There is a total of 28 questions this will only allow so many characters I will go in and edit the question after it posts.
Trade accounts receivable are valued and reported on the balance sheet
a.in the investment section.
b.at gross amounts less sales returns and allowances.
c.at net realizable value.
d.only if they are not past due.
2. The existing balance in Allowance for Doubtful Accounts is considered in computing bad debts expense in the
a.direct write-off method.
b.percentage of receivables basis.
c.percentage of sales basis.
d.percentage of receivables and percentage of sales basis.
3. The best managed companies will have
a.no uncollectible accounts.
b.a very strict credit policy.
c.a very lenient credit policy.
d.some accounts that will prove to be uncollectible.
4. Which one of the following items is not considered a part of the cost of a truck purchased for business use?
a.Sales tax
b.Truck license
c.Substitution of heavy duty shock absorbers for standard ones
d.Cost of lettering on side of truck
5. Shawnee Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $12,000. Which of the following statements is true with respect to these additions?
a.$30,000 should be debited to the Land account.
b.$12,000 should be debited to Land Improvements.
c.$42,000 should be debited to the Land account.
d.$42,000 should be debited to Land Improvements.
6. When estimating the useful life of an asset, accountants do not consider
a.the cost to replace the asset at the end of its useful life.
b.obsolescence factors.
c.expected repairs and maintenance.
d.the intended use of the asset.
7. Sales taxes collected by a retailer are recorded by
a.crediting Sales Taxes Revenue.
b.debiting Sales Taxes Expense.
c.crediting Sales Taxes Payable.
d.debiting Sales Taxes Payable.
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8. On December 31, 2005, Bertram Company had an outstanding note payable totaling $125,000. The note is due in equal annual installments of $25,000 on January 1 of each of the next 5 years. The current portion of long-term debt that should be reported on the December 31, 2005 balance sheet is
a.$0
b.$25,000
c.$50,000
d.$125,000
9. The party who has the right to exercise a call option on bonds is the
a.investment banker.
b.bondholder.
c.bearer.
d.issuer.
10. The dominant form of business organization in the United States in terms of dollar sales volume, earnings, and employees is
a.the sole proprietorship.
b.the partnership.
c.the corporation.
d.not known.
11. Which of the following would not be true of a privately held corporation?
a.It is sometimes called a closely held corporation.
b.Its shares are regularly traded on the New York Stock Exchange.
c.It does not offer its shares for sale to the general public.
d.It is usually smaller than a publicly held company.
12. Retained earnings
a.is unique to the corporate form of business.
b.is an optional account in the partnership form of business.
c.reflects cash paid in by shareholders to date.
d.is closed at the end of the year.
13. The statement of cash flows should help investors and creditors assess each of the following except the
a.entity's ability to generate future income.
b.entity's ability to pay dividends.
c.reasons for the difference between net income and net cash provided by operating activities.
d.cash investing and financing transactions during the period.
14. The primary purpose of the statement of cash flows is to
a.provide information about the investing and financing activities during a period.
b.prove that revenues exceed expenses if there is a net income.
c.provide information about the cash receipts and cash payments during a period.
d.facilitate banking relationships.
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15. Financing activities involve
a.the day-to-day operations of the company.
b.acquiring investments in the stocks and bonds of other companies.
c.issuing debt and equity.
d.acquiring long-lived assets.
16. Which one of the following is not a characteristic generally evaluated in analyzing financial statements?
a.Liquidity
b.Profitability
c.Marketability
d.Solvency
17. A technique for evaluating financial statements that expresses the relationship among selected items of financial statement data is
a.common size analysis.
b.horizontal analysis.
c.ratio analysis.
d.vertical analysis.
18. The acid-test (quick) ratio
a.is used to quickly determine a company's solvency and long-term debt paying ability.
b.relates cash, short-term investments, and net receivables to current liabilities.
c.is calculated by taking one item from the income statement and one item from the balance sheet.
d.is the same as the current ratio except it is rounded to the nearest whole percent.
19. Which one of the following payroll taxes does not result in a payroll tax expense for the employer?
a.FICA tax
b.Federal income tax
c.Federal unemployment tax
d.State unemployment tax
20. Assuming a FICA tax rate of 8% on the first $87,000 in wages, and a federal income tax rate of 20% on all wages, what would be an employee's net pay for the year if he earned $95,000?
a.$88,040
b.$68,400
c.$76,000
d.$69,040
21. Jan Rice has worked 44 hours this week. She worked in excess of 8 hours each day. Her regular hourly wage is $12 per hour. What are Jan's gross wages for the week? (The company Jan works for is in compliance with the Fair Labor Standards Act.)
a.$528
b.$552
c.$792
d.$576
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22. Hunt Company purchased factory equipment with an invoice price of $60,000. Other costs incurred were freight costs, $1,100; installation wiring and foundation, $2,200; material and labor costs in testing equipment, $700; oil lubricants and supplies to be used with equipment, $500; fire insurance policy covering equipment, $1,400. The equipment is estimated to have a $5,000 salvage value at the end of its 8-year useful service life.
Instructions
(a)Compute the acquisition cost of the equipment. Identify each element of cost clearly.
(b)If the double-declining-balance method of depreciation was used, the constant percentage applied to a declining book value would be ______.
answer a)
Invoice price 60000
Freight cost 1100
installation wiring and foundation 2200
testing cost 700
total acqusition cost 64000
answer b
1/8*2 = 0.25 or 25 %
23. Carey Word Processing Service uses the straight-line method of depreciation. The company's fiscal year end is December 31. The following transactions and events occurred during the first three years.
2006July1Purchased a computer from the Computer Center for $2,500 cash plus sales tax of $150, and shipping costs of $50.
Nov.3Incurred ordinary repairs on computer of $140.
Dec.31Recorded 2006 depreciation on the basis of a four year life and estimated salvage value of $500.
2007Dec.31Recorded 2007 depreciation.
2008Jan.1Paid $500 for an upgrade of the computer. This expenditure is expected to increase the operating efficiency and capacity of the computer.
Instructions
Prepare the necessary entries. (Show computations.)
Necessary journal entries
Debit Credit
1 July 2006 computer 2700
Cash 2700
31 Nov 2006repairs expense 140
Cash140
31 dec 2006 Depreciation expense 275
Accumulated depreciation 275{(2700-500)/4}*6/12
31 Dec 2007 Depreciation expense 550
Accumulated depreciation 550{(2700-500)/4}
1 Jan 2008 computer 500
Cash 500
24. Finney Company billed its customers a total of $1,575,000 for the month of November. The total includes a 5% state sales tax.
Instructions
(a)Determine the proper amount of revenue to report for the month.
1575000/1.05 = 1500000
The amount to be reported as revenue = 1500000
(b)Prepare the general journal entry to record the revenue and related liabilities for the month.
Accounts receivable DR 1575000
Sales CR 1500000
Sales tax payable Cr 75000
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25. On March 12, Reichers Corporation purchased 2,000 shares of its $4 par value common stock at a cash price of $22 per share. On June 25, the company sold 500 shares of the treasury stock for $25 per share.
Instructions
Journalize the two transactions.
12 March Treasury stock44000
Cash 44000 (2000*22)
25 June cash 12500 (500*25)
Treasury stock 11000(500*22)
Additional paid in Capital treasury stock 1500{500*(25-22)}
26. The comparative balance sheets for Kohl Company appear below:
KOHL COMPANY
Comparative Balance Sheet
Dec. 31, 2005Dec. 31, 2004
Assets
Cash$ 23,000$12,000
Accounts receivable18,00014,000
Prepaid expenses6,0009,000
Inventory27,00018,000
Long-term investments-0-18,000
Equipment60,00030,000
Accumulated depreciation—equipment (18,000)(14,000)
Total assets$116,000$87,000
Liabilities and Stockholders' Equity
Accounts payable$ 21,000$ 9,000
Bonds payable37,00045,000
Common stock40,00023,000
Retained earnings18,000 10,000
Total liabilities and stockholders' equity$116,000$87,000
Additional information:
1.Net income for the year ending December 31, 2005 was $20,000.
2.Cash dividends of $12,000 were declared and paid during the year.
3.Long-term investments that had a cost of $18,000 were sold for $16,000.
Instructions
Prepare a statement of cash flows for the year ended December 31, 2005, using the indirect method.
Statement of cash flows
Net income 20000
Depreciation expense 4000
Loss on sale of investment 2000
Working capital adjustment
Accounts receivable(18000-14000) (4000)
Inventory (27000-18000) (9000)
Prepaid expenses ( 6000-9000) 3000
Accounts payable ( 21000-9000) 12000
Cash generated from operating activities 28000
Investing activities
Additions (60000-30000) (30000)
Sales of investment 16000
Cash flow from investing activities (14000)
Financing activities
Common stock ( 40000-23000)17000
Bonds payable (37000-45000)(8000)
Dividends paid (12000)
Cashflow from financing activities (3000)
Cash generated from all activities11000
Add opening balnce12000
Closing balance23000
27.
Selected financial statement data for Morton Company are presented below.
December 31, 2005December 31, 2004
Cash$ 20,000$30,000
Short-term investments25,00018,000
Receivables (less allowance of $10,000 and $8,000)90,00072,000
Inventories85,00065,000
Total current liabilities100,00090,000
During 2005, net sales were $720,000, and cost of goods sold was $540,000.
Instructions
Compute the following ratios at December 31, 2005:
(a)Current.
220000/100000 = 2.2 times
(b)Acid-test.
220000-85000/100000 = 1.35 times
(c)Receivables turnover.
720000/(100000+80000)/2 = 8 times
(d)Inventory turnover.
540000/(85000+65000)/2 = 7.2 times
P14-7A The financial statements of Ernest Banks Company appear below.
ERNEST BANKS COMPANY
Comparative Balance Sheets
December 31
Assets 2006 2005
Cash $ 23,000 $ 13,000
Accounts receivable24,000 33,000
Merchandise inventory20,000 27,000
Prepaid expenses 20,000 13,000
Land 40,000 40,000
Property, plant, and equipment200,000225,000
Less: Accumulated depreciation(50,000) (67,500)
Total $277,000 $283,500
Liabilities and Stockholders' Equity
Accounts payable $9,000 $18,500
Accrued expenses payable9,500 7,500
Interest payable1,000 1,500
Income taxes payable3,000 2,000
Bonds payable 50,00080,000
Common stock 123,000 105,000
Retained earnings 81,500 69,000
Total $277,000
ERNEST BANKS COMPANY
Income Statement
For the Year Ended December 31, 2006
Revenues
Sales $600,000
Gain on sale of plant assets 2,500 $602,500
Less: Expenses
Cost of goods sold500,000
Operating expenses (excluding
depreciation)60,000
Depreciation expense 7,500
Interest expense 5,000
Income tax expense 9,000 581,500
Net income $ 21,000$283,500
Additional information:
1. Plant assets were sold at a sales price of $62,500.
2. Additional equipment was purchased at a cost of $60,000.
3. Dividends of $8,500 were paid.
4. All sales and purchases were on account.
5. Bonds were redeemed at face value.
6. Additional shares of stock were issued for cash.
Statement of cash flows
Net income 21000
Depreciation expense 7500
Gain on sale of plant assets (2500)
Working capital adjustment
Accounts receivable(33000-24000) 9000
Inventory (27000-20000) 7000
Prepaid expenses ( 20000-13000) (7000)
Accounts payable ( 18500-9000) (9500)
Accrued expenses payable (9,500 7,500)2000
Interest payable(1,500 -1,000)(500)
Income taxes payable(3,000 -2,000)1000
Cash generated from operating activities 28000
Investing activities
Additions equipment (60000)
Sale of plant assets 62500
Cash flow from investing activities 2500
Financing activities
Common stock ( 123000-105000)18000
Bonds payable (80000-50000)(30000)
Dividends paid (8500)
Cashflow from financing activities (20500)
Cash generated from all activities10000
Add opening balnce13000
Closing balance23000