The quality of consistency enhances
a.relevance.
b.materiality.
c.comparability.
d.faithful representation.
A common measure of profitability is the
a.current ratio.
b.current cash debt coverage.
c.return on common stockholders’ equity.
d.debt to assets.
Use the following data to calculate the current ratio.
a.2.13 : 1
b.1.44 : 1
c.2.86 : 1
d.2.50 : 1
Holden Packaging Corporation began business in 2014 by issuing 80,000 shares of $5
par common stock for $8 per share and 20,000 shares of 6%, $10 par preferred stock for
par. At year end, the common stock had a market value of $10. On its December 31,
2014 balance sheet, Holden Packaging would report
a.Common Stock of $800,000.
b.Common Stock of $400,000.
c.Common Stock of $640,000.
d.Paid-In Capital of $600,000.
What effect occurs when a stock split is declared?
a.Total assets and total stockholders’ equity increase.
b.Part of retained earnings is transferred to paid-in capital.
c.The par value decreases and the number of shares increase.
d.Ownership interests of each stockholder are increased.
The financial statements of the Melton Manufacturing Company reports net sales of
$300,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year
and end of year, respectively. What is the average collection period for accounts
receivable in days?
a.96.1
b.48.7
c.36.5
d.60.8
Wooderson Company sells many products. Gizmo is one of its popular items. Below is
an analysis of the inventory purchases and sales of Gizmo for the month of March.
Wooderson Company uses the periodic inventory system.
Instructions
(a)Using the FIFO assumption, calculate the amount charged to cost of goods sold for
March. (Show computations)
(b)Using the weighted-average method, calculate the amount assigned to the inventory
on hand on March 31. (Show computations)
Using the LIFO assumption, calculate the amount assigned to the inventory on hand on
March 31. (Show computations)
On January 1, 2014, Asianic Inc. issued 10-year bonds with a face amount of
25,000,000 and a contract rate of 8% payable annually on January 1. The
effective-interest rate on the bonds is 10%. Present value factors are as follows:
Total issue price of the bonds was
a.25,000,000.
b.24,500,000.
c.23,000,000.
d.21,940,000.
The following information is available for Mergenthaler Corporation for the year ended
December 31, 2014:
In addition, the following information is available from the comparative balance sheet
for Mergenthaler at the end of 2014 and 2013:
Instructions
Prepare Mergenthaler’s statement of cash flows for the year ended December 31, 2014,
using the indirect method.
Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8
years has been depreciated using the straight-line method for 2 years. Assuming a
revised estimated total life of 6 years and no change in the salvage value, the
depreciation expense for Year 3 would be
a.$10,500.
b.$9,333.
c.$14,000.
d.$7,000.
Jimmy’s Repair Shop started the year with total assets of $200,000 and total liabilities
of $160,000. During the year the business recorded $420,000 in revenues, $220,000 in
expenses, and dividends of $40,000. The net income reported by Jimmy’s Repair Shop
for the year was
a.$160,000.
b.$200,000.
c.$120,000.
d.$380,000.
Below are descriptions of internal control problems. In the space to the left of each
item, enter the code letter of the one best internal control principle that is related to the
problem described.
Internal Control Principles
A.Establishment of responsibility
B.Segregation of duties
C.Physical control devices
D.Documentation procedures
E.Independent internal verification
F.Human resource controls
Jimmy’s Repair Shop started the year with total assets of $200,000 and total liabilities
of $160,000. During the year the business recorded $420,000 in revenues, $220,000 in
expenses, and dividends of $40,000. Stockholders’ equity at the end of the year was
a.$240,000.
b.$200,000.
c.$160,000.
d.$180,000.
The accounts in the ledger of Dependable Delivery Service contain the following
balances on July 31, 2014.
Instructions
Prepare an income statement and a retained earnings statement for the month of July
2014, and a classified balance sheet for July 31.
If the inventory turnover is 7.3 times, and the average inventory was $600,000, the cost
of goods sold during the year was $______________ and the average days to sell the
inventory was ______________ days.
Employees at Biquell Corporation are paid $9,000 cash every Friday for working
Monday through Friday. The calendar year accounting period ends on Wednesday,
December 31. How much salaries and wages expense should be recorded two days later
on January 2?
Why must a corporation have sufficient retained earnings before it may declare cash
dividends?
Authentic Exposure Company had the following transactions that took place during the
year:
What is the total effect of these transactions on Free Cash Flow, Current Cash Debt
Coverage, and Cash Debt Coverage, respectively?
Armada Company has these comparative balance sheet data:
Additional information for 2014:
1)Net income was $25,000.
2)Sales on account were $450,000. Sales returns and allowances amounted to $25,000.
3)Cost of goods sold was $275,000.
4)Net cash provided by operating activities was $49,000.
5)Capital expenditures were $23,000, and cash dividends were $18,000.
Instructions
Compute the following ratios at December 31, 2014.