Financial Accounting General test questions

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?

$280,000 only include amount that is paid in next year!!! 60% of 125,000 45,000 of notes payable

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. On December 31, 2014, assuming Luster Consulting Company uses straight-line depreciation, what will be the amount of depreciation expense on the books?

3000 = 9months * 333.33(monthly depreciation)

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, 201

= $46,000 94,000 + 22,000 - 70,000

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? (Please select all that apply.)

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

real accounts:

unearned revenue!!

Bianca's Bicycles is a small shop that sells bicycles and offers repair services. Which of the following would be considered an asset on the balance sheet of Bianca's Bicycles? Select all that apply

bicycles in storeroom amounts owed by customers for delivered goods prepaid subscription

order of current assets (by liquidity)

cash accounts receivable prepaid expenses inventory other current assets

product cost:

direct labor manufacturing overhead

Which of the options below would cause the following journal entry to be made? cash debited 200,000 PPE credited 500,000 accumulated depreciation credited 350,000 gainloss credited 50,000

disposed of asset and realized $50,000 gain

An automotive parts company that sells to automotive manufacturers is forecasting revenue as part of its internal budgeting and planning process. Which of the following is LEAST likely to be important in its forecasting assumptions?

level of long term debt

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:

lower net income and higher accumulated depreciation

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

no impact!!!

liquor license

non-current asset goes right after PPE

explicit transaction

recognizing revenue for inventory sold

Which of the following items would NOT be shown on a statement of cash flows created using the indirect method?

retained earnings

income statement

revenue less cost of goods sold, less operating expenses of selling expense, depreciation expense, rent expense, utilities expense, insurance expense, wages expense, general and administrative expense, and miscellaneous operating expenses. interest expense to get to income before taxes. Finally subtract tax expense to get to net income.

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 was abiding by US GAAP standards?

Company under IFRS will have lower CF in financing and higher in operating

non-current assets in order of liquidity

PPE liquor license other

order of current liabilities (liquidity)

accounts payable wages payable sales tax payable short term loan payable other current

Based on this income statement for Company ZYX for the year ending December 31, 2014, what adjustment would need to be made to Net Income to account for Gain or Loss in calculating cash flow from Operating Activities using the indirect method? Select the appropriate adjustment to the statement of cash flows from the options below.

adjustment of (16,000) in OPERATING SECTION The total cash flows received from both the sale of equipment and the sale of debt investment are investing activities and not operating activities. The net of the gain and loss is a gain of $16,000. To eliminate this gain, the $16,000 amount should be subtracted from net income. Since the gain would have increased net income, this subtraction ensures that the net effect on cash flow from operations is zero.

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

company A is more efficient with inventory turnover

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?

company A more efficient at collection receivables than B

Johnny's Drive-in pays its employees bi-weekly. The first payday of 2014 will be on January 3 and will compensate employees for work done from December 18-31, 2013. Because the employee work was performed in 2013, the wages expense should be recorded in 2013.What adjusting entry will need to be made? Total compensation to be paid for the 2 week period is $100,000

debit wages expense credit wages payable

When projecting financial statements, which of the following accounts is difficult to forecast using the percent of sales method?

interest expense

non current liability

mortgage payable