Acct 7080 Exam II Study
If a retail store has a current ratio of 2.5 and current assets of $195,000, the amount of working capital is:
$117,000
During Year 2, the cash flows related to Global Data, Incorporated's lending and borrowing activities are summarized as follows: Cash lent to borrowers $ 127,600 Payment to retire bonds payable $ 357,500 Proceeds from borrowing at bank (note payable) $ 215,500 Interest received from borrowers $ 26,500 Interest payments made on bonds payable $ 37,000 On the basis of the above information alone, what is Global Data's net cash flow from financing activities?
$142,000 net cash used for financing activities
Shown below is selected information from the statement of financial position (balance sheet) of Comoros, a small electronics store (dollar amounts are in thousands): Cash $ 76 Accounts receivable $ 136 Inventory $ 245 Total assets $ 905 Current liabilities $ 310 Noncurrent liabilities $ 380 What is the amount of working capital?
$147
Castle TV, Incorporated purchased 2,600 monitors on January 5 at a per-unit cost of $210, and another 2,600 units on January 31 at a per-unit cost of $294. In the period from February 1 through year-end, the company sold 4,500 units of this product. At year-end, 700 units remained in inventory. Assume that Castle TV, Incorporated uses the FIFO flow assumption. The cost of the 700 units in inventory at year-end is:
$205,800
On April 2, Year 1, Victor, Incorporated acquired a new piece of filtering equipment. The cost of the equipment was $340,000 with a residual value of $20,000 at the end of its estimated useful lifetime of 10 years. Victor uses a calendar year-end for financial reporting. If Victor uses straight-line depreciation with the half-year convention, the book value of the equipment at December 31, Year 2 will be:
$292,000
Land and a warehouse were acquired for $840,000. What amounts should be recorded in the accounting records for the land and for the warehouse if an appraisal showed the estimated values to be $560,000 for the land and $830,000 for the warehouse? (Round intermediate percentage calculations to 1 decimal place.)
$338,520 for land; $501,480 for warehouse
On April 2, Year 1, Victor, Incorporated acquired a new piece of filtering equipment. The cost of the equipment was $500,000 with a residual value of $30,000 at the end of its estimated useful lifetime of 5 years. Victor uses a calendar year-end for financial reporting. Assume that in its financial statements, Victor uses straight-line depreciation and the half-year convention. Depreciation recognized on this equipment in Year 1 and Year 2 will be
$47,000 in Year 1 and $94,000 in Year 2
On March 2, Year 1, Glen Industries purchased a fleet of automobiles at a cost of $760,000. The cars are to be depreciated by the straight-line method over five years with no salvage value. Glen uses the half-year convention to compute depreciation for fractional periods. The book value of the fleet of automobiles at December 31, Year 2, will be
$532,000.
Zigma Corporation is authorized to issue 2,000,000 shares of $4 par value capital stock. The corporation issued half the stock for cash at $8 per share, earned $336,000 during the first three months of operation, and declared a cash dividend of $60,000. The total paid-in capital of Zigma Corporation after three months of operation is:
$8,000,000
Castle TV, Incorporated purchased 2,700 monitors on January 5 at a per-unit cost of $217, and another 2,700 units on January 31 at a per-unit cost of $298. In the period from February 1 through year-end, the company sold 5,000 units of this product. At year-end, 400 units remained in inventory. Assume that Castle TV, Incorporated uses the LIFO flow assumption. The cost of the 400 units in the year-end inventory is:
$86,800
Given below are comparative statements of financial position (balance sheets) and an income statement for Claret Corporation. Claret Corporation Balance Sheets Year 2 December 31 January 1 Cash $ 16,200 $ 16,200 Accounts receivable 47,580 38,900 Inventory 33,100 37,000 Equipment (net) 57,800 66,900 Total $ 154,680 $ 159,000 Accounts payable 26,600 29,200 Dividends payable 8,400 4,500 Long-term note payable 14,900 14,900 Capital stock, $5 par 73,400 73,400 Retained earnings 31,380 37,000 Total $ 154,680 $ 159,000 Claret Corporation Income Statement For the year ended Year 2 Sales $ 229,400 Cost of goods sold 137,600 Gross profit on sales $ 91,800 Operating expenses 75,928 Operating income $ 15,872 Interest expense and income taxes 9,400 Net income $ 6,472 All sales were made on account. Cash dividends declared during the year totaled $12,092. Claret Corporation's earnings per share for Year 2, rounded to the nearest cent, is:
0.44
Shown below is selected information from the statement of financial position (balance sheet) of Comoros, a small electronics store (dollar amounts are in thousands): Cash $ 69 Accounts receivable $ 129 Inventory $ 210 Total assets $ 870 Current liabilities $ 240 Noncurrent liabilities $ 345 What is the quick ratio?
0.83 to 1
Shown below is selected information from the statement of financial position (balance sheet) of Comoros, a small electronics store (dollar amounts are in thousands): Cash $ 65 Accounts receivable $ 125 Inventory $ 195 Total assets $ 850 Current liabilities $ 200 Noncurrent liabilities $ 325 What is the current ratio?
1.93 to 1
During the current year, Carl Equipment Stores had net sales of $600 million, a cost of goods sold of $500 million, average accounts receivable of $75 million, and average inventory of $50 million. Carl Equipment's inventory turnover rate is
10 times
Given below are comparative statements of financial position (balance sheets) and an income statement for Claret Corporation. Claret Corporation Balance Sheets Year 2 December 31 January 1 Cash $ 16,400 $ 16,400 Accounts receivable 47,840 39,300 Inventory 33,300 37,200 Equipment (net) 58,000 67,100 Total $ 155,540 $ 160,000 Accounts payable 26,800 29,400 Dividends payable 8,600 4,700 Long-term note payable 15,100 15,100 Capital stock, $5 par 73,600 73,600 Retained earnings 31,440 37,200 Total $ 155,540 $ 160,000 Claret Corporation Income Statement For the year ended Year 2 Sales $ 229,600 Cost of goods sold 137,620 Gross profit on sales $ 91,980 Operating expenses 75,948 Operating income $ 16,032 Interest expense and income taxes 9,500 Net income $ 6,532 All sales were made on account. Cash dividends declared during the year totaled $12,292. Claret Corporation's return on assets for Year 2 rounded to the nearest tenth of a percent is:
10.16%
Shown below is selected information from the financial statements of Noble Computers. (Dollar amounts are in millions, except for the per share data.) Income statement information: Net sales $ 3,500 Cost of goods sold $ 1,890 Operating expenses $ 675 Net income $ 115 Balance sheet information: Average total equity $ 540 Average total assets $ 4,400 Noble reported earnings per share for the year of $6 and paid cash dividends of $2.00 per share. At year-end, the Wall Street Journal listed Noble's capital stock as trading at $81 per share. Noble's price-earnings ratio at year end was:
13.5
Cardinal Company's bank statement showed a balance at May 31 of $180,974. The only reconciling items consisted of a large number of outstanding checks totaling $51,847. At May 31, what balance should Cardinal's Cash account show?
18,0974 - 51,847 = 129,127
Shown below is selected information from the financial statements of Noble Computers. (Dollar amounts are in millions, except for the per share data.) Income statement information: Net sales $ 3,500 Cost of goods sold $ 1,890 Operating expenses $ 675 Net income $ 115 Balance sheet information: Average total equity $ 540 Average total assets $ 4,400 Noble reported earnings per share for the year of $6 and paid cash dividends of $2.00 per share. At year-end, the Wall Street Journal listed Noble's capital stock as trading at $81 per share. Noble's return on equity was
21%
The Cash account in the records of Hensley, Incorporated showed a balance of $3,100 at June 30. The bank statement, however, showed a balance of $3,900 at the same date. The only reconciling items consisted of a $700 deposit in transit, a bank service charge of $7, and a large number of outstanding checks. What is the "adjusted cash balance" at June 30?
3,100 - 7 = 3,093
Given below are comparative statements of financial position (balance sheets) and an income statement for Claret Corporation. Claret Corporation Balance Sheets Year 2 December 31 January 1 Cash $ 15,900 $ 15,900 Accounts receivable 47,190 38,300 Inventory 32,800 36,700 Equipment (net) 57,500 66,600 Total $ 153,390 $ 157,500 Accounts payable 26,300 28,900 Dividends payable 8,100 4,200 Long-term note payable 14,600 14,600 Capital stock, $5 par 73,100 73,100 Retained earnings 31,290 36,700 Total $ 153,390 $ 157,500 Claret Corporation Income Statement For the year ended Year 2 Sales $ 229,100 Cost of goods sold 137,570 Gross profit on sales $ 91,530 Operating expenses 75,898 Operating income $ 15,632 Interest expense and income taxes 9,250 Net income $ 6,382 All sales were made on account. Cash dividends declared during the year totaled $11,792. Claret Corporation's gross profit rate for Year 2 is:
39.95%
Given below are comparative statements of financial position (balance sheets) and an income statement for Claret Corporation. Claret Corporation Balance Sheets Year 2 December 31 January 1 Cash $ 15,200 $ 15,200 Accounts receivable 46,280 36,900 Inventory 32,100 36,000 Equipment (net) 56,800 65,900 Total $ 150,380 $ 154,000 Accounts payable 25,600 28,200 Dividends payable 7,400 3,500 Long-term note payable 13,900 13,900 Capital stock, $5 par 72,400 72,400 Retained earnings 31,080 36,000 Total $ 150,380 $ 154,000 Claret Corporation Income Statement For the year ended Year 2 Sales $ 228,400 Cost of goods sold 137,500 Gross profit on sales $ 90,900 Operating expenses 75,828 Operating income $ 15,072 Interest expense and income taxes 8,900 Net income $ 6,172 All sales were made on account. Cash dividends declared during the year totaled $11,092. Claret Corporation's inventory turnover for Year 2 is:
4.04 times
Given below are comparative statements of financial position (balance sheets) and an income statement for Claret Corporation. Claret Corporation Balance Sheets Year 2 December 31 January 1 Cash $ 14,900 $ 14,900 Accounts receivable 45,890 36,300 Inventory 31,800 35,700 Equipment (net) 56,500 65,600 Total $ 149,090 $ 152,500 Accounts payable 25,300 27,900 Dividends payable 7,100 3,200 Long-term note payable 13,600 13,600 Capital stock, $5 par 72,100 72,100 Retained earnings 30,990 35,700 Total $ 149,090 $ 152,500 Claret Corporation Income Statement For the year ended Year 2 Sales $ 228,100 Cost of goods sold 137,470 Gross profit on sales $ 90,630 Operating expenses 75,798 Operating income $ 14,832 Interest expense and income taxes 8,750 Net income $ 6,082 All sales were made on account. Cash dividends declared during the year totaled $10,792. Claret Corporation's accounts receivable turnover for Year 2 is:
5.55 times
Shown below is selected information from the statement of financial position (balance sheet) of Comoros, a small electronics store (dollar amounts are in thousands): Cash $ 66 Accounts receivable $ 126 Inventory $ 195 Total assets $ 855 Current liabilities $ 210 Noncurrent liabilities $ 330 What is the debt ratio?
63.16%
A high quality of earnings is indicated by:
A history of increasing earnings and conservative accounting methods.
The cost of a new windshield wiper on a delivery vehicle would be classified as:
A revenue expenditure.
While preparing the bank reconciliation, an accountant discovered that a $426 check returned with the bank statement had been recorded erroneously in the depositor's accounting records as $462. In preparing the bank reconciliation the appropriate action to correct this error would be to:
Add $36 to the balance per the depositor's records.
Which of the following is not a capital expenditure?
Advertising expenditures to introduce a new product line
Marketable securities are:
Almost as liquid as cash
An accelerated depreciation method:
An accelerated depreciation method:
Capital expenditures are recorded as:
An asset
With a line of credit, a liability arises
As soon as any money is borrowed
In a statement of cash flows, the term "cash" includes:
Bank accounts, cash on hand, and cash equivalents.
All things being equal, if investors expect earnings to increase substantially from current levels, the price to earnings ratio will:
Be quite high.
Unusual and infrequent non-recurring items are found on the income statement:
Before discontinued operations.
Which method will yield higher cash flows from operating activities?
Both direct and indirect methods will yield the same amount.
Cash flows from investing activities include all of the following except:
Cash proceeds from borrowing.
Net income differs from net cash flows from operations because of all the following except:
Cash received in exchange for goods sold in the normal course of operations.
Responsibility for selection of the depreciation methods used in financial reporting rests with:
Company management.
Kent Company has used the same inventory method for many years. This is an example of which principle?
Consistency
The debt ratio is used primarily as a measure of:
Creditors' long-term risk.
All of the following are measures of liquidity except:
Debt Ratio
The ratio that measures total liabilities as a percentage of total assets is called the:
Debt Ratio
Which of the following would have no effect on Retained Earnings?
Declaration of a stock split
When preparing a bank reconciliation, outstanding checks will:
Decrease the balance per the bank statement.
The book value of equipment:
Decreases with the passage of time
If the preferred stock of a corporation is cumulative:
Dividends in arrears must be paid on preferred stock before any dividend can be paid on common stock.
Which of the following would not be presented in the cash flows from operating activities section of the statement of cash flows when the direct method is used?
Dividends paid.
The valuation principle of "fair value accounting" applied to investments classified as marketable equity securities:
Enhances usefulness of the balance sheet in evaluating the financial position of a business.
Which of the following results in the inventory being stated at the most current acquisition costs?
FIFO
A cash dividend paid to shareholders is reported on the:
Financing activities section of the statement of cash flows.
Earnings per share figures are shown in the income statement:
For income from continuing operations, discontinued operations, and net income.
The specific identification method is more appropriate than a cost flow assumption method:
If each item in the inventory is unique.
Execucomp Corporation's financial statements in the current year show a loss from discontinued operations, a prior period adjustment, and an unusual and infrequent gain. If Execucomp's income statement is prepared according to generally accepted accounting principles (as illustrated in your text), which of the following four items would appear second in sequence in the income statement?
Income from continuing operations
In a multiple-step income statement, income taxes are not classified as operating expenses because:
Income taxes do not contribute to the production of revenue.
After preparing a bank reconciliation, a journal entry would be required for which of the following:
Interest earned on the company's checking account.
Each of these categories of assets is normally shown in the balance sheet at current value, except
Inventories
Short-term creditors are most likely to use the quick ratio instead of the current ratio in evaluating the solvency of a company with large, slow-moving:
Inventories.
Which of the following is not classified among the investing activities in a statement of cash flows?
Investment of cash made in the business by the owners.
During periods of inflation, which method will yield the smallest ending inventory and the largest cost of goods sold?
LIFO
Which of the following inventory approaches is not in accord with the physical flow of merchandise in most businesses?
LIFO
Which of the following assets is not subject to depreciation and does not decline in usefulness over time?
Land
An advocate of the just-in-time inventory system would advocate:
Maintaining a small inventory supply.
Public corporations are required by law or regulation to perform all of the following except:
Make regularly scheduled dividend payments to all stockholders.
Which of the following practices best illustrates efficient management of cash?
Management arranges for a loan to cover projected cash shortages during the production phase of the business cycle each year.
The price-earnings ratio is the:
Market price of a share of common stock divided by EPS.
Which of the following best describes the book value of a share of stock?
Net assets divided by the number of shares outstanding.
On common size income statements, each component in the income statement is represented as a percentage of:
Net sales
When a stock dividend is declared, total stockholders' equity will:
Not change
Dividends become a liability of a corporation:
On the date the board of directors declares the dividend.
In a statement of cash flows, collections of accounts receivable are classified as:
Operating activities.
Shares that have been sold and are in the hands of stockholders are called:
Outstanding
Which of the following is an investing activity?
Purchase of equipment
One number expressed as a percentage of another is called:
Ratios
In a manufacturing company, the "just-in-time" concept of inventory management is best illustrated by:
Receiving deliveries of materials from suppliers just before the materials are used in the production process.
The choice of inventory valuation method can help achieve each of the following independent goals, except:
Reduce cost of merchandise acquired from suppliers.
Armstrong Company recently acquired a new computer system. Which of the following costs associated with the computer should not be debited to the Equipment account?
Replacement of several circuit boards damaged during installation
An example of a non-cash investing or financing activity that is disclosed in a supplementary schedule accompanying the statement of cash flows is:
Selling land in exchange for a note receivable.
In a corporation's organization chart, who has/have the highest position?
Stockholders
Which of the following is not a characteristic of the corporate form of organization?
Stockholders have authority to decide by majority vote the amount of dividends to be paid.
Which depreciation method is most commonly used among publicly owned corporations?
Straight-line
If a corporation has only common stock outstanding, which of the following constitutes legal capital at a particular date?
The amount in the Common Stock account.
The primary advantage of a just-in-time inventory system is:
The amount of money tied up in inventory is minimized.
When a corporation issues capital stock at a price higher than the par value:
The amount received in excess of par value becomes part of paid-in capital.
Harris Corporation's inventory of a particular product includes 200 units purchased at a per-unit cost of $50, and another 100 units purchased at a unit cost of $60. If Harris sells 10 units of this product, the cost of goods sold will be:
The answer will depend upon the inventory cost flow assumption in use.
A bank reconciliation explains the differences between:
The balance per bank statement and the cash balance per the accounting records of the depositor.
The gain on the disposal of equipment is recognized when:
The book value of the equipment is less than the value received.
When comparing the units-of-output method of depreciation with straight-line depreciation:
The depreciation expense in the first year may be greater than, equal to, or less under the units-of-output method.
Which of the following would usually be the greatest amount?
The number of shares authorized
The measurement that best reflects investors' expectations about future earnings is:
The price-earnings ratio.
Which of the following does not decrease the cash flow from operating activities?
The purchase of operating equipment.
When a bank reconciliation has been satisfactorily completed, the only related entries to be made in the depositor's records are:
To record items that explain the difference between the balance per the accounting records and the adjusted cash balance.
The rights of a common stockholder do not include the right:
To withdraw a share of corporate net assets, proportionate to the person's stockholdings.
The net assets of a corporation are equal to:
Total assets − total liabilities.
The term paid-in capital means:
Total stockholders' equity minus retained earnings.
The board of directors' primary functions include all of the following except:
Transacting corporate business.
The changes in financial statement items from a base year to following years are sometimes expressed as:
Trend percentages.
Most preferred stocks have one or more of the following characteristics, except:
Voting rights
The excess of current assets over current liabilities is called:
Working capital
Which of the following is not an example of internal control over cash?
combining the functions of signing checks with the approval of expenditures
The current ratio will be _______________ the quick ratio.
greater than or equal to
