Exam 1 (4-5)
A limitation of the balance sheet that is not also a limitation of the income statement is valuation of items at historical cost. the use of judgments and estimates. omitted items. the numbers are affected by the accounting methods employed.
valuation of items at historical cost.
Wildhorse Co. has the following items: common stock, $964000; treasury stock, $105000; deferred income taxes, $125000 and retained earnings, $455000. What total amount should Wildhorse Co. report as stockholders' equity? $1314000. $1439000. $1189000. $1564000.
$1314000. ($964000 - $105000 + $455000 = $1314000)
Blossom Company's trial balance reflected the following account balances at December 31, 2017: Accounts receivable (net) $40000 Trading securities 13000 Accumulated depreciation on equipment and furniture 29500 Cash 30500 Inventory 58500 Equipment 49000 Patent 7200 Prepaid expenses 5000 Land held for future business site 35000 In Blossom's December 31, 2017 balance sheet, the current assets total is $232700. $214700. $147000. $206500.
$147000. ($40000 + $13000 + $30500 + $58500 + $5000 = $147000)
Presented below are data for Pharoah Company 2017 2018 Assets, January 1 $4210 $5000 Liabilities, January 1 2500 ? Stockholders' Equity, Jan. 1 ? ? Dividends 868 646 Common Stock 767 668 Stockholders' Equity, Dec. 31 ? ? Net Income 842 665 Stockholders' Equity at January 1, 2017 is $1075. $2477. $1160. $1710.
$1710. ($4210 - $2500 = $1710.)
Sandhill Co.'s trial balance of income statement accounts for the year ended December 31, 2017 included the following: Debit Credit Sales revenue $276000 Cost of goods sold $178000 Administrative expenses 38000 Loss on sale of equipment 19000 Commissions to salespersons 15100 Interest revenue 10000 Freight-out 6200 Loss from discontinued operations 24800 Bad debt expense 6200 Totals $287300 $286000 Other information: Sandhill's income tax rate is 30%. Finished goods inventory: January 1, 2017 $159700 December 31, 2017 140100 On Sandhill's multiple-step income statement for 2017, The discontinued operations loss is $24800. $17360. $30660. $43800.
$17360. ($24800 × 0.70 = $17360)
The following information was extracted from the accounts of Pharoah Company at December 31, 2017: Total reported income since incorporation $4720000 Total cash dividends paid (2460000) Unrealized holding loss on available-for-sale securities (358000) Total stock dividends distributed (602000) Prior period adjustment, recorded January 1, 2017 225000 What should be the balance of retained earnings at December 31, 2017? $1858000. $3017400. $1883000. $1525000.
$1883000. ($4720000 - $2460000 - $602000 + $225000 = $1883000)
For the year ended December 31, 2017, Oriole Company reported the following: Net income $306000 Preferred dividends declared 51100 Common dividend declared 9700 Unrealized holding loss, net of tax 4500 Retained earnings 394000 Common stock 182000 Accumulated Other Comprehensive Income, Beginning Balance 25100 What would Oriole report as its ending balance of Accumulated Other Comprehensive Income? $4500 $29600 $25100 $20600
$20600 ($25100 - $4500 = $20600)
Presented below are data for Pharoah Company 2017 2018 Assets, January 1 $6835 ? Liabilities, January 1 ? $4105 Stockholders' Equity, Jan. 1 ? $4117 Dividends 855 977 Common Stock 915 967 Stockholders' Equity, Dec. 31 ? 3404 Net Income 1033 ? Net income for 2018 is $212 income. $264 loss. $713 loss. $713 income.
$212 income. ($3404 + $977 - $4117 - ($967 - $915) = $212.)
Carla Vista Co. has the following items: common stock, $1611000; treasury stock, $217000; deferred income taxes, $253000 and retained earnings, $790000. What total amount should Carla Vista Co. report as stockholders' equity? $1394000. $2437000. $2618000. $2184000.
$2184000. ($1611000 - $217000 + $790000 = $2184000.)
For Oriole Company, the following information is available: Capitalized leases $559000 Copyrights 240000 Long-term receivables 215000 In Oriole's balance sheet, intangible assets should be reported at $774000. $240000. $799000. $215000.
$240000.
For Wildhorse, the following information is available: Capitalized leases $544000 Trademarks 265000 Long-term receivables 225000 In Wildhorse's balance sheet, intangible assets should be reported at $490000. $265000. $769000. $809000.
$265000.
Crane Company reports the following information: Net income $377000 Depreciation expense 73000 Increase in accounts receivable 27000 Crane should report cash provided by operating activities of $423000. $477000. $277000. $331000.
$423000. ($377000 + $73000 - $27000 = $423000.)
Presented below are data for Cullumber Company 2017 2018 Assets, January 1 $8851 $9725 Liabilities, January 1 4860 ? Stockholders' Equity, Jan. 1 ? ? Dividends 1619 1225 Common Stock 1458 1289 Stockholders' Equity, Dec. 31 ? ? Net Income 1928 1302 Stockholders' Equity at January 1, 2018 is $3991. $5758. $4300. $5919.
$4300. ($8851 - $4860) + $1928 - $1619 = $4300)
For the year ended December 31, 2017, Crane Company reported the following: Net income $305000 Preferred dividends declared 51800 Common dividend declared 10800 Unrealized holding loss, net of tax 4200 Retained earnings, beginning balance 385000 Common stock 199200 Accumulated Other Comprehensive Income, Beginning Balance 24200 What would Crane report as the ending balance of Retained Earnings? $627400 $623200 $685800 $653200
$627400 ($385000 + $305000 - $51800 - $10800 = $627400)
Sheridan Company reports the following information: Net income $531000 Depreciation expense 157000 Increase in accounts receivable 59000 Sheridan should report cash provided by operating activities of $315000. $629000. $747000. $433000.
$629000. ($531000 + $157000 - $59000 = $629000.)
During 2017 the Oriole Company had a net income of $85900. In addition, selected accounts showed the following changes: Accounts Receivable $2700 increase Accounts Payable 1100 increase Buildings 4200 decrease Depreciation Expense 1500 increase Bonds Payable 7900 increase What was the amount of cash provided by operating activities? $85900. $94900. $85800. $87400.
$85800. ($85900 - $2700 + $1100 + $1500 = $85800.)
For the year ended December 31, 2017, Blossom Company reported the following: Net income $313500 Preferred dividends declared 48100 Common dividend declared 10200 Unrealized holding loss, net of tax 4600 Retained earnings, beginning balance 391200 Common stock 199900 Accumulated Other Comprehensive Income, Beginning Balance 24400 What would Blossom report as total stockholders' equity? $846300 $646400 $591100 $866100
$866100 ($391200 + $313500 - $48100 - $10200) + $199900 + ($24400 -$4600) = $866100.)
Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows? Cash purchase of treasury stock. Cash purchases of equipment. Cash purchases of bonds issued by another company. Cash received as repayment for funds loaned.
Cash purchase of treasury stock.
If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows? It would be a negative $8,000 in the financing section and a positive $8,000 in the investing section. It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities. It would be a positive $8,000 in the financing section and a negative $8,000 in the investing section. It would depend on whether you are using the direct or the indirect method.
It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities.
Which one of the following types of losses is excluded from the determination of net income in income statements? Material losses resulting from the write-off of intangibles. Material losses resulting from unusual sales of assets not acquired for resale. Material losses resulting from correction of errors related to prior periods. Material losses resulting from transactions in the company's investments account.
Material losses resulting from correction of errors related to prior periods.
Which of the following is an example of managing earnings down? Reducing research and development expenditures. Revising the estimated life of equipment from 10 years to 8 years. Changing estimated bad debts from 3 percent to 2.5 percent of sales. Not writing off obsolete inventory.
Revising the estimated life of equipment from 10 years to 8 years.
In preparing a statement of cash flows, which of the following transactions would be considered an investing activity? Declaration of a cash dividend Issuance of bonds payable at a discount Sale of equipment at book value Sale of merchandise on credit
Sale of equipment at book value
One of the benefits of the statement of cash flows is that it helps users evaluate financial flexibility. Which of the following explanations is a description of financial flexibility? The firm's ability to pay its debts as they mature. The firm's ability to invest in a number of projects with different objectives and costs. The nearness to cash of assets and liabilities. The firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities.
The firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities.
Which of the following is an example of managing earnings up? Underestimating warranty claims. Writing off obsolete inventory. Decreasing estimated salvage value of equipment. Accruing a contingent liability for an ongoing lawsuit.
Underestimating warranty claims.
Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as a prior period adjustment. a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements. a change in accounting principle for the year in which the error was made. an increase in depreciation expense for the year in which the error is discovered.
a prior period adjustment.
The occurrence that most likely would have no effect on 2017 net income is the sale in 2017 of an office building contributed by a stockholder in 1964. collection in 2017 of a dividend from an investment. correction of an error in the financial statements of a prior period discovered subsequent to their issuance. stock purchased in 1999 deemed worthless in 2017.
correction of an error in the financial statements of a prior period discovered subsequent to their issuance.
The balance sheet contributes to financial reporting by providing a basis for all of the following except assessing the liquidity and financial flexibility of the enterprise. evaluating the capital structure of the enterprise. computing rates of return. determining the increase in cash due to operations.
determining the increase in cash due to operations.
In a statement of cash flows, proceeds from issuing equity instruments should be classified as cash inflows from investing activities. financing activities. lending activities. operating activities.
financing activities
The basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in inventory back into cash, or 12 months, whichever is shorter. receivables back into cash, or 12 months, whichever is longer. tangible fixed assets back into cash, or 12 months, whichever is longer. inventory back into cash, or 12 months, whichever is longer.
inventory back into cash, or 12 months, whichever is longer.
In a statement of cash flows, payments to acquire debt instruments of other entities (other than cash equivalents) should be classified as cash outflows for financing activities. lending activities. operating activities. investing activities.
investing activities.
In a statement of cash flows, receipts from sales of property, plant, and equipment and other productive assets should generally be classified as cash inflows from financing activities. selling activities. investing activities. operating activities.
investing activities.
Making and collecting loans and disposing of property, plant, and equipment are financing activities. investing activities. liquidity activities. operating activities.
investing activities.
