Final Exam Practice - Accounting

On January 1, 2011, the Accounts Receivable balance was $18,500 and the credit balance in the Allowance for Doubtful Accounts was $1,410. On January 15, 2011 a $410 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is:

$17,090. 18500 - 410 = 17,090

On January 1, Year 1, the Mahoney Company borrowed $170,000 cash from Sun Bank by issuing a five-year 8% term note. The principal and interest are repaid by making annual payments beginning on December 31, Year 1. The annual payment on the loan based on the present value of annuity factor would be $40,775. The amount of principal repayment included in the December 31, Year 1 payment is:

$170,000 × 8% = $13,600; $40,775 payment − $13,600 interest = $27,175 principal repayment

Flagler Corporation shows a total of $870,000 in its common stock account and $1,200,000 in its paid-in capital in excess of par value - common stock account. The par value of Flagler's common stock is $6. How many shares of Flagler stock have been issued?

$870,000 total par value ÷ $6 par value per share = 145,000 shares issued

Montana Company was authorized to issue 100,000 shares of common stock. The company had issued 39,000 shares of stock when it purchased 6,000 shares of treasury stock. The number of outstanding shares of common stock was:

39,000 shares issued − 6,000 shares of treasury stock = 33,000 shares outstanding

The Miller Company reported gross sales of $800,000, sales returns and allowances of $6,500 and sales discounts of $6,500. The company has average total assets of $450,000, of which $225,000 is property, plant, and equipment. What is the company's asset turnover ratio?

Asset turnover = Net sales ÷ Average assets Asset turnover = ($800,000 − $6,500 − $6,500) ÷ $450,000 = $787,000 ÷ $450,000 = 1.75 times

Which of the following choices accurately reflects how the recording of accrued salary expense affects the financial statements of a business?

NA = + + - NA - + = - NA

Jack's Snow Removal Company received a cash advance of $13,500 on December 1, Year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract will

recognize one month's work on the three-month contract results in a $4,500 decrease in liabilities (unearned revenue) and an increase in equity (retained earnings due to recognizing revenue).

Richmond Company made a loan of $10,000 to one of the company's employees on April 1, 2011. The one-year note carried a 14% rate of interest. The amount of interest revenue that Richmond would report in 2011 and 2012, respectively would be:

$1,050.00, $350.00 10000*14%*8/12 = 1,050 10000*14%*4/12 =

Assume the perpetual inventory method is used. 1) Green Company purchased merchandise inventory that cost $17,400 under terms of 4/10, n/30 and FOB shipping point. 2) The company paid freight cost of $740 to have the merchandise delivered. 3) Payment was made to the supplier within 10 days. 4) All of the merchandise was sold to customers for $26,300 cash and delivered under terms FOB shipping point with freight cost amounting to $540. The gross margin from these transactions of Green Company is

$26,300 Sales - [($17,400 × 0.96) + $740] Cost of goods sold = $8,856 Gross margin

On January 1, Year 1, Friedman Company purchased a truck that cost $33,000. The truck had an expected useful life of 8 years and an $7,000 salvage value. The book value of the truck at the end of Year 1, assuming that Friedman uses the double-declining-balance method, is: (Do not round intermediate calculations.)

$33,000 × (2 × 12.5%) = $8,250 Depreciation expense for Year 1; $33,000 - $8,250 = $24,750 book value at the end of Year 1.

Richmond Company made a loan of $6,500 to one of the company's employees on April 1, 2011. The one-year note carried a 7% rate of interest. The amount of interest revenue that Richmond would report in 2011 and 2012, respectively would be:

$341.25, $113.75 6500*7%*9/12 = 341.25 6500*7%*3/12 = 113.75

Jason Company paid $5,400 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of

$5,400 × 3/12 = $1,350 rent expense; $5,400 payment on 10/1/15 is a cash outflow for rent

Revenue on account amounted to $6,000. Cash collections of accounts receivable amounted to $5,700. Cash paid for expenses was $4,000. The amount of employee salaries accrued at the end of the year was $1,800. Cash flow from operating activities was

$5,700 collected from customers − $4,000 paid for expenses = $1,700. Revenue earned on account and accrued salaries are not cash flow activities.

Santa Fe Company was started on January 1, Year 1, when it acquired $8,700 cash by issuing common stock. During Year 1, the company earned cash revenues of $4,550, paid cash expenses of $3,100, and paid a cash dividend of $650. what is the net cash flow for FA?

$8,700 cash inflow from issuing stock - $650 cash outflow for dividends = $8,050 net cash inflow from financing activities

Under what condition is a pending lawsuit recognized as a liability on a company's balance sheet?

A contingent liability should be recorded in the financial statements as a liability if the outcome is considered probable and the amount owed can be reasonably estimated. If it is considered only reasonably possible, it is only disclosed in the notes to the financial statements.

Which form of business organization is established as a legal entity separate from its owners?

Corporations are owned by shareholders. Corporations file and pay income taxes on their own.

SX Company sold merchandise on account for $17,400. The merchandise had cost the company $8,300. What is the effect of the sale on the income statement?

Selling merchandise on account will increase revenue by $17,400. It will increase expenses by $8,300 and increase net income by $9,100. Revenue - Expenses = Net income. $17,400 − $8,300 = $9,100

Stosch Company's balance sheet reported assets of $122,000, liabilities of $31,000 and common stock of $28,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $82,000 and Stosch paid a $30,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following?

Step 1: Calculation of the retained earning as of december 31, year 1: Retained earning = Assets - Liabilites - Common stock = $122,000 - $31,000 - $28,000 = $63,000 Step 2: Calculation of the amount of net income for year 2: Net income = (Retained earning for year 2 - Retained earning for year 1) + Dividend paid = ($82,000 - $63,000) + $30,000 = $19,000 + $30,000 = $49,000 (Answer)

Madison Company issued an interest-bearing note payable with a face amount of $13,200 and a stated interest rate of 8% to the Metropolitan Bank on August 1, Year 1. The note carried a one-year term. The amount of cash flow from operating activities on the Year 1 statement of cash flows would be:

The $13,200 borrowed is classified as a financing activity, not an operating activity. No interest was paid in Year 1, so there is no cash flow related to the interest.

Curtain Co. paid dividends of $4,000; $5,000; and $8,000 during Year 1, Year 2, and Year 3, respectively. The company had 1,600 shares of 3.0%, $100 par value preferred stock outstanding that paid a cumulative dividend. The amount of dividends received by the common shareholders during Year 3 would be:

The annual preferred dividends each year = $100 × 1,600 shares × 3.0% = $4,800. In Year 1, there were $800 of dividends in arrears ($4,800 preferred dividends − $4,000 paid). In Year 2, there were $600 in arrears ($800 beginning + $4,800 preferred dividends − $5,000 paid). In Year 3, the preferred dividends was $4,800 + $600 in arrears = $5,400. The remaining $2,600 was paid to common shareholders.

On January 2, Year 1, Torres Corporation issued 22,000 shares of $15 par-value common stock for $25 per share. Which of the following statements is true?

The cash account will increase by $550,000 (22,000 × $25), the common stock account will increase by $330,000 (22,000 × $15 par value), and the paid-in capital in excess of par value account will increase by $220,000 (22,000 × $10).

Which of the following is not considered an advantage of the corporate form of business organization?

The large amount of government regulation is a disadvantage of the corporate form of business.

Assume the perpetual inventory method is used. 1) The company purchased $12,200 of merchandise on account under terms 2/10, n/30. 2) The company returned $1,700 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $18,400 cash. What effect will the return of merchandise to the supplier have on the accounting equation?

The purchase return will decrease assets (merchandise inventory) and decrease liabilities (accounts payable) by $1,700, the full invoiced amount of the merchandise returned.

Abbott Company purchased $7,200 of merchandise inventory on account. Advent uses the perpetual inventory method. How does this transaction affect the financial statements?

When the perpetual system is used, the purchase of inventory on account increases inventory and increases accounts payable.

On January 1, Year 1, Missouri Co. purchased a truck that cost $35,000. The truck had an expected useful life of 10 years and a $3,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is:

$35,000 × (2 × 10%) = $7,000 depreciation expense in Year 1. ($35,000 - $7,000) × (2 × 10%) = $5,600 depreciation expense in Year 2.

On January 1, 2011 Grace Company had an $12,500 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2011, Grace provided $54,500 of service on account. The company collected $48,090 cash from account receivable. Uncollectible accounts are estimated to be 11% of sales on account. Based on this information, the amount of cash flow from operating activities that would appear on the 2011 statement of cash flows is:

$48,090.

Laramie Co. paid $2,100,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $594,000, Building, $880,000, and Office Furniture, $726,000. Based on this information the cost that would be allocated to the land is: (Do not round intermediate calculations.)

$594,000 ÷ ($594,000 + $880,000 + $726,000) = 27% of market value; $2,100,000 purchase price × 27% = $567,000.

Kier Company issued $780,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 5-year term to maturity. They had a 6.00% stated rate of interest that was payable in cash on December 31st. Based on this information alone, the amount of interest expense shown on the December 31, Year 1 income statement and the cash flow from operating activities shown on the December 31, Year 1 statement of cash flows would be:

$780,000 × 0.060 = $46,800; Payment of interest on December 31, Year 1 increases interest expense by $46,800 and is reported as a cash outflow for operating activities.

On January 1, Year 1, Friedman Company purchased a truck that cost $36,000. The truck had an expected useful life of 100,000 miles over 8 years and an $7,000 salvage value. During Year 2, Friedman drove the truck 32,000 miles. The amount of depreciation expense recognized in Year 2 assuming that Friedman uses the units-of-production method is: (Do not round intermediate calculations.)

($36,000 - $7,000) ÷ 100,000 miles = $0.290 per mile depreciation expense. 32,000 miles × $0.290 per mile = $9,280 depreciation expense in Year 2.

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 - 300units@$2.20 First purchase @ May 7 - 400units@$2.40 second purchase @ May 17 - 600units@$2.50 Third purchase @ May 23 - 200units@$2.60 Sales @ May 31 - 1,200units@$4.10 Determine the amount of ending inventory assuming the FIFO cost flow method.

1,500 units available for sale − 1,200 units sold = 300 units in ending inventory; (200 × $2.60) + (100 × $2.50) = $770

Koontz Company uses the perpetual inventory method. On January 1, Year 1, the company's first day of operations, Koontz purchased 650 units of inventory that cost $3.50 each. On January 10, Year 1, the company purchased an additional 900 units of inventory that cost $4.50 each. If Koontz uses a weighted average cost flow method and sells 800 units of inventory, the amount of inventory appearing on balance sheet following the sale will be approximately: (Round your intermediate calculations to one decimal place.)

650 units + 900 units − 800 units sold = 750 units in ending inventory; [(650 × $3.50) + (900 × $4.50)] ÷ 1,550 = $4.10 per unit;750 units × $4.10 = $3,075

The following balance sheet information was provided by O'Connor Company: Assets Year 2 Year 1 - Cash$3,800 $2,800 - Accounts receivable$8,800 $ 6,800 - Inventory$38,000 $39,000 Assuming that net credit sales for Year 2 totaled $163,000, what is the company's most recent accounts receivable turnover?

Accounts receivable turnover = Net credit sales ÷ [(Beginning accounts receivable + ending accounts receivable) ÷ 2] Accounts receivable turnover = $163,000 ÷ [($6,800 + $8,800) ÷ 2] = $163,000 ÷ $7,800 = 20.90 times

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $36,000; Liabilities = ?; Common Stock = $6,600; Revenue = $14,200; Dividends = $1,550; Beginning Retained Earnings = $4,550; Ending Retained Earnings = $8,600.The amount of liabilities reported on the end-of-period balance sheet was:

Assets = Liabilities + Common Stock + Ending Retained Earnings $36,000 = Liabilities + $6,600 + $8,600 Liabilities = $20,800

Li Company paid cash to purchase land. As a result of this accounting event: A) total assets decreased B) total assets were unaffected C) total equity decreased D) both assets and total equity decreased.

B)

Jackson Company had a net increase in cash from operating activities of $9,800 and a net decrease in cash from financing activities of $3,700. If the beginning and ending cash balances for the company were $4,800 and $14,600, then net cash change from investing activities was:

Beginning cash balance + Increase from operating activities - Decrease from financing activities +/- from investing activities = Ending cash balance $4,800 + $9,800 - $3,700 +/- Increase or decrease from investing activities = $14,600 $3,700 = Increase in investing activities

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $31,000; Liabilities = ?; Common Stock = $6,100; Revenue = $13,200; Dividends = $1,300; Beginning Retained Earnings = $4,300; Ending Retained Earnings = $8,100.Based on this information, the amount of expenses on Calloway's income statement was

Beginning retained earnings + Revenue - Expenses - Dividends = Ending retained earnings $4,300 + $13,200 - Expenses - $1,300 = $8,100 Expenses = $8,100

Ix Company issued 14,000 shares of $10 par value common stock at a market price of $20. As a result of this accounting event, the amount of stockholders' equity would:

Common stock will increase by $140,000, the par value, and paid-in capital in excess of par value will increase by $140,000, for a total increase in stockholders' equity of $280,000.

Assume the perpetual inventory method is used. 1) The company purchased $13,100 of merchandise on account under terms 4/10, n/30. 2) The company returned $2,600 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $20,200 cash. The amount of gross margin from the four transactions is:

Cost of goods sold = ($13,100 - $2,600) × 0.96 = $10,080 Sales revenue $20,200 - Cost of goods sold $10,080 = $10,120

Milton Company has total current assets of $47,000, including inventory of $11,000, and current liabilities of $23,000. The company's current ratio is:

Current ratio = Current assets ÷ Current liabilities Current ratio = $47,000 ÷ $23,000 = 2.04

Blake Company purchased two identical inventory items. The item purchased first cost $33.00, and the item purchased second cost $34.00. Blake sold one of the items for $62.00. Which of the following statements is true?

Ending inventory will be lower if Blake uses weighted average than if FIFO were used. If Blake uses weighted average, ending inventory will be $33.50. If the company uses FIFO, ending inventory will be $34.00.

The following balance sheet information is provided for Gaynor Company: AssetsYear 2 Year 1 - Cash$3,250 $2,500 - Accounts receivable 16,000 14,000 - Inventory$34,500 $42,000 Assuming Year 2 cost of goods sold is $120,000, what is the company's inventory turnover?

Inventory turnover = Cost of goods sold ÷ [(Beginning inventory + ending inventory) ÷ 2 Inventory turnover = $120,000 ÷ [($42,000 + $34,500) ÷ 2] = $120,000 ÷ $38,250 = 3.14 times

The following balance sheet information is provided for Patton Company: Assets Year 2 Year 1 - Cash$3,100 $2,700 - Accounts receivable$12,600 $14,600 - Inventory$27,500 $34,500 Assuming Year 2 cost of goods sold is $371,000, what are the company's average days to sell inventory? (Use 365 days in a year. Do not round your intermediate calculations.)

Inventory turnover = Cost of goods sold ÷ [(Beginning inventory + ending inventory) ÷ 2] Inventory turnover = $371,000 ÷ [($34,500 + $27,500) ÷ 2] = 371,000 ÷ $31,000 = 11.97 times Average days to sell inventory = 365 days ÷ Inventory turnover Average days to sell inventory = 365 days ÷11.97 times = 30.50 days

Monthly remittance of sales tax:

Remittance of sales tax reduces assets (cash) and reduces liabilities (sales tax payable).

The Wilson Company purchased $23,000 of merchandise from the Poole Wholesale Company. Wilson also paid $1,600 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system.

When the perpetual system is used, the inventory account is increased when inventory is purchased; that account is also increased when the company (as the buyer of the merchandise) pays the transportation costs.

Sheldon Company began Year 1 with $1,100 in its supplies account. During the year, the company purchased $3,200 of supplies on account. The company paid $2,000 on accounts payable by year end. At the end of Year 1, Sheldon counted $1,700 of supplies on hand. Sheldon's financial statements for Year 1 would show:

$1,700 of supplies on hand is the supplies asset on the balance sheet; $1,100 beginning balance + $3,200 of supplies purchased − $1,700 ending balance = $2,600 supplies expense

The balance in Accounts Receivable at the beginning of the period amounted to $4,600. During the period $7,000 of credit sales were made to customers, and uncollectible accounts expense amounted to $460. The ending balance in Accounts Receivable is $1,600, and the ending balance in the uncollectibles allowance account is $600. The amount of cash inflow from customers that would appear in the operating section of the statement of cash flows is

$10,000. Sales + Decrease in Accounts Receivable (7,000 + (4,600 - 1,600)

On January 1, 2011 Grace Company had an $12,500 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2011, Grace provided $54,500 of service on account. The company collected $48,090 cash from account receivable. Uncollectible accounts are estimated to be 11% of sales on account. The amount of uncollectible accounts expense recognized on the 2011 income statement is:

$5,995. Uncollectible Expense = 11% of Sales on account Given that Sales on Account During the year = $54,500 Amount of Uncollectible Expense to be recognised in Income statement = $54,500 x 11% = $5995

Hailey Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $89,000 of revenue on account during 2011. During 2011, Hailey collected $65,800 of cash from its receivables accounts. The company estimates that it will be unable to collect 19% of revenue on account. The amount of net realizable value of receivables on the December 31, 2011 balance sheet would be:

$6,290. Estimated uncollectibles = Revenue on account * Percent uncollectible 89,000* .19 = 16,910 Amount estimated to be collected = Revenue on account - Estimated uncollectibles 89000 - 16,910 = 72,090 Net realizable value = Amount estimated to be collected - Amount actually collected 72,090 - 65,800 = 6,290

Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $10,000 of common stock to stockholders. Provided $6,300 of services on account. Paid $2,600 cash for operating expenses. Collected $3,900 of cash from accounts receivable. Paid a $300 cash dividend to stockholders. The amount of net income recognized on Nelson Company's Year 1 income statement is:

$6,300 revenue − $2,600 expenses = $3,700 net income

On January 1, 2011, Chase Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $66,000 and $1,120 (credit), respectively. During the year Chase reported $141,200 of credit sales. Chase wrote off $2,300 of receivables as uncollectible in 2011. Cash collections of receivables amounted to $151,500. Chase estimates that it will be unable to collect six percent (6%) of credit sales. The amount of uncollectible accounts expense recognized in the 2011 income statement will be:

$8,472. Credit sales * % of credit sales = uncollectible accounts expense

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $1,450 cash from the issue of common stock. 2) Borrowed $920 from a bank. 3) Earned $1,100 of revenues cash. 4) Paid expenses of $350. 5) Paid a $150 dividend. During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $825 of common stock. 2) Repaid $570 of its debt to the bank. 3) Earned revenues of $1,250 cash. 4) Incurred expenses of $560. 5) Paid dividends of $200. Packard Company's net cash flow from financing activities for Year 2 is:

$825 inflow from stock - $570 outflow for loan repayment - $200 outflow for dividends = $55 inflow.

Anchor Company purchased a manufacturing machine with a list price of $90,000 and received a 2% cash discount on the purchase. The machine was delivered under terms FOB shipping point, and freight costs amounted to $3,200. Anchor paid $4,500 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $5,800 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be:

$90,000 list price - ($90,000 × 2% discount) + $3,200 freight + $4,500 installation and testing = $95,900. The insurance cost is not included in the cost of the machine, but is instead expensed during the first year.

Emir Company purchased equipment that cost $110,000 cash on January 1, Year 1. The equipment had an expected useful life of six years and an estimated salvage value of $8,000. Assuming that Emir depreciates its assets under the straight-line method, the amount of depreciation expense appearing on the Year 4 income statement and the amount of accumulated depreciation appearing on the December 31, Year 4, balance sheet would be:

($110,000 - $8,000) ÷ 6 years = $17,000 depreciation expense each year; $17,000 × 4 years = $68,000 accumulated depreciation expense at the end of Year 4.

Dinkins Company purchased a truck that cost $39,000. The company expected to drive the truck 100,000 miles over its 5-year useful life, and the truck had an estimated salvage value of $5,500. If the truck is driven 26,500 miles in the current accounting period, what would be the amount of depreciation expense for the year? (Do not round intermediate calculations.)

($39,000 cost - $5,500 salvage value) ÷ 100,000 miles = $0.34 per mile depreciation; $0.34 per mile × 26,500 miles = $8,878 depreciation expense.

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,805,000. Harding paid $490,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $518,000; Building, $1,540,000 and Equipment, $1,022,000. (Round your intermediate percentages to the nearest whole number: i.e 0.054231 = 5%. Do not round any other intermediate calculations.) Assume that Harding uses the units-of-production method when depreciating its equipment. Harding estimates that the purchased equipment will produce 1,090,000 units over its 5-year useful life and has salvage value of $18,000. Harding produced 274,000 units with the equipment by the end of the first year of purchase. Which amount below is closest to the amount Harding will record for depreciation expense for the equipment in the first year?

($595,650 cost of equipment (33% of $1,805,000 purchase price) minus $18,000 salvage value) ÷ 1,090,000 units = $0.5300 per unit; $0.5300 × 274,000 units = $145,207.

Anton Co. uses the perpetual inventory method. Anton purchased 1,000 units of inventory that cost $8 each. At a later date the company purchased an additional 1,050 units of inventory that cost $10 each. If Anton uses the FIFO cost flow method and sells 1,450 units of inventory, the amount of cost of goods sold will be:

(1,000 × $8) + (450 × $10) = $12,500

The inventory records for Radford Co. reflected the following Beginning inventory @ May 1 - 1,600units@$4.80 First purchase @ May 7 - 1,700units@$5.00 second purchase @ May 17 - 1,900units@$5.10 Third purchase @ May 23 - 1,500units@$5.20 Sales @ May 31 - 5,100units@$6.70 Determine the amount of cost of goods sold assuming the LIFO cost flow method.

(1,500 × $5.20) + (1,900 × $5.10) + (1,700 × $5.00) = $25,990

The following balance sheet information was provided by Western Company: Assets Year 2 Year 1 - Cash$2,000 $1,500 - Accounts receivable$15,000 $13,000 - Inventory$24,000 $30,000 Assuming Year 2 net credit sales totaled $120,000, what was the company's average days to collect receivables? (Use 365 days in a year. Do not round your intermediate calculations.)

Accounts receivable turnover = Net credit sales ÷ [(Beginning accounts receivable + ending accounts receivable) ÷ 2] Accounts receivable turnover = $120,000 ÷ [($13,000 + $15,000) ÷ 2] = $120,000 ÷ $14,000 = 8.57 times Average days to collect receivables = 365 days ÷ 8.57 = 42.60 days

Retained Earnings at the beginning and ending of the accounting period was $600 and $1,300, respectively. If revenues were $2,300 and dividends paid to stockholders were $500, expenses for the period must have been:

Beginning retained earnings + Revenues - Expenses - Dividends = Ending retained earnings $600 + $2,300 - Expenses - $500 = $1,300 Expenses = $1,100

Which of the following items is an example of revenue? A) Cash received from a bank loan B) Cash received from investors from the sale of common stock C) Cash received from customers at the time services were provided D) Cash received from the sale of land for its original selling price

C)

The following balance sheet information is provided for Santana Company for Year 2: Assets - Cash$4,800 - Accounts receivable 10,950 - Inventory 14,400 Prepaid expenses 1,200 - Plant and equipment, net of depreciation 19,100 - Land 13,000 Total assets$63,450 - Liabilities and Stockholders' Equity - Accounts payable$2,550 - Salaries payable 8,630 - Bonds payable (Due in ten years) 10,000 - Common stock, no par 18,500 - Retained earnings 23,770 Total liabilities and stockholders' equity$63,450 What is the company's debt to equity ratio?

Debt to equity = Total liabilities ÷ Total stockholders' equity Debt to equity = ($2,550 + $8,630 + $10,000) ÷ ($18,500 + $23,770) = $21,180 ÷ $42,270 = 50.11%

The Abel Company provided the following information from its financial records: - Net income $275,000 - Common shares outstanding 1/1 410,000 - Common stock dividends$25,000 - Common shares outstanding 12/31 470,000 - Preferred stock dividends$27,500 - Preferred shares outstanding 1/1 25,000 - Sales$950,000 - Preferred shares outstanding 12/31 21,000 What is the amount of the company's earnings per share?

Earnings per share = (Net income − Preferred stock dividends) ÷ Average shares outstanding Earnings per share = (Net income − Preferred stock dividends) ÷ [(Beginning shares outstanding + ending shares outstanding) ÷ 2] Earnings per share = ($275,000 − $27,500) ÷ [(410,000 shares outstanding + 470,000 shares outstanding) ÷ 2] = $247,500 ÷ 440,000 shares = $0.56 per share

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $2,280,000. Harding paid $665,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $703,000; Building, $2,090,000 and Equipment, $1,387,000. What value will be recorded for the building?

In a basket purchase, the cost of each asset in the "basket" is determined as a percentage of the basket's total appraised value. $2,090,000 ÷ ($703,000 + $2,090,000 + $1,387,000) = 50%; $2,280,000 × 50% = $1,140,000

Currie Company borrowed $12,000 from the Sierra Bank by issuing a 9% three-year note. Currie agreed to repay the principal and interest by making annual payments in the amount of $4,221. Based on this information, the amount of the interest expense associated with the second payment would be: (Round your answer to the nearest dollar.)

Interest expense in year 1: $12,000 × 9% = $1,080; Principal reduction in year 1: $4,221 − $1,080 = $3,141; Principal balance at beginning of year 2: $12,000 − $3,141 = $8,859; Interest expense in year 2: $8,859 × 9% = $797.

The following balance sheet information is provided for Greene Company for Year 2: Assets - Cash$5,800 - Accounts receivable 11,950 - Inventory 14,900 - Prepaid expenses 1,700 - Plant and equipment, net of depreciation 19,600 - Land 13,500 Total assets$67,450 - Liabilities and Stockholders' Equity - Accounts payable$2,850 - Salaries payable 8,130 - Bonds payable (Due in ten years) 12,500 - Common stock, no par 16,000 - Retained earnings 27,970 Total liabilities and stockholders' equity$67,450 What is the company's quick (acid-test) ratio? (Round your answer to 2 decimal places.)

Quick ratio = Quick assets ÷ Current liabilities Quick ratio = (Cash + Receivables + Current marketable securities) ÷ Current liabilities Quick ratio = ($5,800 + $11,950 + $0) ÷ ($2,850 + $8,130 ) = $17,750 ÷ $10,980 = 1.62

The recognition of an expense may be accompanied by which of the following?

Recognizing an expense may be accompanied by an increase in liabilities (i.e. accounts payable, salaries payable) or a decrease in assets (i.e. cash, prepaid rent or insurance).

Revenue on account amounted to $5,400. Cash collections of accounts receivable amounted to $3,350. Expenses for the period were $2,800. The company paid dividends of $800. Net income for the period was

Revenue $5,400 − Expenses $2,800 = $2,600 Net Income

Ballard Company uses the perpetual inventory system. The company purchased $9,000 of merchandise from Andes Company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $350 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $17,000 cash. The amount of gross margin for this merchandise is:

Sales $17,000 - Cost of goods sold ($9,000 × 0.98 + $350) = $7,830 Gross margin

Which of the following represents the impact of a taxable cash sale of $1,200 on the accounting equation if the sales tax rate is 5%?

The transaction is recorded as an increase to cash of $1,260, the amount of the sale, plus the 5% sales tax collected, an increase to sales tax payable of $60, the amount owed to the state, and an increase to sales revenue of $1,200, the amount of the sale.

Darden Company has cash of $34,000, accounts receivable of $44,000, inventory of $23,000, and equipment of $64,000. Assuming current liabilities of $31,000, this company's working capital is:

Working capital = Current assets − Current liabilities Working capital = ($34,000 + $44,000 + $23,000) - $31,000 = $70,000

The following balance sheet information is provided for Apex Company for Year 2: Assets - Cash$7,600 - Accounts receivable 13,750 - Inventory 15,800 Prepaid expenses 2,600 - Plant and equipment, net of depreciation 20,500 - Land 14,400 - Total assets $74,650 Liabilities and stockholders' equity - Accounts payable $3,390 - Salaries payable 7,230 - Bonds payable (due in ten years) - 17,000 Common stock, no par 11,500 - Retained earnings 35,530 Total liabilities and stockholders' equity$74,650 What is the company's working capital?

Working capital = Current assets − Current liabilities Working capital = ($7,600 + $13,750 + $15,800 + $2,600) − ($3,390 + $7,230) = $39,750 − $10,620 = $29,130

The inventory records for Radford Co. reflected the following Beginning inventory @ May 12,100units@$5.80 First purchase @ May 72,200units@$6.00 second purchase @ May 172,400units@$6.10 Third purchase @ May 232,000units@$6.20 Sales @ May 316,600units@$7.70 Determine the amount of gross margin assuming the weighted average cost flow method.

[(2,100 × $5.80) + (2,200 × $6.00) + (2,400 × $6.10) + (2,000 × $6.20)] ÷ 8,700 units = $6.03 per unit.(6,600 × $7.70) − (6,600 × $6.03) = $11,022.

Hoover Company purchased two identical inventory items. The item purchased first cost $36.50. The item purchased second cost $40.25. Then Hoover sold one of the inventory items for $70. Based on this information, the amount of:

gross margin is $31.62 if Hoover uses the weighted average cost flow method.