American Importers reports net income of $50,000 and cost of goods sold of $450,000.
If the company’s gross profit rate was 40%, net sales were
a.$750,000.
b.$1,125,000.
c.$1,175,000.
d.$825,000.
Use the following information to calculate for the year ended December 31, 2014 (a)
net income (net loss), (b) ending retained earnings, and (c) total assets.
Wynne Company issued $900,000 of 10%, 5-year bonds at 108. Interest is paid
annually, and the effective interest method is used for amortization. Assume that the
market rate for similar investments is 8%. The bonds are issued on the date of the
bonds.
a.What amount was received for the bonds?
b.How much interest is paid each interest period?
c.What is the premium amortization for the first interest period?
d.How much interest expense is recorded on the first interest date?
e.What is the carrying value of the bonds after the first interest date?
Using the percentage-of-receivables method for recording bad debt expense, estimated
uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful
Accounts is $11,000 debit before adjustment what is the balance after adjustment?
a.$45,000
b.$11,000
c.$56,000
d.$34,000
Positive operating income will result if gross profit exceeds
a.costs of goods sold.
b.salaries and wages expense.
c.cost of goods sold plus operating expenses.
d.operating expenses.
A company purchased factory equipment for $350,000. It is estimated that the
equipment will have a $35,000 salvage value at the end of its estimated 5-year useful
life. If the company uses the double-declining-balance method of depreciation, the
amount of annual depreciation recorded for the second year after purchase would be
a.$140,000.
b.$84,000.
c.$126,000.
d.$75,600.
A company sells a plant asset that originally cost $225,000 for $75,000 on December
31, 2014. The accumulated depreciation account had a balance of $90,000 after the
current year’s depreciation of $22,500 had been recorded. The company should
recognize a
a.$150,000 loss on disposal.
b.$60,000 gain on disposal.
c.$60,000 loss on disposal.
d.$37,500 loss on disposal.
During 2014, Ecuyer Industries reported cash provided by operations of $397,000,000,
cash used in investing of $343,000,000, and cash used in financing of $95,000,000. In
addition, cash spent for fixed assets during the period was $138,000,000. Average
current liabilities were $325,000,000 and average total liabilities were $858,000,000.
No dividends were paid. Based on this information, what was Ecuyer’s free cash flow?
a.($72,000,000).
b.$54,000,000.
c.$259,000,000.
d.($302,000,000).
Smithson Corporation’s unadjusted trial balance includes the following balances
(assume normal balances):
Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt
expense will the company record?
a.$201,420
b.$137,520
c.$133,686
d.$205,254
On July 1, 2014, Dillman Kennels sells equipment for $66,000. The equipment
originally cost $180,000, had an estimated 5-year life and an expected salvage value of
$30,000. The Accumulated Depreciation account had a balance of $105,000 on January
1, 2014, using the straight-line method. The gain or loss on disposal is
a.$9,000 gain.
b.$6,000 loss.
c.$9,000 loss.
d.$6,000 gain.
Jiffy Mart and Quick Shop are two companies of roughly the same size both running a
chain of convenience stores. Each company depreciates its plant assets using the
straight-line method. An investigation of their financial statements reveals the following
information:
Instructions: Complete the requirements specified for each of the following independent
situations. Round answers to two decimal places.
1)For each company, calculate:
A.Return on assets
B.Profit margin
C.Asset turnover
2)Based on your calculations in part 1, comment on the relative effectiveness of the two
companies in using their assets to generate sales. What factors complicate your ability to
compare the two companies?
An error in the physical count of goods on hand at the end of a period resulted in a
$10,000 overstatement of the ending inventory. The effect of this error in the current
period is
Cost of Goods Sold Net Income
a. Understated Understated
b. Overstated Overstated
c. Understated Overstated
d. Overstated Understated
Betty’s Fabrics sold merchandise for $114,000 cash during the month of July. Returns
that month totaled $2,400. If the company’s gross profit rate is 40%, Betty will report
monthly net sales revenue and cost of goods sold of
a.$114,000 and $68,400.
b.$111,600 and $44,640.
c.$111,600 and $66,960.
d.$114,000 and $66,960.
Expected direct materials purchases in Rees Company are $140,000 in the first quarter
and $180,000 in the second quarter. Forty percent of the purchases are paid in cash as
incurred, and the balance is paid in the following quarter. The budgeted cash payments
for purchases in the second quarter are:
a.$192,000.
b.$180,000.
c.$156,000.
d.$144,000.
Hunter Company reported a net loss of $6,000 for the year ended December 31, 2014.
During the year, accounts receivable decreased $14,000, inventory increased $10,000,
accounts payable increased by $15,000, and depreciation expense of $12,000 was
recorded. During 2014, operating activities
a.used net cash of $7,000.
b.used net cash of $25,000.
c.provided net cash of $25,000.
d.provided net cash of $37,000.
Sizemore, Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock and
100,000 shares of $1 par value common stock outstanding at December 31, 2014. If the
board of directors declares a $30,000 dividend, the
a.preferred stockholders will receive 1/10th of what the common stockholders will
receive.
b.preferred stockholders will receive the entire $30,000.
c.$30,000 will be held as restricted retained earnings and paid out at some future date.
d.preferred stockholders will receive $15,000 and the common stockholders will
receive $15,000.
Which of the following has the advantage of enabling a business to raise funds most
easily?
a.Entity
b.Sole proprietorship
c.Corporation
d.Partnership
Which statement is true concerning the preparation of closing entries?
a.They can be prepared before or after adjusting entries.
b.They cause the balances of all accounts at the end of the period to be adjusted to zero.
c.They are necessary before financial statements can be prepared.
d.They result in updating the balance in Retained Earnings for the period.
Which of the following items will be reported on the statement of retained earnings?
a.Cash received from customers
b.Amounts received from issuing stock
c.Amounts owed to creditors
d.Amounts earned by a company but not distributed as dividends