ACCT 2100 Syllabus Spring 2020 Qu- Exam 3 Study Guide
80 The Abel Company provided the following information from its financial records: Net income$225,000 Common shares outstanding 1/1 260,000 Common stock dividends$15,000 Common shares outstanding 12/31 350,000 Preferred stock dividends$22,500 Preferred shares outstanding 1/1 15,000 Sales$850,000 Preferred shares outstanding 12/31 11,000 What is the amount of the company's earnings per share? Multiple Choice $26.47 $0.66 $0.75 $0.74
$0.66 Explanation Earnings per share = (Net income − Preferred stock dividends) ÷ Average shares outstandingEarnings per share = (Net income − Preferred stock dividends) ÷ [(Beginning shares outstanding + ending shares outstanding) ÷ 2]Earnings per share = ($225,000 − $22,500) ÷ [(260,000 shares outstanding + 350,000 shares outstanding) ÷ 2] = $202,500 ÷ 305,000 shares = $0.66 per share
Currie Company borrowed $18,000 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 $7,111. Based on this information, the amount of the interest expense associated with the second payment would be: (Round your answer to the nearest dollar.) rev: 04_25_2018_QC_CS-125586 Multiple Choice $4,821. $1,126. $1,620. $924.
$1,126. Explanation Interest expense in year 1: $18,000 × 9% = $1,620; Principal reduction in year 1: $7,111 − $1,620 = $5,491; Principal balance at beginning of year 2: $18,000 − $5,491 = $12,509; Interest expense in year 2: $12,509 × 9% = $1,126.
12. 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: Multiple Choice A. $2,300 of supplies; $600 of supplies expense B. $1,700 of supplies; $1,500 of supplies expense C. $1,700 of supplies; $2,600 of supplies expense D. $2,300 of supplies; $3,200 of supplies expense
$1,700 of supplies; $2,600 of supplies expense Explanation $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
14. Revenue on account amounted to $6,200. Cash collections of accounts receivable amounted to $5,900. Cash paid for expenses was $4,100. The amount of employee salaries accrued at the end of the year was $1,900. Cash flow from operating activities was Multiple Choice $1,900. $1,800. Correct $2,100. $7,700.
$1,800. Explanation $5,900 collected from customers − $4,100 paid for expenses = $1,800. Revenue earned on account and accrued salaries are not cash flow activities.
13. Jason Company paid $7,500 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 Multiple Choice $7,500; $7,500 $1,875; $1,875 $1,875; $7,500 $1,250; $7,500
$1,875; $7,500 Explanation $7,500 × 3/12 = $1,875 rent expense; $7,500 payment on 10/1/15 is a cash outflow for rent
32 Hailey Medical Supply Co., which had no beginning balance in its Accounts Receivable and Allowance for Doubtful Accounts, earned $85,000 of revenue on account during 2011. During 2011, Hailey collected $65,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 11% of revenue on account. The amount of net realizable value of receivables on the December 31, 2011 balance sheet would be: Multiple Choice $27,150. $20,000. $19,000. $10,650.
$10,650.
21 Assume the perpetual inventory method is used. 1) The company purchased $13,400 of merchandise on account under terms 4/10, n/30. 2) The company returned $2,900 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 $20,800 cash. The amount of gross margin from the four transactions is: Multiple Choice $7,400. $7,104. $10,836. $10,720.
$10,720. Explanation Cost of goods sold = ($13,400 - $2,900) × 0.96 = $10,080Sales revenue $20,800 - Cost of goods sold $10,080 = $10,720
42. The inventory records for Radford Co. reflected the following Beginning inventory @ May 12,000units@$5.60 First purchase @ May 72,100units@$5.80 second purchase @ May 172,300units@$5.90 Third purchase @ May 231,900units@$6.00 Sales @ May 316,300units@$7.50 Determine the amount of ending inventory assuming the FIFO cost flow method. Multiple Choice $11,990 Correct $12,000 $11,200 $7,100
$11,990 Explanation 8,300 units available for sale − 6,300 units sold = 2,000 units in ending inventory; (1,900 × $6.00) + (100 × $5.90) = $11,990
53 Dinkins Company purchased a truck that cost $57,000. 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 $8,500. If the truck is driven 29,500 miles in the current accounting period, what would be the amount of depreciation expense for the year? (Do not round intermediate calculations.) Multiple Choice $14,308. $16,815. $9,700. $22,800.
$14,308. Explanation ($57,000 cost - $8,500 salvage value) ÷ 100,000 miles = $0.48 per mile depreciation; $0.48 per mile × 29,500 miles = $14,308 depreciation expense.
4. 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.The amount of liabilities reported on the end-of-period balance sheet was: Multiple Choice $10,400. $20,600. $12,400. $16,800.
$16,800. Explanation Assets = Liabilities + Common Stock + Ending Retained Earnings$31,000 = Liabilities + $6,100 + $8,100Liabilities = $16,800
Quiz 1 1 As of December 31, 2013, Bloch Company had $4,700 of assets, $1,900 of liabilities and $1,000 of retained earnings. The balance in the common stock account on the December 31, 2013 balance sheet was Multiple Choice $4,700. none of these. $1,800. $3,800.
$1800 My explanation assets - (liabilities + Retained earnings) = common stock 4700 - (1900 + 1000) = 1800
10. Revenue on account amounted to $4,600. Cash collections of accounts receivable amounted to $2,750. Expenses for the period were $2,400. The company paid dividends of $600. Net income for the period was Multiple Choice $350. $2,200. $1,600. $2,150.
$2,200. Explanation Revenue $4,600 − Expenses $2,400 = $2,200 Net Income
45. Koontz Company uses the perpetual inventory method. On January 1, Year 1, the company's first day of operations, Koontz purchased 550 units of inventory that cost $3.10 each. On January 10, Year 1, the company purchased an additional 800 units of inventory that cost $3.90 each. If Koontz uses a weighted average cost flow method and sells 700 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.) Multiple Choice $2,340. Correct $2,520. Incorrect $2,730. $2,015.
$2,340. Correct Explanation 550 units + 800 units − 700 units sold = 650 units in ending inventory; [(550 × $3.10) + (800 × $3.90)] ÷ 1,350 = $3.60 per unit;650 units × $3.60 = $2,340
Quiz 1 4 At the end of 2013, retained earnings for the Bisk Company was $2,850. Revenue earned by the company in 2013 was $3,100, expenses paid during the period were $1,650, and dividends paid during the period were $1,050. Based on this information alone, retained earnings at the beginning of 2013 was Multiple Choice $1,400. $3,250. $6,200. $2,450.
$2,450. My explanation calculate retained earnings: Ending retained earnings = (begining retained earnings) + (revenue - expences) - dividends 2850 = (begining retained earnings) + (3100 - 1650) - (550) 2850 - (3100 - 1650) + 550 = 2450 beginning retained earnings = 2450 note: (rev - Exp) denotes net income
15. Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $8,400 of common stock to stockholders. Provided $4,700 of services on account. Paid $2,200 cash for operating expenses. Collected $3,100 of cash from accounts receivable. Paid a $220 cash dividend to stockholders. The amount of net income recognized on Nelson Company's Year 1 income statement is: Multiple Choice $2,500. Correct $1,820. $1,600. $2,280.
$2,500. Explanation $4,700 revenue − $2,200 expenses = $2,500 net income
Curtain Co. paid dividends of $7,000; $11,000; and $14,000 during Year 1, Year 2, and Year 3, respectively. The company had 1,400 shares of 7.0%, $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: Multiple Choice $4,000. $2,800. $9,800. $2,600.
$2,600. Explanation The annual preferred dividends each year = $100 × 1,400 shares × 7.0% = $9,800. In Year 1, there were $2,800 of dividends in arrears ($9,800 preferred dividends − $7,000 paid). In Year 2, there were $1,600 in arrears ($2,800 beginning + $9,800 preferred dividends − $11,000 paid). In Year 3, the preferred dividends was $9,800 + $1,600 in arrears = $11,400. The remaining $2,600 was paid to common shareholders.
58. Currie Company borrowed $29,000 from the Sierra Bank by issuing a 11% three-year note. Currie agreed to repay the principal and interest by making annual payments in the amount of $5,921. Based on this information, the amount of the interest expense associated with the second payment would be: (Round your answer to the nearest dollar.) Multiple Choice $2,271. $2,890. Correct $3,190. $5,921.
$2,890. Explanation Interest expense in year 1: $29,000 × 11% = $3,190; Principal reduction in year 1: $5,921 − $3,190 = $2,731; Principal balance at beginning of year 2: $29,000 − $2,731 = $26,269; Interest expense in year 2: $26,269 × 11% = $2,890.
37 Richmond Company made a loan of $15,500 to one of the company's employees on April 1, 2011. The one-year note carried a 25% rate of interest. The amount of interest revenue that Richmond would report in 2011 and 2012, respectively would be: Multiple Choice $0, $3,875.00 $968.75, $2,906.25 $2,906.25, $968.75 $3,875.00, $0
$2,906.25, $968.75
31 Valdez Company uses the percent of receivables method to estimate uncollectible accounts expense. Valdez began 2011 with balances in Accounts Receivable and Allowance for Doubtful Accounts of $39,750 and $2,930 (credit), respectively. During the year, the company wrote off $2,620 in uncollectible accounts. In preparation for the company's 2011 estimate, Valdez prepared the following aging schedule (Do not round your intermediate calculations. Round your final answer to two decimal places): Number of Days Past Due Receivables Amount% Likely to be Uncollectible Current $26,300 4% 0-30 $11,850 8% 31-60 $2,510 13% 61-90 $1,140 28% Over 90 $1,100 53% Total$42,900 What will Valdez record as Uncollectible Accounts Expense for 2011? Multiple Choice $4,965.50 $3,228.50 $2,620.00 $2,918.50 Correct
$2,918.50
26. On January 1, 2011, the Accounts Receivable balance was $23,000 and the credit balance in the Allowance for Doubtful Accounts was $1,500. On January 15, 2011 a $500 uncollectible account was written-off. The net realizable value of accounts receivable immediately after the write-off is: Multiple Choice $22,500. $22,000. $21,500. $21,000.
$21,500. Explanation?
47. Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $2,755,000. Harding paid $840,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $888,000; Building, $2,640,000 and Equipment, $1,752,000. (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 1,190,000 units over its 5-year useful life and has salvage value of $19,000. Harding produced 284,000 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? Multiple Choice $418,124 $217,654 $212,439 $413,590
$212,439 Explanation ($909,150 cost of equipment (33% of $2,755,000 purchase price) minus $19,000 salvage value) ÷ 1,190,000 units = $0.7480 per unit; $0.7480 × 284,000 units = $212,439.
41. The inventory records for Radford Co. reflected the following Beginning inventory @ May 11,500units@$4.60 First purchase @ May 71,600units@$4.80 second purchase @ May 171,800units@$4.90 Third purchase @ May 231,400units@$5.00 Sales @ May 314,800units@$6.50 Determine the amount of cost of goods sold assuming the LIFO cost flow method. Multiple Choice $23,500 Correct $24,000 $23,040 $22,080
$23,500 Explanation (1,400 × $5.00) + (1,800 × $4.90) + (1,600 × $4.80) = $23,500
61. 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.) Multiple Choice $17,750. $24,750. $26,500. $19,500.
$24,750. Explanation $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.
83 The following balance sheet information is provided for Apex Company for Year 2: Assets Cash$6,600 Accounts receivable 12,750 Inventory 15,300 Prepaid expenses 2,100 Plant and equipment, net of depreciation 20,000 Land 13,900 Total assets$70,650 Liabilities and stockholders' equity Accounts payable$3,090 Salaries payable 7,730 Bonds payable (due in ten years) 14,500 Common stock, no par 14,000 Retained earnings 31,330 Total liabilities and stockholders' equity$70,650 What is the company's working capital? Multiple Choice $8,530 $25,930 $31,560 $9,330
$25,930 Explanation Working capital = Current assets − Current liabilitiesWorking capital = ($6,600 + $12,750 + $15,300 + $2,100) − ($3,090 + $7,730) = $36,750 − $10,820 = $25,930
67 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: Multiple Choice $13,600. Incorrect $37,513. $40,775. $27,175. Correct
$27,175. Explanation $170,000 × 8% = $13,600; $40,775 payment − $13,600 interest = $27,175 principal repayment
1. Stosch Company's balance sheet reported assets of $72,000, liabilities of $21,000 and common stock of $18,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $42,000 and Stosch paid a $20,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following? Multiple Choice $29,000 $33,000 $9,000 $20,000
$29,000 Explanation If assets on December 31, Year 1 totaled $72,000, total claims (including liabilities, common stock, and retained earnings) on that date must have also been $72,000. If liabilities were $21,000 and common stock was $18,000, retained earnings on December 31, Year 1 must have been $33,000. At the end of Year 2, the company reported $42,000 in retained earnings, a $9,000 increase. During Year 2, Stosch paid a $20,000 cash dividend, which reduced retained earnings. Therefore, Year 2 net income must have been $9,000 greater than the dividend paid. $20,000 + $9,000 = $29,000.
43. The inventory records for Radford Co. reflected the following Beginning inventory @ May 1500units@$2.60 First purchase @ May 7600units@$2.80 second purchase @ May 17800units@$2.90 Third purchase @ May 23400units@$3.00 Sales @ May 311,800units@$4.50 Determine the amount of gross margin assuming the weighted average cost flow method. (Round your intermediate calculations to 2 decimal places.) Multiple Choice $3,006 Correct $5,400 $2,700 $2,520
$3,006 Explanation [(500 × $2.60) + (600 × $2.80) + (800 × $2.90) + (400 × $3.00)] ÷ 2,300 units = $2.83 per unit.(1,800 × $4.50) − (1,800 × $2.83) = $3,006.
76. Curtain Co. paid dividends of $3,000; $6,000; and $9,200 during Year 1, Year 2, and Year 3, respectively. The company had 1,000 shares of 5.0%, $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: Multiple Choice $5,000. $3,000. $3,200. $2,000.
$3,200. Explanation The annual preferred dividends each year = $100 × 1,000 shares × 5.0% = $5,000. In Year 1, there were $2,000 of dividends in arrears ($5,000 preferred dividends − $3,000 paid). In Year 2, there were $1,000 in arrears ($2,000 beginning + $5,000 preferred dividends − $6,000 paid). In Year 3, the preferred dividends was $5,000 + $1,000 in arrears = $6,000. The remaining $3,200 was paid to common shareholders.
Riley Company borrowed $26,000 on April 1, Year 1 from the Titan Bank. The note issued by Riley carried a one year term and a 5% annual interest rate. Riley earned cash revenue of $920 in Year 1 and $700 in Year 2. Assume no other transactions. The amount of net income on the Year 2 income statement would be: Multiple Choice $(50). $325. $1,025. $375.
$375. Correct Explanation $26,000 × 5% × 3/12 months = $325 interest expense; $700 revenue − $325 interest expense = $375 net income
52. On January 1, Year 1, Friedman Company purchased a truck that cost $35,000. The truck had an expected useful life of 200,000 miles over 8 years and an $7,000 salvage value. During Year 2, Friedman drove the truck 33,000 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.) Multiple Choice $4,620. $5,775. $3,500. $4,375.
$4,620. Explanation ($35,000 - $7,000) ÷ 200,000 miles = $0.140 per mile depreciation expense. 33,000 miles × $0.140 per mile = $4,620 depreciation expense in Year 2.
44 The inventory records for Radford Co. reflected the following Beginning inventory @ May 1800units@$3.20 First purchase @ May 7900units@$3.40 second purchase @ May 171,100units@$3.50 Third purchase @ May 23700units@$3.60 Sales @ May 312,700units@$5.10 Determine the amount of gross margin assuming the FIFO cost flow method. Multiple Choice $4,340 $5,130 $4,650 $9,120
$4,650 Explanation (800 × $3.20) + (900 × $3.40) + (1,000 × $3.50) = $9,120 cost of goods sold; $13,770 sales − $9,120 cost of goods sold = $4,650
28. Part 2 of 2 Required information On January 1, 2011 Grace Company had an $11,500 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2011, Grace provided $53,500 of service on account. The company collected $48,070 cash from account receivable. Uncollectible accounts are estimated to be 9% of sales on account. rev: 03-07-2011 The amount of uncollectible accounts expense recognized on the 2011 income statement is: rev: 03-07-2011 Multiple Choice $4,815. $535. $1,035. $4,635.
$4,815. Explanation?
6. Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $1,350 cash from the issue of common stock. 2) Borrowed $820 from a bank. 3) Earned $1,000 of revenues cash. 4) Paid expenses of $330. 5) Paid a $130 dividend. During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $725 of common stock. 2) Repaid $500 of its debt to the bank. 3) Earned revenues of $1,150 cash. 4) Incurred expenses of $520. 5) Paid dividends of $180. Packard Company's net cash flow from financing activities for Year 2 is: Multiple Choice $545 outflow. $45 inflow. $500 outflow. $680 inflow.
$45 inflow. Explanation $725 inflow from stock - $500 outflow for loan repayment - $180 outflow for dividends = $45 inflow.
27. Part 1 of 2 Required information On January 1, 2011 Grace Company had an $11,500 balance in the Accounts Receivable account and a zero balance in the Allowance for Doubtful Accounts account. During 2011, Grace provided $53,500 of service on account. The company collected $48,070 cash from account receivable. Uncollectible accounts are estimated to be 9% of sales on account. rev: 03-07-2011 Based on this information, the amount of cash flow from operating activities that would appear on the 2011 statement of cash flows is: rev: 03-07-2011 Multiple Choice $53,200. $53,500. $41,116. $48,070.
$48,070. Explanation?
60. On January 1, Year 1, Missouri Co. purchased a truck that cost $43,000. The truck had an expected useful life of 10 years and a $4,000 salvage value. The amount of depreciation expense recognized in Year 2 assuming that Missouri uses the double declining-balance method is: Multiple Choice $6,240. $6,880. $4,300. $8,600.
$6,880. Explanation $43,000 × (2 × 10%) = $8,600 depreciation expense in Year 1. ($43,000 - $8,600) × (2 × 10%) = $6,880 depreciation expense in Year 2.
5. Retained Earnings at the beginning and ending of the accounting period was $350 and $800, respectively. If revenues were $1,300 and dividends paid to stockholders were $250, expenses for the period must have been: Multiple Choice $1,050. $600. $850. $450.
$600 Explanation Beginning retained earnings + Revenues - Expenses - Dividends = Ending retained earnings$350 + $1,300 - Expenses - $250 = $800Expenses = $600
36 Richmond Company made a loan of $8,000 to one of the company's employees on April 1, 2011. The one-year note carried a 10% rate of interest. The amount of interest revenue that Richmond would report in 2011 and 2012, respectively would be: Multiple Choice $200.00, $600.00 $600.00, $200.00 $0, $800.00 $800.00, $0
$600.00, $200.00
3. The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $23,000; Liabilities = ?; Common Stock = $5,300; Revenue = $11,600; Dividends = $900; Beginning Retained Earnings = $3,900; Ending Retained Earnings = $7,300.Based on this information, the amount of expenses on Calloway's income statement was Multiple Choice $3,400. $7,300. $14,600. $8,200.
$7,300. Explanation Beginning retained earnings + Revenue - Expenses - Dividends = Ending retained earnings$3,900 + $11,600 - Expenses - $900 = $7,300Expenses = $7,300
24 Assume the perpetual inventory method is used. 1) Green Company purchased merchandise inventory that cost $16,300 under terms of 4/10, n/30 and FOB shipping point. 2) The company paid freight cost of $630 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 $24,100 cash and delivered under terms FOB shipping point with freight cost amounting to $430. The gross margin from these transactions of Green Company is Multiple Choice $8,452. $7,392. $7,822. $8,022.
$7,822. Explanation $24,100 Sales - [($16,300 × 0.96) + $630] Cost of goods sold = $7,822 Gross margin
49. Laramie Co. paid $600,000 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, $84,000, Building, $490,000, and Office Furniture, $126,000. Based on this information the cost that would be allocated to the land is: (Do not round intermediate calculations.) Multiple Choice $61,920. $72,000. $84,000. $91,430.
$72,000. Explanation $84,000 ÷ ($84,000 + $490,000 + $126,000) = 12% of market value; $600,000 purchase price × 12% = $72,000.
80 Darden Company has cash of $35,000, accounts receivable of $45,000, inventory of $23,500, and equipment of $65,000. Assuming current liabilities of $31,500, this company's working capital is: Multiple Choice $72,000. $102,000. $48,500. $13,500.
$72,000. Explanation Working capital = Current assets − Current liabilitiesWorking capital = ($35,000 + $45,000 + $23,500) - $31,500 = $72,000
29. The balance in Accounts Receivable at the beginning of the period amounted to $2,600. During the period $6,600 of credit sales were made to customers, and uncollectible accounts expense amounted to $420. The ending balance in Accounts Receivable is $1,200, 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 Multiple Choice $8,000. $6,600. $9,200. None of these.
$8,000.
23 Ballard Company uses the perpetual inventory system. The company purchased $9,500 of merchandise from Andes Company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $400 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $18,000 cash. The amount of gross margin for this merchandise is: Multiple Choice $8,100. $8,500. $8,290. $9,500.
$8,290. Explanation Sales $18,000 - Cost of goods sold ($9,500 × 0.98 + $400) = $8,290 Gross margin
30. On January 1, 2011, Chase Company's Accounts Receivable and the Allowance for Doubtful Accounts carried balances of $62,500 and $1,050 (credit), respectively. During the year Chase reported $140,500 of credit sales. Chase wrote off $1,600 of receivables as uncollectible in 2011. Cash collections of receivables amounted to $150,100. 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: Multiple Choice $1,600. $3,750. $9,600. $8,430.
$8,430.
Anton Co. uses the perpetual inventory method. Anton purchased 1,120 units of inventory that cost $5 each. At a later date the company purchased an additional 1,140 units of inventory that cost $7 each. If Anton uses the FIFO cost flow method and sells 1,600 units of inventory, the amount of cost of goods sold will be: Multiple Choice $11,200. $8,000. $11,180. $8,960.
$8,960. Correct Explanation (1,120 × $5) + (480 × $7) = $8,960
48. Anchor Company purchased a manufacturing machine with a list price of $85,000 and received a 2% cash discount on the purchase. The machine was delivered under terms FOB shipping point, and freight costs amounted to $2,200. Anchor paid $3,000 to have the machine installed and tested. Insurance costs to protect the asset from fire and theft amounted to $3,800 for the first year of operations. Based on this information, the amount of cost recorded in the asset account would be: Multiple Choice $88,500. $85,500. $92,300. $83,300.
$88,500. Explanation $85,000 list price - ($85,000 × 2% discount) + $2,200 freight + $3,000 installation and testing = $88,500. The insurance cost is not included in the cost of the machine, but is instead expensed during the first year.
89. The Miller Company reported gross sales of $930,000, sales returns and allowances of $5,800 and sales discounts of $5,800. The company has average total assets of $580,000, of which $290,000 is property, plant, and equipment. What is the company's asset turnover ratio? Multiple Choice 1.58 times 0.63 times 1.62 times 1.60 times
1.58 times Explanation Asset turnover = Net sales ÷ Average assetsAsset turnover = ($930,000 − $5,800 − $5,800) ÷ $580,000 = $918,400 ÷ $580,000 = 1.58 times
81 Milton Company has total current assets of $55,000, including inventory of $15,000, and current liabilities of $31,000. The company's current ratio is: Multiple Choice 1.77. 2.26. 0.56. 1.29.
1.77. Explanation Current ratio = Current assets ÷ Current liabilitiesCurrent ratio = $55,000 ÷ $31,000 = 1.77
82 The following balance sheet information is provided for Greene Company for Year 2: Assets Cash$7,200 Accounts receivable 13,350 Inventory 15,600 Prepaid expenses 2,400 Plant and equipment, net of depreciation 20,300 Land 14,200 Total assets$73,050 Liabilities and Stockholders' Equity Accounts payable$3,270 Salaries payable 7,430 Bonds payable (Due in ten years) 16,000 Common stock, no par 12,500 Retained earnings 33,850 Total liabilities and stockholders' equity$73,050 What is the company's quick (acid-test) ratio? (Round your answer to 2 decimal places.) Multiple Choice 0.77 3.60 1.35 1.92
1.92 Explanation Quick ratio = Quick assets ÷ Current liabilitiesQuick ratio = (Cash + Receivables + Current marketable securities) ÷ Current liabilitiesQuick ratio = ($7,200 + $13,350 + $0) ÷ ($3,270 + $7,430 ) = $20,550 ÷ $10,700 = 1.92
Flagler Corporation shows a total of $700,000 in its common stock account and $700,000 in its paid-in capital in excess of par value - common stock account. The par value of Flagler's common stock is $7. How many shares of Flagler stock have been issued? Multiple Choice A. 100,000. B. It cannot be determined C. 200,000. D. 300,000.
100,000 Explanation $700,000 total par value ÷ $7 par value per share = 100,000 shares issued
64 Flagler Corporation shows a total of $440,000 in its common stock account and $1,040,000 in its paid-in capital in excess of par value - common stock account. The par value of Flagler's common stock is $4. How many shares of Flagler stock have been issued? Multiple Choice 260,000. 370,000. 110,000. It cannot be determined
110,000. Explanation $440,000 total par value ÷ $4 par value per share = 110,000 shares issued
86 The following balance sheet information is provided for Gaynor Company: AssetsYear 2 Year 1Cash$3,850 $3,100 Accounts receivable 16,600 14,600 Inventory$40,500 $48,000 Assuming Year 2 cost of goods sold is $126,000, what is the company's inventory turnover? Multiple Choice 2.63 times 2.85 times 3.11 times None of the these answers is
2.85 times Explanation Inventory turnover = Cost of goods sold ÷ [(Beginning inventory + ending inventory) ÷ 2Inventory turnover = $126,000 ÷ [($48,000 + $40,500) ÷ 2] = $126,000 ÷ $44,250 = 2.85 times
84 The following balance sheet information was provided by O'Connor Company: AssetsYear 2 Year 1Cash$3,400 $2,400 Accounts receivable$8,400 $ 6,400 Inventory$34,000 $35,000 Assuming that net credit sales for Year 2 totaled $159,000, what is the company's most recent accounts receivable turnover? Multiple Choice 21.49 times 10.74 times 24.84 times 18.93 times
21.49 times explanation Accounts receivable turnover = Net credit sales ÷ [(Beginning accounts receivable + ending accounts receivable) ÷ 2]Accounts receivable turnover = $159,000 ÷ [($6,400 + $8,400) ÷ 2] = $159,000 ÷ $7,400 = 21.49 times
75. Montana Company was authorized to issue 85,000 shares of common stock. The company had issued 30,000 shares of stock when it purchased 4,500 shares of treasury stock. The number of outstanding shares of common stock was: Multiple Choice 80,500. 34,500. 25,500. 30,000.
25,500. Explanation 30,000 shares issued − 4,500 shares of treasury stock = 25,500 shares outstanding
Quiz 1 6 Company began operations on January 1, 2013. During 2013, the company engaged in the following cash transactions: 1) issued stock for $56,000 2) borrowed $33,000 from its bank 3) provided consulting services for $54,000 4) paid back $23,000 of the bank loan 5) paid rent expense for $13,000 6) purchased equipment costing $20,000 7) paid $3,800 dividends to stockholders 8) paid employees' salaries, $29,000 What is Yi's net cash flow from investing activities? Multiple Choice Inflow of $36,000 Outflow of $20,000 Inflow of $56,000 Outflow of $45,800
36000? my explanation 56000 - 20,000 = 36000
87 The following balance sheet information is provided for Patton Company: AssetsYear 2 Year 1Cash$4,400 $4,000 Accounts receivable$13,900 $15,900 Inventory$40,500 $47,500 Assuming Year 2 cost of goods sold is $384,000, what are the company's average days to sell inventory? (Use 365 days in a year. Do not round your intermediate calculations.) Multiple Choice 41.82 days 38.50 days 45.15 days 57.00 days
41.82 days Explanation Inventory turnover = Cost of goods sold ÷ [(Beginning inventory + ending inventory) ÷ 2]Inventory turnover = $384,000 ÷ [($47,500 + $40,500) ÷ 2] = 384,000 ÷ $44,000 = 8.73 timesAverage days to sell inventory = 365 days ÷ Inventory turnoverAverage days to sell inventory = 365 days ÷8.73 times = 41.82 days
85 The following balance sheet information was provided by Western Company: AssetsYear 2 Year 1Cash$2,300 $1,800 Accounts receivable$16,500 $14,500 Inventory$27,000 $33,000 Assuming Year 2 net credit sales totaled $123,000, what was the company's average days to collect receivables? (Use 365 days in a year. Do not round your intermediate calculations.) Multiple Choice 43.00 days 46.00 days 92.00 days 49.00 days
46.00 days Explanation Accounts receivable turnover = Net credit sales ÷ [(Beginning accounts receivable + ending accounts receivable) ÷ 2]Accounts receivable turnover = $123,000 ÷ [($14,500 + $16,500) ÷ 2] = $123,000 ÷ $15,500 = 7.94 timesAverage days to collect receivables = 365 days ÷ 7.94 = 46.00 days
88 The following balance sheet information is provided for Santana Company for Year 2: Assets Cash$4,600 Accounts receivable 10,750 Inventory 14,300 Prepaid expenses 1,100 Plant and equipment, net of depreciation 19,000 Land 12,900 Total assets$62,650 Liabilities and Stockholders' Equity Accounts payable$2,490 Salaries payable 8,730 Bonds payable (Due in ten years) 9,500 Common stock, no par 19,000 Retained earnings 22,930 Total liabilities and stockholders' equity$62,650 What is the company's debt to equity ratio? Multiple Choice 35.97% 31.71% 147.75% 49.42%
49.42% Explanation Debt to equity = Total liabilities ÷ Total stockholders' equityDebt to equity = ($2,490 + $8,730 + $9,500) ÷ ($19,000 + $22,930) = $20,720 ÷ $41,930 = 49.42%
Montana Company was authorized to issue 150,000 shares of common stock. The company had issued 69,000 shares of stock when it purchased 11,000 shares of treasury stock. The number of outstanding shares of common stock was: Multiple Choice A. 80,000. B. 69,000. C. 139,000. D. 58,000.
58,000. Explanation 69,000 shares issued − 11,000 shares of treasury stock = 58,000 shares outstanding
46. Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,235,000. Harding paid $280,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $296,000; Building, $880,000 and Equipment, $584,000. What value will be recorded for the building? Multiple Choice 140,000 355,000 Incorrect 617,500 Correct 880,000
617,500 Explanation In a basket purchase, the cost of each asset in the "basket" is determined as a percentage of the basket's total appraised value. $880,000 ÷ ($296,000 + $880,000 + $584,000) = 50%; $1,235,000 × 50% = $617,500
Quiz 1 5 Retained Earnings at the beginning and ending of the accounting period was $850 and $1,800, respectively. If revenues were $3,300 and dividends paid to stockholders were $750, expenses for the period must have been Multiple Choice $2,350. $950. $1,600. $2,550.
?1600? Revenue (-) Expenses= Profit before P & L Appropriation Hence, $3,300 - (1800 - 850) - 750 =
Quiz 1 7 Franklin Trash Removal Company received a cash advance of $10,500 on December 1, 2013 to provide services during the months of December, January, and February. The year-end adjustment to recognize the partial expiration of the contract will Multiple Choice increase equity by $3,500 increase assets by $3,500 increase liabilities by $3,500 Increase Equity by $3,500 and assets by $3,500.
A 10500 / 3 = 3500 per month in advance december is when the service started so for year 2013 equity increases by $3,500
Benitez Co. had sales of $600,000 in Year 1. The company expects to incur warranty expenses amounting to 3% of sales. There were $15,700 of warranty obligations paid in cash during Year 1. Based on this information: Multiple Choice A. All of these answer choices are B. Cash would decrease by $15,700 as a result of the accounting events associated with warranties in Year 1. C. The warranties payable account would increase by $2,300 in Year 1. D. Warranty expenses would decrease net earnings by $18,000 in Year 1.
All of these answer choices are correct. Explanation: $600,000 × 3% = $18,000 warranty expense is recognized in Year 1. Cash decrease by $15,700 when the warranty obligations are paid. Warranties payable increases by $18,000 when warranty expense is recognized and decreases by $15,700 when warranty obligations are paid, for a net increase of $2,300.
The recognition of an expense may be accompanied by which of the following? Multiple Choice An increase in liabilities A decrease in liabilities A decrease in revenue An increase in assets
An increase in liabilities Explanation 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).
56. Which of the following represents the impact of a taxable cash sale of $500 on the accounting equation if the sales tax rate is 4%? Multiple Choice An increase to cash for $520, an increase to sales tax expense for $20, and an increase to sales revenue for $500. An increase to cash for $500, an increase to sales tax payable for $20, and an increase to sales revenue for $480. An increase to cash for $520, an increase to sales tax payable for $20, and an increase to sales revenue for $500. None of these answer choices is correct.
An increase to cash for $520, an increase to sales tax payable for $20, and an increase to sales revenue for $500. Explanation The transaction is recorded as an increase to cash of $520, the amount of the sale, plus the 4% sales tax collected, an increase to sales tax payable of $20, the amount owed to the state, and an increase to sales revenue of $500, the amount of the sale.
Which of the following represents the impact of a taxable cash sale of $950 on the accounting equation if the sales tax rate is 4%? Multiple Choice A. An increase to cash for $988, an increase to sales tax payable for $38, and an increase to sales revenue for $950. B. An increase to cash for $950, an increase to sales tax payable for $38, and an increase to sales revenue for $912. C. An increase to cash for $988, an increase to sales tax expense for $38, and an increase to sales revenue for $950. D. None of these answer choices is correct.
An increase to cash for $988, an increase to sales tax payable for $38, and an increase to sales revenue for $950. Explanation The transaction is recorded as an increase to cash of $988, the amount of the sale, plus the 4% sales tax collected, an increase to sales tax payable of $38, the amount owed to the state, and an increase to sales revenue of $950, the amount of the sale.
20. Assume the perpetual inventory method is used. 1) The company purchased $14,000 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,500 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 $22,000 cash. What effect will the return of merchandise to the supplier have on the accounting equation? Multiple Choice Assets and equity are reduced by $3,500. Assets and liabilities are reduced by $3,430. Assets and liabilities are reduced by $3,500. None. It is an asset exchange transaction.
Assets and liabilities are reduced by $3,500. Explanation The purchase return will decrease assets (merchandise inventory) and decrease liabilities (accounts payable) by $3,500, the full invoiced amount of the merchandise returned.
Quiz 1 10 Which of the following items is an example of revenue? Multiple Choice Cash received from a bank loan Cash received from customers at the time services were provided Cash investments made by owners All of these
Cash received from customers at the time services were provided payed for service = revenue Revenue is something received against sale of goods and services .It is the result of business activities. Hence, any non operating income is not part of revenue. Cash received from loan is not a normal business activity , hence it is not a revenue. Cash investments made by owners is not a business activity, hence it is not a revenue.
8. Which of the following items is an example of revenue? Multiple Choice 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
Cash received from customers at the time services were provided Explanation Cash received from providing services to customers is an example of revenue, and is an asset source transaction. Cash received from a bank loan results in a liability, notes payable. Cash investments made by owners increase the stockholders' equity account common stock. Cash received from the sale of land for its original selling price is an asset exchange transaction that decreases one asset, land, and increases another asset, cash.
69 On January 12, Year 1, Gilliam Corporation issued 550 shares of $12 par-value common stock for $15 per share. The number of shares authorized is 5,000, and the number of shares outstanding prior to this transaction is 1,200. Which of the following answers describes the effect of the January 12, Year 1 transaction? Assets=Liab.+Com. Stk.+Pd-in ExcessRev.−Exp.=Net Inc.Cash FlowA.6,600=NA+6,600+NANA−NA=NA6,600 FAB.8,250=NA+8,250+NANA−NA=NA8,250 FAC.8,250=NA+6,600+1,650NA−NA=NA8,250 FAD.8,250=NA+6,600+1,650NA−NA=NA8,250 IA Multiple Choice Choice A Choice B Choice C Choice D
Choice C Explanation Assets (cash) increase by $8,250 (550 × $15), common stock increases by $6,600 (= 550 shares × $12 par value), and paid-in excess of par value − common increases by $1,650 (= $8,250 − $6,600). The cash inflow is a financing activity.
59. Kier Company issued $460,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 4-year term to maturity. They had a 6.50% 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: Interest Expense Cash Outflow A.$29,900 zero B. zero $29,900 C.$29,900 $29,900 D. zero zero Multiple Choice Choice A Incorrect Choice B Choice C Choice D
Choice C Explanation $460,000 × 0.065 = $29,900; Payment of interest on December 31, Year 1 increases interest expense by $29,900 and is reported as a cash outflow for operating activities.
67. Which form of business organization is established as a legal entity separate from its owners? Multiple Choice Sole proprietorship Partnership Corporation Correct None of these
Corporation Explanation Corporations are owned by shareholders. Corporations file and pay income taxes on their own.
16. Addison Company experienced an accounting event that affected its financial statements as indicated below: Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow + NA + + NA + NA Which of the following accounting events could have caused these effects on Addison's statements? Multiple Choice A. Issued common stock. B. Earned revenue on account. C. Earned cash revenue. D. Collected cash from accounts receivable.
Earned revenue on account. Explanation Earning revenue on account increases assets (accounts receivable) and increases revenue, which increases net income and equity (retained earnings). It does not affect cash flows.
Blake Company purchased two identical inventory items. The item purchased first cost $17.00, and the item purchased second cost $18.00. Blake sold one of the items for $30.00. Which of the following statements is true? Multiple Choice Ending inventory will be lower if Blake uses weighted average than if FIFO were used. Correct Cost of goods sold will be higher if Blake uses FIFO than if weighted average were used. Incorrect The dollar amount assigned to ending inventory will be the same no matter which cost flow method is used. Gross margin will be higher if Blake uses LIFO than it would be if FIFO were used.
Ending inventory will be lower if Blake uses weighted average than if FIFO were used. Explanation If Blake uses weighted average, ending inventory will be $17.50. If the company uses FIFO, ending inventory will be $18.00.
25. SX Company sold merchandise on account for $14,700. The merchandise had cost the company $9,900. What is the effect of the sale on the income statement? Multiple Choice Revenue increases by $4,800 Expenses increase by $9,900 Net Income increases by $14,700 All of the above
Expenses increase by $9,900 Explanation Selling merchandise on account will increase revenue by $14,700. It will increase expenses by $9,900 and increase net income by $4,800. Revenue - Expenses = Net income. $14,700 − $9,900 = $4,800.
Ogilvie Corp. issued 21,000 shares of no-par stock for $50 per share. Ogilvie was authorized to issue 44,000 shares. What effect will this event have on the company's financial statements? Multiple Choice A. None of these answer choices are correct. B. Increase assets by $2,200,000, increase equity by $2,200,000. C. Increase cash flow from investing activities by $1,050,000. D. Increase assets by $1,050,000, increase equity by $1,050,000.
Increase assets by $1,050,000, increase equity by $1,050,000. Explanation Assets (cash) and equity (common stock) both increase by $1,050,000 (21,000 shares × $50). The cash inflow is a financing activity, not an investing activity.
19. Abbott Company purchased $6,800 of merchandise inventory on account. Advent uses the perpetual inventory method. How does this transaction affect the financial statements? Multiple Choice Decrease accounts payable and decrease purchases. Increase inventory and increase accounts payable. Increase cost of goods sold and increase accounts payable. Decrease accounts payable and decrease inventory.
Increase inventory and increase accounts payable. Explanation When the perpetual system is used, the purchase of inventory on account increases inventory and increases accounts payable.
78. Which of the following is not considered an advantage of the corporate form of business organization? Multiple Choice Ability to raise capital. Continuity of existence. Ease of transferability of ownership. Incorrect Lack of government regulation.
Lack of government regulation. Correct Explanation The large amount of government regulation is a disadvantage of the corporate form of business.
33-35 Required information On December 31, 2011, the Lincoln Corporation estimated that 6% of its credit sales of $230,000 would be uncollectible. Lincoln uses the allowance method of accounting for uncollectible accounts. In February 2012, one of Lincoln's customers failed to pay his $2,800 account and was written off. On April 4, 2012, this customer paid Lincoln the $2,800. rev: 03-07-2011 Which of the following answers correctly states the effect of recording the collection of the reestablished receivable on April 4, 2012? Assets=Liabilities+EquityRevenue−Expenses=Net Inc.Cash Flow rev: 03-07-2011 Multiple Choice NA NA NANA NA NA2,800 OA Correct (2,800) NA (2,800)(2,800) NA (2,800)(2,800) OA 2,800 NA 2,8002,800 NA 2,8002,800 OA Incorrect NA (2,800) 2,8002,800 NA 2,800NA Next Visit question mapQuestion 35 of 80 Total35 of 80 Prev
NA NA NANA NA NA2,800 OA
33, 34, 35 On December 31, 2011, the Lincoln Corporation estimated that 6% of its credit sales of $230,000 would be uncollectible. Lincoln uses the allowance method of accounting for uncollectible accounts. In February 2012, one of Lincoln's customers failed to pay his $2,800 account and was written off. On April 4, 2012, this customer paid Lincoln the $2,800. rev: 03-07-2011 Which of the following answers correctly states the effect of recording the reestablishment of the receivable on April 4, 2012? Assets=Liabilities+EquityRevenue−Expenses=Net Inc.Cash Flow rev: 03-07-2011 Multiple Choice A. (2,800) 2,800 NANA NA NA(2,800) OA B. (2,800) NA (2,800)NA 2,800 (2,800)NA C. 2,800 NA 2,8002,800 NA 2,8002,800 OA D. NA NA NANA NA NANA
NA NA NANA NA NANA Correct
33-35 On December 31, 2011, the Lincoln Corporation estimated that 6% of its credit sales of $230,000 would be uncollectible. Lincoln uses the allowance method of accounting for uncollectible accounts. In February 2012, one of Lincoln's customers failed to pay his $2,800 account and was written off. On April 4, 2012, this customer paid Lincoln the $2,800. rev: 03-07-2011 Which of the following answers correctly states the effect of the February 2012 entry to write off the customer's account? Assets=Liab.+EquityRevenue−Expenses=Net Inc.Cash Flow rev: 03-07-2011 Multiple Choice A. NA 2,800 (2,800)NA 2,800 (2,800)NA B. (2,800) NA (2,800)NA 2,800 (2,800)(2,800) OA C. 2,800 NA 2,800NA (2,800) 2,8002,800 OA D. NA NA NANA NA NANA
NA NA NANA NA NANA Correct
54. 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: Depreciation expense Accumulated depreciation A. $17,000 $17,000 B. $17,000 $68,000 C. $68,000 $17,000 D. $17,000 $51,000 Multiple Choice Option A Option B Option C Option D
Option B Explanation ($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.
17. Which of the following choices accurately reflects how the recording of accrued salary expense affects the financial statements of a business? Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow A. NA = + + - - - + = NA NA B. NA = NA + +/- NA - NA = NA NA C. NA = + + - NA - + = - NA D. + = + + NA NA - + = - -OA Multiple Choice Option A Option B Option C Option D
Option C Explanation Accruing salary expense increases liabilities (salaries payable) and increases expenses, which decreases net income and equity (retained earnings). It does not affect cash flows.
Monthly remittance of sales tax: Multiple Choice Reduces liabilities. Correct Is a claims exchange transaction. Reduces stockholders' equity. All of these answer choices are correct.
Reduces liabilities. Explanation Remittance of sales tax reduces assets (cash) and reduces liabilities (sales tax payable).
7. Santa Fe Company was started on January 1, Year 1, when it acquired $9,600 cash by issuing common stock. During Year 1, the company earned cash revenues of $5,900, paid cash expenses of $3,550, and paid a cash dividend of $1,100. Based on this information, Multiple Choice A. The balance sheet at December 31, Year 1 would show total equity of $15,500. B. The Year 1 statement of cash flows would show a net cash flow from financing activities of $9,600. C. The Year 1 income statement would show net income of $1,250. D. The Year 1 statement of cash flows would show net cash inflow from financing activities of $8,500.
The Year 1 statement of cash flows would show net cash inflow from financing activities of $8,500. Explanation $9,600 cash inflow from issuing stock - $1,100 cash outflow for dividends = $8,500 net cash inflow from financing activities
Quiz 1 9 Callahan Company earned $3,100 of cash revenue, paid $1,800 for cash expenses, and paid a $600 cash dividend to its owners. Which of the following statements is true? Multiple Choice Cash flows from financing activities were unchanged. The net cash flow from investing activities was an outflow or decrease of $600. The net cash flow from operating activities was $1,300. The net cash flow from operating activities was $700.
The net cash flow from operating activities was $1,300. 3100 - 1800 = 1300
61. Under what condition is a pending lawsuit recognized as a liability on a company's balance sheet? Multiple Choice The amount can be reasonably estimated. The outcome is probable. The outcome is reasonably possible. The outcome is probable and can be reasonably estimated. Correct
The outcome is probable and can be reasonably estimated. Explanation 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.
62 On January 2, Year 1, Torres Corporation issued 17,000 shares of $12 par-value common stock for $18 per share. Which of the following statements is true? Multiple Choice The common stock account will increase by $306,000. The cash account will increase by $204,000. Total equity will increase by $204,000. Incorrect The paid-in capital in excess of par value account will increase by $102,000. Correct
The paid-in capital in excess of par value account will increase by $102,000. Explanation The cash account will increase by $306,000 (17,000 × $18), the common stock account will increase by $204,000 (17,000 × $12 par value), and the paid-in capital in excess of par value account will increase by $102,000 (17,000 × $6).
On January 2, Year 1, Torres Corporation issued 28,000 shares of $20 par-value common stock for $28 per share. Which of the following statements is true? Multiple Choice A. The cash account will increase by $560,000. B. The common stock account will increase by $784,000. C. Total equity will increase by $560,000. D. The paid-in capital in excess of par value account will increase by $224,000.
The paid-in capital in excess of par value account will increase by $224,000. Explanation: The cash account will increase by $784,000 (28,000 × $28), the common stock account will increase by $560,000 (28,000 × $20 par value), and the paid-in capital in excess of par value account will increase by $224,000 (28,000 × $8).
22 The Wilson Company purchased $36,000 of merchandise from the Poole Wholesale Company. Wilson also paid $2,900 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. Multiple Choice A. Total increases to the inventory account would be $38,900. B. Total increases to the inventory account would be $36,000. C. Transportation-in would be increased by $2,900. D. Total increases to the inventory account would be $2,900.
Total increases to the inventory account would be $38,900. Explanation 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.
Quiz 1 3 During 2013, Chi Company earned $2,000 of cash revenue, paid $950 of cash expenses, and paid a $450 cash dividend to its owners. Based on this information alone, Multiple Choice net income amounted to $1,050. total assets increased by $600. cash inflow from operating activities was $1,050. all of these are correct.
all of these are correct. My Explanation revemue - expanses = net oncome = 1050 total assets increase by (1050 - 450) = 600 cash flow from operating activities increases by (2000 - 950) = 1050
2. Jackson Company had a net increase in cash from operating activities of $9,000 and a net decrease in cash from financing activities of $2,500. If the beginning and ending cash balances for the company were $4,000 and $13,000, then net cash change from investing activities was: Multiple Choice A. an outflow or decrease of $2,500. B. an inflow or increase of $1,500. C. an inflow or increase of $2,500. D. zero.
an inflow or increase of $2,500. Explanation Beginning cash balance + Increase from operating activities - Decrease from financing activities +/- Increase or decrease from investing activities = Ending cash balance$4,000 + $9,000 - $2,500 +/- Increase or decrease from investing activities = $13,000$2,500 = Increase in investing activities
Quiz 1 2 The following account balances were drawn from the 2013 financial statements of Gunn Company Cash $6,400 Accounts payable $2,250 Accounts receivable $3,500 Common stock? Land$10,000 Retained earnings, Jan.1 $4,700 Revenue$11,500 Expenses$8,250 Based on the above information, what is the balance of Common Stock for Gunn Company? (Grayson Company) Multiple Choice $12,950 $9,700 $1,450 $12,400
answer 9700 My explanation Ending retained earnings = Beginning retained earnings + Revenues -Expenses (4700+11500-8250)=7950 Total assets = Cash + AR_Land (6400+3500+10000)=19900 Total assets = Total liabilities + (Retained earnings + Common stock) Hence Common stock = (19900-2250-7950)=9700
Quiz 1 8 Which of the following financial statements provides information about a company as of a specific point in time? Multiple Choice Income statement Statement of changes in equity Statement of cash flows Balance sheet
balance sheet
39. Hoover Company purchased two identical inventory items. The item purchased first cost $38.50. The item purchased second cost $43.00. Then Hoover sold one of the inventory items for $65. Based on this information, the amount of: Multiple Choice ending inventory is $43.00 if Hoover uses the LIFO cost flow method. gross margin is $24.25 if Hoover uses the weighted average cost flow method. Correct cost of goods sold is $43.00 if Hoover uses the FIFO cost flow method.
gross margin is $24.25 if Hoover uses the weighted average cost flow method. Explanation If Hoover uses LIFO, cost of goods sold will be $43.00 (most recent purchase) and ending inventory will be $38.50, not 43.00. If Hoover uses weighted average, the weighted average cost per unit is $40.75. Therefore, gross margin will be $24.25 ($65 Sales − $40.75 Cost of goods sold). If Hoover uses FIFO, cost of goods sold will be $38.50 (earliest purchase), not $43.00.
63 Ix Company issued 38,000 shares of $10 par value common stock at a market price of $32. As a result of this accounting event, the amount of stockholders' equity would: Multiple Choice increase by $1,216,000. be unaffected. increase by $380,000. increase by $836,000.
increase by $1,216,000. Explanation Common stock will increase by $380,000, the par value, and paid-in capital in excess of par value will increase by $836,000, for a total increase in stockholders' equity of $1,216,000.
11. Jack's Snow Removal Company received a cash advance of $12,000 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 Multiple Choice A. increase assets by $4,000 B. increase equity by $4,000 C. increase liabilities by $4,000 D. increase assets by $4,000 and increase equity by $4,000
increase equity by $4,000 Explanation: The year-end adjustment to recognize one month's work on the three-month contract results in a $4,000 decrease in liabilities (unearned revenue) and an increase in equity (retained earnings due to recognizing revenue).
9. Li Company paid cash to purchase land. As a result of this accounting event: Multiple Choice A. total assets decreased. B. total assets were unaffected. C. total equity decreased. D. both assets and total equity decreased.
total assets were unaffected. Explanation Paying cash for land is an asset exchange transaction that increases one asset (land) and decreases another asset (land). The result is no overall change in total assets.
Madison Company issued an interest-bearing note payable with a face amount of $26,400 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: Multiple Choice $880. zero. $26,400. $2,112.
zero Explanation The $26,400 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.
55. Madison Company issued an interest-bearing note payable with a face amount of $25,800 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: Multiple Choice $2,064. $860. $25,800. Incorrect zero. Correct
zero. Correct Explanation The $25,800 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.
