 2016:
Grooming revenue
$130,000
Salary and wage expense
$44,000
Dividends declared and paid
13,000
Rent expense
24,000
Equipment
40,000
Furniture
60,000
Accounts payable
30,000
Accounts receivable
23,000
Capital stock
22,000
Retained earnings, Jan. 1,2016
21,000
Utilities expense
10,000
Notes payable
88,000
Cash
33,000
Income tax expense
7,000
A.
Calculate net income for 2016.
B.
Prepare a statement of retained earnings for the year ended December 31, 2016.
C.
What information can you derive from the statement of retained earnings concerning this
company? Explain.
ANSWER:
A.
$130,000 – $10,000 – $44,000 – $24,000 – $7,000 = $45,000
B.
Meredith Corporation
Statement of Retained Earnings
For the Year Ended December 31, 2016
Beginning balance
$21,000
Add: Net income for the year
45,000
Less: Dividends for the year
(13,000)
Ending balance
$53,000
C.
The statement of retained earnings provides information on the changes in
retained earnings during 2016. Net income causes retained earnings to increase,
and dividends cause it to decrease. Since net income exceeded dividends paid,
the ending balance is larger than the beginning balance.
DIFFICULTY:
Moderate
REFERENCES:
pp. 6-7
LEARNING OBJECTIVES:
FACC.PONO.13.01-02 - LO: 01-02
KEYWORDS:
Bloom's: Analyzing
185. Here is a list of accounts and their balances that appear on the Thomas Company’s income statement and balance
sheet.
Accounts payable
$ 800
Accounts receivable
500
Building
2,000
Cash
3,300
Gas, utilities, and other expenses
300
Land
4,000
Lawn-care revenue
1,500
Notes payable
6,000
Salaries and wages expense
900
Tools
800
Tree-trimming revenue
500
Truck
2,000
REQUIRED:
Identify which of these are:
(a) Assets
(b) Liabilities
(c) Expenses
(d) Revenues
ANSWER:
(a) Assets: Accounts receivable, Building, Cash, Land, Tools, Truck
(b) Liabilities: Accounts payable, Notes payable
(c) Expenses: Gas, utilities, and other expenses, Salaries and wages expense
(d) Revenues: Lawn-care revenue, Tree-trimming revenue
DIFFICULTY:
Easy
REFERENCES:
pp. 8-10
LEARNING OBJECTIVES:
FACC.PONO.13.01-03 - LO: 01-03
KEYWORDS:
Bloom's: Analyzing
Chapter 1: Accounting as a Form of Communication
Taryn Corporation
The accountant for Taryn Corporation prepared the following list of account balances from the company’s records for the
year ended December 31, 2016:
Sales revenue
$165,000
Cash
$ 30,000
Accounts receivable
14,000
Selling expenses
44,000
Equipment
42,000
Common stock
41,000
Accounts payable
12,000
Interest income
3,000
Salaries and wages expense
40,000
Cost of sales
51,000
Inventories
22,000
Prepaid expenses
2,000
Income taxes payable
5,000
Income taxes expense
18,000
Notes payable
20,000
Retained earnings
?
186. Read the information for Taryn Corporation. Determine the following amounts for Taryn Corp.
A)
Total assets at the end of 2016
B)
Total liabilities at the end of 2016
_____________________________
C)
What parties have a claim on Taryn Corporation’s assets? Explain you answer in the terms of
the accounting equation.
ANSWER:
A)
$110,000
($30,000 Cash + $14,000 Accounts Receivable + $42,000 Equipment + $22,000
Inventories + 2,000 Prepaid Expenses = $110,000)
B)
$37,000
($12,000 Accounts Payable + $5,000 Income Taxes Payable + $20,000 Notes Payable
= $37,000)
C)
Both the creditors and the owners have a claim on the assets of the corporation. The
creditors have their claim arising from the liabilities of the corporation, while the
owners have a claim through the owners’ (or stockholders’) equity.
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
187. Read the information for Taryn Corporation. Determine the following amounts for Taryn Corporation.
A)
The balance of retained earnings at the end of 2016.
B)
The total stockholders’ equity at the end of 2016.
___________________________
C)
Name the two events that might cause stockholders’ equity to increase.
ANSWER:
A)
$32,000
($110,000 Total Assets – $37,000 Total Liabilities – $41,000 Common Stock =
$32,000)
B)
$73,000
($110,000 Total Assets – $37,000 Total Liabilities = $73,000; OR $41,000 Common
Stock + $32,000 Retained Earnings = $73,000)
C)
Stockholders equity can increase when common (or capital) stock is issued to
investors. It also can increase through increases to retained earnings when the net
income of the business is greater than any dividends paid to the shareholders.
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
188. Read the information for Taryn Corporation. Prepare an income statement for Taryn Corporation in good form.
ANSWER:
Taryn Corporation
Income Statement
For the Year Ended December 31, 2016
Revenues:
Sales revenue
$165,000
Interest income
3,000
$168,000
Expenses:
Cost of sales
$ 51,000
Salaries and wages expense
40,000
Selling expenses
44,000
Income taxes expense
18,000
153,000
Net income
$ 15,000
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
189. Read the information for Taryn Corporation. Prepare a balance sheet for Taryn Corporation in good form.
ANSWER:
Taryn Corporation
Balance Sheet
December 31, 2016
Assets
Liabilities & Owners’ Equity
Cash
$ 30,000
Accounts payable
$ 12,000
Accounts receivable
14,000
Income taxes payable
5,000
Inventories
22,000
Notes payable
20,000
Prepaid expenses
2,000
Common stock
41,000
Equipment
42,000
Retained earnings
32,000
Total assets
$ 110,000
Total liabilities and owners’
equity
$ 110,000
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
190. Read the information for Taryn Corporation. Determine the following amounts for Taryn Corporation:
A)
Total revenues for 2016.
B)
Total expenses for 2016.
__________________________
C)
What is the purpose of the income statement?
D)
Is Taryn Corp. profitable? Explain your answer.
E)
Is this the first year of operations for Taryn Corp.? Explain your answer.
ANSWER:
A)
$168,000
($165,000 Sales Revenue + $3,000 Interest Income = $168,000)
B)
$153,000
($51,000 Cost of Sales + $40,000 Salaries & Wages Expense + $44,000 Selling
Expenses + $18,000 Income Taxes Expense = $153,000)
C)
The purpose of the income statement is to provide information regarding the revenues
and expenses of the entity. The difference shows the profitability of the company for a
particular period of time.
D)
Taryn Corporation had net income for the period of $15,000. Since revenues exceeded
expenses for the period, the company would be considered profitable.
E)
This would not be the first year of operations for Taryn Corporation. The reasons for
this are that the ending Retained Earnings balance is greater than the net income of
$15,000. Since the ending balance of Retained Earnings is $32,000, and Net Income
for the period was $15,000 as well as apparently no dividends declared and paid to the
stockholders during the year, Taryn Corporation began the year with a balance of
$17,000 ($32,000 – 15,000) in Retained Earnings.
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
Chapter 1: Accounting as a Form of Communication
Canyon Corporation
The accountant for the Canyon Corporation prepared the following list from the company’s accounting records for the
year ended December 31, 2016:
Retained earnings
?
Prepaid expenses
$ 3,000
Cash
$ 7,000
Common stock
40,000
Accounts payable
15,000
Accounts receivable
17,000
Sales revenue
125,000
Interest income
500
Cost of sales
70,000
Salary expense
4,000
Land
75,000
Income tax expense
200
Notes payable
15,000
Selling expense
45,000
Inventory
20,000
Salaries payable
5,000
191. Read the information for Canyon Corporation. Determine the following amounts for Canyon Corporation.
A)
Total assets at the end of 2016.
B)
Total liabilities at the end of 2016.
C)
Total equity at the end of 2016.
ANSWER:
A)
$122,000
($3,000 Prepaid Expenses + $7,000 Cash + $17,000 Accounts Receivable + $75,000
Land + $20,000 Inventory = $122,000)
B)
$35,000
($15,000 Accounts Payable + $15,000 Notes Payable + $5,000 Salaries Payable =
$35,000)
C)
$87,000
($122,000 Total Assets – $35,000 Total Liabilities = $87,000)
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
192. Read the information for Canyon Corporation. Determine the following amounts for Canyon Corporation:
A)
Total revenues for 2016.
B)
Total expenses for 2016.
C)
Net income for 2016.
ANSWER:
A)
$125,500
($125,000 Sales Revenue + $500 Interest Income = $125,500)
B)
$119,200
($70,000 Cost of Sales + $4,000 Salary Expense + $200 Income Tax Expense
+ $45,000 Selling Expense = $119,200)
C)
$6,300
($125,500 Total Revenue – $119,200 Total Expenses = $6,300)
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
193. Read the information for Canyon Corporation. Determine the following amounts for Canyon Corporation:
A)
Stockholders’ equity at the end of 2016.
B)
Retained earnings at the end of 2016.
____________________________
C)
Name two events that might cause stockholders’ equity to decrease.
ANSWER:
A)
$87,000
($122,000 Total Assets – $35,000 Total Liabilities = $87,000)
B)
$47,000
($87,000 Total Stockholders’ Equity – $40,000 Common Stock = $47,000
C)
Stockholders’ equity is decreased when dividends are declared and paid. Expenses or
net losses also reduce stockholders’ equity.
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21-18
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
194. Read the information for Canyon Corporation. Using good form, prepare an income statement for Canyon
Corporation.
ANSWER:
Canyon Corporation
Income Statement
For the Year Ended December 31, 2016
Revenues:
Sales Revenue
$125,000
Interest Income
500
$125,500
Expenses:
Cost of Sales
$ 70,000
Selling Expense
45,000
Salary Expense
4,000
Income tax Expense
200
119,200
Net Income
$ 6,300
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
195. Read the information for Canyon Corporation. Using good form, prepare a Balance Sheet for the Canyon
Corporation.
ANSWER:
Canyon Corporation
Balance Sheet
December 31, 2016
Assets
Liabilities and Owners’
Equity
Cash
$ 7,000
Accounts payable
$ 15,000
Accounts receivable
17,000
Salaries payable
5,000
Inventory
20,000
Notes payable
15,000
Prepaid expenses
3,000
Common stock
40,000
Land
75,000
Retained earnings
47,000
Total assets
$122,000
Total liabilities
and owners’ equity
$122,000
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
196. Assume that you have received copies of the financial statements for PepsiCo for the years ending December 31,
2016 and 2015. Answer the following questions:
A)
If you were a banker, why would you need information from PepsiCo’s financial
statements?
B)
If you were a potential investor in PepsiCo stock, what information would you want
from their financial statements?
C)
If you were a labor negotiator for a union that represents a group of PepsiCo’s
employees, which financial statement would provide you with the most useful
information?
ANSWER:
A)
A banker wants to be assured that the company will make its interest payments and
repay the principle of the loan in a timely manner.
B)
Investors want to know whether they should make an investment in the company’s
stock, or continue to hold their investment. They will be looking at the company’s
recent performance, whether the company has been profitable, how their profits
compare with other companies, and how much the company has declared and paid in
dividends.
C)
A labor negotiator needs to know how much profit the company has made. This
information is found on the Income Statement.
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
197. Bullseye, Inc., started the year with total assets of $400,000 and total liabilities of $240,000. Net income for the year
is $120,000 and dividends declared and paid during the year are $90,000.
A) What is the amount of Bullseye’s total stockholders’ equity at the end of the year?
B) Could Bullseye have paid additional dividends during the year? Explain your answer.
ANSWER:
A)
$190,000
($400,000 Total Assets at the beginning of the year – $240,000 Total Liabilities
at the beginning of the year = $160,000 Total Equity at the beginning of the year)
($160,000 Total Equity at the beginning of the year + $120,000 Net Income for the
year – $90,000 Dividends declared and paid during the year = $190,000)
B)
Yes. Assuming the company has enough cash to do so, dividends can be paid. Net
income exceeded the amount of dividends paid by $30,000 ($120,000 – $90,000), so
the amount paid could have been increased. Also the company has total positive
retained earnings.
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
198. Anthony Corp. started business at the beginning of the year, with assets of $650,000 and stockholders' equity of
$240,000. By the end of the year, assets increased by $80,000 and liabilities increased by $60,000. Other than net income
or loss, the only change in stockholders' equity was dividends declared and paid of $55,000.
A) What was the amount of Ramos Corp. stockholders’ equity at the end of the year?
B) What was the amount of Ramos Corp. net income or net loss for the year?
ANSWER:
A)
Assets
Liabilities
Stockholders’ Equity
Beginning of year
$650,000
$360,000
$290,000
Change during year
+80,000
+60,000
+20,000
End of year
$730,000
=
$420,000
$310,000
B)
Change in equity
$20,000
Add: Dividends
55,000
Net Income
$75,000
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
199. Presented below are selected data from the balance sheet of Farmer Company for 2016. The figures are expressed in
millions.
Total Current assets
$ 5,572
Property, plant, and equipment
16,325
Other assets
?
Total Current liabilities
3,274
Total Long-term debt
5,632
Total Stockholders’ equity
19,639
A)
Determine the amount of “Other assets” for Farmer’s 2016 balance sheet. (HINT: you
must use the accounting equation concept to determine your answer.)
B)
How much of Farmer Company is financed by creditors? How much is financed by the
owners?
ANSWER:
A)
$6,648
($3,274 Current liabilities + $5,632 Long-term debt + $19,639 Stockholders’
equity = $28,545 Total Assets)
($28,545 Total Assets – $5,572 Current assets – 16,325 Property, plant &
equipment = $6,648)
B)
Amount of financing by creditors: $8,906 or 31.2%
($3,274 Current liabilities + $5,632 Long-term debt = $8,906)
Amount of financing by owners: $19,639 or 68.8%
($19,639 Stockholders’ equity)
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
200. Presented below are selected data from the accounting records for Micco’s Gift Store for 2016.
Net sales
$ 190,000
Income taxes
30,000
Cost of sales
80,000
Operating expenses
45,000
Dividends
12,000
A)
Calculate the net income or loss for 2016.
B)
Explain how the amount from part “A” will affect the financial position of Micco’s Gift
Store.
C)
Is the company profitable? Explain your answer.
ANSWER:
A)
$35,000
($190,000 Net sales – $30,000 Income taxes – $80,000 Cost of sales – $45,000
Operating expenses = $35,000)
B)
Net income will improve the company’s financial position.
C)
Yes. The amount of revenues exceeds the amount of expenses by $35,000.
DIFFICULTY:
Moderate
REFERENCES:
pp. 14-21
LEARNING OBJECTIVES:
FACC.PONO.13.01-05 - LO: 01-05
KEYWORDS:
Bloom's: Analyzing
