Owner’s withdrawals should appear on the statement of owner’s equity.
In accounting, depreciation refers to the decline in fair value of a plant asset.
The interest coverage ratio is expressed as a percentage.
The evaluation and interpretation of financial statements and related performance
measures is called technical analysis.
A capital lease represents both an asset and a liability.
Dividend yield is a liquidity ratio.
Proper control procedures can guarantee the prevention of theft.
When using the direct charge-off method, year-end adjustments for uncollectible
accounts expense are not made.
A sales forecast for a retail organization is based on purchases and cost of goods sold
budgets.
The potential loss of all partners in an ordinary partnership is limited only by personal
bankruptcy laws.
Inventory methods such as LIFO and FIFO deal more with cost flow than with goods
flow.
Most bonds issued today are registered bonds rather than coupon bonds.
Similar to financial accounting reports, management accounting reports are
standardized in format.
Managers’ knowledge on unit cost helps in setting reasonable selling prices for
products.
The work sheet should be prepared after the formal financial statements have been
prepared.
The Pink Thai Restaurant is considering the purchase of a second oven that would
accommodate its new take-out business. The oven would cost $17,000, has an estimated
residual value of $5,000, and would be useful for six years. Annual net cash inflows
would increase by $3,960. Pink Thai uses the straight-line method of depreciation.
Using the above facts and the present value factors given below, calculate the
following.
(a) Payback period (Round your answer to one decimal place.)
(b) Accounting rate of return (Round your answer to one decimal place.)
(c) Net present value of the investment based on a 15 percent minimum desired rate of
return (Use parentheses to indicate a negative net present value. Round your answer to
the nearest dollar, if necessary).
During 20×5, Oates Company had sales of $500,000, net income of $50,000, average
total assets of $700,000, dividend payments of $35,000, net cash flows from operating
activities of $90,000, purchases of plant assets of $75,000, and sales of plant assets of
$90,000. Free cash flow equals
A.$55,000.
B.$105,000.
C.$40,000.
D.$70,000.
Which of the following transactions affects total retained earnings?
A.Purchase of treasury stock
B.Payment of previously declared cash dividend
C.Declaration of a stock dividend
D.Declaration of a stock split
The year-end adjusting entry to reflect an increase in the value of trading securities
includes a
A)credit to Unrealized Gain on Short-Term Investments.
B)credit to Short-Term Investments.
C)credit to Allowance to Adjust Short-Term Investments to Market.
D)credit to Realized Gain on Investments.
Field Legal Services is trying to determine the variable and fixed elements of its service
overhead. The following data have been collected from recent activity:
The formula for total service overhead costs is
A.$5,600 + $140 per case.
B.$5,600 + $40 per case.
C.$7,823 + $134.62 per case.
D.$7,080 + $140 per case.
The construction of a new wing on an existing building is described as a(n)
A.addition.
B.extraordinary repair.
C.revenue expenditure.
D.betterment.
Match the itmes (a) – (q) to the appropriate description below.
The type of product costing system used by a company is dictated by the
A.cost flow assumptions made by the company.
B.production process of the product.
C.inventory system used by the company.
D.selling price of the product.
Which of the following is an example of a commitment?
A.Purchasing agreement
B.Note payable
C.Revenue received in advance
D.Dividend payable
Total manufacturing costs incurred during a period are transferred to the
A.Cost of Goods Sold account.
B.Work in Process Inventory account.
C.Finished Goods Inventory account.
D.Overhead account.
Assume the indirect method is used to compute net cash flows from operating activities.
For this item extracted from the financial statements’”Decrease in Accounts
Receivable’”indicate the effect on net income in arriving at net cash flows from
operating activities by choosing one of the following:
A.Add to net income to arrive at net cash flows from operating activities.
B.Subtract from net income to arrive at net cash flows from operating activities.
C.Not used to adjust net income to calculate net cash flows from operating activities.
Vertical analysis of comparative financial statements includes the
A.development of common-size statements.
B.calculation of dollar amount changes and percentage changes from the previous to the
current year.
C.use of an index number.
D.All of these choices.
Using the contribution margin approach, find the contribution margin ratio for
Consumer Products if the selling price per unit is $15, the variable cost per unit is
$7.50, and the fixed costs are $8,000.
A.25%
B.75%
C.50%
D.100%
Positive operating income will result if gross margin exceeds
A.operating expenses.
B.purchases.
C.cost of goods sold.
D.cost of goods sold minus operating expenses.
Identify (by code letter) each of the following characteristics as being an advantage of
(A), a disadvantage of (D), or not applicable to (N) the corporate form of business.
On March 1, 20×5, Sherwin, Inc. issued bonds with a face value of $800,000. The
bonds carry a face interest rate of 12 percent that is payable each June 30 and December
31. The bonds were sold at 100. Sherwin’s accounting year ends on December 31.
a. Prepare an entry in journal form without explanation to record the issuance of the
bonds on March 1, 20×5.
b. Prepare an entry in journal form without explanation to record the interest payment
on June 30, 20×5.
c. Prepare an entry in journal form without explanation to record the interest payment
on December 31, 20×5.
d. Calculate the amount that should appear for Bond Interest Expense on Sherwin’s
income statement for the year ended December 31, 20×5. Show your calculations.
e. Calculate the amount that should appear for Bond Interest Expense on Sherwin’s
income statement for the year ended December 31, 20×6 . Show your calculations.
