In the table below the information for four companies is provided.
If Garner’s net credit sales are $290,000, what are its average net accounts receivable?
a.$11,508
b.$20,000
c.$42,050
d.$73,080
Forcum Company reports the following information (in millions) during a recent year:
net sales, $12,408.5; net earnings, $344.9; total assets, ending, $4,312.6; and total
assets, beginning, $4,254.3.
Instructions
(a)Calculate the (1) return on assets, (2) asset turnover, and (3) profit margin ratios.
(b)Prove mathematically how the profit margin and asset turnover ratios work together
to explain return on assets, by showing the appropriate calculations.
The board of directors of Benson Company declared a cash dividend of $1.50 per share
on 42,000 shares of common stock on July 15, 2014. The dividend is to be paid on
August 15, 2014, to stockholders of record on July 31, 2014. The effects of the journal
entry to record the payment of the dividend on August 15, 2014, are to
a.decrease stockholders’ equity and decrease liabilities.
b.decrease liabilities and decrease assets.
c.increase stockholders’ equity and increase liabilities.
d.increase stockholders’ equity and decrease assets.
How may a company increase its return on common stockholders’ equity?
a.Increase its reliance on debt
b.Reduce its return on assets
c.Reduce net income
d.Issue more stock
Which statement is true concerning off-balance sheet financing?
a.It allows a company to overstate its debt to assets ratio.
b.It is an intentional effort by a company to structure its financing arrangements to
avoid showing liabilities on its balance sheet.
c.It is a violation of GAAP and causes total liabilities to be understated.
d.It occurs when companies report liabilities on the income statement as expenses rather
than liabilities on the balance sheet.
Financial information is presented below:
The gross profit rate would be
a..70
b..24
c..06
d..30
If total liabilities increased by $75,000 and stockholders’ equity increased by $25,000
during a period of time, then total assets must change by what amount and direction
during that same period?
a.$100,000 decrease
b.$100,000 increase
c.$125,000 increase
d.$150,000 increase
Which one of the following is not an enhancing quality of useful information?
a.Timeliness
b.Understandability
c.Materiality
d.Comparability
Information for two companies in the same industry, Tucker Corporation and Wiggins
Corporation, is presented here.
Instructions
Using the cash-based measures presented in this chapter, compare the (a) liquidity and
(b) solvency of the two companies.
Pearson Company bought a machine on January 1, 2014. The machine cost $144,000
and had an expected salvage value of $24,000. The life of the machine was estimated to
be 5 years. The depreciation expense using the straight-line method of depreciation is
a.$40,000.
b.$28,800.
c.$24,000.
d.none of these answer choices are correct.
On January 1, a machine with a useful life of five years and a residual value of $40,000
was purchased for $120,000. What is the depreciation expense for year 2 under the
double-declining-balance method of depreciation?
a.$28,800.
b.$48,000.
c.$38,400.
d.$23,040.
Barnett Company had the following records:
What is Barnett’s average days in inventory for 2013? (rounded)
a.45.1 days
b.48.0 days
c.46.8 days
d.365 days
Sue Cole is a new accountant with Simon Company. Simon purchased merchandise on
account for $9,000. The credit terms are 1/10, n/30. Sue has talked with the company’s
banker and knows that she could earn 6% on any money invested in the company’s
savings account.
Instructions
(a)Should Sue pay the invoice within the discount period or should she keep the $9,000
in the savings account and pay at the end of the credit period? Support your
recommendation with a calculation showing which action would be best.
(b)If Sue forgoes the discount, it may be viewed as paying an interest rate of 1% for the
use of $9,000 for 20 days. Calculate the annual rate of interest that this is equivalent to.
Karcan, Inc. purchased supplies costing 2,500 on January 1, 2014 and recorded the
transaction by increasing assets. At the end of the year 1,100 of the supplies are still on
hand. How will the adjusting entry impact Karcan, Inc.’s statement of financial position
at December 31, 2014?
a.Decreased assets 1,100.
b.Increased equity 1,100.
c.Increased liabilities 1,400.
d.Decreased assets 1,400.