Accounting: MBA 5100 (As much as I could place in here)

Green Company has $10,000 of assets. Fifty percent of the assets were acquired from the issue of common stock and thirty percent were acquired from earnings. Based on this information, the dollar value of liabilities must be

$2,000 Liabilities had to be 20% because the right side of the accounting equation represents 100% of total assets. (100% - 50% - 30% = 20%). Liabilities = $10,000 total assets x 20% = $2,000.

straight-line depreciation method

(cost - Salvage value) / Useful life years

Which of the following statements are true?

All corporations have common stock. Common stockholders have the right to buy and sell stock.

PPE (Property, plant, and equipment) includes

Buildings, land, computers.

Which of the following statements are true? (Business style)

A proprietorship is the simplest form of business organization to organize and operate. The requirements for establishing a corporation vary from state to state.

The accounting records of Direct Marketing Company (DMC) indicate that the company has $500 of cash; $3,500 of land; $1,000 of liabilities; $600 of common stock; and $2,400 of retained earnings. Based on this information, the percent of assets provided by earnings is

60%. Retained earnings/total assets = percent of assets provided by earnings Total assets amount to $4,000 ($500 cash + $3,500 Land). Retained earnings = 60% ($2,400/$4,000) of total assets.

If a company has earnings before interest and taxes of $780,000, interest expense of $105,000, income tax expense of $230,000, and net income of $445,000, ts number of times interest is earned is

7.428 $780,000 ÷ $105,000 = 7.428 (the company has $7.43 of earnings for every $1 of interest owed).

If a company has total assets of $1,500,000, current assets of $220,000, total liabilities of $1,100,000, current liabilities of $176,000, and total stockholders' equity of $400,000, its debt to asset ratio is

73.3% $1,100,000 ÷ $1,,500,000 = 73.3%

Given current assets of $700,000, average accounts receivable of $160,000, credit sales of $1,500,000, cost of goods sold of $900,000 and net income of $100,000, the accounts receivable turnover ratio is

Accounts receivable turnover ratio = (Net credit sales / Average accounts receivable) $1,500,000 / $160,000 = 9.375 = 9.38

Inventory item 101 cost $100 and was acquired April 1. Inventory item 102 cost $110 and was acquired June 1. The two inventory items are identical in all respects, except the date purchased price paid to acquire them. The business uses the weighted-average cost flow method. If item 102 is sold to a customer, the amount assigned to cost of goods sold is

$105 The average of both products COGS, $100 and $110, is $105. (110 + 110) / 2 = 105

The seller of a bond is called the ___ while the buyer of a bond is called the ___.

Issuer Bondholder

Fred's Fans purchased two identical fans for resale. Fan 1 was purchased in April and cost $76. Fan 2 was purchased in May and cost $80. One of the fans was sold in June for $100. Which inventory cost flow method would result in a $20 gross margin?

Last-in, first out $100 - $80 = $20

When an intangible asset with an identifiable useful life is amortized

Liabilities are not affected Cash flow is not affected Net income decreases

Which of the following statements are true?

Limited liability companies (LLCs) offer many of the benefits of corporate ownership, yet are, in general, taxed as partnerships. S Corporations are taxed as proprietorships or partnerships.

Which of the following statements are true? (LLC/Ltd Liabs)

Limited liability companies (LLCs) offer many of the benefits of corporate ownership, yet are, in general, taxed as partnerships. S Corporations are taxed as proprietorships or partnerships.

Which of the following statements are true?

Many states allow corporations to issue no-par stock. To minimize the amount of assets that owners must maintain in the business, many corporations issue stock with very low par values.

Accounts receivable turnover ratio

Net Credit Sales / Average Accounts Receivable

Paying a previously declared cash dividend

Decreases both liabilities and assets

When a company expects heavy asset use and high revenues in the early years of an asset's life and lower revenues and use in the later years, the best depreciation method to smooth out the amount of net income reported each year is

Double-declining balance

A company may use LIFO or weighted average for financial reporting even if its goods flow physically on a FIFO basis.

False Companies are permitted to expense the cost of an inventory item that is different from the one that was actually sold.

Because it is highly liquid, inventory is generally presented above accounts receivable on the balance sheet.

False Inventory is less liquid than accounts receivable (also cash, securities, ect) so it is below, not above.

True or false: The stated value of a share of stock is established by the federal government.

False The stated value is established by the corporation's board of directors under the authority of a state government not the federal government.

Activities dealing with raising money to start a business are ______ activities.

Financing

Which of the following would be classified as a long-term operational asset?

Goodwill

The date of record for a cash dividend

Has no effect on the financial statements

Which of the following statements are true? (Stock)

Treasury stock is stock that a company has repurchased from its investors. The number of shares outstanding may be less than the number of shares issued.

True or false: Partnerships and proprietorships are usually managed by their owners.

True

Companies that use LIFO for income tax reporting must use the same inventory cost flow method for their financial statements.

True Companies using LIFO for tax reporting are also required to use LIFO for financial reporting.

A partnership balance sheet includes

a separate capital account for each partner

When a company pays cash to purchase land, the amount of cash

decreases and the amount of land increases

Intangible assets with identifiable useful lives are

amortized over the shorter of their useful or legal lives shown in the asset section of the balance sheet

Preferred stock

dividends are paid before dividends are distributed to common stockholders has a liquidation value that, in case of bankruptcy, is paid before assets are distributed to common stockholders

Cumulative dividends

are dividends that accumulate for future payment when a company fails to pay a periodic dividend may also be called dividends in arrears

Given an accounts receivable turnover ratio of 15.5, ending accounts receivable of $150,000, and average accounts receivable of $140,000, the average days to collect receivables is ______ days.

average days to collect receivables = (365/account receiv turnover) (365/15.5) = 23.54 days

The number of times interest earned ratio = ... ÷ interest expense.

earnings before interest and taxes

Creditors cannot claim owners' personal assets as payment for the company's debts if the company is organization as a(n)

corporation

Stock certificates are used as evidence of ownership in

corporations

Inventory Turnover: Number of times, ON AVERAGE, that inventory is replaces during the year.

cost of goods sold / average inventory

When board members are reluctant to fire the CEO or other poorly performing managers, a corporation is said to be experiencing

entrenched management

Activities dealing with raising money to start a business are ______ activities.

financing

The net effect of the entries to recognize the receipt of a previously written-off account under the allowance method is to

have no effect on total assets or stockholders' equity.

The cost of a building includes

Purchase price Realtor commissions Renovation costs

A company's financial statements are not impacted on the date of ... of a cash dividend.

Record

The party that owns the stock on the date of ... is legally entitled to a cash dividend.

Record

The gain or loss on the disposal of an asset is equal to the sales price minus

Sales price minus - Book value

Congress gave legal authority to establish accounting principles for corporations that are registered on the exchange to the

SEC The SEC has normally deferred its rule-making authority to this board.

Which of the following statements are true?

The amount due at bond maturity is called the face value of the bond. A bond certificate describes the company's obligation to repay the principal. Cash interest payments are based on the stated interest rate.

The term withdrawal may appear in the financial statements of a

proprietorship partnership

Owner contributions and retained earnings are combined in a single capital account on the balance sheets o

proprietorships

Asset use transactions include purchasing land repaying debt paying expenses paying dividends

repaying debt paying expenses paying dividends

Financing activities include

repaying the principal on a loan issuing common stock paying a dividend to stockholders

The par value represents the

maximum liability of the investors. minimum amount of assets that must be retained in the company as protection for creditors

Retained earnings is all past and present income

minus all past and present dividends

The salvage value of an asset is the

Expected market value of a fully depreciated asset

Knowledgeable investors will be more attracted to companies that choose the inventory value method that

Minimizes tax expense

Which of the following assets is not considered to have indefinite useful lives?

Copyrights

The benefit of continuity of existence is an advantage of being organized as a

Corporation

The benefit of continuity of existence is an advantage of being organized as a(n)

Corporation

The life of a continues even after the owner(s) have departed.

Corporation

Which form of business organization offers the greatest ease of transferring ownership?

Corporation

The ability to raise huge amounts of capital is generally limited to organizations organized as

Corporations

Which of the following statements is true? (Corporations)

Corporations are not legally required to declare cash dividends.

When inventory is sold, inventory cost methods (FIFO, LIFO, weighted average) are used to determine how much cost to assign to

Cost of goods sold (COGS)

The complete collection of a company's accounts is called the

General ledger

Which of the following statements are true? (Stock)

The stock of closely held companies is not sold on major stock exchanges. Trading on a stock exchange is limited to the stockbrokers who are members of the exchange.

An asset use event causes a(n)

decrease in an asset account and a decrease in a liability or stockholders' equity account

Common stockholders have the right to

share in the distribution of profits vote on significant matters that affect the corporate charter participate in the election of directors

Cloud Company has 5,000 shares of 6%, $20 par value noncumulative preferred stock outstanding. The company also has 8,000 shares of $10 par value common stock outstanding. Cloud paid no dividends in Year 1 or Year 2. In Year 3, Cloud paid $30,000 of cash dividends. What was the amount of dividends paid to preferred stockholders?

$ ,000 5,000 shares × $20 × 6% = $6,000 annual preferred dividend. Since the preferred stock is noncumulative, there are no dividends in arrears.

The Black Limo Company (BLC) purchased a limo on January 1 of Year 1. The limo cost $48,000. It had an expected useful life of 4 years and a $8,000 salvage value. Assuming BLC uses straight-line depreciation, cash flow from operating activities shown on the Year 2 statement of cash flows is

$0 The cash paid for the limo would have been shown on the Year 1 cash statement as an investing activity. There is no cash flow associated with the recognition of depreciation. But, the yearly depreciation amount would be $10,000. ((Cost - Salvage value) / life years)

Cloud Company has 5,000 shares of 6%, $20 par value cumulative preferred stock outstanding. The company also has 8,000 shares of $10 par value common stock outstanding. Cloud paid no dividends in Year 1 or Year 2. In Year 3, Cloud paid $30,000 of cash dividends. What was the amount of dividends paid to common stockholders?

$12,000 5,000 shares × $20 x 6% = $6,000 annual × 3 years = $18,000 due to preferred stockholders. $30,000 total dividend - $18,000 preferred stock distribution = $12,000 common stock distribution.

Kate Company submitted an offer to purchase a plot of land that was listed at $120,000. Kate's offer was 10% below the list price and was accepted. Kate paid $10,000 to remove an old structure in order to make the land ready for use as a building site. Title and attorney fees amounted to $3,000. Annual property taxes amounted to $5,000 per year. Based on this information, the cost of the land as shown on the balance sheet equals

$120,000 List price × 90% = $108,000 purchase price + $10,000 structure removal + $3,000 title and attorney fees $108,000 + $10,000 + $3,000 = $121,000 The annual tax fee happens at end of the year.

Thomas Company has $120,000 of assets, $40,000 of liabilities, $50,000 of stock, and $30,000 of retained earnings. Investors own 25,000 shares of Thomas' stock that has a current market value of $5.20 per share. Based on this The book value per share of the stock is

$3.20 (Stock + R.E.) / Number Of Shares (($50,000 stock + $30,000 retained earnings)/ 25,000 shares of stock = $3.20 per share)

Benson Company had beginning inventory of 150 units that cost $200 each. During the year, Benson made two inventory purchases: Purchase 1 for 500 units that cost $210 each and Purchase 2 for 350 units that cost $220 each. During the year, Benson sold 700 units. If Benson uses LIFO, reported ending inventory equals

$61,500 Purchase 2 (350 units × $220) + purchase 1 (350 units × $210 each) = $150,500 cost of goods sold; $212,000 cost of goods available for sale - $150,500 cost of goods sold =$61,500.

Benson Company had beginning inventory of 150 units that cost $200 each. During the year, Benson made two inventory purchases: Purchase 1 for 500 units that cost $210 each and Purchase 2 for 350 units that cost $220 each. During the year, Benson sold 700 units. If Benson uses FIFO, the reported ending inventory equals

$66,000 Beginning inventory (150 units × $200 each) + Purchase 1 (500 units × $210 each) + Purchase 2 (50 units × $220) = $146,000 Cost of goods sold; $212,000 cost of goods available for sale - $146,000 cost of goods sold = $66,000

Allegheny Company ended Year 1 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $68,000 and $3,450, respectively. During Year 2, Allegheny wrote off $6,300 of Uncollectible Accounts. After aging its receivables, Allegheny estimates that the ending Allowance for Doubtful Accounts balance should be $5,400. What will Allegheny report as Uncollectible Accounts Expense on its Year 2 income statement?

$8,250 $3,450 beginning allowance balance − $6,300 write-offs + uncollectible accounts expense = $5,400 ending allowance balance; uncollectible accounts expense = $5,400 − $3,450 + $6,300 = $8,250

If a company has sales of $17,500,000, net income of $1,475,000, earnings before interest and taxes of $2,300,000, income tax expense of $695,000, and interest expense of $130,000, the number of times interest is earned is

17.69 $2,300,000 ÷ $130,000 = 17.69 (there is $17.69 of earnings for every $1 of interest expense).

If a company has total assets of $1,700,000, current liabilities of $300,000, total liabilities of $1,200,000, common stock of $150,000 and total stockholders' equity of $500,000, its debt to equity ratio is

2.40 to 1 $1,200,000 ÷ $500,000 = 2.4 (there is $2.40 of debt for every $1 of equity).

Which of the following characteristics make transferring the ownership of a proprietorship difficult?

A buyer must purchase the entire business. Most proprietorships are owner operated.

If a company has current assets of $145,000, total assets of $1,200,000, current liabilities of $100,000, total liabilities of $660,000, and total stockholders' equity of $540,000, its debt to asset ratio is

55.0% $660,000 ÷ $1,200,000 = 55%

Which of the following is not normally included in the articles of incorporation?

A forecast of projected profitability

Intangible assets may have

A legal useful life An indefinite useful life An identifiable useful life

Which of the following statements concerning internal controls is true? Internal controls are limited to the policies and procedures used to protect the company from fraud. A system of internal controls is designed to prevent or detect errors and fraud. The control procedure, separation of duties, prohibits the employment of a husband and wife or other closely related parties within the same company. Strong internal controls cannot be circumvented.

A system of internal controls is designed to prevent or detect errors and fraud. A system of internal controls is designed to prevent or detect errors and fraud. However, no control system is foolproof. Internal controls can be circumvented by collusion among employees. Two or more employees working together can hide embezzlement by covering for each other. Similarly, internal controls can be compromised by management override. No system can prevent all fraud. However, a good system of internal controls minimizes illegal or unethical activities by reducing temptation and increasing the likelihood of early detection. When duties are separated, the work of one employee can act as a check on the work of another employee. Whenever possible, the functions of authorization, recording, and custody of assets should be performed by separate individuals.

The term used when recognizing expense for intangible assets with identifiable useful lives i

Amortization

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

Amortization

The maximum number of shares of stock corporations are legally permitted to issue is the ... number of shares.

Authorized

An event that causes assets and liabilities to decrease is an asset

Asset Use

Which financial statement is affected on both the date of declaration and the payment date of a dividend?

Balance Sheet

Which statement reports on a company's financial condition at a specific point in time?

Balance Sheet

Recognizing depreciation expense affects the

Balance sheet Income statement

Arron Company had beginning inventory of 200 units that cost $200 each. During the year, Arron made two inventory purchases: Purchase 1 for 500 units that cost $210 each and Purchase 2 for 300 units that cost $220 each. Assuming Arron uses LIFO and sells 800 units of inventory during Year 2, the amount of cost of goods available for sale equals $ Blank 1Blank 1 211000 , Correct Unavailable, cost of goods sold equals $Blank 2Blank 2 171000 , Correct Unavailable and ending inventory equals $Blank 3Blank 3 40000 , Correct Unavailable.

Blank 1: 211,000 Blank 2: 171,000 Blank 3: 40,000

A company recorded an event that caused assets, liabilities and cash flow from financing activities to increase, but had no affect on net income. This event could have been due to

Borrowing money with a two year term to maturity

Which of the following are operating activities? Cash receipts from customers Paying expenses Paying employees Purchasing land Paying dividends

Cash receipts from customers Paying expenses Paying employees

The greatest potential for rewards when a corporation prospers rests with ... stockholders.

Common

If a company is forced to liquidate, the highest risk of losing their investment rests with ... stockholders.

Common Preferred shareholders frequently are guaranteed a liquidation value in the case of bankruptcy before assets are distributed to common stockholders

Cost of goods available for sale is allocated between

Ending inventory and cost of goods sold

Which items are presented on the statement of changes in stockholders' equity? Total stockholders' equity Ending retained earnings Net income Notes payable Cash Beginning common stock Revenue Expense Dividends

Ending retained earnings Dividends Total stockholders' equity Net income Beginning common stock

Consider rolling two dice. Which of the following describe two events that are collectively Exhaustive?

Event 1: Rolling an even number. Event 2: Rolling an odd number. Event 1: Rolling a value of 7 or more. Event 2: Rolling a value of 6 or less. Event 1: Rolling a value of 6 or more. Event 2: Rolling a value of 8 or less.

Exclusive rights to sell products or perform services in certain geographic areas is granted by

Franchise

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

Franchise

Which of the following statements regarding franchises are true?

Franchises may be issued by the federal government. Franchises may be issued by private businesses.

Recognizing accrued interest expense affects the

Income statement Balance sheet NOT THE STATEMENT OF CASH FLOWS

Declaring a cash dividend will

Increases liabilities and decreases stockholders' equity

The cost of a long-term asset includes

Installation costs Sales tax Purchase price Realtor's and attorney fee's

When goods are sold under the perpetual inventory system, the cost of the good sold is transferred from the ___ account to the ___ account

Inventory Cost of goods sold

Book value per share is

Measured in historical dollars Calculated by dividing total stockholders' equity by the number of shares of stock owned by investors

Which of the following is not an inventory cost flow method?

Next in First Out (NIFO)

The Sarbanes-Oxley Act gave the ______ authority to set and enforce standards for auditors of public companies.

PCAOB

Activities dealing with purchasing and selling short-term assets are ______ activities.

Operating

Which of the following is a financing activity Paying interest on a loan Paying expenses Selling a building Paying a dividend to stockholders

Paying a dividend to stockholders

Which of the following is an operating activity? Paying employees Purchasing equipment Selling a building Paying dividends

Paying employees

Which of the following are operating activities Paying dividends Paying employees Purchasing land Cash receipts from customers Paying expenses

Paying employees Cash receipts from customers Paying expenses

Which of the following statements are true?

Preferred stock dividends in arrears must be paid before dividends can be distributed to common stockholders. If a company skips a dividend on noncumulative preferred stock, the dividend is lost forever.

Inventory of batch 101 consists of 50 units and is purchased in October at a total cost of $100. Inventory of batch 102 consists of 50 units and is purchased in November at a total cost of $110. The two inventory items are identical in all respects, except the price paid to acquire them. The business uses the first-in, first-out (FIFO) cost flow method. If 50 items of inventory are used in manufacturing 50 units of finished product, the ending balance in the Inventory account is

Regardless of which item is used in manufacturing, FIFO requires the cost of items in batch 101 to be charged to the cost of goods sold. Therefore, the cost of batch 102 of $110 is the ending inventory. Specifically, the FIRST batches of inventory has been sold off. So what's left is are last inventory batches, which = $110.

Which items are not presented on the statement of changes in stockholders' equity? Revenue Dividends Ending retained earnings Cash Net income Beginning common stock Expense Total stockholders' equity

Revenue Cash Expense

In practice, bonds normally pay interest

Semiannually

No-par stock may have a(n) value which is an arbitrary amount established by the board of directors to the stock

Slated

Which statements report what happened over a span of time Statement of Changes in Stockholders' Equity Statement of Cash Flows Balance Sheet Income Statement

Statement of Changes in Stockholders' Equity Statement of Cash Flows Income Statement

Which of the following statements are true?

The balance sheet of a proprietorship contains a single Owner's Capital account. Owner withdrawals are shown in the capital statement of a proprietorship.

Which of the following statements are true? The increase in a business's commitments to stockholders is called retained earnings. Income is an obligation to deliver assets to creditors. A company that has earnings is required to pay dividends to stockholders. Businesses may retain assets generated through operations.

The increase in a business's commitments to stockholders is called retained earnings. Businesses may retain assets generated through operations.

Authorized stock Issued stock Outstanding stock Treasury stock

The maximum number of shares a company can legally issue The total number of share the company has sold to investors The number of shares currently owned by investors The number of shares of stock that a company has repurchased from its investors

A corporation becomes legally obligated to make a cash dividend on the ...

declaration

Double taxation refers to the fact that

income is taxed first at the corporate level and a second time when stockholders receive dividends

Which financial statements are NOT affected by the declaration of a dividend?

income statement statement of cash flows

A chief advantage of the corporate form of business is

limited liability

Jones Co. started the year with no inventory. During the year, it purchased two identical inventory items at different times. The first purchase cost $1,230 and the other, $1,460. Jones sold one of the items during the year. Required Based on this information, how much product cost would be allocated to cost of goods sold and ending inventory on the year-end financial statements, assuming use of a. FIFO? b. LIFO? c. Weighted average? FIFO LIFO Weighted Average Cost of goods sold Ending inventory

n case of FIFO the inventory purchase first would be sold first and thus accordingly COGS and ending inventory would be determinedThus, the first item would be sold and second item held in inventoryCOGS$1,230Ending inventory$1,460 In case of LIFO method the inventory purchase latest is sold first and earlier one is held as inventoryThus, the second item would be sold and first item held in inventoryCOGS$1,460Ending inventory$1,230 Weighted average costs per unit(1230+1460)/2Weighted average costs per unit$1,345per unitCosts of goods sold$1,3451345*1Ending inventory$1,3451345*1

The debt to equity ratio is

total liabilities ÷ total stockholders' equity