Accounting Crash Course

During 2018, Clayton Co. reported the following activities: - The company recognized revenues of $10,000 during the period. - The company recognized cost of goods sold of $1,250 - The company recognized $4,000 in operating expenses for salaries, rent, utilities, and other selling, general and administrative expenses. - The company paid taxes in the amount of 25% of pretax income. - In addition, the company purchased a new machine for $5,000 at the beginning of the year. The machine had a useful life of 20 years and no residual value, depreciated using the straight-line method. - Company borrowed $5,000 at the beginning of the year. During the year, the company paid down $1,000 of the loan principal. - During the year, the company paid $500 in interest on the loan - The company had 10,000 shares outstanding at the beginning of the year and issued 5,000 new shares at the middle of the year. Based on the above info, what is Clayton's earnings per share?

$0.24 per share (EPS = Net Income / Weighted Average Shares Outstanding)

Lemon has provided the following information for its recent year of operation: - The common stock account balance at the beginning of the year was $20,000 and the year-end balance was $25,000. - The additional paid-in capital account balance increased $2,500 during the year. - The retained earnings balance at the beginning of the year was $75,000 and the year-end balance was $91,000. - Net income was $26,000. How much were Lemon's dividends during its recent year of operation?

$10,000 (Ending retained Earnings = Beginning Retained Earnings + Net Income - Dividends declared)

A company's June 1, 2014 balance sheet reported total assets of $120,000 and total liabilities of $40,000. During June 2014, the following transactions occurred: 1. The company issued stock and collected cash totaling $30,000. 2. The company paid an account payable of $6,000. 3. The company purchased supplies for $1,000 with cash. 4. The company purchased land for $60,000 by paying $10,000 with cash and signing a note payable for the balance. What is total stockholders' equity after the transactions above?

$110,000

Warren Company, a retailer, has provided the following information pertaining to its recent year of operation: - Net income, $100,000 - Accounts receivable increased $9,000 - Prepaid insurance decreased $3,000 - Depreciation expense was $15,000 - Gain on sale of land, $2,000 - Wages payable decreased $7,000 - Unearned revenue increased $11,000 How much was Rice's net cash provided by operating activities?

$111,000

Celtics Company has provided the following information for its most recent year of operation: - Cash collected from customers totaled $99,300. - Cash borrowed from banks totaled $42,700. - Cash paid to employees totaled $23,300. - Cash paid for interest totaled $3,100. - Cash received from selling an investment in Lakers' stock totaled $73,000. - Cash payments to banks for repayment of money borrowed totaled $9,700. - Cash paid for operating expenses totaled $11,200. - Land costing $75,000 was sold for $75,000 cash. - Cash paid for dividend payments to stockholders totaled $7,700. How much was Celtics' net cash flow from investing activities?

$148,000

Warren Corporation purchased a truck at a cost of $60,000. It has an estimated useful life of five years and estimated residual value of $5,000. At the beginning of year three, Warren's managers concluded that the total useful life would be four years, rather than five years. There was no change in the estimated residual value. What is the amount of depreciation that Warren should record for year 3 under the straight-line depreciation method?

$16,500

Purdue Farms borrowed $10 million by signing a five-year note on December 31, 2013. Repayments of the principal are payable annually in installments of $2 million each. Purdue Farms makes the first payment on December 31, 2014 and then prepares its balance sheet. What amount will be reported as current and long-term liabilities, respectively, in connection with the note at December 31, 2014, after the first payment is made?

$2 million in current liabilities and $6 million in long-term liabilities.

Jones Company has provided the following information: - Cash sales totaled $255,000 - Credit sales totaled $479,000 - Interest income was $7,700 - Interest expense was $19,900 - Cost of goods sold was $336,000 - Rent expense was $36,000 - Salaries expense was $49,000 - Other operating expenses totaled $79,000 How much was Jones' operating income?

$234,000 (Operating Income = Operating revenues - Operating expenses)

ABC Company's total stockholders' equity at the beginning of the year was $200,000. During the year ABC reported the following: - Net loss of $30,000. - Stock issued in exchange for land totaling $80,000. - Collections of accounts receivable $40,000. - Dividends paid totaling $2000. What is ABC's total stockholders' equity at the end of the year?

$248,000

Jimmie Inc. is preparing a statement of stockholders' equity for 2014. - On January 1, 2014, Jimmie started the year with a $200,000 credit balance in its retained earnings account. - During 2014, the company earned net income of $140,000. - Jimmie paid dividends of $80,000. - Also, the company received cash of $100,000 for additional shares of common stock issued and then paid $30,000 to repurchase shares of common stock. What is the balance in retained earnings on December 31, 2014?

$260,000

At the beginning of April, Jamie Corporation's assets totaled $240,000 and liabilities totaled $60,000. During April, the following summarized transactions occurred: - Additional shares of stock were sold for $20,000 cash. - A building costing $95,000 was purchased using $10,000 cash and by signing an $85,000 long-term note payable. - Short-term investments costing $9,000 were purchased using cash. - $10,000 was paid to an employee as a loan; the employee signed a six-month note in exchange for the loan. How much are Jamie's total assets at the end of April?

$345,000

A company provided the following data: - Sales: $500,000 - Beginning inventory: $40,000 - Ending inventory: $45,000 - Gross profit: $150,000 What was the amount of inventory purchased during the year?

$355,000

Lemon Company has provided the following information for its most recent year of operation: - Cash collected from customers totaled $89,300. - Cash borrowed from banks totaled $31,700. - Cash paid to employees for salaries totaled $32,100. - Cash received from selling Lemon common stock to stockholders totaled $41,000. - Cash payments to banks for repayment of money borrowed totaled $7,500. - Cash paid to suppliers totaled $12,500. - Land costing $25,000 was sold for $25,000 cash. - Cash paid for dividends to stockholders totaled $3,300. How much was Lemon's cash flow from operating activities?

$44,700

Milligan Co. reported short-term borrowings of $2.5 million, long-term borrowings of $6.8 million, repayments of long-term borrowings of $3.5 million, interest payments of $780,000, and purchase of common stock shares for treasury of $0.5 million. What is the cash flow from financing activities?

$5,300,000 net cash inflow (Net financing cash inflow = short-term borrowings + long-term borrowings - long-term repayments - treasury stock purchases)

Milligan Company paid $2.2 million to purchase stock in another company, $1.0 million to repurchase treasury shares, $0.5 million to buy short-term investments, sold used equipment for $0.8 million when its book value was $.6 million, and purchased new equipment for $3.4 million. What was the net cash flow from investing activities?

$5.3 million net cash outflow. (Net cash flow from investing activities = Purchase stock in another company + short-term investment purchase - Equipment sale proceeds + equipment purchase)

Clayton Corp. has provided the following information: - Operating (excluding COGS) expenses were $345,000; - Operating income was $215,000; - Net sales were $1,100,000; - Interest expense was $71,000; - Loss on sale of investments was $87,000; - Income tax expense was $58,000. What was Clayton's gross profit?

$560,000 (Gross Profit = Net Sales - COGS)

During 2014, Boston Company's assets increased $95,500 and the liabilities decreased $17,300. Boston Company's stockholders' equity at December 31, 2014 was $211,500. What amount was stockholders' equity at January 1, 2014?

$98,700

The Smith Corporation has provided the following information: - Cash dividend payments were $25,000. - Long-term investments were sold for $79,000 cash. - A building costing $198,000 was purchased using $19,800 cash with the balance financed by a debt issuance. - Stock was issued to stockholders in exchange for $110,000 cash. - A $44,000 cash investment was made in a local inventory supplier. - Equipment used in operations was sold for $37,000. - Shares of Smith Corporation stock were acquired (repurchased) from stockholders for $92,000 cash. - Cash received from bank loans totaled $71,000. - Land costing $57,000 was purchased in exchange for a long-term note payable. Determine Smith's cash flows from investing activities

-$126,000

Which of the following are company assets? 1. Cash 2. A loan 3. Revenue earned by the company 4. A car owned by the company CEO 5. A year's worth of utilities prepaid by the company 6. Money owed by the company to suppliers

1. Cash and 5. A year's worth of utilities prepaid by the company

Which of the following are company assets? 1. Inventory 2. Money owed to the company from customers 3. The value of trademarks developed internally by a company under US GAAP 4. The value of trademarks acquired by a company 5. Dividends a company issue to shareholders

1. Inventory and 2. Money owed to the company from customers and 4. The value of trademarks acquired by a company

Which of these activities are credits? 1. The impact on inventory from a company recognizing $12 in COGS expense. 2. The impact on treasury stock from a company repurchasing $30 in shares. 3. The impact on debt from a $15 principal paydown. 4. The impact on accounts receivable from a $10 customer payment.

1. The impact on inventory from a company recognizing $12 in COGS expense and 4. The impact on accounts receivable from a $10 customer payment

Which of these items are current liabilities? 1. Cash. 2. Money owed to suppliers within 30 days. 3. Taxes owed and due. 4. A 5-year bank loan due this year.

2. Money owed to suppliers within 30 days and 3. Taxes owed and due and 4. A 5-year bank loan due this year.

Which of these activities are debits? 1. The impact to retained earnings from a company recording $100 in revenue. 2. The impact on PP&E of a company purchasing a $50 fixed asset. 3. The impact on retained earnings of $15 in depreciation expense. 4. The impact on cash from a company borrowing a $50 loan.

2. The impact on PP&E of a company purchasing a $50 fixed asset and 3. The impact on retained earnings of $15 in depreciation expense and 4. The impact on cash from a company borrowing a $50 loan

The Jamie Corporation has provided the following information: - Total sales were $1,200,000. - Beginning net accounts receivable was $45,000. - Ending net accounts receivable was $65,000. - Sales returns and allowances totaled $100,000. What was Jamie's receivables turnover ratio (Use average beginning and ending receivables)?

20.0

Clayton Company's cost of goods sold in the year of sale (2014) was $750,000 and 2013 cost of goods sold was $770,000. The inventory at the end of 2014 was $188,000 and $208,000 at the end of 2013. Using average inventory, Clayton's inventory turnover during 2014 was closest to:

3.79 (Inventory turnover = COGS / Average inventory)

The Warren Company has provided the following information: - Net sales totaled $750,000. - Beginning net accounts receivable was $65,000. - Ending net accounts receivable was $85,000. What was Warren's average collection period?

36.5 days

Boston Restaurants reported cost of goods sold of $322 million and accounts payable of $84 million for 2015. In 2014, cost of goods sold was $258 million and accounts payable was $72 million. Using average accounts payables balances, Boston Restaurants' accounts payable turnover ratio in 2015 was closest to:

4.13 (Accounts payable turnover = COGS / average accounts payable)

During 2014, Widge-widge reported the following revenues and expenses: Revenues: - $10,000 Expenses included: - $1,000 of raw material costs - $3,000 in new equipment purchased at year-end - $1,000 in executive salaries - $2,000 in factory labor - $800 in recurring general legal expenses - $300 in sales commissions - $400 in travel expenses - $500 in product delivery costs What is Widge-widge's operating (EBIT) profit margin?

40% (Operating Profit = Revenues - (COGS + SG&A)

A machine, acquired for a cash cost of $15,000, is being depreciated on a straight-line basis of $2,700 per year. The residual value was estimated to be 10% of cost. The estimated useful life is:

5 years

Which of the following are company liabilities? 1. Employee wages earned and paid 2. Treasury stock 3. Interest payments on a loan 4. The possibility that employees will go on strike 5. Funds owed to suppliers 6. Earned wages owed to employees

5. Funds owned to suppliers and 6. Earned wages owed to employees

Clayton Corp. has provided the following information - Gross profit was $620,000 - COGS was $380,000 - Net in come was $400,000 What was Clayton's gross profit margin?

62% (Gross Profit = Sales - COGS, Gross Profit Percentage = Gross profit / Sales)

During 2014, Clayton Co. reported the following revenues and expenses: Revenues: - $10,000 Expenses included: - $1,000 of raw material costs - $3,000 in new equipment purchased at year-end - $1,000 in executive salaries - $2,000 in factory labor - $800 in recurring general legal expenses - $300 in sales commissions - $400 in travel expenses - $200 in office supplies What is Clayton's gross profit margin?

70%

What is the net adjustment to net income in determining cash flows from operating activities when inventory increases $100,000 and accounts payable increases $20,000?

A decrease of $80,000.

During 2014, the Clayton Company reported net income of $1,872 million, depreciation expense of $1,412 million and $978 million paid for purchases of property, plant and equipment. What would be the effect on cash flows from operating activities during 2014? A) Cash flow from operating activities would be increased by depreciation expense but the property, plant and equipment purchases would have no effect on cash flow from operating activities. B) Depreciation is a noncash expense and would not be used to calculate cash flow from operating activities. C) Cash flow from operating activities would be increased by depreciation expense and by the property, plant and equipment purchases. D) Cash flows from operating activities would be increased by depreciation expense and decreased by the property, plant and equipment purchases.

A) Cash flow from operating activities would be increased by depreciation expense but the property, plant and equipment purchases would have no effect on cash flow from operating activities.

Imagine two identical companies, with only one difference - Company A reports using LIFO, while Company B reports using FIFO. Assume that prices of inventories steadily rise over time. Which of the following is correct? A) Company A will report lower net income than company B B) Company A will report higher PP&E than company B. C) Company A will report higher total assets than company B. D) Company A and Company B will have identical shareholders equity balances.

A) Company A will report lower net income than company B

Which of the following statements is true? A) GAAP requires that firms show recorded values for acquired intangible assets such as patents and trademarks on their financial statements B) GAAP requires that firms show recorded values for intangible assets such as employee and customer loyalty C) GAAP requires that financial statements accurately reflects the market value of internally-developed trademarks such as the value of the Coca-Cola brand name. D) All of the above

A) GAAP requires that firms show recorded values for acquired intangible assets such as patents and trademarks on their financial statements

Which of the following transactions would result in an increase in the current ratio? A) Selling shares of stock to stockholders in exchange for cash. B) Declaration of a cash dividend by the board of directors. C) Purchasing a building with cash. D) Collection of cash from an account receivable.

A) Selling shares of stock to stockholders in exchange for cash.

Which statement regarding the cash flows from operating activities section is false? A) Depreciation expense is added to net income. B) An increase in accounts receivable is added to net income. C) An increase in accounts payable is added to net income. D) An increase in merchandise inventory is subtracted from net income.

B) An increase in accounts receivable is added to net income.

Which of the following statements is correct? A) A decrease in accounts receivable is deducted from net income when determining cash flow from operating activities. B) An increase in accounts receivable is deducted from net income when determining cash flow from operating activities. C) A decrease in the accounts receivable balance means that credit sales exceeded cash collections from customers. D) The accounts receivable balance increases when cash collected from customers exceeds credit sales.

B) An increase in accounts receivable is deducted from net income when determining cash flow from operating activities.

On June 30, 2020, a company that sells smartphones prepaid $50,000 to cover the next 12 months' worth of utilities. 6 months later, the company reports their annual results. Assuming no adjustments have been made since the original journal entries, what journal entries should be made when reporting the annual results? A) No adjustment is required until June 30, 2021. B) Credit prepaid expenses for $25,000 and debit retained earnings for $25,000. C) Debit prepaid expenses for $25,000 and credit retained earnings for $25,000. D) Debit prepaid expenses for $25,000 and credit cash for $25,000.

B) Credit prepaid expenses for $25,000 and debit retained earnings for $25,000.

Assuming a period of rising costs, which of the following is false under the first-in first-out (FIFO) method for valuing inventory? A) Net income will be higher under FIFO than under LIFO. B) Ending inventory will be lower under FIFO than under LIFO. C) Income tax expense will be higher under FIFO than under Last-in Last-out (LIFO). D) Cost of goods sold will be lower under FIFO than under LIFO.

B) Ending inventory will be lower under FIFO than under LIFO.

Which of the following transactions would result in a decrease in the current ratio? A) Purchasing $15 million in inventory from a vendor. Payment is due in 90 days. B) Purchasing a fixed asset with $5 million in cash . C) Collection of $20 million in cash from an account receivable. D) Prepaying $50,000 in utilities (covers the next 30 days).

B) Purchasing a fixed asset with $5 million in cash .

Which of the following statements is false? A) Collecting cash after delivery of a good or service does not create revenue on the income statement on the date of collection B) Revenue is not recognized at the time of delivery of goods and services if cash is received after delivery of the goods and services C) A liability is created when cash is received prior to delivery of the goods or services D) Revenue is recognized at the time of delivery of the goods or services regardless of if cash is received

B) Revenue is not recognized at the time of delivery of goods and services if cash is received after delivery of the goods and services

Which of the following transactions would NOT be reported within the investing section of the cash flow statement? A) The cash sale of land at a gain. B) The cash receipt of a dividend from a stock investment. C) The purchase of a building for cash. D) The purchase of a stock investment for cash.

B) The cash receipt of a dividend from a stock investment.

A company reports $100 million total asset balance on December 31, 2019 and net income of $10 million for the year ending December 31, 2019. Which of the following transactions during 2020 would most directly result in a decrease in return on assets (ROA)? Assume end of year balances for calculating ROA and ignore the impact of taxes and evaluate each transaction independently. A) On June 30, 2020 the company pays a vendor $5 million for recent inventory purchases. B) The company purchases a $5 million non-depreciable fixed asset on January 1, 2020, financed with a $5 million note at 10% annual interest. The asset produces $0.5 million in incremental operating income during 2020. C) The company repays a $5 million loan obligation on January 1, 2020, that it was paying 5% annual interest. D) The company announces a 5% across-the-board decrease in the price of the products it sells.

B) The company purchases a $5 million non-depreciable fixed asset on January 1, 2020, financed with a $5 million note at 10% annual interest. The asset produces $0.5 million in incremental operating income during 2020.

Which of the following statements regarding the debt-to-equity ratio is correct? A) The debt-to-equity ratio is a measure of a company's ability to pay its debt. B) The debt-to-equity ratio is a measure of investor and creditor risk. C) A high ratio means that the company is primarily financed through stockholder investments. D) A higher ratio is preferred.

B) The debt-to-equity ratio is a measure of investor and creditor risk.

Amazonia, an online retailer, lost $50 million in inventory due to a fire. Which of the following journal entries will likely occur as a result? A) $50 million debit to inventory and $50 million credit to retained earnings B) $50 million debit to inventory and $50 million credit to cash C) $50 million credit to inventory and $50 million debit to retained earnings D) $50 million credit to inventory and $50 million debit to cash

C) $50 million credit to inventory and $50 million debit to retained earnings

Consider a single business transaction's impact on the balance sheet. Which of the following could NOT possibly occur as a result of this single transaction? A) An increase in an asset and a decrease in an asset. B) A decrease in stockholders' equity and a decrease in an asset. C) An increase in a liability and a decrease in an asset. D) An increase in stockholders' equity and an increase in an asset.

C) An increase in a liability and a decrease in an asset.

The "matching principle" states that: A) Costs associated with making a product must be recognized at the end of the production process B) Costs associated with making a product must be recognized immediately as incurred C) Costs associated with making a product must be recognized during the same period as revenue generated from that product D) Costs associated with making a product must be recorded during the sam period as the sales, general, and administrative expenses that are also associated with the product

C) Costs associated with making a product must be recognized during the same period as revenue generated from that product

Warren Company sold inventory costing $500 to a customer on account for $700. The customer took advantage of a sales discount and paid $686 in cash for the inventory. Which of the following best describes the impact of the cash collection? A) Operating expenses increase $14. B) Accounts receivable decreases $686. C) Current assets decrease $14. D) Gross profit is not affected.

C) Current assets decrease $14.

2014 ending inventory was overstated by $25,000, but it was too late to correct the financial statements. Which of the following describes the effect of the inventory error on the 2014 financial statements? A) Current assets were understated and net income was understated. B) Current assets were overstated and net income was understated. C) Current assets were overstated and net income was overstated. D) Current assets were understated and net income was overstated.

C) Current assets were overstated and net income was overstated.

A company that sells smartphones and other computer devices has collected $500,000 in cash and an additional $100,000 is due within the next 30 days for sales that it has made. It has already shipped all the merchandise. Which of the following show the correct journal entries for these activities? A) Debit cash for $500,000, Debit Accounts Receivable for $100,000, Credit Retained Earnings for $500,000, Credit Deferred Revenue for $100,000. B) Credit cash for $500,000, Credit Accounts Receivable for $100,000, Debit Retained Earnings for $600,000. C) Debit cash for $500,000, Debit Accounts Receivable for $100,000, Credit Retained Earnings for $600,000. D) Debit cash for $500,000, Debit Accounts Receivable for $100,000, Credit Inventory for $600,000. E) Credit cash for $500,000, Credit Accounts Receivable for $100,000, Debit Inventory for $600,000.

C) Debit cash for $500,000, Debit Accounts Receivable for $100,000, Credit Retained Earnings for $600,000.

A company that sells smartphones prepays $20,000 to cover the next 12 months' worth of utilities. Which of the following shows the correct journal entries for these activities? A) Debit retained earnings for $20,000 and credit cash for $20,000. B) Credit retained earnings for $20,000 and debit cash for $20,000. C) Debit prepaid expenses for $20,000 and credit cash for $20,000. D) Credit prepaid expenses for $20,000 and debit cash for $20,000.

C) Debit prepaid expenses for $20,000 and credit cash for $20,000.

Which of the following statements is incorrect? A) Ending inventory exceeds beginning inventory when purchases are greater than cost of goods sold. B) Cost of goods sold exceeds purchases when ending inventory is less than beginning inventory. C) Ending inventory is greater than beginning inventory when purchases are less than cost of goods sold. D) None of the above.

C) Ending inventory is greater than beginning inventory when purchases are less than cost of goods sold.

The regulating body that oversees the development of accounting standards in the U.S. is: A) SFAS B) GAAP C) FASB D) IASB

C) FASB

Which of the following would not be classified as property, plant and equipment on a balance sheet? A) A natural resource being mined. B) A building used as corporate headquarters. C) Land held for investment. D) Equipment used in the manufacturing process.

C) Land held for investment.

Which of the following transactions would be reported in the cash flow statement as a cash flow from financing activities? A) The cash payment of interest expense. B) Acquiring land by signing a note payable. C) Paying cash to stockholders for dividends. D) Purchasing shares of stock of another company using cash.

C) Paying cash to stockholders for dividends.

Which of the following statements is NOT correct? A) Purchase of treasury stock creates a financing activities cash outflow. B) Issuance of common stock creates a financing activities cash inflow. C) Payment of a common stock cash dividend creates an operating activities cash outflow. D) Issuance of preferred stock creates a financing activities cash inflow.

C) Payment of a common stock cash dividend creates an operating activities cash outflow.

Which of the following statements is true? A) Publicly traded US companies are required to file four 10-Q's and one 10-K annually B) All US companies are required to file three 10-Q's and one 10-K annually C) Publicly traded US companies are required to file three 10-Q's and one 10-K annually D) Publicly traded US companies are required to file one 10-K annually; 10-Q's are typically filed but are technically voluntary.

C) Publicly traded US companies are required to file three 10-Q's and one 10-K annually

Which of the following best describes the objective of depreciation? A) To estimate the remaining useful life of the asset B) To report the asset on the balance sheet oat the estimated amount for which the asset could be sold on the balance sheet date C) To allocate the cost of a tangible asset to the periods in which its use contributes to earning revenue D) To estimate the current market value of the asset

C) To allocate the cost of a tangible asset to the periods in which its use contributes to earning revenue

Clayton Company issues 10,000 shares of $10 par value common stock and pays $20,000 cash to purchase a building. The market price of the Clayton stock is $35 per share and the building's book value on the books of the seller is $250,000. Which of the following is correct based on the above information? A) Stockholders' equity increases $330,000 B) Total assets increase $330,000 C) Total assets increase $350,000 D) Stockholders' equity increases $250,000

C) Total assets increase $350,000

On January 1, 2020, a company purchases equipment with a useful life of 5 years for $50 million. The company uses straight-line depreciation and has assumed no residual value for the company. On January 1, 2023, the company sells the equipment for $45 million. Which of the following is correct? A) When the company sells the equipment, it will recognize a $15 million gain on sale on the income statement. B) When the company sells the equipment, it will recognize a $5 million loss on sale on the income statement. C) When the company sells the equipment, it will recognize a $25 million gain on sale on the income statement. D) When the company sells the equipment, it will recognize a $45 million gain on sale on the income statement.

C) When the company sells the equipment, it will recognize a $25 million gain on sale on the income statement.

Which of the following would be subtracted from net income when determining cash flows from operating activities? A) A decrease in prepaid rent B) Amortization expense C) A loss on the sale of a depreciable asset D) A decrease in utilities payable

D) A decrease in utilities payable

Which of the following statements is correct with respect to the sale of a depreciable asset? A) A loss occurs when the selling price is more than book value. B) A sale for a loss results in an increase in total assets. C) A sale for a gain results in a decrease in total assets. D) A gain occurs when the selling price exceeds book value.

D) A gain occurs when the selling price exceeds book value.

Which of the following would not be reported as a financing activities cash flow? A) Issuing common stock for cash. B) Purchasing treasury stock. C) Cash dividend payments. D) Purchase of a building by signing a note payable.

D) Purchase of a building by signing a note payable.

During 2014, Jones Corporation incurred operating expenses amounting to $100,000 of which $75,000 was paid in cash; the remaining balance will be paid during 2015. Which of the following is correct for the 2014 year-end balance sheet? A) Stockholders' equity decreases $75,000 and assets decrease $75,000. B) Assets decrease $100,000 and stockholders' equity decreases $100,000. C) Assets decrease $100,000, liabilities increase $25,000, and stockholders' equity decreases $100,000. D) Stockholders' equity decreases $100,000, assets decrease $75,000, and liabilities increase $25,000.

D) Stockholders' equity decreases $100,000, assets decrease $75,000, and liabilities increase $25,000.

Which of the following is correct? A) Working capital increases when a company pays the principal on a long-term note. B) Unearned revenues are considered increases to stockholders' equity. C) Working capital is measured as current liabilities minus current assets. D) Unearned revenues will eventually become revenue earned.

D) Unearned revenues will eventually become revenue earned.

The income statement is designed to measure: A) The liquidity of a firm B) How solvent a company has been C) The income of a firm at a point in time D) Cash inflows/outflows generated over a period of time E) The profits of a firm over a period of time

E) The profits of a firm over a period of time

A company's June 1, 2014 balance sheet reported total assets of $150,000 and total liabilities of $60,000. During June 2014, the company completed the following transactions: - Paid a note payable using $10,000 cash (no interest was paid) - Collected a $9,000 accounts receivable - Paid a $5,000 accounts payable - Purchased a truck for $5,000 cash and by signing a $20,000 note payable from a bank. The company's June 30, 2014 balance sheet would report which of the following? A) $150,000 assets, $60,000 liabilities, $90,000 Stockholder's Equity B) $155,000 assets, $65,000 liabilities, $90,000 Stockholder's Equity C) $160,000 assets, $75,000 liabilities, $85,000 Stockholder's Equity D) $170,000 assets, $100,000 liabilities, $70,000 Stockholder's Equity

Option B) $155,000 assets, $65,000 liabilities, $90,000 Stockholder's Equity

A customer purchased and received $5,000 of goods on credit from Discount Paper Supply on September 1. The customer received the bill on September 13 and mailed a $5,000 check on September 30. Discount Paper Supply received the check on October 4. On which of the following dates should Discount Paper Supply record sales revenue?

September 1st (Sales revenue should be recorded on the date of sale)