Accounting Chapter 7,8,9

At the end of the accounting period, Houston Company had $8,200 of par value common stock issued, additional paid-in capital in excess of par value − common of $10,600, retained earnings of $8,500, and $6,250 of treasury stock. The total amount of stockholders' equity is:

$21,050.

Double taxation

$75,000.

Alpha Associates was organized on January 1, Year 1. Alpha was organized as a corporation. Alpha reported $240,000 of before-tax income during Year 1 and paid a $50,000 cash dividend to its stockholders. Assuming a corporate income tax rate of 30% and a personal income tax rate of 15%, the total amount of tax collected by the government is:

$79,500.

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:

1.77.

The Martin Company reported net income of $14,700 on gross sales of $81,500. The company has average total assets of $116,700, of which $101,500 is property, plant and equipment. What is the company's return on investment? Note: Round your final answer to 1 decimal place.

12.6%

The Martin Company reported net income of $16,200 on gross sales of $89,000. The company has average total assets of $124,200, of which $109,000 is property, plant and equipment. What is the company's return on investment? Note: Round your final answer to 1 decimal place.

13.0%

Flagler Corporation shows a total of $960,000 in its common stock account and $1,020,000 in its paid-in capital in excess of par value − common stock account. The par value of Flagler's common stock is $6. How many shares of Flagler stock have been issued?

160,000

The following balance sheet information is provided for Gaynor Company: AssetsYear 2Year 1Cash$4,000$2,000Accounts receivable15,00012,000Inventory$35,000$38,000 Assuming Year 2 cost of goods sold is $153,300, what is the company's inventory turnover?

4.2 times

Montana Company was authorized to issue 200,000 shares of common stock. The company had issued 50,000 shares of stock when it purchased 10,000 shares of treasury stock. The number of outstanding shares of common stock was:

40,000.

Factors involved in communicating useful information are:

All of these answers are correct.

The following data were drawn from the accounting records of Fox Company. Note: Do not round intermediate calculations. Year 2Year 1Revenue$ 156,000$ 130,000Operating Expenses93,60072,000Net Income62,40058,000 If the year-to-year trends shown in these data continue:

All of these answers are correct.

Which of the following is an (are) objective(s) of ratio analysis?

All of these answers are correct.

Which of the following represents the impact of a taxable cash sale of $400 on the accounting equation if the sales tax rate is 5%?

An increase to cash for $420, an increase to sales tax payable for $20, and an increase to sales revenue for $400.

Which of the following represents the impact of a taxable cash sale of $920 on the accounting equation if the sales tax rate is 5%?

An increase to cash for $966, an increase to sales tax payable for $46, and an increase to sales revenue for $920.

Where is treasury stock reported on a corporation's balance sheet?

As a deduction from total stockholders' equity, following retained earnings

The party who borrows money in a note payable is known as the:

Both Maker and Issuer.

The term "double taxation" refers to which of the following?

Corporations must pay income taxes on their net income, and their stockholders must pay income taxes on the dividends they receive from the corporation.

Which of the following statements regarding the information disclosed in financial statements is incorrect?

Financial statements should be detailed enough to answer any financial-related question an investor might have.

Burger Barn has been named as a plaintiff in a $5 million lawsuit filed by a customer over the addictive nature of the company's french fries. Burger Barn's attorneys have advised them that the likelihood of a future obligation from the suit is remote. As a result of the lawsuit, Burger Barn should:

Ignore the lawsuit in its financial statements.

Houston Company borrowed $20,000 from Dallas Company on March 1, Year 1. Houston is to repay the principal and interest on March 1, Year 2. The interest rate is 8%. If the year-end adjustment is properly recorded, what will be the effects of the accrual on Houston's Year 1 financial statements?

Increase liabilities and increase expenses

Which of the following is not considered an advantage of the corporate form of business organization?

Lack of government regulation

Rialto Company collected $5,000 on account. What impact will this transaction have on the firm's current ratio?

No impact

The payment of a previously declared cash dividend will:

None of these answer choices are correct.

Which of the following terms designates the maximum number of shares of stock that a corporation may issue?

Number of shares authorized

Which of the following items is not classified as a current asset?

Office equipment.

Which of the following statements regarding ratio analysis is incorrect?

Ratio analysis is a specific form of horizontal analysis.

Monthly remittance of sales tax:

Reduces liabilities.

Under what condition is a pending lawsuit recognized as a liability on a company's balance sheet?

The outcome is probable and can be reasonably estimated.

Which of the following statements regarding the quick ratio is incorrect?

The quick ratio equals quick assets divided by total liabilities.

Which of the following is a disadvantage of a sole proprietorship?

Unlimited liability

Current financial reporting standards assume that users of accounting information have:

a reasonably informed knowledge of business.

Voiles Company reissued 200 shares of its treasury stock. The treasury stock originally cost $25 per share and was reissued for $35 per share. Which of the following accurately reflects how the reissue of the treasury stock would affect Voiles's financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders' EquityCash+Accounts Receivable=Accounts Payable+Other Equity Accounts−Treasury Stock+Paid-in Capital from Treasury StockRevenues−Expenses=Net IncomeA.7,000+NA=NA+NA−(5,000)+2,000NA−NA=NA7,000 FAB.7,000+NA=NA+NA−5,000+(2,000)NA−NA=NA7,000 IAC.7,000+NA=NA+NA−NA+7,000NA−NA=NA(7,000) FAD.5,000+NA=NA+NA−NA+5,000NA−NA=NA5,000 FA

choice a

Chandler Company declared and paid a cash dividend. Which of the following choices accurately reflects how this event would affect the company's financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders' EquityRevenues−Expenses=Net IncomeA.NA=++−NA−+=−NAB.−=NA+−NA−NA=NA−FAC.−=NA+−NA−NA=NA−OAD.NA=++−NA−NA=NANA

choice b

Kellogg, Incorporated purchased 200 shares of its own $20 par value stock for $30 cash per share. Which of the following answers reflects how this purchase of treasury stock would affect Kellogg's financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders' EquityCash+Investment=Accounts Payable+Other Equity Accounts−Treasury StockRevenues−Expenses=Net IncomeA.(4,000)+NA=NA+NA−4,000NA−NA=NA(4,000)FAB.(6,000)+6,000=NA+NA−NANA−NA=NA6,000IAC.(6,000)+NA=NA+NA−6,000NA−NA=NA(6,000)FAD.(4,000)+4,000=NA+NA−NANA−NA=NA4,000IA

choice c

On a classified balance sheet, the financial statement user will be able to distinguish between:

current and noncurrent assets.

Working capital is defined as:

current assets less current liabilities.

All of the following are considered to be measures of a company's short-term debt-paying ability except:

earnings per share.

The par value of a company's stock:

has little connection to the market value of the stock.

The study of an individual financial statement item over several accounting periods is called:

horizontal analysis.

Franklin Company issued a $40,000 note to the Mercantile Bank on August 1, Year 1. The note carried a one-year term and a 12% rate of interest. The accrual of interest on December 31, Year 1 will:

increase liabilities and decrease stockholders' equity by $2,000.

Common methods of financial statement analysis include all of the following except:

incremental analysis.

Senath Company's annual report reveals net credit sales of $256,000 and average accounts receivable of $36,000. The report also shows an average inventory balance of $14,000 and cost of goods of $240,000. Based on this information (treat any partial day as a whole day): Note: Do not round intermediate calculations.

the average number of days to collect receivables is 52.

An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements is:

vertical analysis.

Madison Company issued an interest-bearing note payable with a face amount of $24,000 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:

zero.

Madison Company issued an interest-bearing note payable with a face amount of $6,600 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

zero.