Matt needs to compute the present value of $5,000 to be received four years from now.
He should multiple $5,000 by the appropriate present value interest factor obtained
from the present value of $1 table.
After closing, only balance sheet accounts have non-zero balances.
Opportunity, pressure and rationalization are the three elements of the fraud triangle.
The Financial Accounting Standards Board is an agency of the US government with
authority for establishing accounting standards for businesses in the US.
Indicate whether each of the following statements about financial statement analysis is
true or false.
1> The ratio, plant assets to long-term liabilities, is a measure of a company’s ability to
obtain additional long-term financing.
2> Generally, a company’s current assets should be purchased using long-term
financing such as bonds payable.
3> Ratios that measure a company’s profitability provide some measure of the
effectiveness of the company’s management.
4> Net margin indicates the amount remaining from each sales dollar after cost of
goods sold has been subtracted out.
5> Net margin is also sometimes called the return on assets ratio.
The Sarbanes-Oxley Act allows, but does not require, a corporation to establish a
whistleblower policy.
Profitability ratios attempt to assess the company’s ability to generate earnings.
The cost of capital represents the maximum acceptable rate of return that a capital
investment should earn.
Indicate whether each of the following statements about financial statement analysis is
true or false.
1> Meaningful comparisons between two companies generally should be made using
percentage analysis or ratio analysis, not absolute amounts.
2> The materiality of accounting information refers to whether it is viewed as favorable
(good news) or unfavorable (bad news).
3> Companies must account for immaterial items in compliance with generally
accepted accounting principles.
4> To judge the materiality of an absolute financial statement amount, one must
consider the size of the company reporting it.
5> Comparing percentages derived from financial statement analysis has the drawback
of varying materiality levels.
The balance sheet of the Chesapeake Company contained the following accounts and
balances:
Based on the above information only, the amount or balance for Land must be
A.$450.
B.$750.
C.$150.
D.$1,350.
Borrowing cash from the bank is an example of which type of transaction?
A.Asset exchange
B.Claims use
C.Asset use
D.Asset source
In vertical analysis, each item is expressed as a percentage of:
A.Total expenses on the income statement.
B.Net income on the income statement.
C.Sales on the income statement.
D.None of these answers is correct.
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments
of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed
to (1) interest of 10% of the beginning capital balance each year, (2) annual
compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss
in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was
$150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use
every month during 2012 and 2013.
What was Nolan’s total share of net income for 2012?
A.$63,000.
B.$53,000.
C.$58,000.
D.$29,000.
E.$51,000.
Norris Company experienced the following transactions during 2013, its first year in
operation.
1) Issued $6,000 of common stock to stockholders.
2) Provided $2,300 of services on account.
3) Paid $1,600 cash for operating expenses.
4) Collected $1,900 of cash from accounts receivable.
5) Paid a $100 cash dividend to stockholders.
The amount of net income recognized on Norris Company’s 2013 income statement is:
A.$500.
B.$400.
C.$700.
D.$600.
Managerial accounting provides information primarily to which of the following groups
or individuals?
A.Internal users
B.Shareholders
C.External users
D.Internal users and Shareholders
Which of the following does not represent an advantage of the unadjusted rate of return
over the payback method for evaluating capital projects?
A.The unadjusted rate of return method considers the investment’s profitability.
B.The unadjusted rate of return method considers the time value of money.
C.The unadjusted rate of return is a percentage that can be compared to a stated hurdle
rate.
D.None of these represents an advantage.
Which of the following statements is correct?
A.Investors need to understand that the value of a company’s earnings per share is
affected by its choices of accounting principles and assumptions.
B.Earnings per share is calculated for a company’s preferred stock.
C.The most widely quoted measure of a company’s earnings performance is return on
equity.
D.The book value per share measures the market value of a corporation’s stock.
A company acquired a new piece of equipment on January 1, 2011 at a cost of
$200,000. The equipment is expected to have a useful life of 10 years, a residual value
of $20,000 and is depreciated on a straight-line basis. On January 1, 2013, the
equipment was appraised and determined to have a fair value of $190,000 and a
residual value of $25,000 and a remaining useful life of 10 years.
At what amount should the equipment be reported on the December 31, 2013 balance
sheet under the IFRS revaluation model?
A.$190,000
B.$173,500
C.$165,000
D.$136,000
E.$110,000
Butch’s Barbecue thinks that offering delivery will increase their sales. Butch’s is
considering whether to purchase a used delivery truck costing $12,000. Additional net
income from the delivery service will be $1,400 per year. The truck will last
approximately 5 years. What is the unadjusted rate of return based on the average
investment?
A.About 58.3%
B.About 11.7%
C.About 23.3%
D.About 857.1%
Select the incorrect statement regarding upstream and downstream costs.
A.Companies normally incur significant downstream costs.
B.To be profitable, companies must recover the total cost of developing, producing, and
delivering products.
C.Pricing decisions must consider both upstream and downstream costs in addition to
manufacturing costs.
D.Upstream and downstream costs are reported as product costs on the income
statement.
Which of the following could represent the effects of an asset exchange transaction on a
company’s financial statements?
A.
B.
C.
D.
Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and
$30,000 respectively. The partners share profits and losses 20%, 40%, and 40%
respectively.
What is the total partnership capital after Anne retires receiving $80,000 and using the
bonus method?
A.$70,000.
B.$40,000.
C.$60,000.
D.$80,000.
E.$42,000.
Solvency ratios are used to assess a company’s:
A.Long-term debt paying ability.
B.Profitability.
C.Short-term debt paying ability.
D.Efficiency in use of its assets.
A company that was to be liquidated had the following liabilities:
The company had the following assets:
Total assets available to pay liabilities with priority and unsecured creditors are
calculated to be what amount?
Which of the following financial statements provides information about a company as
of a specific point in time?
A.Income statement
B.Statement of changes in equity
C.Statement of cash flows
D.Balance sheet
To what does the term Chapter 7 bankruptcy refer?
Candice Company is currently going through bankruptcy reorganization. The
accountant has determined the following balances of the accounts at December 31,
2013.
Prepare the balance sheet for Candice Company. Retained earnings will need to be
calculated.
Montana Company is evaluating two different capital investments, Project X and Y.
Either X or Y would cost $210,000, and the company cannot afford to do both. The
company expects that Project X would provide net cash inflows of $62,000 per year for
5 years. For Project Y, the net cash inflows are expected to be as follows:
Montana’s cost of capital is 12%.
Required:
1) Calculate the present value index for Project X and for Project Y. Round your answer
to three decimal places.
2) Indicate whether each of the projects is an acceptable investment.
3) Based on present value index, which of the two projects should Montana implement?
What was the purpose of the Securities Exchange Act of 1934?
Hampton Company is trying to decide whether to seek liquidation or reorganization.
Hampton has provided the following balance sheet:
Additional information is as follows:
– The investments are currently worth $13,000.
– It is estimated that $32,000 of the accounts receivable are collectible.
– The inventory can be sold for $74,000.
– The prepaid expenses and the intangible assets have no net realizable value.
– The land and building are currently valued at $250,000.
– The equipment can be sold for $60,000.
– Administrative expenses (not yet recorded) are estimated to be $12,500.
– Accrued expenses include $17,000 of salaries payable ($11,000 to one employee and
$3,000 each to two other employees).
– Accrued expenses include $7,000 of unpaid payroll taxes.
Compute the amount of total assets available to pay liabilities with priority and
unsecured creditors.