exam 2
Which of the following is an advantage of the single-step income statement over the multiple-step income statement?
It does not imply that one type of revenue or expense has priority over another.
Which of the following is true about intraperiod tax allocation?
Its purpose is to relate the income tax expense to the items which affect the amount of tax.
____________ is the ability of a company to pay its debts as they mature.
Solvency
To convert an annual interest rate into the compounding period interest rate, a company divides that annual interest the number of compounding periods per year.
True
Which of the following is included in comprehensive income?
Unrealized gains on available-for-sale securities
Which limitation of an income statement occurs when one company uses an accelerated depreciation method while another company uses straight-line depreciation?
Income numbers are affected by the accounting methods employed.
Payment of dividends would come under which activity on the statement of cash flows?
Financing.
Present value is the value now of a future sum or sums discounted assuming compound interest.
true
Clair, Inc. reports net income of $700,000. It declares and pays total dividends of $100,000 for the year, one-half of which relate to the preferred shares. The weighted-average number of common shares outstanding during the year is 200,000 shares, and the weighted-average number of preferred shares outstanding during the year is 10,000 shares. Earnings per share for Clair, Inc. is (round your answer to the nearest cent):
$3.25.
Addison, Inc. reports: Cash provided by operating activities $2,300,000 Cash used by investing activities 640,000 Cash used by financing activities 220,000 Beginning cash balance 340,000 What is Addison's ending cash balance?
$340,000 + $2,300,000 - $640,000 - $220,000 = $1,780,000 $1,780,000.
On January 1, 2014, Simmons Company sold to Flay Corporation $400,000 of its 10% bonds for $354,118 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Simmons report as interest expense for the six months ended June 30, 2014?
$354,118 X 12% X (6/12) equals $21,247.
Sally Tucker wants to invest a certain sum of money at the end of each year for six years. The investment will earn 6% compounded annually. At the end of six years, she will need a total of $500,000 accumulated. How should she compute her required annual investment?
$500,000 divided by the future value of a 6-year, 6% ordinary annuity of 1 factor.
For an investment that earns 1% compounded monthly for two years, how many compounding periods are there?
(12 x 2 = 24). 24
Joan's uncle has promised her $20,000 when she graduates college 4 years from now. What is the equivalent amount stated in today's dollars? Given below are the present value factors for 1 at 8% for one to three periods with interest compounded annually. Periods Present Value of 1 at 8% 1 .92593 2 .85734 3 .79383
.79383 / .92593 = $14,700. $20,000 × .92593 × .79383
Josie Corporation reported the following information for 2014: Sales revenue $1,000,000 Cost of goods sold 700,000 Operating expenses 110,000 Unrealized holding gain on available-for-sale securities 40,000 Cash dividends received on the securities 4,000 For 2014, Josie would report comprehensive income of
1,000,000 less $700,000 less $110,000 plus $40,000 plus $4,000 equals $234,000. 234,000
Avery Tag makes an investment today (January 1, 2014). Avery will receive $40,000 every December 31st for the next six years (2014 - 2019). If Avery wants to earn 12% on her investment, what is the most she should invest on January 1, 2014? Time periods Factor PV Annuity due 5 4.03735 PV Annuity due 6 4.60478 PV Ordinary annuity 5 3.60478 PV Ordinary annuity 6 4.11141
164,456
An amount is deposited for eight years at 8%. If compounding occurs quarterly, then the table value is found at
2% for 32 periods.
The excess of current assets over current liabilities is referred to a net working capital.
True
Which of the following balance sheet formats lists the assets on the left side of the page and the liabilities and stockholders' equity on the right side?
Account form.
Which of the following is not one of the classifications in owners' equity?
Accumulated capital.
When a company transfers an amount of restricted retained earnings into a different account, that account is titled
Appropriated Retained Earnings.
The correct order to present current assets is
Cash, accounts receivable, inventories, prepaid items.
Which of the following is true of accounting for changes in estimates?
Changes in estimates are not carried back to adjust prior years
Supplemental balance sheet information that addresses material events with uncertain outcomes is referred to as
Contingencies
Barger Enterprises has an extraordinary loss of $300,000, an unusual gain of $700,000, and a tax rate of 30%. At what amount should Barger report each item? Extraordinary loss Unusual gain (210,000) 700,000 (210,000) 490,000 $(300,000) $700,000 (300,000) 490,000
Correct. $300,000 less 30% of $300,000, or $210,000 as an extraordinary loss and $700,000 as an unusual gain. Answer: (210,000) 700,000
Which of the following is an intangible asset?
Customer lists.
Which of the following statements regarding the statement of cash flows is incorrect?
Due to its format and level of detail, most individuals have difficulty comprehending the information reported in the statement of cash flows.
Which table would you use to determine how much you will have five years from now if you deposit $10,000 today at 8% compounded annually?
Future value of 1 or present value of 1
In solving single-sum problems, which of the following values can be calculated?
Future value, present value, number of periods and interest rate.
Which of the following occur from peripheral or incidental transactions?
Gain on the sale of equipment.
Jackson, Inc. has the following information is available: Cost of goods sold $148,500 Dividend revenue 3,750 Income tax expense 3,000 Operating expenses 79,500 Sales 255,000 In Jackson's multiple-step income statement, gross profit
Gross profit = Sales - Cost of goods sold. will be reported at $106,500.
Trent Co. reports the following information: Net cash provided by operating activities $430,000 Average current liabilities 300,000 Average long-term liabilities 200,000 Dividends paid 120,000 Capital expenditures 220,000 Purchase of treasury stock 22,000 Payments of debt 70,000 Trent's free cash flow is
Net cash provided by operating activities, $430,000 - $220,000 - $120,000 = $90,000. $90,000.
Rate of return on assets is computed as:
Net income ÷Average total assets.
Which of the following is not a selling expense?
Office salaries expense
Which of the following investments will result in the smallest future amount?
One that offers annual compounding.
Which of the following describes an expense?
Outflows or other using-up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major or central operations.
Which of the following is true?
Rents occur at the beginning of each period in an annuity due.
Which of the following is an example of managing earnings down?
Revising the estimated life of equipment from 10 years to 8 years.
Which of the following statements related to an annuity is correct?
The periodic payments must always be the same amount.
Which of the following investments should always be reported as current assets?
Trading securities.
Interest is the excess cash received or repaid over and above the amount lent or borrowed.
True
Liquidity refers to the amount of time that is expected to elapse until a liability has to be paid.
True
Alexa Smith has saved $250,000 for her retirement. It is invested in an annuity that pays 12%. Alexa wishes to make equal semi-annual withdrawals over the next 10 years, beginning 6 months from now. How much can she withdraw each period without exhausting her initial investment? Time periods Factor PV Annuity due 12% 10 6.32825 PV Annuity due 6% 20 12.15812 PV Ordinary annuity 12% 10 5.65022 PV Ordinary annuity 6% 20 11.46992
Using the present value of an ordinary annuity, 6% for 20 periods (10 years, 2 compounding periods per year) 11.46992, the amount she can withdraw is $21,796 each period. $21,796.
Which of the following is not a major disclosure technique for the balance sheet?
Worksheets.
Wendy Brown invests $50,000 at 10% annual interest. How much money has accumulated after five years, assuming simple interest?
[$50,000 + ($50,000 x .10 x 5)] = $75,000.
A company with a _________________ is better able to survive bad times, to recover from unexpected setbacks, and to take advantage of profitable and unexpected investment opportunities.
a high degree of financial flexibility.
Which of the following is true about the information provided in the income statement?
a) It provides a basis for predicting future performance. b) It helps assess the risk or uncertainty of achieving future cash flows. c) It helps in evaluating the past performance of the enterprise. d) All of these answer choices are correct.
Companies use intraperiod tax allocation on the income statement for
a) income from continuing operations. b) extraordinary items. c) discontinued operations. d) all of these answer choices are correct
Which of the following has an impact on the dollar amount of the interest related to any financing transaction?
a) rincipal. b) Time c) Interest rate. d) All of these answer choices are correct d) All of these answer choices are correct
The financial statement which summarizes the operating, investing, and financing activities of an entity for a period of time is the
statement of cash flows.
A change in the method of inventory pricing from FIFO to LIFO would be accounted for as a (an):
change in accounting principle.
Activities that involve the cash effects of making and collecting loans and acquiring and disposing of property, plant, and equipment are classified as:
investing activities.
In the single-step income statement:
just two groupings exist - revenues and expenses.
The future value of an ordinary annuity will always be:
less than the future value of an annuity due.
All of the following would meet the criteria for an extraordinary item except gains or losses from:
loss on exchange of foreign currencies.
Receipt of interest from a Note Receivable would be reported as a cash inflow in which of the following sections:
operating activities.
When an annuity is received at the end of each period, it is called a (n):
ordinary annuity.
Gains and losses that bypass net income but affect stockholders' equity are referred to as:
other comprehensive income.
Simple interest is expressed in which of the following formulas?
p x i x n.
The balance sheet is useful for analyzing all of the following except
profitability.