FinancialAccountingFinal

Breeze Inc. receives payment of $800,000 for 4 wind turbines that were delivered and invoiced on credit in the previous month. How would this receipt impact the accounting equation of Breeze Inc.? Select all that apply.

Assets increase by $800,000 because the company receives cash, and assets also decrease by $800,000 because the company no longer has a right to receive the cash (the receivable previously recorded at the time of the sale).

Using the Indirect Method to create the Statement of Cash Flows, which of the following options are correct in describing what must be done to convert net income to operating cash flow?

A gain, an increase in operating current assets, and a decrease in operating current liabilities would all need to be subtracted from net income in order to convert net income into operating cash flow when using the indirect method to create the Statement of Cash Flows.

Company A has a higher Accounts Payable Turnover Ratio than Company B. Which of the following statements is true regarding these two companies?

Accounts Payable Turnover = Credit Purchases / Average Accounts Payable Balance Accounts Payable Turnover measures the number of times a company can pay off its average account payable balance during a time period.

Jarvard University Bookstore paid $67,000 for books purchased on credit in the previous month. How would this payment impact the accounting equation?

Assets decrease by $67,000 as cash is paid, and liabilities decrease by $67,000 as Jarvard no longer has the obligation to pay for the books.

Jarvard University Bookstore paid $67,000 on June 10 for books purchased on credit on May 4. How would the June 10th payment impact the accounting equation?

Assets decrease by $67,000 as cash is paid, and liabilities decrease by $67,000 as Jarvard no longer has the obligation to pay for the books.

Gilligan and Skipper's Tour Boat Co. (GSTBC) receives $150,000 in advance payments for an upcoming 3-hour tour. How will the accounting equation of GSTBC be impacted when these advance payments are received?

Assets increase by $150,000 because the company now has that amount of cash, and liabilities increase by $150,000 because the company now has the obligation to provide services on the upcoming cruise.

Perfect Printers is able to obtain 30 days credit terms to purchase a heavy duty printing machine for $200,000. How will this purchase impact the accounting equation of Perfect Printers at the time of the purchase?

Assets increase by $200,000 because the company now has a machine, and liabilities increase by $200,000 because the company now has the obligation to pay for the machine within 30 days.

Qingji Corp., an oil separator manufacturer, rented a warehouse on January 1st and paid $30,000 for the rent for the next two years. How would this transaction impact the accounting equation of Qingji Corp.?

Assets increase by $30,000 as the company now has a right to receive the benefits of prepaid rent for two years. In addition, assets also decrease by $30,000 as the company no longer has the cash they paid out.

Dongfeng, an automobile manufacturer, purchased raw materials for $600,000 on credit on January 1st. Dongfeng promised to pay for the raw materials in three equal monthly installments beginning from February 1st. How will this purchase impact the accounting equation on the books of Dongfeng

Assets increase by $600,000 because the company now has raw materials it will use in the manufacturing process, and liabilities increase by $600,000 because the company now has an obligation to pay for these materials.

A company purchased a building for $850,000 on January 1, 2010. As of December 31, 2014, $200,000 of accumulated depreciation had been recorded related to this building. The building was sold to another party for $1,250,000 on January 1, 2015. On the sale of this building, the company should recognize:

At the sale date, the building's net book value was $650,000 ($850,000 original cost less $200,000 accumulated depreciation). Since it was sold for $1,250,000, which is more than the net book value, the company should recognize a gain of $600,000.

Company A has a shorter Average Collection Period than Company B using the formula 365 / (Credit Sales / Average AR Balance). Which of the following statements is true regarding these two companies?

Average Collection Period = 365 / AR Turnover = 365 / (Credit Sales / Average AR Balance) Accounts Receivable Turnover is an indicator of a business' ability and efficiency in collecting receivables from customers.

In which stage would you typically expect to see large positive Investment Cash Flows?

Companies in decline tend to have negative Operating Cash Flows, positive Investment Cash Flows, and positive or negative Financing Cash Flows.

Inventory Turnover is calculated by ..,.

Cost of goods sold / Average inventory Inventory Turnover measures the number of times inventory is sold or used in a time period. It is an indicator of operating efficiency.

Bob's Burgers has an Inventory Turnover of 6.0, an Accounts Receivable Turnover of 8.5, and an Accounts Payable Turnover of 10.1. What is the length of their Cash Conversion Cycle?

Days Inventory + Average Collection Period - Days Purchases Outstanding = Cash Conversion Cycle Days Inventory = 365 / Inventory Turnover Average Collection Period = 365 / Accounts Receivable Turnover Days Purchases Outstanding = 365 / Accounts Payable Turnover ( 365 / 6.0 + 365 / 8.5 - 365 / 10.1 ) = 67.6

Suppose that on January 1, 2016 PepsiCo purchased a patent on a production process and it expected that this patent would have value for 10 years. The patent was recorded on the books for $4,800,000. What will the entry look like to record amortization for the month of January, 2016?

Debit Amortization Expense for $40,000 and credit Accumulated Amortization for $40,000.

On January 1, 2016, Flathound Properties received $22,800 from a tenant as rent for all of 2016. How would this receipt be recorded on Flathound Properties' books on 1/1/2016?

Debit Cash for $22,800 and credit Deferred Revenue for $22,800.

Suppose a piece of plant equipment that PepsiCo put into service on January 1, 2014 at a total cost of $300,000 with an expected useful life of 5 years and a salvage value of $60,000 is sold on June 30, 2018 for $60,000. The accumulated depreciation is $216,000. What would the journal entry look like to record this sale?

Debit Cash for $60,000, credit Property, Plant & Equipment for $300,000, debit Accumulated Depreciation for $216,000, and debit Gain/Loss on Disposal of Assets for $24,000.

On January 1, 2016, Flathound Properties received $22,800 from a tenant as rent for all of 2016. What journal entry would Flathound Properties make at the end of January 2016 to show that one month of service had been provided?

Debit Deferred Revenue for $1,900 and credit Revenue for $1,900.

What adjusting entry will need to be made? Total compensation to be paid for the 2 week period is $100,000.

Debit Wages Expense for $100,000 and credit Wages Payable for $100,000.

Which of the following is an example of a Product Cost? Select all that apply.

Direct Labor and Manufacturing Overhead are considered Product Costs and will be added to the cost of Inventory in a manufacturing business.

The income statement reflects a company's:

Financial performance over a given period of time.

We Like to Rock (WLR), a granite countertop manufacturer, delivered 5 countertops at $2,000 each to their client. The cost of producing the countertops was $500 each. The client paid cash for the countertops. First, how would the revenue from this transaction impact the accounting equation for WLR?At the same time, how will the related expense from this transaction impact the accounting equation of WLR?

First, assets increase by $10,000 (5 countertops at $2,000 each) as the company has received cash, and owners' equity increases by $10,000 to recognize the revenue associated with the sale. At the same time, assets decrease by $2,500 (5 countertops at $500 each) as the company no longer has the inventory, and owners' equity decreases by $2,500 to recognize the expense associated with the sale.

Leak Geeks, a plumbing supply company, sold $25,000 of plumbing supplies to one of their larger customers. The supplies had an inventory value of $12,000. How will the revenue and cash inflow from this transaction impact the accounting equation of Leak Geeks?

First, assets increase by $25,000 because the company now has that amount of cash, and owners' equity increases by $25,000 to recognize the revenue associated with the sale. At the same time, assets decrease by $12,000 because the company no longer has the supplies, and owners' equity decreases by $12,000 to recognize the expense associated with the sale.

Address You, a fancy dress manufacturer, sold a dress for $8,000 on credit. The cost of producing this dress was $1,000. First, how would the revenue and receivable from this transaction impact the accounting equation of Address You?At the same time, how will the related expense from this transaction impact the accounting equation of Address You?

First, assets increase by $8,000 because the company now has a receivable, or right to receive cash, and owners' equity increases by $8,000 to recognize the revenue gained from the sale. At the same time, assets decrease by $1,000 because the company no longer has the inventory, and owners' equity decreases by $1,000 to recognize the expense associated with the sale.

What is free cash flow?

Free cash flow is the amount of cash that a business could be expected to generate from its normal operations.

For the year 2015, Dark Horse Corp.'s sales revenue was $1,600,000. Cost of goods sold (COGS) was 40% of sales revenue. Their income statement shows that operating expense was $150,000. What was Dark Horse Corp.'s gross profit for 2015?

Gross Profit is equal to Sales Revenue minus Cost of Goods Sold, in this case $1,600,000 - $640,000 = $960,000. The Cost of Goods Sold of $640,000 is found by multiplying $1,600,000 by 40%.

Suppose for the year 2015, Speedy Chef, a fast food restaurant, had a Gross Profit of $1,281,648. Speedy Chef had the following expenses: Cost of Goods Sold $1,251,167 Selling Expense $70,578 Rent Expense $156,941 Utilities Expense $73,994 Insurance Expense $35,148 Wages $505,245 General & Administrative $24,358 Miscellaneous $32,968 Interest Expense $4,059 Income Tax Expense $60,596 What would Speedy Chef's Income Before Taxes be for 2015?

Income Before Taxes is calculated by subtracting Operating Expenses and Non-Operating Expenses from Gross Profit (note that Cost of Goods Sold has already been subtracted to get Gross Profit, and Income Tax Expense should not be subtracted to get Income Before Taxes so these two figures can be ignored in this case). $1,281,648 - $70,578 - $156,941 - $73,994 - $35,148 - $505,245 - $24,358 - $32,968 - $4,059 = $378,357

Cash flow from operating activities

Interest earned in cashThis is a cash flow from Operating Activities. Sale of inventory - Correct - This is a cash flow from Operating Activities. Sale of inventoryThis is a cash flow from Operating Activities. Cash paid for interest - Correct - This is a cash flow from Operating Activities. Cash paid for interestThis is a cash flow from Operating Activities. Cash received from loan made to others - Incorrect - Cash received from loan made to others is included in the Investing Section. Cash received from loan made to othersCash received from loan made to others is included in the Investing Section. Payment to suppliers - Correct - This is a cash flow from Operating Activities. Payment to suppliersThis is a cash flow from Operating Activities.

In which stage would you typically expect to see large negative Financing Cash Flows?

Mature/Steady companies tend to have positive Operating Cash Flows, either positive or negative Investment Cash Flows, and negative Financing Cash Flows.

How does the following transaction impact cash flow? Recognizing depreciation expense on a piece of equipment purchased six years ago.

No Impact No cash is actually paid when a company recognizes depreciation expense. This is an implicit transaction related to the passage of time, and therefore, there is no impact on cash flows.

Closing Process steps include:

Nominal accounts are reset to zero & Net income is transferred to the retained earnings account on the balance sheet.

Organize the accounts and amounts shown on the right into the current assets and non-current assets sections of the balance sheet for Cardullo's. Start building the sections according to US GAAP and then do it according to IFRS standards. You will have a chance to review both side by side before submitting your answer.

Notice again how US GAAP presents Current Assets first, followed by Non-Current Assets, while IFRS presents them in the reverse order. In these questions we are not evaluating on the order of accounts within Current Assets or Non-Current Assets, but remember that accounts are generally presented in order of liquidity from most liquid to least liquid under US GAAP, and vice versa under IFRS.

Which ratio measures the ability of a company to make a profit relative to revenue generated during a period?

Profit Margin (Net Income/Sales) measures the ability of a company to make a profit relative to revenue generated during a period.

You have just reviewed the financial statements of Penelope's Candy Store (PCS). You have determined that PCS has a Profit Margin of 19%. How do you explain this to owner Penelope Hassey?

Profit Margin (Net Income/Sales) measures the ability of a company to make a profit relative to revenue generated during a period. A Profit Margin of 19% tells us that for every $100 in sales, $19 ended up in Net Income.

The Peach Pit, a restaurant, has Net Income of $25,000, Sales of $55,000, Assets of $115,000, and no debt. What is their ROE?

ROE = (Net Income / Sales) X (Sales / Assets) X (Assets / Equity) If a company has no debt, then their equity multiplier is 1. (25,000/55,000) * (55,000/115,000) * 1 = 21.7%

Which of the following accounts is decreased by a debit?

Sales Revenue Sales Revenue is a revenue account as part of owners' equity and therefore increases with a credit and decreases with a debit. Deferred Revenue Deferred Revenue is a liability account and therefore increases with a credit and decreases with a debit.

In which stages would you typically expect to see large negative Investment Cash Flows?

Startups tend to have negative Operating Cash Flows, negative Investment Cash Flows, and Positive Financing Cash Flows. Profitable/Growing companies tend to have positive Operating Cash Flows, negative Investment Cash Flows, and positive or negative Financing Cash Flows.

Gordon Growth Model?

Terminal value is the present value of infinite cash flows expected in the future. The Gordon Growth Model assumes that the growth rate will remain fixed.A higher growth rate results in a higher terminal value.

Suppose Waterman Cable Company lent $125,000 to Comcast. On December 31, 2015, Comcast paid back the $125,000 and also paid $3,000 interest to Waterman Cable Company. Under U.S.GAAP, what would be the impact of the repayment on Waterman Cable Company's statement of cash flows using the direct method?

The $125,000 received should be an increase in the Investing Section and, under U.S.GAAP, the $3,000 interest received should be included in the Operating Section.

The Mayflower, a seafood restaurant, had the following liabilities by the end of 2015: Accounts Payable $60,000 Wages Payable $100,000 Unearned Revenue $125,000 (60% will be earned in 2016) Notes Payable $140,000 ($45,000 payable in 2016) What is the amount that The Mayflower should report as Total Current Liability on its balance sheet as of December 31, 2015?

The Total Current Liability reported would be the sum of Accounts Payable, Wages Payable, $75,000 of Unearned Revenue, and $45,000 of Notes Payable. 60,000 + 100,000 + 75,000 + 45,000 = $280,000

A company under IFRS standards decides to include interest paid in the Financing Section of their Statement of Cash Flows. How will this company's Statement of Cash Flows differ from how it would appear if the company were abiding by US GAAP standards?

The company under IFRS will have lower cash flow in the financing section and higher cash flow in the operating section because interest paid is a use of cash (so the financing section's cash flow is decreased). The company under US GAAP would be required to include interest paid in the operating section, which lowers cash flows for that section.

Cash and Cash Equivalents$2,000Insurance Expense$250Accounts Payable$800Prepaid Rent$400Accounts Receivable$750Deferred Revenue$1,650Inventory$925 Which of the amounts below is the correct total of liabilities?

The correct answer is $2,450, which includes: Accounts Payable$800Deferred Revenue$1,650

Cash and Cash Equivalents$2,000Insurance Expense$250Accounts Payable$800Prepaid Rent$400Accounts Receivable$750Deferred Revenue$1,650Inventory$925

The correct answer is $4,075, which includes: Cash and Cash Equivalents$2,000Prepaid Rent$400Accounts Receivable$750Inventory$925

Luster Consulting Company purchased a new heating and cooling system for their office building in March, 2014. After installing and testing the equipment, it was put into service on April 1, 2014. The total cost to put the equipment into service was $45,000; it is expected to have a useful life of 10 years and a salvage value of $5,000. Assuming Luster Consulting Company uses straight-line depreciation, what will the accumulated depreciation be at the end of September, 2015?

The correct answer is $6,000. The depreciable value of the equipment is $40,000 ($45,000 cost - $5,000 salvage value) and the number of years to be depreciated is 10 years. So the depreciation for 12 months is $4,000 ($40,000 / 10 years). The amount of accumulated depreciation at the end of September, 2015 will be $6,000, which includes $3,000 for the nine months of depreciation in 2014 and $3,000 for the nine months of depreciation in 2015.

Quench, a bottled water supplier, has 5,496 bottles of water in their warehouse at the end of April. One third of the bottles were purchased in February at a cost of $1.00 per bottle. Another third were purchased in the month of March at a cost of $1.25 per bottle. The remaining third were purchased in April at a cost of $1.75 per bottle. The warehouse sold and shipped 4,925 bottles during May. Quench uses FIFO to value their inventory. What was the Cost of Sales related to the bottles shipped in May?

The correct answer is $6,328.75. Under FIFO, the oldest purchased are expensed first as Cost of Sales. In this case, the 4,925 bottles of water sold in May include 1,832 bottles expensed at a cost of $1.00 per bottle (related to February), 1,832 bottles expensed at a cost of $1.25 (related to March) and 1,261 bottles expensed at a cost of $1.75 per bottle (related to April).

Chrissie's Cooking Supply Company has 5,000 skillets in their warehouse at the end of July. One quarter of these skillets were held over from the month of June at a cost of $12 per skillet. The remaining skillets were purchased in July at a cost of $15 per skillet. At the beginning of August they received another 2,000 skillets at a cost of $17 per skillet. The warehouse sold and shipped 2,198 skillets during August. Chrissie's Cooking Supply Company uses LIFO to value their inventory. What would be the remaining balance of skillets in the inventory account at the end of August?

The correct answer is $68,280. Under LIFO, the most recent purchases are expensed first as cost of sales. In this case, the 2,198 skillets sold at the end of August include 2,000 expensed at a cost of $17 per skillet (related to August) and 198 expensed at a cost of $15 per skillet (related to July). This means that the remaining balance of inventory is related to the skillets purchased in July and June. (3,552 * $15 per skillet) + (1,250 * $12 per skillet) = 68,280

Initech finances their business using a combination of equity and liabilities. Which of the following numbers is most likely Initech's equity multiplier?

The correct answer is 1.5. A company that finances using only equity will have an equity multiplier of 1. Any amount over 1 shows the proportion financed using liabilities. Since Initech uses a combination of equity and liabilities to finance operations, the only option that would most likely be their equity multiplier is option 4, 1.5.

Company A estimates that it needs 30% of sales in net working capital. In year 1, sales were $1 million and in year 2, sales were $2 million. Associated with the change in net working capital from year 1 to year 2 is a cash:

The correct answer is an outflow of $300,000. The company would need to make a cash investment (outflow) of $300,000 to increase their net working capital from the $300,000 needed to support $1 million of sales to the $600,000 needed to support $2 million of sales.

Wise Guys Consulting issues an invoice for $9,000 to one of their clients for services provided. The terms of the invoice call for payment 30 days after the invoice date. What would be the impact at the date the services are completed and invoiced?

The correct answer is to debit Accounts Receivable (an asset) for $9,000 as the company now has the right to receive cash, and credit Revenue (part of owners' equity) for $9,000 to recognize the revenue associated with the sale.

Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000. What is the journal entry to record the revenue on the books of Traxx?

The correct answer is to debit Accounts Receivable for $16,000 as the company now has the right to receive cash and credit Revenue for $16,000 to recognize the revenue associated with the sale.

Cakery Bakery receives $1,000 from a customer on August 5, 2016 for a wedding cake to be delivered on September 19, 2016. What would Cakery Bakery record on their books when they receive this payment?

The correct answer is to debit Cash (an asset) for $1,000 as the company now has the cash and credit Deferred Revenue (a liability) for $1,000 as the company now has an obligation to provide services in the future.

Wise Guys Consulting receives payment in full totaling $9,000 from a client for services which were rendered and invoiced the previous month. What would be the impact at the time the payment is received?

The correct answer is to debit Cash (an asset) for $9,000 as the company now has the cash and credit Accounts Receivable (also an asset) for $9,000 as the company no longer has the right to receive cash.

Keep You in the Know (KYK) magazine received $120,000 cash in annual subscriptions in December 2013. KYK is a monthly publication and all of these subscriptions commence in January 2014. What entry should KYK make on December 31, 2013 to record the payments received for these subscriptions?

The correct answer is to debit Cash for $120,000 as the company now has the cash, and credit Deferred Revenue for $120,000 as the company now has the obligation to provide services in the future.

Like A Wrecking Ball is a demolition company. At the end of a project, they presented their client with an invoice for $18,000 and immediately received a check for the full amount. What is the journal entry to record this receipt?

The correct answer is to debit Cash for $18,000 as the company now has the cash (remember--checks are considered cash!) and credit Revenue for $18,000 to recognize the revenue associated with the services provided.

Traxx is a shoe manufacturer. They sold 250 pairs of shoes on credit to Feet of Endurance (FOE) for $16,000. The total manufactured cost of the shoes was $7,000. What is the journal entry to record the cost of the inventory transfer on the books of Traxx?

The correct answer is to debit Cost of Goods Sold for $7,000 to recognize the expense associated with the sale of shoes, and credit Inventory for $7,000 as the company no longer has the inventory.

Cakery Bakery received $1,000 from a customer on August 5, 2016 for a wedding cake to be delivered on September 19, 2016. What would Cakery Bakery record on their books when the cake is successfully delivered?

The correct answer is to debit Deferred Revenue (a liability) for $1,000 as the company no longer has an obligation to provide services and credit Revenue (part of owners' equity) for $1,000 to recognize the revenue associated with the sale.

Keep You in the Know (KYK) magazine received $120,000 cash in annual subscriptions in December 2013. KYK is a monthly publication and all of these subscriptions commence in January 2014. What entry should KYK make on January 31, 2014 related to the subscription services provided for one month?

The correct answer is to debit Deferred Revenue for $10,000 as the company no longer has the liability for one month's worth of subscription, and credit Revenue for $10,000 to recognize the revenue associated with one month's worth of services provided.

Curls Just Want to Have Fun, a small salon, purchased 200 wigs from their supplier for $25,000 and paid by check. What entry should the salon make to record this purchase?

The correct answer is to debit Inventory for $25,000 as the company now has the inventory (the wigs), and credit Cash for $25,000 as the company paid with cash (remember checks are considered cash in accounting terms).

Friends International is an NGO that fosters greater cultural awareness and understanding by arranging for people of different backgrounds to spend time in other countries and cultures. On January 1, 2014 they purchase $80,000 of open airline tickets in advance that can be used for a variety of destinations because they need the flexibility and savings provided by such tickets. What entry should Friends International make to record this purchase?

The correct answer is to debit Prepaid Expense for $80,000 as the company now has the right to receive benefits from the prepaid tickets and credit Cash for $80,000 as the company no longer has the cash.

Dobby & Dumbledor's Candy Store (DDCS) receives 12 wall-mounted candy dispensers from Potter's Plastics to be installed for its grand opening on June 30. DDCS bought the dispensers for $2,000 each. DDCS is granted credit terms, which gives them 30 days to pay for the dispensers. What journal entry would be made at the time of the purchase?

The correct answer is to debit Property, Plant, & Equipment for $24,000 as the company now has the wall-mounted candy dispensers, and credit Accounts Payable for $24,000 as the company now has the obligation to pay

Friends International is an NGO that fosters greater cultural awareness and understanding by arranging for people of different backgrounds to spend time in other countries and cultures. On January 1, 2014 they purchased $80,000 of open airline tickets in advance that can be used for a variety of destinations. Using the accrual method, build the entry to record the use of $40,000 of these tickets on March 15, 2014 for multiple passengers on a flight from New York to Kigali, Rwanda.

The correct answer is to debit Travel Expense for $40,000 to recognize the expense associated with the use of the tickets and credit Prepaid Expense for $40,000 as the company no longer has the right to receive benefits from the prepaid tickets.

On which financial statements would you be most likely to find information about capital expenditures related to the purchase of equipment during the past year?

The correct answer is to look at the investing section in the statement of cash flows. The other alternatives would only give partial, and possibly misleading, information about capital expenditures. The investing section of the statement of cash flows would directly show the cash spent on capital purchases.

Cybertrex, a manufacturing facility, rented a new piece of equipment on January 1st and agreed to pay an annual rental fee of $18,000 at the end of each of the next 10 years. The weighted average cost of capital of the company is 8%. The present value of $1 for 10 years at 8% is 0.46319 The present value of an ordinary annuity of $1 for 10 years at 8% is 6.71008 What is the Present Value of the rental payments over 10 years?

The correct answer is: $120,781 It is calculated by multiplying the annual payment by the present value of an annuity factor. $18,000 * 6.71008 = $120,781

How does the following transaction impact cash flow? Recording an account receivable for the sale of goods to a customer.

The correct answer is: No Impact When a company records an account receivable for goods sold to a customer, it is because they are allowing the customer to pay for the goods at a later date. Since no cash was received at the time of transaction, there is no impact on cash flows.

Suppose Zenon Co. issued a long-term bond and received $250,000 cash from the issuance during 2015. The company also issued 12,000 shares of common stock for $260,000. At the end of the year, Zenon paid $165,000 for the dividend declared last year. What would be the net impact of these transactions on Zenon's 2015 statement of cash flows under US GAAP?

The correct answer is: the $345,000 would be shown as an increase in the Financing section. $250,000 + $260,000 - $165,000 = $345,000 Cash inflows from issuing long-term bonds and stocks, and cash outflows for paying dividends should be included in the Financing Section.

Tom's Grocery purchased 5 new cash registers for their new store and they paid $2,400 each for a total of $12,000 on August 1, 2013, the day they were delivered. The cash registers are expected to have useful lives of 5 years and they are not expected to have any salvage value. Tom's Grocery uses straight-line depreciation. The cash registers were recorded as long-lived assets at the time of the purchase and now Tom's needs to make an entry showing the expense related to these cash registers up to December 31, 2013.

The depreciable value of the cash registers is $12,000 and they have an estimated useful life of 5 years (or 60 months), so the monthly depreciation would be $200 per month ($12,000 / 60). To recognize the 5 months' worth of depreciation ($200 per month * 5 months = $1,000) at 12/31/13, the company would record a debit to Depreciation (an expense, part of owners' equity) for $1,000 and a credit to Accumulated Depreciation (a contra-asset, part of assets) for $1,000.

Suppose a manufacturing plant purchased a new heating system in December, 2015 and, after installing and testing the equipment, it was put into service on January 1, 2016. The total cost to put the equipment into service was $55,000; it is expected to have a useful life of 5 years and a salvage value of $5,000. Using the straight-line method of depreciation, what will the entry be to record depreciation for the 6 months ending June 30, 2016?

The depreciable value of the equipment is $50,000 ($55,000 cost - $5,000 salvage value), which means that the manufacturing company will recognize $10,000 of depreciation every year over the 5 year useful life. Thus, the depreciation for the 6 months ending June 30, 2016 is $5,000. The journal entry to record this is a debit to Depreciation Expense (expense account) for $5,000 and a credit to Accumulated Depreciation (contra-asset account) for $5,000.

Which of the following items represents the net income/(loss) for the year?

The difference between the revenues/gains and expenses/losses.

A company purchased a piece of equipment for $350,000 in 2008. As of 12/31/2015, $215,000 of depreciation expense had been recognized against this piece of equipment. What is the equipment's net book value on 12/31/2015?

The net book value is calculated by subtracting the accumulated depreciation from the original cost of the asset. $350,000 - $215,000 = $135,000

Which of the following is measured by the DuPont Framework?

The return that a business generates during a period on equity invested in the business by the owners of the business. This is the definition of ROE (Return on Equity), which is measured by the DuPont Framework.

Company A's accounting period goes from January 1 through December 31. Which of the following describes the difference between the trial balance on December 31, 2013 and the trial balance on January 1, 2014?

The trial balance on January 1, 2014 shows no balance in all nominal accounts because they were closed to retained earnings in the closing process.

A company has retained earnings of $94,000 as of December 31, 2014. The Pro-forma income statement projects net income of $22,000 for 2015. The company expects to declare their annual dividend on March 15, 2015 of $0.70 per share and has a total of 100,000 shares outstanding. What will the projected retained earnings account be as of December 31, 2015?

To calculate the projected retained earnings, you add the projected 2015 net income of $22,000 to the beginning balance of $94,000 carried over from 2014. Then you must subtract $70,000 for the dividend of $0.70 per share times the 100,000 shares outstanding. $94,000 + $22,000 - $70,000 = $46,000

For the year 2015, McGuire's Auto had Operating Income of $320,000. It also had the following expenses: Salaries and Wages Expense $75,000 Building and Utilities Expense $86,000 Interest Expense $122,000 Income Tax Expense $84,000 Cost of Goods Sold (COGS) for the year was $440,000 What would McGuire's Auto's gross profit be for 2015?

To get to Gross Profit from Operating Income, we must add back any Operating Expenses. In this case we start with $320,000 Operating Income and add back Salaries and Wages Expense of $75,000 and Building and Utilities Expense of $86,000, to get Gross Profit of $481,000.

West Corp. purchased a piece of equipment in January 2014. The accountant of West Corp. decided to use double declining balance method to depreciate this equipment. For 2014, compared with using straight-line depreciation method, the company will have:

Using an accelerated depreciation method as compared to the straight-line method means that a higher depreciation expense will be recognized in the early years so the company will have a lower net income and a higher accumulated depreciation

A Deferred Tax Asset arises when:

When a Deferred Tax Asset arises it means a company is recognizing Tax Expense now on an amount of income that will be reflected in the financial records later.

The Gross Profit Margin is calculated by

dividing Gross Profit by Revenue.

The Profit Margin is calculated by

dividing the Net Income by the Revenue.

Asset Turnover is calculated

dividing the annual revenue by the average asset value for the year.

the leverage ratio is calculated by

dividing the average total assets by the average equity.

Debt to Equity Ratio

measures a company's leverage, not ability to pay off debts

Current Ratio

measures the ability of a company to pay its short-term debts.

Quick Ratio

measures the ability of a company to use its quick assets to pay off its short-term debts.

Days Sales in Receivables (365/Accounts Receivable Turnover) determines

the average number of days it takes for a business to collect payments from customers.

Days Purchases Outstanding (365/Accounts Payable Turnover) determines

the average number of days it takes for a business to pay its suppliers.

Gross Profit Margin (Gross Profit/Sales) identifies

what percentage of revenue remains to cover other expenses after Cost of Goods Sold is eliminated.