CH 14 ACC, CH 15 ACC, ACC CH 16, CH 17 ACC, CH 18 ACC

Bonds Payable has a balance of $900,000, and Premium on Bonds Payable has a balance of $10,000. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

$17,000 loss

Firefly Inc. sold land for $225,000 cash. The land had been purchased 5 years earlier for $275,000. The loss on the sale was reported on the income statement. On the statement of cash flows, what amount should Firefly report as an investing activity from the sale of the land?

$225,000

Bonds Payable has a balance of $1,000,000 and Premium on Bonds Payable has a balance of $7,000. If the issuing corporation redeems the bonds at 101, what is the amount of gain or loss on redemption?

$3,000 loss

Bonds Payable has a balance of $1,000,000, and Discount on Bonds Payable has a balance of $15,500. If the issuing corporation redeems the bonds at 98.5, what is the amount of gain or loss on redemption?

$500 loss

The present value of $60,000 to be received in 1 year, at 6% compounded annually, is (rounded to nearest dollar)

$56,604

An investor purchased 500 shares of common stock, $25 par, for $21,750. Subsequently, 100 shares were sold for $49.50 per share. What is the amount of gain or loss on the sale?

$600 gain

If a gain of $11,000 is realized in selling (for cash) office equipment having a book value of $55,000, the total amount reported in the investing activities section of the statement of cash flows is

$66,000

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

$720,000

When the market rate of interest was 12%, Halprin Corporation issued $1,000,000, 11%, 10-year bonds that pay interest annually. The selling price of this bond issue was Use the present value tables in Exhibit 8 and Exhibit 10.

$943,494

The times interest earned ratio is computed as

(Income Before Income Tax + Interest Expense) ÷ Interest Expense

The relationship of $325,000 to $125,000, expressed as a ratio, is

2.6

The relationship of $309,260 to $104,225, expressed as a ratio, is

3

Cash generated from operations can be used for which of the following investment purposes?

All of these choices

If the straight-line method of amortization of bond premium or discount is used, which of the following statements is true?

Annual interest expense will remain the same over the life of the bonds with the amortization of bond discount.

Which of the following is not an advantage of issuing bonds instead of additional common stock?

Earnings per share on common stock may be lower.

Which of the following should be added to net income in computing net cash flows from operating activities using the indirect method?

an increase in accrued liabilities

In horizontal analysis, each item is expressed as a percentage of the

base year figure

The last item on the statement of cash flows prior to the schedule of noncash investing and financing activities reports

cash at the end of the period

Which of the following would not be on the statement of cash flows?

cash flows from contingent activities

Which of the following is the most useful in analyzing companies of different sizes?

common-sized financial statements

Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $20,000 net loss. Zach Company's entry would include a

credit to the investment account for $9,000

Blanton Corporation purchased 15% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use for the dividends it receives?

debit Cash; credit Dividend Revenue

The journal entry a company makes for the payment of interest, interest expense, and amortization of bond premium is

debit Interest Expense and Premium on Bonds Payable, credit Cash

The adjusting entry for the amortization of a discount on bonds payable is

debit Interest Expense, credit Discount on Bonds Payable

Jacks Corporation purchases $200,000 bonds plus accrued interest for 2 months of $2,000 from Kennedy Company on March 1. The bonds have an annual interest rate of 6% payable on June 30 and December 31. The entry for the purchase of the bonds would include a

debit to Interest Receivable for $2,000

On January 1, Gemstone Company obtained a $165,000, 7%, 10-year installment note from Guarantee Bank. The note requires annual payments of $23,492, with the first payment occurring on December 31. The first payment consists of interest of $11,550 and principal repayment of $11,942. The journal entry for the payment would include a

debit to Notes Payable for $11,942

On the statement of cash flows prepared using the indirect method, a $7,500 gain on the sale of fixed assets would be

deducted from net income in converting the net income reported on the income statement to cash flows from operating activities

If a company borrows money from a bank as an installment note, the interest portion of each annual payment will

equal the interest rate on the note times the carrying amount of the note at the beginning of the period

Armando Company owns 17,000 of the 70,000 shares of common stock outstanding of Tito Company and exercises a significant influence over its operating and financial policies. The investment should be accounted for by the

equity method

The method of accounting for investments in equity securities in which the investor records its share of periodic net income of the investee is the

equity method

Which of the following represents an inflow of cash and therefore would be reported on the statement of cash flows?

issuance of long-term debt

Financing activities include

issuing debt

Short-term creditors are typically most interested in analyzing a company's

liquidity

One reason that a common-sized statement is a useful tool in financial analysis is that it enables the user to

make a better comparison of two companies of different sizes in the same industry

Which of the following is not a characteristic evaluated in ratio analysis?

marketability

Cash flow per share is

not required to be reported on any statement

Debt securities include

notes and bonds

Cash received from customers is what cash flow

operating

Payment for selling expenses is what cash flow

operating

collection of accounts receivable is what cash flow

operating

Horizontal analysis is a technique for evaluating financial statement data

over a period of time

Parker Company owns 83% of the outstanding stock of Tadeo Company. Parker Company is referred to as the

parent company

Interest revenue on bonds is reported as

part of Other Revenue (Loss)

Which of the following would not be classified as an operating activity?

payment of dividends

Equity securities include

preferred stock

On a common-sized income statement, 100% is assigned to

sales

The numerator for the computation of accounts receivable turnover is

sales

The balance in Discount on Bonds Payable

would be subtracted from the related bonds payable on the balance sheet

On the first day of the fiscal year, a company issues a $4,200,000, 10%, five-year bond that pays semiannual interest of $210,000 ($4,200,000 × 10% × ½), receiving cash of $4,041,710. Journalize the first interest payment and the amortization of the related bond discount. If an amount box does not require an entry, leave it blank.

Interest expense: debit 225,829 Discount on bonds payable: credit: 15,829 Cash: credit: 210,000

A corporation uses the indirect method of preparing the statement of cash flows. A fixed asset has been sold for $25,000, representing a gain of $4,500. The value of this transaction appearing in the operating activities section of the statement of cash flows is

$(4,500)

If Eddie Industries issues $1,500,000 of 8% bonds at 105, the amount of cash received from the sale is

$1,575,000

The balance in Premium on Bonds Payable

would be added to the related bonds payable on the balance sheet

Assume the following sales data for a company: Current year $797,635 Preceding year 601,060 What is the percentage increase in sales from the preceding year to the current year (rounded to one decimal place)?

32.7%

Jarvis Corporation makes an investment in 100 shares of Saxton Company's common stock. The stock is purchased for $45 a share plus brokerage fees of $280. The journal entry for the purchase is

Investments—Saxton Company Stock 4,780 Cash4,780

Dylan Corporation issues for cash $2,000,000 of 8%, 15-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

The amount of annual interest paid to bondholders remains the same over the life of the bonds.

Basil Corporation issues for cash $1,000,000 of 8%, 10-year bonds, interest payable annually, at a time when the market rate of interest is 7%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?

The carrying amount decreases from its amount at issuance date to $1,000,000 at maturity.

Which of the following can be found on the statement of cash flows?

cash flows from operating activities

The financial statements for Nike, Inc., are presented in Appendix D. What is the major source of financing for Nike?

common stock

The statement of cash flows is not useful for

computing the net worth of a company

Financial statements in which financial data for two or more companies are combined as a single entity are called

consolidated statements

Changes in current assets and current liabilities are reported on the statement of cash flows, using the indirect method, in the

operating activities section

Debtors are interested in the times interest earned ratio because they want to

have adequate protection against a potential drop in earnings jeopardizing their interest payments

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at

a discount

If one company owns more than 50% of the common stock of another company,

a parent-subsidiary relationship exists

Preferred stock issued in exchange for land would be reported on the statement of cash flows in

a separate section of noncash investing and financing activities, usually at the bottom of the statement

The percent of fixed assets to total assets is an example of

vertical analysis

Held-to-maturity securities

are primarily purchased to earn interest revenue

Temporary investments

are reported as current assets

When the maturities of a bond issue are spread over several dates, the bonds are called

serial bonds

Which of the following is not one of the four basic financial statements?

statement of changes in financial position

Which of the following statements is not a reason a company may purchase another company's stock?

sustaining the other company's stock price

Cash paid for equipment would be reported on the statement of cash flows in

the Cash Flows from (used for) Investing Activities section

Cash paid to purchase long-term investments would be reported on the statement of cash flows in

the Cash Flows from (used for) Investing Activities section

For accounting purposes, the method used to account for investments in common stock is determined by

the extent of an investor's influence over the operating and financial affairs of the investee

The equity method of accounting for investments requires

the investment to be increased by the reported net income of the investee

Which of the following should be shown on a statement of cash flows under the financing activities section?

the payment of cash to retire a long-term note

On a common-sized balance sheet, 100% is assigned to

total assets

An analysis in which all the components of an income statement are expressed as a percentage of sales is a

vertical analysis

Which of the following is not included in the computation of the quick ratio?

inventory

Purchase of equipment is what cash flow

investing

Eastlund Corporation's accumulated depreciation—equipment account increased by $6,320, while $2,450 of patent amortization was recognized between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $13,510 from the sale of investments. Reconcile a net income of $126,300 to net cash flows from operating activities.

121560

Based on the following data, what is the accounts receivable turnover? Sales on account during year$ 700,000 Cost of merchandise sold during year 270,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year35,000 Merchandise inventory, beginning of year 90,000 Merchandise inventory, end of year 110,000

17.5

A company that has 25,000 shares of $5.00 par common stock issued and outstanding paid a dividend of $0.40 per share. The market value of the stock is $16 per share. The company's dividend yield is

2.5%

Evaluate Alternative Financing Plans Henriksen Co., which produces and sells biking equipment, is financed as follows: Bonds payable, 5% (issued at face amount)$6,000,000Preferred $2.00 stock, $100 par3,000,000Common stock, $25 par5,000,000 Income tax is estimated at 40% of income. What factors other than earnings per share should be considered in evaluating alternative financing plans?

Bonds represent a fixed annual interest requirement, while dividends on stock do not.

Freeman Corporation issues a $2,000,000, 8%, 10-year bond dated January 1 at 96. The journal entry for the issuance will show a

debit to Cash for $1,920,000

On May 1, Pierce Company purchased $60,000 of Stanton Company's 12% bonds at 100 plus accrued interest of $2,400. On June 30, Pierce received its first semiannual interest. On February 1, Pierce sold $50,000 of the bonds at 103 plus accrued interest. The journal entry Pierce records on June 30 will include a

debit to Cash for $3,600

Glenn Corporation issues a $2,000,000, 8%, 10-year bond dated January 1 at 96. The journal entry for the issuance will show a

debit to Discount on Bonds Payable for $80,000

Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?

discarding an asset that had been fully depreciated

Which of the following items would not affect the investor's income for the period?

dividends received on a long-term investment in stock where the investor owns 30% of the investee's stock

If accounts payable have increased during a period,

expenses on an accrual basis are greater than expenses on a cash basis

When the bonds are sold for more than their face value, the carrying value of the bonds is equal to

face value plus the unamortized premium

GAAP requires trading and available-for-sale investments to be reported at their

fair value

The market price that would be received for a security if it were sold is the

fair value

Payment of dividends to common stockholders is what cash flow

financing

issuance of bonds payable is what cash flow

financing

Cash paid for preferred stock dividends should be shown on the statement of cash flows under

financing activities

A $300,000 bond was redeemed at 104 when the carrying value of the bond was $316,000. The journal entry for the redemption would include a

gain on bond redemption of $4,000

If bonds are issued at a premium, the stated interest rate is

higher than the market rate of interest

The account Unrealized Gain (Loss) on Trading Investments should be included on the

income statement in the Other Revenue and Expense section

Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As a result of this transaction, cash would

increase by $48,000