accounting final

1.44 to 1

A company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000. What is the company's current ratio?

Company A's retained earnings would be higher by $1,200

Company A and Company B are identical in all regards except that during Year 1 Company A borrowed $40,000 at an interest rate of 10%. In contrast, Company B obtained financing by acquiring $40,000 from sale of common stock. Company B agreed to pay a $4,000 cash dividend each year. Both companies are in a 30% tax bracket. Which company would show the greater retained earnings at the end of Year 1, and by what amount?

installment note

Definition: requires equal payments of interest and principal in which the amount of interest decreases over the life of the note.

Option D

Flagler Company purchased equipment that cost $90,000. The equipment had a useful life of 5 years and a $10,000 salvage value. Flagler uses the double-declining-balance method. Which of the following choices accurately reflects how the recognition of the first year's depreciation would affect the elements of the financial statements?

Increase liabilities and decrease equity by $2,000

Franklin Company issued a $40,000 note to the Mercantile Bank on August 1, Year 1. The note carried a one-year term and a 12% rate of interest. How will the adjusting entry, dated December 31, Year 1, to record accrued interest expense impact the elements of the financial statements?

Gates' debt to asset ratio will be higher than Markham's.

Gates, Inc. and Markham, Inc. each had the same financial position on January 1, Year 2. The following is a summary of each of their balance sheets on that date: Current assets $ 330,000 Non-current assets 2,970,000 Current liabilities 165,000 Non-current liabilities 1,815,000 Common stock 907,500 Retained earnings 412,500 Gates is about to raise $200,000 in cash by issuing bonds. Markham is going to raise $200,000 on the same day by issuing common stock. Immediately after these transactions, which of the following statements will be correct?

$950,000

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $350,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000. What value will be recorded for the building?

increase liabilities and increase expenses

Houston Co. borrowed $20,000 from Dallas Co. on March 1, Year 1. Houston issued a note payable that had a one-year term and the annual interest rate is 8%. How will the necessary adjustment, dated December 31, Year 1, affect the elements of the Year 1 financial statements?

it dictates that notes payable be reported at their face value

How does the going concern assumption affect accounting for notes payable?

asset source transaction

Issuing a note payable is a(n):

$550 and $0

On January 1, Year 1, Dalen Company purchased office equipment that cost $3,500. The equipment had an estimated five-year useful life and an estimated salvage value of $750. The company uses the straight-line method. What is the depreciation expense shown on the income statement and the related cash flow from operating activities shown on the statement of cash flows, respectively, for Year 1?

$3600 and $7200

On January 1, Year 1, Parker Company purchased an asset costing $20,000. The asset had an expected five-year life and a $2,000 salvage value. The company uses the straight-line method. What are the amounts of depreciation expense and accumulated depreciation, respectively, that will be reported in the Year 2 financial statements?

Option A

On January 1, Year 1, the Platte Corporation issues a 5-year note payable for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal. Which of the following correctly shows the effect of the issuance of the note on Platte's financial statements? Assets = Liab. + Stk. Equity Revenue − Expense = Net Inc. Stmt. of Cash Flows A. 5,000 = 5,000 + NA NA − NA = NA +FA B. 5,000 = 5,000 + NA NA − NA = NA +OA C. 5,000 = NA + 5,000 NA − NA = NA +FA D. NA = 5,000 + (5,000) NA − 5,000 = (5,000) NA

Option C

On January 1, Year 1, the Platte Corporation issues a 5-year note payable for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal. Which of the following correctly shows the effects of the December 31, Year 2 payment (rounded to the nearest whole dollar)? Assets = Liab. + Stk. Equity Revenue − Expense = Net Inc. Stmt. of Cash Flows A. (1,156) = (951) + (205) NA − 205 = (205) (1,156)FA B. (1,156) = (906) + (250) NA − 250 = (250) (906)FA/(250)OA C. (1,156) = (951) + (205) NA − 205 = (205) (951)FA/(205)OA D. (1,156) = (951) + (205) NA − 205 = (205) (1,156)OA

Option B

On January 1, Year 1, the Platte Corporation issues a 5-year note payable for $5,000. The interest rate is 5% and the annual payment of $1,156, due each December 31, includes both interest and principal. Which of the following shows the effect of the December 31, Year 1 payment? Assets = Liab. + Stk. Equity Revenue − Expense = Net Inc. Stmt. of Cash Flows A. (1,156) = (1,156) + NA NA − NA = NA (1,156)FA B. (1,156) = (906) + (250) NA − 250 = (250) (906)FA/(250)OA C. (1,156) = NA + (1,156) NA − 1,156 = (1,156) (1,156)OA D. (1,156) = (906) + (250) NA − 250 = (250) (1,156)FA

It will increase the current ratio to 5:1

The following information is taken from the balance sheet of Menendez Company on January 1, Year 1: Current Assets $ 12,000 Current Liabilities $ 4,000 Equipment 52,000 Long-term Liabilities 32,000 Land 36,000 Common Stock 64,000 Total Assets $ 100,000 Total Liab. & Equity $ 100,000 On January 2, Year 1, the company recorded the following transaction: Accounts receivable 8,000debit Service revenue 8,000credit How will this transaction affect the current ratio?

Earnings before interest and taxes divided by interest expense

The times-interest-earned ratio is calculated by which of the following?

$50,000

Tyler Company purchased equipment that cost $260,000 cash on January 1, Year 1. The equipment had an expected useful life of five years and an estimated salvage value of $10,000. Tyler depreciates its assets under the straight-line method. What is the amount of depreciation expense appearing on the Year 1 income statement?

the outcome is probable and can be reasonably estimated

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

liquidity

What is the current ratio used to evaluate?

balance sheet

Which financial statement reports the amount of accumulated depreciation?

A low times-interest-earned ratio

Which of the following conditions indicate a company has a relatively high level of financial risk?

both double-declining-balance and MACRS

Which of the following is considered an accelerated depreciation method?

Total Cash flow from investing activities

Which of the following measurements would not be affected by the choice of depreciation methods?

liquidity

Which of the following terms describes the ability to generate short-term cash flows?

depreciation

Which of the following terms is used to describe the process of expense recognition for property, plant and equipment?

amortization

Which of the following terms is used to identify the expense recognition associated with intangible assets?

land

Which of the following would be classified as a tangible asset?

copyright

Which of the following would not be classified as a tangible long-term asset?

convertible bond

definition/characteristics: Bonds may be exchanged for stock at the discretion of the bondholder.

callable bond

definition: Can be called for early retirement at the option of the issuer