equity accounting

Ace Electric's income statement reports Sales of $100,000; Cost of goods sold of $46,000, Operating expenses of $34,000, Interest expense of $15,000, Income tax expense of $2,000, and Net income of $3,000. If you were to perform a vertical analysis of this income statement, you would divide each of these income statement line items by

$100,000.

Jingle Company signs a 6-month, $20,000 note. Stated interest rate is 8% payable at the maturity date. Interest incurred on the note is calculated as

$20,000 x 0.08 x 6/12

Volker Company signs a 3-month, $10,000 note. Stated interest rate is 12% payable at the maturity date. Interest incurred on the note is:

$300

Which of the following formulas is used in horizontal analysis to determine the percentage increase or decrease between two years?

(Current-year amount -- Prior-year amount)/Prior-year amount

Stockit, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. Stockit has repurchased 10,000 of its own shares. The number of shares authorized equals ______ shares.

1,000,000

Berta's total assets are $100,000; its total liabilities are $40,000; total equity is $60,000; current liabilities are $10,000. If the company prepares a common-size balance sheet, its current liabilities would be expressed as:

10%

Kat Company reported current assets in year 1 of $20,000 and in year 2 of $24,000. When performing horizontal analysis, the percentage change in current assets would be expressed as:

20% : (24k-20k)/20k

Albert's total assets are $250,000; its total liabilities are $100,000; its total equity is $150,000; its long-term assets are $80,000; and its property, plant, and equipment is $50,000. If the company prepares a common-size balance sheet, its property, plant, and equipment would be expressed as:

20% Reason: $50,000/$250,000

Pferd Company reported total assets in year 1 of $200,000 and in year 2 of $250,000. When performing horizontal analysis, the percentage change in total assets would be expressed as:

25% Reason: (250k-200k)/200

Ace Electronics had sales of $1,000,000 in 2018 and sales of $1,040,000 in 2019. The percentage increase in sales was ______.

4% Reason: Percentage increase = (($1,040,000 - 1,000,000)/$1,000,000) x 100 = 4%

Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals ______ shares.

45,000 Reason: The 45,000 shares outstanding equals the number issued of 50,000 minus the 5,000 shares bought back by the company.

Acme, Inc. had net income of $120,000 in 2018 and net income of $126,000 in 2019. The percentage increase in net income was ______.

5% Reason: Percentage increase=(($126,000-120,000)/$120,000) x 100=5%.

Shares of stock that are repurchased are referred to as____ stock.

: treasury

Select all that apply Which of the following are included in FICA taxes?

A 1.45% Medicare tax A 6.2% social security tax

A common-size balance sheet presents each line item as a percentage of _____ ______

Blank 1: total Blank 2: assets

Select all that apply Which of the following are not required to be deducted from an employee's paycheck?

Charitable contributions State unemployment tax (SUTA) Federal unemployment tax (FUTA)

Select all that apply A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document?

Corporate charter Articles of incorporation

Notes payable is classified as a liability that has which of the following effects?

Creates interest expense on the income statement

True or false: A corporation is owned by debt and equity holders.

False

True or false: Current liabilities are always payable within one year.

False

Select all that apply Which of the following are employer payroll costs?

Federal and state unemployment taxes Employer portion of Medicare tax

The acronym "IPO" stands for

Initial public offering

____ capital is the amount of money paid into a company by its owners.

Invested, Contributed, or Paid-in

_______ capital is the amount of money paid into a company by its owners.

Invested, Contributed, or Paid-in

Select all that apply What are the two classifications for liabilities?

Long-term Current

Select all that apply Withholding taxes for federal and state income tax are based upon which items?

Number of exemptions claimed Amounts earned by employees

Which type of corporation is regulated by the Securities and Exchange Commission?

Public

Match the source of capital with the account in which it is recognized. Earned capital Invested capital

Retained earnings Common stock

Select all that apply The rights of common stockholders typically include which of the following?

Right to vote for corporate directors. Right to distribution of assets in liquidation. Right to dividends when declared.

Select all that apply Which of these payroll taxes are paid only by the employer? (Check all that apply.)

SUTA FUTA

Select all that apply Which of these payroll taxes are paid by the employer and the employee? (Check all that apply.)

Social Security Medicare

Match each term with its definition. Authorized shares Issued shares Outstanding shares

Total number of shares available to sell as indicated in the company's articles of incorporation Total number of shares of stock issued (sold) to investors The number of shares issued less treasury shares repurchased by the corporation

Select all that apply Which of the following is/are common terms used for horizontal analysis?

Trend analysis Time-series analysis

Select all that apply Which of these are the same as horizontal analysis?

Trend analysis Time-series analysis

Risk ratios and profitability ratios represent common ratios used for analysis.

True

Which of the following provides additional financing to a firm in exchange for a percentage ownership in the company before it issues stock through an initial public offering?

Venture capital firm

______ analysis identifies the relative contribution made by each financial statement line item.

Vertical

______ analysis is a technique that expresses each financial statement amount as a percentage of another amount on the same financial statement.

Vertical

Which of the following types of analysis allows for the comparison of financial statement items between companies of different size?

Vertical approach

Select all that apply Which of the following are current liabilities?

Wages payable Accounts payable Note payable due in 3 months

A company purchases inventory or supplies and promises to pay within 30 to 45 days. No formal agreement is signed. This transaction is recorded as a(n)

accounts payable.

_______ investors are wealthy individuals in the business community willing to risk investment funds on a promising business venture. Listen to the complete question

angel

A wealthy individual in the business community who risks investment funds on promising new businesses is referred to as a(n)

angel investor.

Select all that apply Payroll withholdings ______. (Select all that apply.)

are amounts subtracted from employees' gross earnings to determine their net pay decrease the amount of cash an employee receives

The number of shares authorized is set forth in the company's:

articles of incorporation

When a business incorporates, it must file its ______ with the state in which it incorporates.

articles of incorporation

For a specific corporation, the total number of shares available to sell are referred to as:

authorized

The total number of shares that a company may sell is referred to as ________ shares.

authorized

Vertical analysis is also commonly known as_____ - size analysis.

common

An analyst who wants to compare two companies based on their income statement information should prepare a _____ income statement.

common-size

Analyzing trends of financial statement data over time by looking at the percent change from year to year is referred to as_____ analysis.

horizontal

Trend analysis and time-series analysis refer to _____ analysis.

horizontal

The type of analysis used to analyze trends in financial statement data over time is called

horizontal analysis

To analyze changes in a company's net income over the last 10 years, you should perform a ______.

horizontal analysis

To analyze changes in a company's sales over the last 5 years, you should perform a ______.

horizontal analysis

Select all that apply Retained earnings are:

increased by net income. decreased by dividends. all of the company's earnings not distributed to stockholders. sometimes called earned capital.

We record interest expense in the period in which we

incur it.

Interest expense is recorded in the period when it is _____

incurred, incur, or incured

On December 1, Milka Inc. borrows $500,000 from the bank. Interest of 6% is due in six months. On December 31, Milka recognizes interest. As a result of this journal entry, Milka's income statement reports:

interest expense for one month

On December 1, Milka Inc. borrows $500,000 from the bank. Interest of 6% is due in six months. On December 31, Milka recognizes interest. As a result of this journal entry, Milka's balance sheet reports:

interest payable for one month

The amount of money paid into a company by its owners is referred to as:

invested capital

Horizontal analysis ______.

is used to identify trends over time

Corporations raise capital by

issuing stock.

A(n) ________is a probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services as a result of past transactions or events. (Enter one word per blank)

liability or liabilities

Stockit, Inc. issued 100,000 shares of the 1,000,000 shares authorized. Stockit has repurchased 10,000 of its shares. The number of shares authorized represents the:

maximum number of shares Stockit is allowed to sell.

Retained earnings of $100,000 represent a corporation's cumulative earnings ______ and is shown on the ______.

not paid out by dividends; balance sheet and statement of retained earnings

Amounts that are subtracted from an employee's gross pay are referred to as

payroll withholdings.

The formula (current-year amount -- prior-year amount)/prior-year amount calculates the _______ used in horizontal analysis.

percentage increase or decrease

A(n) _________corporation is considered closely held with few owners, whereas a(n)________ corporation is available to any investor who wants to purchase shares of stock on the stock exchange.

private, public

Select all that apply When comparing the financial statements of two different companies, a financial analyst would use which two categories of ratios?

profitability ratios risk ratios

Earned capital increases ____.

retained earnings

a company's past profits that are not paid out in dividends are ______.

retained earnings

Which of the following is included in the rights of common stockholders?

right to vote right to receive dividends right to share in the distribution of assets

To perform a vertical analysis of an income statement, you would divide each line item on the statement by ______.

sales

Another common term for stockholders' equity is:

shareholders equity

The number of shares issued represents the number of shares:

sold

An IPO:

stands for initial public offering. is when a private company goes public.

Select all that apply An IPO:

stands for initial public offering. is when a private company goes public.

Shareholders' equity is another common term for ________ equity. (Do not use shareholders)

stockholders', owners', or stockholders

A corporation is owned by its ______

stockholders, shareholders, or investors

To calculate a year-to-year percentage change in any financial statement line item, you should take ______, then divide by the prior year's amount, and finally multiply the result by 100.

the current year's financial statement amount minus the prior year's amount

Payroll withholdings are

the items subtracted from an employee's gross pay to arrive at take-home pay.

To calculate a year-to-year percentage change in any financial statement line item such as sales, you should take the current year's amount, subtract the prior year's amount, then divide by ______, and finally multiply the result by 100.

the prior year's amount

A common-size balance sheet will list each line item as a percentage of

total assets.

Select all that apply Attracting outside investment is easier for corporations than for sole proprietorships and partnerships because:

transfer of ownership interest does not change the organization's operations ownership interest can easily be transferred among individual investors

Shares of stock previously sold by the corporation that are repurchased are called

treasury stock.

_____ ______firms provide additional financing to start up corporations.

venture capitals

Common-size analysis is another term used for a ____ analysis

vertical