clarke accounting final uark

22. CORN TORTILLA's income statement reports sales of $100,000; cost of goods sold of $46,000, operating expenses of $34,000, interest expense of $15,000, income tax expense of $2,000, and net income of $3,000. If you were to perform a vertical analysis of this income statement, you would divide each of these income statement line items by:

A. $100,000

19. A company had the following cash flows for the year: (a) Purchased land, $60,000 (b) Borrowed from a local bank, $100,000 (c) Paid employee salaries, $50,000 (d) Issued common stock, $75,000 (e) Paid dividends, $20,000 (f) Sold equipment, $40,000 (g) Sold services to customers, $120,000 What amount would be reported for net financing cash flows on the Statement of Cash Flows?

A. $155,000.

KEEGAN purchased new equipment for $90,000. Residual value at the end of an estimated four-year service life is expected to be $10,000. During the four-year period, the company expects to use the equipment a total of 5,000 hours. What is the depreciation expense for the second year and the remaining book value of the equipment assuming the firm uses the "Double Declining Balance" method? A. $22,500, $22,500 , B. $45,000, $45,000 , C. $20,000, $50,000 , D. $11,250, $11,250

A. $22,500, $22,500

10. CHEESE EMPORIUM was organized on January 1, 2018. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2018, CHEESE EMPORIUM had the following transactions relating to shareholders' equity Issued 30,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. What is the total stockholders' equity at the end of 2018?

A. $420,000.

6. Treasury Stock is normally reported as:

A. A reduction of total stockholders' equity.

A(n) ______ receivable is an informal credit arrangement with trade customers, whereas a(n) ______ receivable is a formal signed credit arrangement between a creditor and a debtor. A. Account; Note B. Revenue; Note C. Note; Account D. Allowance; Stock

A. Account; Note

Deferred revenues refer to: A. Customers paying cash in advance of the good or service to be provided. B. Revenue being recorded prior to cash collection from the customer. C. Revenue being recorded at the same time the cash is collected from the customer. D. Cash being collected from the customer after the revenue is recorded.

A. Customers paying cash in advance of the good or service to be provided.

A company received a bill for newspaper advertising services, $400. The bill will be paid in 10 days. How would the transaction be recorded today? A. Debit Advertising Expense $400, credit Accounts Payable $400. B. Debit Accounts Payable $400, credit Advertising Expense $400. C. Debit Accounts Payable $400, credit Cash $400. D. Debit Advertising Expense $400, credit Cash $400.

A. Debit Advertising Expense $400, credit Accounts Payable $400.

On November 1, 2018, JOEL signed a $200,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. JOEL should record which of the following adjusting entries at December 31, 2018? A. Debit Interest Expense and credit Interest Payable, $2,000. B. Debit Interest Expense and credit Cash, $2,000. C. Debit Interest Expense and credit Interest Payable, $6,000. D. Debit Interest Expense and credit Cash, $6,000.

A. Debit Interest Expense and credit Interest Payable, $2,000.

23. Which of the following ratios is most useful in evaluating solvency?

A. Debt to equity ratio.

8. Retained Earnings represent a company's:

A. Net income less dividends since the company first began operations.

33. Which of the following does not represent a liability of a company?

A. Salaries owed to employees. B. Taxes owed to the government. C. Amounts owed to suppliers. D. All of the other answers are liabilities.*

16. Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows?

A. Salaries payable increase.

In each succeeding payment on an installment note: A. The amount that goes to decreasing the carrying value of the note increases. B. The amount that goes to decreasing the carrying value of the note decreases. C. The amount that goes to decreasing the carrying value of the note is unchanged. D. The amounts paid for both interest and principal increase proportionately.

A. The amount that goes to decreasing the carrying value of the note increases.

31. If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true?

A. The company's assets exceed liabilities by $60,000.

25. Which of the following is correct?

A. The receivables turnover ratio depicts the company's frequency of cash collections. B. The inventory turnover ratio can be used to assess the company's frequency of selling inventory. C. The current ratio reflects the company's ability to pay current debt. D. All of these.*

30. A discontinued operation refers to:

A. The sale or disposal of a significant component of a company's operations.

ELLARY COMPANY purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the second year of use for $5,000 cash. ELLARY should record: A. a loss of $1,000. B. a gain of $1,000. C. neither a gain nor a loss - the computer was sold at its book value. D. neither a gain nor a loss - the gain that occurred in this case would not be recognized.

A. a loss of $1,000.

PUFF ADVENTURES has 15 employees each working 40 hours per week and earning $30 an hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the actual direct deposit of payroll for the first week of January? A. $13,923. B. $12,843. C. $5,157. D. $18,000.

B. $12,843.

Using the information in the table above in problem 58 and assuming CILANTRO sold 2,300 units of inventory during the month. Cost of goods sold assuming LIFO would be: A. $16,800. B. $16,760. C. $16,540. D. $16,660.

B. $16,760.

5. BARBACOA issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of 2017. All remaining shares are common stock. The company was not able to pay dividends in 2017, but plans to pay dividends of $100,000 in 2018. Assuming the preferred stock is cumulative, how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2018?

B. $80,000 to preferred stockholders and $20,000 to common stockholders.

When preparing a bank reconciliation, a deposit outstanding would be: A. Added to the company's cash balance. B. Added to the bank's cash balance. C. Subtracted from the company's cash balance. D. Subtracted from the bank's cash balance.

B. Added to the bank's cash balance.

STEAK LEASING received $12,000 for 24 months rent in advance. How should STEAK record this transaction? A. Debit Prepaid Rent; credit Rent Expense. B. Debit Cash; credit Deferred Revenue. C. Debit Cash; credit Service Revenue. D. Debit Rent Expense; credit Cash

B. Debit Cash; credit Deferred Revenue.

21. Comparing changes in net income for one company over time is an example of

B. Horizontal analysis.

12. The payment of salaries is classified in the statement of cash flows as a(n):

B. Operating activity.

Which measure reflects profitability from normal operations and a key performance measure for predicting the future profit-generating ability of a company? A. Gross profit. B. Operating income. C. Income before income taxes. D. Net income.

B. Operating income.

3. The correct order from the smallest number of shares to the largest number of shares is:

B. Outstanding, issued, and authorized.

15. Which of the following is an example of a noncash activity?

B. Purchase of land by issuing debt.

20. _________ is an investing cash flow and ________ is a financing cash flow, as reported on the Statement of Cash Flows.

B. Purchasing land; repaying a bank loan

The act of collusion refers to: A. Top management and lower-level employees working together to share information necessary for effective internal controls. B. Two or more people acting in coordination to circumvent internal controls. C. Management working with an auditor to prevent occupational fraud. D. Middle-level managers taking full responsibility for effective internal controls.

B. Two or more people acting in coordination to circumvent internal controls.

KOURTNEY COMPANY made an ordinary repair to a delivery truck at a cost of $500. KOURTNEY's accountant debited the asset account, Equipment. Was this treatment an error, and if so, what will be the effect on KOURTNEY's financial statements? A. No, the repair was accounted for correctly. B. Yes, the error overstated assets and net income. C. Yes, in the years following, net income will be overstated. D. Yes, the error understated net income.

B. Yes, the error overstated assets and net income.

On January 1, 2018, WPS ENTERPRISES borrows $30,000 to purchase a new Toyota Highlander by agreeing to a 6%, 4-year note with the bank. Payments of $704.55 are due at the end of each month with the first installment due on January 31, 2018. What is the second month's interest expense? A. $704.55 B. $150.00 C. $147.23 D. $557.32

C. $147.23

9. CARNITAS, Inc. had a Retained Earnings balance of $12,000 at December 31, 2018. The company had an average income of $7,500 over the next 3 years, and an ending Retained Earnings balance of $15,000 at December 31, 2019. What was the total amount of dividends paid over the last three years?

C. $19,500.

17. CHIPOTLE HONEY VINAIGRETTE reported net income of $200,000. Beginning balances in Accounts Receivable and Accounts Payable were $15,000 and $20,000, respectively. Ending balances in these accounts were $12,000 and $22,000, respectively. Assuming that all relevant information has been presented, CHIPOTLE HONEY VINAIGRETTE's net cash flows from operating activities would be:

C. $205,000.

ALYSON CONSTRUCTION purchased a 3-acre tract of land for a building site for $350,000. The company demolished the old building at a cost of $12,000, but was able to sell scrap from the building for $1,500. The cost of title insurance was $900 and attorney fees for reviewing the contract was $500. Property taxes paid were $3,000, of which $250 covered the period after the purchase date. The capitalized cost of the land is: A. $366,400. B. $366,150. C. $364,650. D. $231,150.

C. $364,650.

AVOCADO reported the following amounts at the end of the year: total sales = $550,000; sales discounts = $12,000; sales returns = $44,000; sales allowances = $17,000. What was the company's net revenues for the year? A. $489,000. B. $485,000. C. $477,000. D. $499,000.

C. $477,000

At December 31, BELL PEPPER (BP) had account balances in Accounts Receivable of $311,000 and in Allowance for Uncollectible Accounts of $970 (credit) before any adjustments. An analysis of BP's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 2% of accounts receivable. Bad debt expense for the year should be: A. $6,220. B. $6,450. C. $5,250. D. $7,190.

C. $5,250.

32. Which of the following accounts represents a resource of the company?

C. Accounts receivable.

4. If a company issues 1,000 shares of $1 par value common stock for $20 per share, which of the following accounts would be credited?

C. Additional Paid-in Capital

Adjusting entries: A. Often include the Cash account. B. Usually are recorded at the beginning of the accounting period. C. Always involve at least one income statement account and one balance sheet account. D. Adjust the balance of revenue and expense accounts to zero.

C. Always involve at least one income statement account and one balance sheet account

Bond X and Bond Y are both issued by the same company, HOGS. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 9% interest. The current market rate of interest is 8%. Which of the following is correct? A. Both bonds will sell for the same amount. B. Bond X will sell for more than Bond Y. C. Bond Y will sell for more than Bond X. D. Both bonds will sell at a discount.

C. Bond Y will sell for more than Bond X.

Cash flows from investing do not include cash flows from: A. Lending. B. The sale of equipment. C. Borrowing. D. The purchase of a building.

C. Borrowing.

Cash transactions recorded by the bank but not yet recorded by the company include all of the following except A. Service fees. B. Interest earned. C. Checks outstanding. D. NSF checks.

C. Checks outstanding.

At the beginning of December, TOMATILLO-GREEN CHILI SALSA (TGCS) had $2,000 in supplies on hand. During the month, supplies purchased amounted to $3,000, but by the end of the month the supplies balance was only $800. What is the appropriate month-end adjusting entry for TGCS? A. Debit Cash $4,200, credit Supplies $4,200. B. Debit Supplies $4,200, credit Supplies Expense $4,200. C. Debit Supplies Expense $4,200, credit Supplies $4,200. D. Debit Cash $800, credit Supplies $800.

C. Debit Supplies Expense $4,200, credit Supplies $4,200.

14. All classifications on the Balance Sheet have a general relationship with sections identified on the Statement of Cash Flows. Indicate which relationships are correctly identified in the table below. Bonds Payable & Financing. I Equipment & Operating. II Common & Stock Financing. III Accounts & Payable Operating. IV Accounts & Receivable Operating. V

C. I, III, IV, V.

11. The balance of cash reported in the balance sheet this year minus the balance of cash reported in the balance sheet last year equals:

C. Net cash flows from operating, investing, and financing activities

13. Which of the following is correct about the statement of cash flows?

C. Paying dividends to investors creates a cash outflow from financing activities.

Which of the following describes the purpose(s) of closing entries? A. Adjust the balances of asset and liability accounts for unrecorded activity during the period. B. Transfer the balances of temporary accounts to common stock. C. Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period. D. Transfer the balances of temporary accounts to common stock; reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.

C. Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.

The purpose of recording an allowance for uncollectible accounts is to: A. Record the sales returns and allowances. B. Report net sales conservatively. C. Report accounts receivable at net realizable value. D. Report accounts receivable for the total amount of sales in the period.

C. Report accounts receivable at net realizable value.

36. "Record revenue when goods or services are provided to customers" is the definition of which principle in accounting?

C. Revenue recognition.

1. Which of the following accounts is not reported in the stockholders' equity section of the balance sheet?

C. Sales Revenue.

2. Which of the following is a reason that a corporation would prefer to issue stock instead of bonds?

C. The risk of going bankrupt is less.

34. Consider the following account balances of the SOUR CREAM LAW FIRM at the end of the year: Accounts Payable = $4,400 Salaries Expense = 12,800 Cash = 1,700 Common Stock = 2,400 Service Revenue = 8,300 Supplies = 4,300 Retained Earnings = 1,100 Utilities Expense = 5,000

C. Three.

Consider the following transactions: 1. The company uses supplies purchased in the previous period, $1,500. 2. The company pays cash for rent in advance, $6,000. 3. The company repays a loan to the bank, $10,000 (ignore any interest cost). The amount of accrual-basis expense is _____ while the amount of cash-basis expense is _____. A. $6,000; 11,500 B. $6,000; $16,000 C. $1,500; 16,000 D. $1,500; $6,000

D. $1,500; $6,000

Suppose you buy dinner (at Chiptole, of course) for $23.75 that includes an 8% sales tax. How much did Chiptole charge you for the dinner (excluding any tax) and how much do they owe for sales tax? A. $23.75 for dinner and $1.90 for sales tax. B. $23.75 for dinner and no sales tax. C. $21.85 for dinner and $1.90 for sales tax. D. $21.99 for dinner and $1.76 for sales tax.

D. $21.99 for dinner and $1.76 for sales tax.

Given the information below, what is the gross profit? Sales revenue $320,000, Accounts receivable 50,000, Ending inventory 100,000, Cost of goods sold 250,000, Sales Returns 20,000. A. $250,000. B. $70,000. C. $220,000. D. $50,000.

D. $50,000.

18. During the year, CHORIZO had the following cash flows: receipt from customers, $10,000; receipt from the bank for long-term borrowing, $6,000; payment to suppliers, $5,000; payment of dividends, $1,000, payment to workers, $2,000; and payment for machinery, $8,000. What amount would be reported for investing net cash flows on the Statement of Cash Flows?

D. ($8,000).

24. FLOUR TORTILLA reports accounts receivable of $100,000 in 2017 and $250,000 in 2018. Using horizontal analysis, what would be the percentage increase or decrease in accounts receivable?

D. 150% increase

Using the information above in problem 66, the journal entry on May 1, 2019 to record the amount of cash needed to pay back the note payable plus any accrued interest would include: A. A debit to cash for $200,000. B. A credit to note payable for $202,000. C. A debit to cash for $204,000. D. A credit to cash for $206,000.

D. A credit to cash for $206,000.

Gains on the sale of long-term assets for cash: A. Are the excess of the book value over the cash received. B. Are recorded as a debit. C. Are reported on a net-of-tax basis if material. D. Are the excess of the cash received over the book value.

D. Are the excess of the cash received over the book value.

7. BLACK BEANS had 100,000 outstanding shares of common stock. On June 16, 2018, BLACK BEANS repurchased 20,000 shares of its own stock at $30 per share. On July 23, 2018, BLACK BEANS resold 10,000 shares at $28 per share. What net effect did the repurchase and the resell of common stock have on the accounting equation?

D. Decrease in assets and decrease in stockholders' equity.

Under an operating lease, leasing improves the balance sheet by reducing: A. There is no effect on the balance sheet. B. Short-term debt. C. Assets. D. Long-term debt.

D. Long-term debt.

A contingent liability should be recorded on a company's financial statements only if the likelihood of a loss occurring is: A. At least remotely possible and the amount of the loss is known. B. At least reasonably possible and the amount of the loss is known. C. At least reasonably possible and the amount of the loss is reasonably estimable. D. Probable and the amount of the loss can be reasonably estimated.

D. Probable and the amount of the loss can be reasonably estimated.

35. Which of the following best explains the meaning of total stockholders' equity?

D. The amount of capital invested by stockholders plus profits retained over the life of the company.

The lower of cost and net realizable value rule causes losses in the value of inventory to be recognized in the period when: A. The inventory is purchased. B. Cash collection from the customer fails to occur. C. The inventory is sold. D. The value of inventory declines below cost.

D. The value of inventory declines below cost.

37. Which of the following is true about a "debit"?

I. It is part of the double-entry procedure that keeps the accounting equation in balance II. It represents an increase to assets III. It represents a decrease to liabilities.