An inventory turnover that is too high may indicate that the company is losing sales
opportunities because of inventory shortages.
The present value is based on two variables€the dollar amount to be received and the
length of time until the amount is received.
The expense recognition principle requires that the cost of goods sold be matched
against the ending merchandise inventory in order to determine income.
A quality of earnings ratio significantly less than 1 suggests that a company may be
using more aggressive accounting techniques in order to accelerate income recognition.
Free cash flow is net cash provided by operating activities less capital expenditures.
This information relates to Tandi Co.
1>On April 5 purchased merchandise from Buehler Company for $33,000, terms 2/10,
net/30.
2>On April 6 paid freight costs of $900 on merchandise purchased from Buehler
Company.
3>On April 7 purchased equipment on account for $26,000.
4>On April 8 returned some of the April 5 merchandise to Buehler Company which
cost $3,000.
5>On April 15 paid the amount due to Buehler Company in full.
Instructions
(a)Prepare the journal entries to record these transactions on the books of Tandi Co.
using a periodic inventory system.
(b)Assume that Tandi Co. paid the balance due to Buehler Company on May 4 instead
of April 15. Prepare the journal entry to record this payment.
United Services and Supplies reports net income of $60,000 and cost of goods sold of
$360,000. US&S’s gross profit rate was 40%, net sales were
a.$600,000.
b.$900,000.
c.$960,000.
d.$660,000.
Indicate whether the following items would be reported as an ordinary or an
extraordinary item in Chemco Corporation’s income statement.
(a)Loss attributable to labor strike.
(b)Gain on sale of fixed assets.
(c)Loss from fire. Chemco is a chemical company.
(d)Loss from sale of marketable securities.
(e)Expropriation of property by a foreign government.
(f)Loss from tornado damage. Chemco Corporation is located in the Midwest’s tornado
alley.
(g)Loss from government condemnation of property through newly enacted law.
Mattress King determined its return on assets was 1.5%. Which statement is true?
a.Mattress King earned profit equal to 1.5% of its total revenue for the period.
b.Mattress King earned profit equal to 1.5 times the amount of its assets.
c.Mattress King generated $1.50 of net income for each dollar of sales earned by the
company.
d.Mattress King generated $.015 of net income for each dollar of assets held by the
company.
Using the following balance sheet and income statement data, what is the total amount
of working capital?
Average common shares outstanding was 10,000.
a.$ 4,000
b.$16,000
c.$ 5,000
d.$ 8,000
A company€s past experience indicates that 60% of its credit sales are collected in the
month of sale, 30% in the next month, and 5% in the second month after the sale; the
remainder is never collected. Budgeted credit sales were:
The cash inflow in the month of September is expected to be
a.$271,200.
b.$205,200.
c.$216,000.
d.$259,200.
The discontinued operations section of the income statement refers to
a.discontinuance of a product line.
b.the income or loss on products that have been completed and sold.
c.obsolete equipment and discontinued inventory items.
d.the disposal of a significant component of a business.
For each of the following unrelated transactions, (a) determine the amount of the
amortization for the current year, and (b) present the adjusting entries required to record
amortization at year end.
(1)Costs (it was not acquired) of $39,000 were incurred on January 1 to obtain a patent.
On January 31, $38,610 was spent in legal costs to successfully defend the patent
against competitors. The patent has an estimated legal life of 12 years.
(2)A company acquired a copyright for $160,000. The copyright has a useful life of 50
years.
During 2014, Phelps Corporation reported net sales of $3,000,000, net income of
$1,320,000, and depreciation expense of $80,000. Phelps also reported beginning total
assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and
accumulated depreciation of $500,000. Phelps’s asset turnover ratio is
a.1.5 times.
b.1.2 times.
c.2.0 times.
d.2.4 times.
If you are able to earn a 6% rate of return, what amount would you need to invest to
have $6,500 one year from now?
a.$6,011.79
b.$6,132.10
c.$5,817.50
d.$6,190.47
The following information is available for Houser Produce Market:
How much is Houser€s cost of goods sold?
a.$173,000
b.$146,000
c.$143,000
d.None of these answer choices are correct.
Chodron Corporation had net credit sales of $13,000,000 and cost of goods sold of
$9,250,000 for the year. The average inventory for the year amounted to $2,500,000.
The average days in inventory during the year was approximately
a.260 days.
b.120 days.
c.99 days.
d.70 days.
A company purchased land for $350,000 cash. Real estate brokers’ commission was
$25,000 and $35,000 was spent for demolishing an old building on the land before
construction of a new building could start. Under the historical cost principle, the cost
of land would be recorded at
a.$385,000.
b.$350,000.
c.$375,000.
d.$410,000.
A company purchased office supplies costing $3,000 and debited Supplies for the full
amount. At the end of the accounting period, a physical count of office supplies
revealed $900 still on hand. The appropriate adjusting journal entry to be made at the
end of the period would be:
a.debit Supplies Expense, $3,900; credit Supplies, $3,900.
b.debit Supplies, $900; credit Supplies Expense, $900.
c.debit Supplies Expense, $2,100; credit Supplies, $2,100.
d.debit Supplies, $2,100; credit Supplies Expense, $2,100.
The following totals for the month of April were taken from the payroll records of Metz
Company.
The entry to record the payment of net payroll would include a
a.debit to Salaries and Wages Payable for $18,165.
b.debit to Salaries and Wages Payable for $19,905.
c.debit to Salaries and Wages Payable for $18,405.
d.credit to Cash for $18,405.
Accrued revenues are:
a.received and recorded as liabilities before they are recognized.
b.recognized and recorded as liabilities before they are received.
c.recognized but not yet received or recorded.
d.recognized and already received and recorded.
At March 1, 2014, Candy Inc. had supplies on hand of $1,500. During the month,
Candy purchased supplies of $2,900 and used supplies of $2,800. The March 31
balance sheet should report what balance in the supplies account?
a.$1,500
b.$1,600
c.$2,800
d.$2,900
At December 31, 2014, the following information (in thousands) was available for
Kitselman Inc.: ending inventory $22,600; beginning inventory $21,400; cost of goods
sold $198,000; and sales revenue $430,000. Calculate the inventory turnover and days
in inventory for Kitselman.
Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January
1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. What entry will
Sadowski Brick Company make to pay off the note and interest at maturity assuming
that interest has been accrued to September 30?
A company receives $261, of which $21 is for sales tax. The journal entry to record the
sale would include a
adebit to Sales Taxes Expense for $21.
b.debit to Sales Taxes Payable for $21.
c.debit to Sales Revenue for $261.
d.debit to Cash for $261.
On January 1, 2014, Mather Corporation had Retained Earnings of $625,000. During
the year, Mather had the following selected transactions:
1)Declared stock dividends of $40,000
2)Declared cash dividends of $50,000
3)A 2 for 1 stock split involving the issue of 200,000 shares of $5 par value common
stock for 100,000 shares of $10 par value common stock
4)Suffered a net loss of $80,000
Instructions
Prepare a Retained Earnings Statement for the year.
Lake Norman Company reported net income of $225,000 for the current year.
Depreciation recorded on buildings and equipment amounted to $75,000 for the year.
Balances of the current asset and current liability accounts at the beginning and end of
the year are as follows:
Instructions
Prepare the cash flows from the operating activities section of the statement of cash
flows using the indirect method.
The following information (in millions of dollars) is available for Kline Sportswear for
2014:
Compute the earnings per share for Kline Sportswear.
Identify which of the following reconciling items would require an adjusting entry to be
made by Costello Company.