Which of the following generally indicates a positive change?
a. Earnings per share decreases
b. The debt service coverage decreases
c. The acid-test ratio decreases
d. The number of days’ sales in inventory decreases
If a company purchases equipment by issuing a note payable, its total assets will not
change.
a. True
b. False
Utah Corp. Use the following selected data and additional information from the records
of Utah Corp. to answer the questions that follow. Balance Sheet Data
2016 2015
Additional information:
(1) Equipment with a cost of $15,000 and a book value of $3,000 was sold for $5,000
during 2016.
(2) Common stock was issued to retire bonds payable during 2016.
(3) The only items affecting retained earnings in 2016 were net income and dividends
declared and paid.Review the data for Utah Corp.REQUIRED:
(A) Prepare the investing activities section of a statement of cash flows for 2016 for
Utah Corp. (B) Prepare the financing activities section of a statement of cash flows for
2016 for Utah Corp.
Sunshine Farm Supply Following are selected data from the financial statements of
Sunshine Farm Supply:
Refer to the data for Sunshine Farm Supply. Which of the following results would be
found through a vertical analysis of the balance sheet or the income statement of
Sunshine Farm Supply?
a. Accounts receivable increased $22,000 during 2016.
b. Total assets increased $70,000 during 2016.
c. Cost of goods sold increased $50,000 or 23.8% during 2016.
d. Gross profit is 57.9% of net sales for 2016.
Which one of the following is an investing activity on the statement of cash flows?
a. Collection of accounts receivable
b. Purchase of long-term investments
c. Receipt of interest
d. Receipt of dividends
Amortized discount is computed annually when a bond is issued for other than its face
value. For a bond issued at a discount, how will this component change as the bond
approaches maturity?
a. decrease
b. increase
c. remain constant
d. not enough information given to decide
On November 1, 2014, Chancellor Co. borrowed $80,000 from State Bank and signed a
12%, six-month note payable, all due at maturity. The interest on this loan is stated
separately. At December 31, 2014, Chancellor Co.’s overall liability for this loan
amounts to:
a. $84,800
b. $80,000
c. $81,600
d. $83,200
Daytona Beach Company purchased a car for a salesman for $23,500 at the beginning
of 2015. The car had an estimated life of 5 years, and an estimated residual value of
$3,500. Daytona Beach used the straight-line depreciation method. At the beginning of
2016, Daytona Beach incurred $2,500 to replace the car’s transmission. This resulted in
a 2-year extension of the car’s useful life, but no change in the residual value. A. What
type of cost is the $2,500? Explain. B. Calculate the book value of the car at the end of
2015. C. Find the depreciation expense on the car for 2016.
Deal Mart The 2014 income statement of Deal Mart shows operating revenues of
$130,800, selling expenses of $37,100, general and administrative expenses of $34,900,
interest expense of $900, and income tax expense of $11,430. Deal Mart’s stockholders’
equity was $280,000 at the beginning of the year and $320,000 at the end of the year.
The company has 20,000 shares of stock outstanding at December 31, 2014.
Read the information about Deal Mart. What is Deal Mart’s net income?
a. $80,000
b. $92,190
c. $130,800
d. $46,470
Match the following bond and long-term liability related terms to the appropriate
definition.
a. Long-term liability
b. Face value
c. Debenture bonds
d. Serial bonds
e. Callable bonds
f. Face rate of interest
g. Market rate of interest
h. Bond issue price
i. Premium
j. Discount
k. Effective interest method of amortization
l. Carrying value
m. Gain or loss on redemption
Bonds that do not all have the same due date. A portion of the bonds comes due each
time period.
A bank loaned York Construction Company $35,000 on a 1-year, 6% note, but deducted
the interest in advance.
The journal entry made by York to record receipt of the cash would include an
a. increase in Cash for $35,000.
b. decrease in Notes Payable for $32,900.
c. increase in Discount on Notes Payable for $2,100.
d. increase in Interest Revenue for $2,100.
A partnership is a business owned by two individuals; if three or more individuals
organize a business, it must be established as a corporation.
a. True
b. False
Which one of the following statements is true?
a. The flow of inventory costs should match the physical flow of the merchandise.
b. Accounting standards require that merchandise costs be specifically traced to units
left in inventory and to units that have been sold.
c. Accountants have developed methods which make assumptions concerning how costs
should be assigned to inventory and cost of goods sold.
d. Alternative inventory cost flow assumptions have the same effect on the amount of
net income reported.
Which one of the following subtotals or totals would appear in a multiple-step, but not
a single-step income statement?
a. Income tax expense
b. Income from operations
c. Cost of goods sold
d. Net income
A file or book which contains a record for all accounts used by a company, including
the account balance, is called a
a. chart of accounts
b. general journal
c. general ledger
d. trial balance
Match the inventory-related accounts to costs that may be included in inventories for
retailers and manufacturers.
a. Merchandise Inventory
b. Raw Materials
c. Work in Process
d. Finished Goods
e. Cost of Goods Sold
Cost of completed, but unsold items.
If a company accepts a major credit card such as VISA from a customer, then the
company is responsible for the amount of the sale in a case of nonpayment from a
cardholder.
a. True
b. False
The statement of retained earnings accomplishes which of the following?
a. It summarizes income earned and dividends paid over a single period of the business.
b. It accumulates all revenues for the year.
c. It summarizes the balance sheet accounts.
d. It summarizes the capital stock accounts over the life of the business.
The operating cycle of a manufacturer is the length of time between the
a. purchase of raw materials and the sale of the goods.
b. sale of the goods and the collection of any outstanding receivables from the sale of
the product.
c. purchase of raw materials and collection of any outstanding receivables from the sale
of the product.
d. purchase of raw materials and the production of goods.
Several years ago, Laurel Company purchased a patent and has since been amortizing it
on a straight-line basis over its estimated useful life. The company’s comparative
balance sheets contain the following items:
A. How much amortization expense was recorded during 2015? B. How is the
amortization expense reported on the company’s statement of cash flows? C. How much
was the original cost of the patent? D. How many years has the patent been amortized?