Everything for the Final Exam

1.) Accounts receivable 6,100 Allowance for uncollectible accounts 6,100 2.) Cash 6,100 Accounts receivable 6,100

Barnes Books allows for possible bad debts. On May 7, Barnes writes off a customer account of $6,100. On September 9, the customer unexpectedly pays the $6,100 balance. Record the cash collection on September 9. 1.) Record the re-established portion of account previously written off: 2.) Record the cash collection on account:

Net sales: $440,000 Utilities expense: $15,000 Advertising expense: $20,000 Interest expense: $10,000 Cost of goods sold: $260,000 Salaries expense: $60,000 ---------------------------------------- Income before $75,000 income taxes

Hall & Smith reported the following amounts in its 2011 income statement. Net sales: $440,000 Utilities expense: $15,000 Advertising expense: $20,000 Income tax expense: $20,000 Interest expense: $10,000 Cost of goods sold: $260,000 Salaries expense: $60,000 What was this company's income before income taxes for 2011?

1.) Inventory 26,000 Accounts payable 26,000 2.) Inventory 460 Cash 460

Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on February 2 for $26,000. In addition to the cost of inventory, the company also pays $460 for freight charges associated with the purchase on the same day. Record the purchase of inventory on February 2, including the freight charges. 1.) Record the purchase of inventory on account. 2.) Record the payment of freight charges in cash.

1.) Inventory 38,000 Accounts payable 38,000 2.) Accounts payable 38,000 Inventory 380 Cash 37,620

Shankar Company uses a perpetual system to record inventory transactions. The company purchases inventory on account on February 2 for $38,000, with terms 1/10, n/30. On February 10, the company pays on account for the inventory. Record the inventory purchase on February 2 and the payment on February 10. 1.) Record the purchase of inventory on account. 2.) Record the payment on account.

1.) Service revenue 895,000 Retained earnings 895,000 2.) Retained earnings 622,000 Salaries expense 389,000 Rent expense 149,000 Interest expense 84,000 3.) Retained earnings 59,000 Dividends 59,000

The year-end adjusted trial balance of Aggies Corporation included the following account balances: Retained Earnings, $229,000; Service Revenue, $895,000; Salaries Expense, $389,000; Rent Expense, $149,000; Interest Expense, $84,000; and Dividends, $59,000. Record the necessary closing entries: 1.) Record the entries to close revenue accounts. 2.) Record the entries to close expense accounts. 3.) Record the Close dividends account.

Cash Account: $4,800

Consider the following T-account for cash. Cash ‖ =================== 12,000 ‖ 7,200 3,400 ‖ 1,400 2,500 ‖ 4,500 Compute the balance of the cash account.

-Retained Earnings -Accounts Payable -Service Revenue -Common Stock All have a normal Credit Balance.

Of the following accounts, which have a normal Credit Balance? -Retained Earnings -Salaries Expense -Equipment -Sales Allowance -Service Revenue -Utilities Expense -Common Stock -Sales Discounts -Accounts Payable

1.) Cash 241,000 Deferred revenue 241,000 2.) Cash 2,169,000 Deferred revenue 241,000 Sales revenue 2,410,000 3.) Cost of goods sold 1,410,000 Inventory 1,410,000

On December 18, Intel receives $241,000 from a customer toward a cash sale of $2.41 million for computer chips to be completed on January 23. The computer chips had a total production cost of $1.41 million. What journal entries should Intel record on December 18 and January 23? Assume Intel uses the perpetual inventory system. 1.) To record advance receipt of cash. 2.) Record the sales revenue. 3.) Record the cost of goods sold.

1.) $9,200

On January 12, Ferrell Incorporated obtains a permit to start a comedy club, which will operate only on Saturday nights. To prepare the club for the grand opening, Ferrell purchases tables, chairs, ovens, and other related equipment for $46,000 on January 16. Ferrell pays 20% of this amount (=$9,200) in cash at the time of purchase and signs a note with Live Bank for the remaining amount. Determine the amount of investing cash flows Ferrell would report in January. Total Investing Cash Flows: 1.)

1.) Notes receivable 3,300,000 Cash 3,300,000 2.) Interest receivable 49,500 Interest revenue 49,500

On November 1, Bahama National Bank lends $3.3 million and accepts a six-month, 9% note receivable. Interest is due at maturity. Record the acceptance of the note and the appropriate adjustment for interest revenue at December 31, the end of the reporting period. 1.) Record the acceptance of the note. 2.) Record the adjustment for interest.

1.) $825 2.) $2,475

On October 1, 2018, Oberley Corporation loans one of its employees $33,000 and accepts a 12-month, 10% note receivable. Calculate the amount of interest revenue Oberley will recognize in 2018 and 2019. 1.) Year 2018: 2.) Year 2019:

Gross Profit minus Operating Expenses.

Operating income is defined as: a) All revenues minus all expenses. b) Sales Revenue minus Cost of Goods Sold. c) Gross Profit minus Operating Expenses. d) Income before Income Tax Expense.

1.) Inventory 39,000 Accounts payable 39,000 2.) Accounts payable 1,950 Inventory 1,950

Shankar Company uses a perpetual system to record inventory transactions. The company purchases 1,000 units of inventory on account on February 2 for $39,000 ($39 per unit) but then returns 50 defective units on February 5. Record the inventory purchase on February 2 and the inventory return on February 5. 1.) Record the purchase of inventory on account. 2.) Record the return of inventory purchased.

1.) $166,950 Explanation: Net income --------------------------- = 21% ($720,000 + $870,000) ÷ 2 Net income ----------- = 21% $795,000 Net income = 21% × $795,000 = $166,950

The balance sheet of Cedar Crest Resort reports total assets of $720,000 and $870,000 at the beginning and end of the year, respectively. The return on assets for the year is 21%. 1.) Calculate Cedar Crest's net income for the year:

Authorized, Issued, and Outstanding

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

a ) Cash $12,500 Service Revenue $12,500 b ) Prepaid Insurance $3,660 Cash $3,660 c ) Equipment $15,500 Cash $15,500 d ) Cash $21,000 Notes Payable $21,000

The following transactions occur for Cardinal Music Academy during the month of October: a ) Provide music lessons to students for $12,500 cash. b ) Purchase prepaid insurance to protect musical equipment over the next year for $3,660 cash. c ) Purchase musical equipment for $15,500 cash. d ) Obtain a loan from a bank by signing a note for $21,000. Record the transactions as a Journal Entry.

a ) Assets = Liabilities + Stockholders' Equity + $47,000 + $47,000 b ) Assets = Liabilities + Stockholders' Equity + $39,000 ($39,000) c ) Assets = Liabilities + Stockholders' Equity + $32,000 + $32,000 d ) Assets = Liabilities + Stockholders' Equity ($4,700) ($4,700)

The following transactions occur for a company during the month of June: a ) Provide services to customers on account for $47,000. b ) Receive cash of $39,000 from customers in (a) above. c ) Purchase bike equipment by signing a note with the bank for $32,000. d ) Pay utilities of $4,700 for the current month. Analyze each transaction and indicate the amount of increases and decreases in the accounting equation: a ) Assets = Liabilities + Stockholders' Equity b ) Assets = Liabilities + Stockholders' Equity c ) Assets = Liabilities + Stockholders' Equity d ) Assets = Liabilities + Stockholders' Equity

a ) Equipment $13,900 Notes Payable $13,900 b ) Supplies $490 Cash $490 c ) Rent Expense $690 Cash $690

The following transactions occur for the Panther Detective Agency during the month of July: a ) Purchase a truck and sign a note payable, $13,900. b ) Purchase office supplies for cash, $490. c ) Pay $690 in rent for the current month. Record the transactions as a Journal Entry.

A capital lease is essentially the purchase of an asset with debt financing.

A capital lease is:

Acid-Test Ratio = Cash + Current Investment + Accts Receivable ---------------------------------------- Current Liabilities

Acid-Test Ratio:

Activity-Based Depreciation Rate = Depreciable Cost ---------------------------------- Total Units Expected to be Produced

Activity-Based Depreciation Rate:

1.) Supplies $2,300 Cash $2,300 2.) Supplies Expense $2,500 Supplies $2,500 3.) Balances after adjustment: Supplies = $200 Supplies Expense = $2,500

At the beginning of May, Golden Gopher Company reports a balance in Supplies of $400. On May 15, Golden Gopher purchases an additional $2,300 of supplies for cash. By the end of May, only $200 of supplies remains. Record the necessary entries as a Journal Entry. 1.) Record the purchase of supplies on May 15th. 2.) Record the adjusting entry for the balance of supplies on May 31st. 3.) Calculate the balances after adjustment on May 31 of Supplies and Supplies Expense.

Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends End. RE = Beg. RE + Net Income - Dividends x = $10,000 + ( +$5,100 ) - $800 ( -$5,100 ) ( -$1,000 ) ( +$6,100 ) ( -$6,100 ) ( -$2,500 ) ( +$5,500 ) ( +$3,900 ) ------------------------------------- x = $10,000 + $5,900 - $800 x = $15,100 Ending Retained Earnings = $15,100

At the beginning of the month, the Retained Earning's balance was $10,000. What was the Retained Earning's balance at the end of the month? -Purchased Equipment, Paying $5,100 cash -Paid rent for $1,000 -Issued Common Stock for Cash, $6,100 -Provided services on account, $5,500 -Provided services in exchange for cash $3,900 -Paid workers salaries, $2,500 -Paid Dividends to Stockholders, $800

1.) Allowance for uncollectible accounts 15,800 Accounts receivable 15,800 2.) Allowance for uncollectible accounts: Debit $2,200

At the beginning of the year, Mitchum Enterprises allows for estimated uncollectible accounts of $13,600. By the end of the year, actual bad debts total $15,800. 1.) Record the write-off to uncollectible accounts: 2.) Following the write-off, what is the balance of Allowance for Uncollectible Accounts?

Receivables Turnover Ratio = $1,100,000 ----------------------- ($60,000 + $82,000)/2 = 15.49 Average Collection Period = 365 ----------------------- 15.49 = 23.6 days Average Collection Period = 23.6 days

At the beginning of the year, the Accounts Receivable's balance was $60,000. At the end of the year, the Account Receivable's balance was $82,000. During the year, their sales totaled $1,100,000. What was their average collection period?

1.) Bad debt expense 5,100 Accounts receivable 5,100

At the end of 2018, Worthy Co.'s balance for Accounts Receivable is $16,000, while the company's total assets equal $1,460,000. In addition, the company expects to collect all of its receivables in 2019. In 2019, however, one customer owing $5,100 becomes a bad debt on March 14. 1.) Record the write off of this customer's account in 2019 using the direct write-off method:

1.) Bad debt expense 1,818 Allowance for uncollectible accounts 1,818

At the end of the first year of operations, Mayberry Advertising had accounts receivable of $20,200. Management of the company estimates that 9% of the accounts will not be collected. What adjustment would Mayberry Advertising record for Allowance for Uncollectible Accounts? 1.) Record the adjustment entry for Allowance for Uncollectible Accounts.

1.) Bad debt expense 1,600 Allowance for uncollectible accounts 1,600

At the end of the year, Mercy Cosmetics' balance of Allowance for Uncollectible Accounts is $440 (credit) before adjustment. The balance of Accounts Receivable is $17,000. The company estimates that 12% of accounts will not be collected over the next year. What adjustment would Mercy Cosmetics record for Allowance for Uncollectible Accounts? 1.) Record the adjustment entry for Allowance for Uncollectible Accounts.

Average Collection Period = 365 ----------------------- Receivables Turnover Ratio

Average Collection Period Formula:

Average Days in Inventory = 365 ----------------------- Inventory Turnover Ratio

Average Days in Inventory:

1.) $21,600 2.) $4,500

China Inn and Midwest Chicken exchanged assets. China Inn received a delivery truck and gave equipment. The fair value and book value of the equipment were $14,500 and $10,000 (original cost of $30,000 less accumulated depreciation of $20,000), respectively. To equalize market values of the exchanged assets, China Inn paid $7,100 in cash to Midwest Chicken. 1.) At what amount did China Inn record the delivery truck? 2.) How much gain or loss did China Inn recognize on the exchange?

Equipment = $11,000 Notes Payable = $12,000

Calculate the missing amounts assuming the business has total assets of $28,700: Accounts ‖ Balances Land ‖ $7,800 Equipment ‖ ? Salaries Payable ‖ $3,300 Notes Payable ‖ ? Supplies ‖ $1,500 Cash ‖ $6,200 Stockholders' Equity ‖ $12,300 Accounts Payable ‖ $1,100 Prepaid Rent ‖ $2,200

1.) Cash 2,200 Treasury Stock 2,000 Additional-Paid in Capital 200

California Surf Clothing Company issues 1,000 shares of $1 par value common stock at $17 per share. Later in the year, the company decides to repurchase 100 shares at a cost of $20 per share. Record the transaction if California Surf reissues the 100 shares of treasury stock at $22 per share. 1.) Record the sale of treasury stock.

-Pay amount owed to bank for previous borrowing. FINANCING -Purchase a factory. INVESTING -Purchase equipment to be used in operations. INVESTING -Purchase office supplies. OPERATING -Purchase treasury stock. FINANCING -Pay last months utility bill. OPERATING -Pay for research and development costs. OPERATING -Pay taxes to the IRS. OPERATING -Sell common stock to investors. FINANCING

Consider the following cash flow items: -Pay amount owed to bank for previous borrowing. -Purchase a factory. -Purchase equipment to be used in operations. -Purchase office supplies. -Purchase treasury stock. -Pay last months utility bill. -Pay for research and development costs. -Pay taxes to the IRS. -Sell common stock to investors. Determine whether the items are involved in: Operating Activities, Financing Activities, or Investing Activities

Current Ratio = Current Assets ----------------- Current Liabilities

Current Ratio:

Debt-to-Equity Ratio = Total Liabilities -------------------- Stockholder's Equity

Debt-to-Equity Ratio:

Mutual Agency: When individual partners have the power to bind the business to a contract.

Define Mutual Agency:

Includes cash receipts and cash payments for transactions relating to revenue and expense activities.

Define Operating Activities

Solvency: A company's ability to pay its long-term liabilities.

Define Solvency:

1.) Bonds payable 61,200 Loss 1,991 Discount on Bonds Payable 4,191 Cash 59,000

Discount Pizza retires its 7% bonds for $59,000 before their scheduled maturity. At the time, the bonds have a face value of $61,200 and a carrying value of $57,009. Record the early retirement of the bonds. 1.) Record the early retirement of bonds.

Double-Declining Depreciation Rate = 2 ---------------------- Estimated Service Life

Double-Declining Depreciation Rate:

Average Cost Method: 200 x $30 = $6,000 300 x $40 = $12,000 300 x $55 = $16,500 100 x $60 = $6,000 200 x $80 = $16,000 = $56,500 $56,500 ---------- 1,100 = 51.3636 Cost of goods sold = 51.3636 x 800 = $41,090.88

During 2011, Brown & Terrell Auto Supply sold 800 crank shafts. The selling price per crank shaft was $100. The company had the following beginning inventory and inventory purchase transactions during 2011. The company has a periodic inventory system. Units Unit Cost Inventory: January 1, 2011 200 $30 Purchase: May 5, 2011 300 40 Purchase: August 4, 2011 300 55 Purchase: October 11, 2011 100 60 Purchase: December 28, 2011 200 80 What was this company's cost of goods sold for 2011 assuming it uses the average cost method?

1.) Securities and Exchange Commission 2.) Financial Accounting Standards Board 3.) Auditors 4.) International Accounting Standards Board

Each of these parties plays a role in the quality of financial reporting. Select the group that matches with its function: 1.) Group that has been given power by Congress to enforce the proper application of financial reporting rules for companies whose securities are publicly traded. 2.) Independent, private-sector group that is primarily responsible for setting financial reporting standards in the United States. 3.) Independent intermediaries that help to ensure that management appropriately applies financial reporting rules in preparing the company's financial statements. 4.) Body that is attempting to develop a single set of high-quality, understandable global accounting standards. Financial Reporting Groups: -International Accounting Standards Board -Financial Accounting Standards Board -Auditors -Securities and Exchange Commission

Entries for cash dividends are recorded on the payment date and declaration date.

Entries for cash dividends are recorded on the:

1.) Cash 29,000 Preferred stock 10 Additional paid-in capital 28,990

Equinox Outdoor Wear issues 1,000 shares of its $0.01 par value preferred stock for cash at $29 per share. Record the issuance of the preferred shares. 1.) Record the issuance of preferred stock.

1.) Salaries Expense $840 Salaries Payable $840 2.) Salaries Payable $840 Salaries Expense $3,080 Cash $3,920 3.) Ending Balance: $840

Fighting Irish Incorporated pays its employees $3,920 every two weeks ($280/day). The current two-week pay period ends on December 28, 2018, and employees are paid $3,920. The next two-week pay period ends on January 11, 2019, and employees are paid $3,920. 1.) Record the adjusting entry on December 31, 2018. 2.) Record the payment of salaries on January 11, 2019. 3.) Calculate the 2018 year-end adjusted balance of Salaries Payable.

Cash ÷ Non-cash Assets = Ratio -------------------------------------------------------- 1.) Tuohy Incorporated: $6,000 ÷ $21,000 = 28.57% 2.) Oher Corporation: $5,300 ÷ $24,000 = 22.08%

For each company, calculate the ratio of cash to noncash assets. Total Cash Assets Liabilities ---------------------------------------------- Tuohy Incorporated: $6,000 $27,000 $5,400 Oher Corporation: $5,300 $29,300 $8,000 1.) Tuohy Incorporated Ratio: 2.) Oher Corporation Ratio:

Ending Retained Earnings = Beginning Retained Earnings + Net Income - Dividends

Formula for Ending Retained Earnings:

1.) $469,600

Fresh Veggies, Inc. (FVI), purchases land and a warehouse for $420,000. In addition to the purchase price, FVI makes the following expenditures related to the acquisition: broker's commission, $22,000; title insurance, $1,200; and miscellaneous closing costs, $4,400. The warehouse is immediately demolished at a cost of $22,000 in anticipation of building a new warehouse. 1.) Determine the amount FVI should record as the cost of the land:

Goodwill = Purchase Price - Fair Value

Goodwill Formula:

Gross Profit Ratio = Gross Profit --------------- Net Sales

Gross Profit Ratio:

Gross profit is defined as Sales Revenue minus Cost of Goods Sold.

Gross profit is defined as:

1.) $6,300 2.) $14,000 3.) $4,060 Explanation: ~Straight-Line method $28,000 - $2,800 −−−−−−−−−−−− = $6,300 4 years ~Double-Declining Balance method $28,000 × 2/4 years = $14,000 ~Activity-Based method $28,000 - $2,800 ---------------- = $1.40 × 2,900 hours 18,000 hours = $4,060

Hawaiian Specialty Foods purchased equipment for $28,000. Residual value at the end of an estimated four-year service life is expected to be $2,800. The machine operated for 2,900 hours in the first year, and the company expects the machine to operate for a total of 18,000 hours. Calculate depreciation expense for the first year using each of the following depreciation methods: 1.) Straight-line 2.) Double-declining-balance 3.) Activity-based

Revenues - Expenses = Net Income $15,000 - $11,000 = $4,000 Net Income = $4,000

Hoya Corporation reports the following amounts: Assets = $12,000 Liabilities = $2,000 Stockholders' Equity = $10,000 Dividends = $2,000 Revenues = $15,000 Expenses = $11,000. What amount is reported for net income?

1.) $400,000 Explanation: $2,000,000 Amortization Expense = ----------- 5 years = $400,000 per year The $1 million trademark and the $3 million goodwill are not amortized, because they have indefinite service lives.

In early January, Burger Mania acquired 100% of the common stock of the Crispy Taco restaurant chain. The purchase price allocation included the following items: $2 million, patent; $1 million, trademark considered to have an indefinite useful life; and $3 million, goodwill. Burger Mania's policy is to amortize intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life. 1.) What is the total amount of amortization expense that would appear in Burger Mania's income statement for the first year ended December 31 related to these items?

1.) Amortization Expense: $800,000 $4,000,000 ----------- 5 years = $800,000

In early January, Burger Mania acquired 100% of the common stock of the Crispy Taco restaurant chain. The purchase price allocation included the following items: $4 million, patent; $3 million, trademark considered to have an indefinite useful life; and $5 million, goodwill. Burger Mania's policy is to amortize intangible assets with finite useful lives using the straight-line method, no residual value, and a five-year service life. What is the total amount of amortization expense that would appear in Burger Mania's income statement for the first year ended December 31 related to these items? 1.) Amortization Expense:

Inventory Turnover Ratio = Cost of Goods Sold ----------------------- Average Inventory

Inventory Turnover Ratio:

1.) $3.8 Million

Kosher Pickle Company acquires all the outstanding stock of Midwest Produce for $10.0 million. The fair value of Midwest's assets is $7.0 million. The fair value of Midwest's liabilities is $.8 million. 1.) Calculate the amount paid for goodwill:

-Purchase Price of Land -Commissions -Property Taxes -Title Insurance -Removal Costs

List a few accounts associated with the Cost of Land:

-Payment of dividends FINANCING -Increase in accounts receivable INVESTING -Purchase of a building OPERATING -Decrease in inventory OPERATING -Depreciation expense OPERATING -Exchange of long-term assets NON CASH

Match the following items with the Activity they would be associated with in the section of a statement of cash flows that was prepared using the indirect method with either Financing, Operating, or Investing. -Payment of dividends -Increase in accounts receivable -Purchase of a building -Decrease in inventory -Depreciation expense -Exchange of long-term assets

1.) Cash 54,889 Discount on Bonds Payable 7,111 Bonds payable 62,000 2.) Interest expense 3,293 Discount on Bonds Payable 193 Cash 3,100

Pretzelmania, Inc., issues 5%, 20-year bonds with a face amount of $62,000 for $54,889 on January 1, 2018. The market interest rate for bonds of similar risk and maturity is 6%. Interest is paid annually on December 31. 1. & 2. Record the bond issue and first interest payment on December 31, 2018. 1.) Record the bond issue. 2.) Record the first interest payment.

1.) Cash 48,305 Discount on Bonds Payable 3,695 Bonds payable 52,000 2.) Interest expense 1,691 Discount on Bonds Payable 131 Cash 1,560

Pretzelmania, Inc., issues 6%, 10-year bonds with a face amount of $52,000 for $48,305 on January 1, 2018. The market interest rate for bonds of similar risk and maturity is 7%. Interest is paid semiannually on June 30 and December 31. Record the bond issue and first interest payment on June 30, 2018. 1.) Record the bond issue. 2.) Record the first interest payment.

Price-Earning Ratio = Stock Price ------------------- Earnings Per Share

Price-Earning Ratio:

Profit Margin Formula = Net Income ------------ Net Sales

Profit Margin Formula:

Cash-Basis Net Income: $14,000 Accrual-Basis Net Income: $19,500 Explanation: Cash-Basis Accrual Accrual-Basis Flow Net Income Adjustments Net Income ===================================================Cash-in: $35,000 + $4,000 $39,000 Cash-out: $21,000 - $1,500 $19,500 -------------------------------------------------------- $14,000 $19,500

Rebel Technology maintains its records using Cash-Basis accounting. During the year, the company received cash from customers of $35,000 and Rebel paid cash for salaries of $21,000. At the beginning of the year, customers owe Rebel $1,000 and by the end of the year, customers owe Rebel $5,000. At the beginning of the year, Rebel owes salaries of $4,000 and at the end of the year, Rebel owes salaries of $2,500. Determine Cash-Basis Net Income and Accrual-Basis Net Income for the year.

Receivables Turnover Ratio = Net Credit Sales --------------------------- Average Accounts Receivable

Receivables Turnover Ratio:

Return on Assets Formula = Net Income --------------------- Average Total Assets

Return on Assets Formula:

1.) No Journal Entry Required 2.) Bad debt expense 3,700 Accounts receivable 3,700

Sanders Inc. is a small brick manufacturer that uses the direct write-off method to account for uncollectible accounts. At the end of 2018, its balance for Accounts Receivable is $42,000. The company estimates that of this amount, $5,400 is not likely to be collected in 2019. In 2019, the actual amount of bad debts is $3,700. Record, if necessary, an adjustment for estimated uncollectible accounts at the end of 2018 and the actual bad debts in 2019. 1.) Record an adjustment for estimated uncollectible accounts at the end of 2018: 2.) Record an adjustment for actual bad debts in 2019:

1.) Operating 2.) Financing 3.) Investing

Select the business activity that matches with the description: 1.) Transactions related to revenues and expenses. 2.) Transactions with lenders and owners. 3.) Transactions involving the purchase and sale of productive assets. Business Activities: -Financing -Investing -Operating

1.) Completeness 2.) Neutrality 3.) Freedom From Error

Select the components of faithful representation that matches with its definition: 1.) All information necessary to describe an item is reported. 2.) Information that does not bias the decision maker. 3.) Reported amounts reflect the best available information. Components of Faithful Representation: -Freedom From Error -Completeness -Neutrality

1.) Predictive Value 2.) Confirmatory Value 3.) Materiality

Select the components of relevance that matches with its definition: 1.) Information is useful in helping to forecast future outcomes. 2.) Information provides feedback on past activities. 3.) The nature or amount of an item has the ability to affect decisions. Components of Relevance: -Materiality -Predictive Value -Confirmatory Value

1.) Statement of Stockholders' Equity 2.) Income Statement 3.) Statement of Cash Flows 4.) Balance Sheet

Select the financial statement that matches with the description: 1.) Change in owners' claims to resources. 2.) Profitability of the company. 3.) Change in cash as a result of operating, investing, and financing activities. 4.) Resources equal creditors' and owners' claims to those resources. Financial Statements: -Balance Sheet -Income Statement -Statement of Cash Flows -Statement of Stockholders' Equity

1.) Statement of Stockholders' Equity 2.) Statement of Cash Flows 3.) Income Statement 4.) Balance Sheet

Select the financial statement to which the item belongs: 1.) The change in retained earnings due to net income and dividends. 2.) Amount of cash received from borrowing money from a local bank. 3.) Revenue from sales to customers during the year. 4.) Total amounts owed to workers at the end of the year. Financial Statements: -Balance Sheet -Income Statement -Statement of Cash Flows -Statement of Stockholders' Equity

1.) Purchases 29,000 Accounts payable 29,000 2.) Freight-in 490 Cash 490

Shankar Company uses a periodic system to record inventory transactions. The company purchases inventory on account on February 2 for $29,000. In addition to the cost of inventory, the company also pays $490 for freight charges associated with the purchase on the same day. Record the purchase of inventory on February 2, including the freight charges. 1.) Record the purchase of inventory on account. 2.) Record the payment of freight charges in cash.

Stockholder's Equity = Net Income - Dividends

Stockholder's Equity = Net Income - ?

Straight-Line Depreciation Rate = Asset's Cost - Residual Value ------------------------------ Service Life

Straight-Line Depreciation Rate:

1.) Accounts receivable 2,760 Service revenue 2,760 2.) Accounts receivable 650 Service revenue 650

The Giles Agency offers a 8% trade discount when providing advertising services of $1,000 or more to its customers. Audrey's Antiques decides to purchase advertising services of $3,000 (not including the trade discount), while Michael's Motors purchases only $650 of advertising. Both services are provided on account. Record both transactions for The Giles Agency, accounting for any trade discounts: 1.) Record the services provided to Audrey's Antiques. 2.) Record the services provided to Michael's Motors.

The Model Business Corporation Act was designed to serve as a guide to states in the development of their corporate statutes.

The Model Business Corporation Act was designed to:

1.) Auditor-Client Relations 2.) Internal Control 3.) Corporate Executive Accountability

The Sarbanes-Oxley (SOX) Act mandates increased regulations related to: 1.) 2.) 3.)

Sales Discounts Sales Returns Sales Allowances

Three examples of negative accounts or contra revenue accounts:

Times Interest Earned Ratio = Net Income + Interest Expense + Tax Expense ---------------------------------------- Interest Expense

Times Interest Earned Ratio:

Treasury Stock has a normal debit balance.

Treasury Stock has a:

Bond Characteristics Amount ---------------------------------------- Face amount $56,000 Interest payment $1,680 Market interest rate 3.5% Periods to maturity 20 Issue price $52,021

Ultimate Butter Popcorn issues 6%, 10-year bonds with a face amount of $56,000. The market interest rate for bonds of similar risk and maturity is 7%. Interest is paid semiannually. At what price will the bonds issue? Bond Characteristics Amount ---------------------------------------------- Face amount $56,000 Interest payment ? Market interest rate ? Periods to maturity ? Issue price ?

1.) No Step 1: Test for Impairment The long-term asset is not impaired since future cash flows ($32 million) are greater than book value ($29.50 million). Step 2: If Impaired, Record Loss Since the asset does not meet the first test for impairment, no impairment loss is recorded.

Vegetarian Delights has been experiencing declining market conditions for its specialty foods division. Management decided to test the operational assets of the division for possible impairment. The test revealed the following: book value of division's assets, $29.50 million; fair value of division's assets, $22 million; sum of estimated future cash flows generated from the division's assets, $32 million. Should Vegetarian Delights record an impairment loss? 1.) Yes or No

Increase in Stockholder's Equity: $18,000 Issuance of Common Stock: $16,000 Net Income: $14,000 Dividends: $12,000 Explained: Stockholder's Equity = Net Income - Dividends ---------------------------------------- $18,000 $14,000 x -$16,000 ---------------------------------------- $2,000 = $14,000 - x + x + x ---------------------------------------- $2,000 + x = $14,000 -$2,000 -$2,000 ---------------------------------------- x = $12,000 Dividends = $12,000

What is the Dividends dollar amount? Increase in Stockholder's Equity: $18,000 Issuance of Common Stock: $16,000 Net Income: $14,000 Dividends: ?

-Issued Common Stock in exchange for Cash -Purchased Equipment by signing a Note Payable -Sold Treasury Stock Are all transactions that increase the total Assets. Explained: -Issued Common Stock in exchange for Cash Assets = Liabilities + Stockholder's Equity +Cash +Common Stock -Purchased Equipment by signing a Note Payable Assets = Liabilities + SE +Equipment +Note Payable -Sold Treasury Stock Assets = Stockholder's Equity + L +Cash +Treasury Stock

Which transactions increase the total assets? -Issued Common Stock in exchange for Cash -Purchased Equipment by signing a Note Payable -Paid Rent for the current month -Sold Treasury Stock -Paid Insurance for the current month -Collected Cash from customers on Account

1.) Total cost of the bread machine: $31,200 Purchase Price: $25,500 Freight: $1,550 Installation: $3,100 Testing: $1,050 -------------------------------------------------------- Total Cost: $31,200

Whole Grain Bakery purchases an industrial bread machine for $25,500. In addition to the purchase price, the company makes the following expenditures: freight, $1,550; installation, $3,100; testing, $1,050; and property tax on the machine for the first year, $510. 1.) What is the initial cost of the bread machine?

1.) $1,450 2.) $1,485 3.) $975 4.) $3,910

Williamson Distributors separates its accounts receivable into three age groups for purposes of estimating the percentage of uncollectible accounts. 1. Accounts not yet due = $29,000; estimated uncollectible = 5%. 2. Accounts 1-30 days past due = $9,900; estimated uncollectible = 15%. 3. Accounts more than 30 days past due = $3,900; estimated uncollectible = 25%. Compute the total estimated uncollectible accounts: Estimated Amount Age Group Uncollectible ================================== Not yet due ‖ 1.) 1-30 days past due ‖ 2.) More than 30 days past due ‖ 3.) ================================== Total ‖ 4.)

Working Capital = Current Assets - Current Liabilities

Working Capital: