accounting final
For the current year, Fitch Company generates net income of $140,000. The company has 40,000 shares of common stock outstanding, and the stock is currently trading at $56 per share. What is the company's price-earnings ratio?
$16.00
Wi-Fi, Inc., reported a net income of $50,000 for the current year. The beginning and ending balances for Retained Earnings for the year are $100,000 and $130,000 respectively. How much did Wi-Fi pay as dividends for the year?
$20,000
Cole Corporation was organized on January 1, Year 1. The company was authorized to issue 100,000 shares of $1 par value common stock. During the year, the company had the following transactions relating to stockholders' equity: Issued 40,000 shares of common stock at $8 per share. Reported a net income of $60,000. Paid dividends of $30,000. Purchased 5,000 shares of treasury stock at $10 per share. What is total stockholders' equity at the end of Year 1?
$300,000
Frederick Corporation reports net income of $410,000. Accounts Payable balances at the beginning and end of the year were $50,000 and $39,000, respectively. Interest Payable balances at the beginning and end of the year were $27,000 and $30,000, respectively. What is the company's cash inflows from operating activities?
$402,000
Phillips Corporation reports net income of $480,000 that includes a gain on the sale of land of $8,000 and a loss on the sale of equipment of $2,000. What is the company's cash inflows from operating activities?
$474,000
Acid Test Ratio
(cash+ current investment+ account receivable)/current liabilities
= net cash flow from operating activities
+ Depreciation expense + Amortization expense + loss on sale of asset - Gain on sale of asset - increase in a current asset + decrease in current asset + increase in current liability - decrease in current liabilities
Monterey Corporation reports net income of $260,000 that includes depreciation expense of $30,000 and amortization expense of $20,000. What is the company's cash inflows from operating activities?
310,000
Summers, Inc., has net income of $50 million in the current year. Stockholders' equity at the beginning and the end of the current year totaled $140 million and $160 million respectively. Total assets at the beginning and the end of the current year totaled $190 million and $210 million respectively. What is the company's return on equity for the current year?
33.33%
cash return on assets
= cash flow to sales x asset turn over
Treasury stock
A corporation's own stock that has been reacquired by the corporation and is being held for future use.
Croft Company sold land costing $10,000 for $12,000. In the investing activities section of the statement of cash flows, the company will report:
An inflow of $12,000
Total number of shares available to sell
Authorized Stock
Identify investing activities from the items given below
Collection of notes receivable, Sale of property, Purchase of equipment
The shares of preferred stock issued by Saturn Corporation can be exchanged for common stock. However, any dividends in arrears are lost. Which of the following features are present in the preferred stock issued by Saturn?
Converible, noncumulative
purchasing treasury stock
Decrease total asset, decrease total stockholder equity
Which of the following can be used to assess the adequacy of a company's level of cash at the end of the period?
Dividing the sum of cash and cash equivalents by noncash assets
Contingent gains are recorded only if a gain is probable and the amount can be reasonably estimated.
FALSE
Kelly Cakes Bakery purchases a new building to use for its baking operations. In addition to the purchase price, the acquisition requires the company owner to pay a commission to a realtor and fees to an attorney. The realtor commissions and legal fees will be expensed in the current period.
FALSE
Tangible assets such as land, land improvements, buildings, equipment, and natural resources are recorded at cost plus all costs necessary to get the asset ready for its intended use.
FALSE
Earnings per share is most useful in comparing earnings performance of one company with another.
False
In comparing bonds with notes, bonds are typically issued to a single lender while notes are issued to many lenders.
False
In preparing journal entries, it is acceptable for the amount of total debits to be higher than the amount of total credits.
False
Paying dividends to stockholders reduces taxable income because dividends are an expense.
False
The entry to record monthly installment payments includes a credit to Notes Payable.
False
issued common stock
Increase total asset and increase total stockholder equity
Shares actually sold, which includes treasury stock
Issued Stock
Identify financing activities from the items given below.
Lending with notes receivable, Repayment of bonds, Payment of dividends
Which concept helps explain why a company can earn a higher return using debt than without debt?
Leverage
Identify the primary advantages of the corporate form of business compared to a sole proprietorship or partnership.
Limited liability Ability to raise capital
Return on Equity
Net income / avg owners equity
Which of the following is the complete description of the numerator in the equation used to calculate earnings per share?
Net income minus dividends on preferred stock
All of the following appear in the numerator for the times interest earned ratio calculation, except:
Notes payable
Shares held by investors
Outstanding Stock
Dexter Tours is a defendant in litigation involving an accident that occurred during a cruise. The company is sued for $5 million in damages. The likelihood of a payment occurring is probable, and the amount is estimated to be in the range of $2 to $3 million. No amount within the range appears more likely than others. Which of the following is the company required to do in this scenario?
Record a $2 million liability and disclose the potential additional loss.
Dexter Tours is a defendant in litigation involving an accident that occurred during a cruise. The company is sued for $5 million in damages. The likelihood of a payment occurring is probable, and the amount is estimated to be $3 million. Which of the following is the company required to do in this scenario?
Record a $3 million liability.
Which of the following dates associated with dividends does not require an entry to be recorded?
Record date
Cash Basis Accounting
Reporting income when the cash is received and expenses when the cash is paid.
limited liablity
Risked only the amount of their investments were not liable for any debts the corporation accumulated. Ability to sell stock to broad public allowed entrepreneurs to gain capital and undertake great projects.
Convertable
Shares can be converted into common stock
cumulative
Shares receive priority for future dividends, if dividends are not paid in a given year
net cash flow from operating activities uses information from all of the following sources except
Stockholder' equity section of the balance sheet
outstanding stock
The number of shares held by investors; excludes treasury shares
Delta Corporation has a higher times interest earned ratio than Gamma Corporation. From this information, we can assume that Delta is relatively better able to meet its interest payments.
True
Recording revenue is similar for debit card transactions and credit card transactions.
True
Trade discounts represent:
a reduction in the listed price of a good or service.
resell treasury stock
add to total asset and to stockholder equity
issue preferred stock
add to total asset and total stockholder equity
declare preferred stock
add to total liabilities, subtract from total stockholder equity
Working Capital
current assets - current liabilities
current ratio
current assets divided by current liabilities
Sales taxes collected from customers by the seller are recorded as _____.
current liabilities
On the date of declaration of the dividend, we _____.
debit Dividends
When a corporation acquires shares of its own common stock, it records a:
debit to Treasury Stock for cost
Diamond Electronics sells previously owned electronics. Each product carries a one-year warranty against defects. Suppose that product sales for the entire month of December are $80,000. The company expects future warranty costs to be 6% of sales. On December 31, Year 1, the company will record a:
debit to Warranty Expense for $4,800
On January 1, Year 1, Greenbriar Corporation issues callable bonds at face amount that pay 8% interest. The company is most likely to call the bonds if the market interest rate:
decreases to a rate below 8%.
Dividend Yield
dividends per share/market price per share
Dividend Yield Ratio
dividends per share/stock price
retain earning
earning not paid out in dividend
what are withheld from employee salary?
employee portion of health insurance, federal and state income taxes, FICA taxes
interest formula =
face value x annual interest rate x fraction of the year
Both dividends paid and dividends declared during the year are reported in the statement of cash flows.
false
Companies usually rely on angel investors and venture capital firms following an initial public offering. true or false
false
Most bonds require payment of the full principal at a single maturity date
false
n the stockholders' equity section of the balance sheet, common stock is listed before preferred stock
false
A current ratio of 2.2 indicates that:
for every $1 of current liabilities, the company has $2.20 of current assets.
Fairfield Corporation issues 100,000 shares of $1 par value common stock for $10 per share. This transaction:
increases assets and increases stockholders' equity.
collection of notes receivable
investing
An investor owns a $1,000 convertible bond that can be converted into 10 shares of common stock. The investor should exercise this conversion feature when the company's stock price is:
more than $100.
return on asset
net income/average total assets
asset turnover
net sales/average total assets
Issued Stock
number of shares that have been sold to investors
cash return on asset
operating cash flow/ average total asset
cash flow to sales
operating cash flows/net sales
Fraud Triangle
opportunity, motivation, rationalization
EyeCare Corporation issued 10,000 shares of 7%, $100 par value preferred stock at the beginning of Year 1. The company did not pay dividends in Year 1. However, preferred stockholders received dividends for Year 1 and Year 2, when the company declared dividends in Year 2. Preferred stockholders also have the option, under specified conditions, to return their shares for a predetermined price. Which of the following features are in present the preferred stock issued by EyeCare?
redeemable, cumulative
What is the net effect of a dividend declaration and payment?
reduction in both stockholders' equity and assets
Accrual Basis Accounting
reporting income when it is earned and expenses when they are incurred
Earnings not distributed as dividends to stockholders is known as:
retained earnings
Authorized stock
shares available to sell
redeemable
shares can be returned to the corporation at a fixed price
Price Earnings Ratio
stock price/earnings per share
Net cash flows from operating activities uses information from all of the following sources, except the _____.
stockholders' equity section of the balance sheet
pay cash dividend
subtract from total asset and total liability
Return on assets measures:
the amount of income generated for each $1 of assets.
Return on equity measures:
the amount of income generated for each $1 of stockholders' equity.
paid-in capital
the amount stockholders have invested in the company
A dividend yield of 5.0% indicates that:
the company paid $0.05 in cash dividends for each $1 invested in its stock.
Earning per share (EPS)
total earning/ outstanding shares
Dividends paid are allocated according to the percentage of shares owned by each stockholder
true
One advantage of debt is that it has the potential to increase the return to stockholders.
true
When comparing the typical sole proprietorship and corporation, the form of business having higher assets and earnings is the corporation.
true
Interest on bonds is traditionally paid:
twice per year.
A contingent liability is an existing:
uncertain situation that might result in a future loss.
Bonds that are not supported by specific assets but instead backed only by the "full faith and credit" of the issuing company are known as:
unsecured bonds.
Angel Investors
wealthy individuals in the business community willing to risk investment funds on a promising business venture
