SB CH 9

Based on the following information (amounts in thousands), calculate income from operations: Income tax expense = $10 General and administrative expenses = $30 Loss on sale of equipment = $5 Selling expenses = $20 Gross profit = $110 Interest expense = $15

$110 - $20 - $30 = $60 = $60,000

Based on the following information (amounts in thousands), calculate income from operations: Cost of goods sold = $120 Marketing and selling expenses = $20 Gain on sale of land = $30 Administrative expenses = $15 Net sales = $200 Interest expense = $5 Research and development expenses = $10

$200 - $120 - $20 - $15 - $10 = $35 = $35,000

On January 1, the beginning of its fiscal year, Wiggins Inc. had 100,000 shares of common stock outstanding. On April 1, 30,000 additional shares were issued for cash. On October 1, 20,000 shares of common stock were acquired as treasury stock (and are no longer outstanding). Calculate the weighted average number of shares outstanding for the year.

(100,000 x 3/12) + (130,000 x 6/12) + (110,000 x 3/12) = 117,500

On January 1, the beginning of its fiscal year, Wiggins Inc. had 100,000 shares of common stock outstanding. On April 1, 30,000 additional shares were issued for cash. On October 1, 20,000 additional shares were issued. Calculate the weighted average number of shares outstanding for the year.

(100,000 x 3/12) + (130,000 x 6/12) + (150,000 x 3/12) = 127,500

Identify the correct statements about matching principle.

1.) Expenses are measured by the cash or other asset used up to obtain the economic benefit they represent. 2.) Some expenses (administrative salaries, for example) are recognized in the period in which they are incurred.

A firm has a 20 percent gross profit ratio, Net sales = $100,000, and Cost of goods available for sale = $88,000. Based on this information, which of the following statements are correct?

1.) Gross profit = $20,000 2.) Cost of goods sold = $80,000 3.) Ending inventory = $8,000

A firm has a 40 percent gross profit ratio, Net sales = $200,000, and Cost of goods available for sale = $170,000. Based on this information, which of the following statements are correct?

1.) Gross profit = $80,000 2.) Ending inventory = $50,000

Identify the correct statements about matching principle.

1.) Some expenses (depreciation, for example) are an allocation of the cost of an asset to the periods expected to benefit from its use. 2.) Some expenses (cost of goods sold, for example) are recognized concurrently with the revenues to which they relate. 3.) Expenses are measured by the cash or other asset used up to obtain the economic benefits they represent.

The financial statement effects of recognizing cost of goods sold include:

1.) a decrease to current assets. 2.) an increase to expenses. 3.) a decrease to net income.

The income or loss from discontinued operations is reported _____ income taxes and shown separately after a subtotal amount labeled income from _____ operations.

1.) after 2.) continuing

When revenues are earned, the financial statement effects typically include:

1.) an increase to Sales or Service Revenues 2.) an increase to net income

When revenues are earned, the effects on the financial statements typically include:

1.) an increase to current assets 2.) an increase to net income

The "other income and expense" category is normally reported after income from operations and includes such items as:

1.) gains 2.) interest expense

Select all that apply By reporting discontinued operations on the income statement as a separate item, net of taxes, all the effects of the discontinued business segment are excluded from the ____ of continuing operations.

1.) gains 2.) losses 3.) expenses 4.) revenues

Multiple-step income statements commonly report subtotals for:

1.) gross profit 2.) income from operations

The "other income and expense" category is normally reported after income from operations and includes such items as:

1.) interest income 2.) losses

To be recognized, revenues must meet both the ______ and _____criteria.

1.) realization 2.) earned

The principal categories of other operating expenses frequently reported on the income statement include:

1.) selling expenses 2.) general and administrative expenses 3.) research and development expenses

Some of the key interpretations to be made from the statement of cash flows include the determination of:

1.) whether the company's cash balance increased or decreased during the year. 2.) whether net cash flows provided by operations exceed the company's cash used for investing activities. 3.) what the two or three largest sources and uses of cash were during the year for both investing and financing activities.

Some of the key interpretations to be made from the statement of cash flows include the determination of:

1.) whether the relative totals of operating, investing, and financing cash flows were similar to those observed in the prior year. 2.) whether net cash flows provided by operations are sufficient to pay adequate dividends to the company's shareholders. 3.) whether the company has generated positive net cash flows from operations.

True or false: The principal categories of other operating expenses frequently reported on the income statement can be combined in a variety of ways for financial reporting purposes, such as, "Marketing and selling expenses," "Administrative expenses," and "Research and development expenses."

True

When a segment, or major portion of a business, is disposed of, it is appropriate to disclose separately the impact that the _____ operation has had on the current operations of the firm, as well as its impact on any previous year results that are shown for comparative purposes.

discontinued

The primary purpose of the statement of cash flows is to _____.

provide relevant information about the cash receipts and cash payments of an enterprise during a period

When a product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash, the _____ criterion has been met.

realization

The statement of cash flows _____.

shows why cash changed during a period by reporting net cash provided or used by operating, investing, and financing activities

The entry typically recorded when revenues are earned is:

Dr. Cash (or Accounts Receivable) Cr. Sales (or Service Revenue)

The entry to record the recognition of cost of goods sold is:

Dr. Cost of Goods Sold Cr. Inventory

Identify a subtotal that is reported in a multiple-step income statement.

Income before taxes