Q&A Hero

Q: The current ratio is measured as: A. current assets minus current liabilities. B. current assets divided by current liabilities. C. current liabilities minus inventory, divided by current assets. D. cash on hand divided by current liabilities. E. current liabilities divided by current assets.

Q: Ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as: A. asset management ratios. B. long-term solvency measures. C. liquidity measures. D. profitability ratios. E. market value ratios.

Q: On May 1, Cedar Inc. purchases $150,000 of 10-year, Knox Corporation 8% bonds dated March 1 at 100 plus accrued interest. Journalize the entry for the semiannual receipt of interest on March 1, Year 2.

Q: Which statement expresses all accounts as a percentage of total assets? A. pro forma balance sheet B. common-size income statement C. statement of cash flows D. pro forma income statement E. common-size balance sheet

Q: Journalize the entries for the following selected transactions of Oliver Co.:May 1Purchased $100,000 of Kruse Co. 6% bonds at their face amount plus accrued interest of $2,000.July 1Received first semiannual interest payment.Sept. 1Sold the bonds at 97 plus accrued interest of $1,000.

Q: The extended version of the percentage of sales method: A. assumes that all net income will be paid out in dividends to stockholders. B. assumes that all net income will be retained by the firm and offset by a reduction in debt. C. is based on a capital intensity ratio of 1.0. D. requires that all financial statement accounts change at the same rate. E. separates accounts that vary with sales from those that do not vary with sales.

Q: On March 1, Year 1, Chase Inc. purchases 35% of the outstanding shares of Glory Corporation stock for $325,000. On December 31, Year 1, Glory reports net income of $162,000. On January 15, Year 2, Glory pays total dividends to stockholders of $33,000. Journalize the three transactions.

Q: Projected future financial statements are called: A. plug statements. B. pro forma statements. C. reconciled statements. D. aggregated statements. E. comparative statements.

Q: Skyline, Inc., purchased a portfolio of available-for-sale securities during the current fiscal year. The cost and fair value of this portfolio on December 31 were as follows:Issuing Company CostFair ValueBlackstone, Inc. $ 4,000$ 5,200Flagler Company 3,0002,700Patterson Corporation 7,500 9,800Total $14,500$17,700​a. Journalize the adjusting entry for the fair value of the portfolio of securities on December 31.b. Where will the information from the journal entry be reported on the financial statements?

Q: Awnings Incorporated has beginning net fixed assets of $234,100 and ending net fixed assets of $243,600. Assets valued at $42,500 were sold during the year. Depreciation was $62,500. What is the amount of net capital spending? A.$42,500 B.$9,500 C.$72,000 D.$53,000 E.$29,500

Q: On February 12, Addison, Inc., purchased 6,000 shares of Lucas Company at $22 per share plus a $240 brokerage fee. This purchase represents less than 20% ownership of Lucas Company. On August 22, Lucas paid a dividend per share of $0.42. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a $160 brokerage fee. Journalize the entries for the original purchase, dividend, and sale.

Q: On August 1, Year 1, Bee Company purchased $1,500,000 of Ant Company 10-year, 6% bonds, dated July 1, at 100 plus accrued interest. On March 1, Year 2, Bee sold half of the bonds for $782,500 plus accrued interest. Journalize the following transactions:a.Purchase of bonds on August 1, Year 1.b.Receipt of first semiannual interest payment on December 31, Year 1.c.The sale of the bonds on March 1, Year 2.

Q: Your firm has total sales of $22,980, costs of $14,715, and depreciation of $6,045. The tax rate is 34 percent. There are no interest expenses or other income. What is the operating cash flow? A.$1,465.20 B.$2,410.80 C.$8,340.00 D.$7,510.20 E.$9,019.80

Q: Discuss the appropriate financial treatment when an investor has a greater than 50% ownership in another company.

Q: The tax rates are as shown. Your firm currently has taxable income of $83,200. How much additional tax will you owe if you increase your taxable income by $24,600? Taxable Income Tax Rate (%) $0 " 50,000 15 50,001"75,000 25 75,001"100,000 34 100,001"335,000 39 A. $8,364 B. $9,014 C. $9,594 D. $8,754 E.

Q: 64% E.

Q: Herberto Company had a net income of $74,000 and other comprehensive loss of $8,500 for the year. On January 1, the retained earnings balance was $425,000, and the accumulated other comprehensive income balance was $52,000. Determine the (a) comprehensive income for the year, (b) the retained earnings balance on December 31, and (c) the accumulated other comprehensive income on December 31.

Q: (a) What is comprehensive income? (b) How is it computed? (c) What are some examples of items included in other comprehensive income? (d) Where is comprehensive income reported?

Q: Ramiro Company purchased 40% of the outstanding stock of Marco Company on January 1. Marco reported net income of $95,000 and declared dividends of $35,000 during the year. How much would Ramiro adjust its investment in Marco Company under the equity method?

Q: 88% C.

Q: On September 1, Year 1, Parsons Company purchased $84,000 of 10-year, 7% government bonds at 100 plus accrued interest. The semiannual interest payment dates are June 30 and December 31. Interest computations are done by the month.​a. Journalize the entry for the bond purchase.b. Journalize the receipt of interest on December 31 of the first year.c. Journalize the sale of the bonds on February 1 of the second year for $82,000 plus accrued interest.

Q: 09% B.

Q: On May 1, Cedar Inc. purchases $100,000 of 10-year, Madison Corporation 6% bonds dated March 1 at 100 plus accrued interest. Journalize the entry for the semiannual receipt of interest on September 1.

Q: Given the tax rates as shown, what is the average tax rate for a firm with taxable income of $218,700?

Q: Mart's Boutique has sales of $820,000 and costs of $540,000. Interest expense is $36,000 and depreciation is $59,000. The tax rate is 35 percent. What is the net income? A.$158,600 B.$120,250 C.$105,000 D.$179,250 E.$99,600

Q: Martha's Enterprises spent $4,100 to purchase equipment three years ago. This equipment is currently valued at $2,700 on today's balance sheet but could actually be sold for $3,200. Net working capital is $400 and long-term debt is $2,300. Assuming the equipment is the firm's only fixed asset, what is the book value of shareholders' equity? A.$1,300 B.$800 C.$1,600 D.$1,900 E.$2,200

Q: Journalize the entries for the following selected bond investment transactions for Southwest Bank:​Apr. 1 Purchased $400,000 of Daytona Beach 4.5% bonds at 100 plus accrued interest of $4,500.July 1 Received the first semiannual interest payment.Sept. 1 Sold $250,000 of the bonds at 97, plus accrued interest of $1,875.

Q: Brad's Company has equipment with a book value of $500 that could be sold today at a 50 percent discount. Its inventory is valued at $450 and could be sold to a competitor for that amount. The firm has $100 in cash and customers owe the firm $250, all of which is collectible. What is the current market value of the firm's assets? A.$100 B.$550 C.$1,050 D.$1,300 E.$600

Q: Skyline, Inc., purchased a portfolio of trading securities during the current fiscal year. The cost and fair value of this portfolio on December 31 were as follows:Issuing Company Total CostTotal Fair ValueAlcon, Inc. $16,000$15,000Easton Company​23,00021,500Panther Company​ 9,000 9,200Total $48,000$45,700​a. Journalize the adjusting entry for the fair value of the trading securities on December 31.b. Where will the information from the journal entry be reported on the financial statements?

Q: Total assets are $1,450, fixed assets are $790, long-term debt is $750, and short-term debt is $300. What is the amount of current assets? A.$660 B.$360 C.$300 D.$40 E.$790

Q: The income statement for Dobson Corporation reported net income of $22,400 for the year ended December 31 before considering the following:During the year, the company purchased available-for-sale securities.At year-end, the fair value of the investment portfolio was $2,100 more than cost. The balance of Retained Earnings was $83,000 on January 1. Dobson Corporation paid $9,000 in cash dividends during the year. Compute the balance of Retained Earnings on December 31.

Q: A firm has $820 in inventory, $3,200 in fixed assets, $1,210 in accounts receivable, $890 in accounts payable, and $360 in cash. What is the amount of the net working capital? A.$4,700 B.$5,590 C.$3,600 D.$2,390 E.$1,500

Q: The income statement for Hudson Company reported net income of $345,000 for the year ended December 31 before considering the following:During the year, the company purchased trading securities.At year-end, the fair value of the investment portfolio was $23,000 less than cost. The balance of Retained Earnings was $823,000 on January 1. Hudson Company paid $43,000 in cash dividends during the year. Compute the balance of Retained Earnings on December 31.

Q: One of the reasons why cash flow analysis is popular is because: A.cash flows are more subjective than net income. B.deferred taxes require future cash payment. C.cash flows are strictly defined by generally accepted accounting principles (GAAP). D.it is difficult to manipulate, or spin the cash flows. E.operating cash flows are found on the income statement.

Q: LM, Inc., reported net income for the year ending December 31 of $483,500. Dividends paid during the year totaled $52,900. The company holds available-for-sale securities with an original cost of $162,000 and a fair value of $181,000 at the end of the year. It also holds trading securities with an original cost of $150,000 and a fair value of $147,000. Retained earnings on January 1 was $736,400, and accumulated other comprehensive income on January 1 was $16,200.Compute the following balances to be reported in the financial statements dated December 31:a. Valuation allowance for available-for-sale securitiesb. Comprehensive incomec. Retained earningsd. Accumulated other comprehensive income

Q: The statement of cash flows consists of the cash flows from: A.operations, investing activities, and financing activities. B.operations, investing activities, and divesting activities. C.internal activities, external activities, and financing activities. D.balance sheet accounts only. E.income statement accounts only.

Q: Match each of the definitions that follow with the appropriate investment term (a–j).a. Debt securitiesb. Equity securitiesc. Investord. Investeee. Fair value methodf. Trading securitiesg. Available-for-sale securitiesh. Held-to-maturity securitiesi. Equity methodj. Business combinationThe company whose stock is purchased by another entity

Q: The cash flow of the firm must be equal to: A.cash flow to stockholders minus cash flow to creditors. B.cash flow to creditors minus cash flow to stockholders. C.cash flow to governments plus cash flow to stockholders. D.cash flow to stockholders plus cash flow to creditors. E.the aftertax operating cash flow.

Q: Free cash flow is: A.the money generated from the sale of new shares of stock. B.another term for operating cash flow. C.the cash generated by decreasing net working capital. D.cash that the firm can distribute to creditors and stockholders. E.the net income of a firm after taxes have been paid.

Q: Cash flow to stockholders is defined as: A.cash dividends paid. B.repurchases of equity less new equity sold minus cash dividends paid. C.cash flow from financing less cash flow to creditors. D.cash dividends paid plus repurchases of equity minus new equity financing. E.cash flow from assets plus cash flow to creditors.

Q: Net capital spending is equal to the: A.net change in total assets plus depreciation. B.net change in fixed assets plus depreciation. C.net income plus depreciation. D.difference between the market and book values of the total assets. E.change in total assets.

Q: Cash flow from assets: A.equals net income plus non-cash items. B.can be positive, negative, or equal to zero. C.equals operating cash flow minus net capital spending. D.equals the addition to retained earnings. E.equals operating cash flow minus the cash flow to creditors.

Q: According to generally accepted accounting principles (GAAP), revenue is recognized as income when: A.a contract is signed to perform a service or deliver a good. B.the transaction is complete and the goods or services are delivered. C.payment is requested. D.income taxes are paid on the revenue earned. E.managers decide to recognize it.

Q: The income statement: A.measures performance for one specific day. B.ignores any income other than operating revenues. C.excludes deferred tax expense. D.treats dividends paid as a cash expense. E.includes noncash expenses.

Q: Under generally accepted accounting principles (GAAP), a firm's assets are reported at: A.market value. B.liquidation value. C.market value less accumulated depreciation. D.historical cost less accumulated depreciation. E.liquidation value less accumulated depreciation.

Q: The carrying value or book value of assets: A.is determined under GAAP and is based on the cost of the asset. B.represents the true market value according to GAAP. C.is always the best measure of the company's value to an investor. D.is always higher than the replacement cost of the assets. E.is shown on the firm's income statement.

Q: An increase in treasury stock: A.increases the total equity of the firm. B.is the result of a firm issuing new shares to stock to the federal government. C.increases the number of shares outstanding. D.results from a repurchase of outstanding shares of stock. E.requires repayment at some point in the future.

Q: Assets are listed on the balance sheet in order of: A.decreasing liquidity. B.decreasing size. C.increasing size. D.market value relative to book value. E.increasing liquidity.

Q: Which one of these will increase the book value of the stockholders' equity in a profitable, non-dividend paying firm? Assume no shares of stock are repurchased or sold. A.a decrease in the book value of inventory B.an increase in earnings per share C.an increase in the market value of the firm's buildings D.an increase in the market value of the firm's long-term debt E.an increase in non-cash expenses

Q: The cash flow to stockholders must be positive when: A.the dividends paid are less than the amount of net new equity raised. B.the net sale of common stock exceeds the amount of dividends paid. C.no income is distributed but new shares of stock are sold. D.the cash flow from assets is positive and also exceeds the cash flow to creditors. E.both the cash flow to assets and the cash flow to creditors are positive.

Q: The cash flow to creditors includes the firm's cash: A.outflow when payments are paid to suppliers. B.outflow when new debt is acquired. C.outflow when interest is paid on outstanding debt. D.inflow when accounts payable increases. E.Inflow when long-term debt is paid off.

Q: A firm starts its year with a positive net working capital. During the year, the firm acquires more short-term debt than it does short-term assets. This means that: A.the ending net working capital will be negative. B.both accounts receivable and inventory decreased during the year. C.the beginning current assets were less than the beginning current liabilities. D.accounts payable increased and inventory decreased during the year. E.the ending net working capital can be positive, negative, or equal to zero.

Q: An increase in which one of the following will cause the operating cash flow to increase for a profitable firm? A.depreciation B.changes in the amount of net fixed capital C.net working capital D.taxes E.administrative expenses

Q: When you are making a financial decision, the most relevant tax rate is the ____ rate. A.average B.fixed C.marginal D.total E.variable

Q: Depreciation for a profitable firm: A.decreases net income by less than $1 for every $1 of depreciation expense. B.increases the net fixed assets as shown on the balance sheet. C.reduces both the net fixed assets and the costs of a firm. D.is a non-cash expense which increases the net operating income. E.decreases net fixed assets, net income, and operating cash flows.

Q: According to the Generally Accepted Accounting Principles, costs are: A.recorded as incurred. B.recorded when paid. C.matched with revenues. D.matched with production levels. E.expensed as management desires.

Q: On July 5, Winter Company had a market price of $58 per share of common stock. For the previous year, Winter Company paid an annual dividend of $3.48 per share. What is the dividend yield for Winter Company? a. 6.0% b. 0.6% c. 16.67% d. 1.67%

Q: Earnings per share: A.will increase if net income increases and number of shares outstanding decreases. B.will increase if net income decreases and number of shares outstanding increases. C.is defined as the addition to retained earnings divided by the number of shares outstanding. D.is the total amount of dividends paid per year on a per share basis. E.must increase at the same rate as the total operating revenue.

Q: Jarvis Corporation makes an investment in 100 shares of Saxton Company's common stock. The stock is purchased for $45 a share plus brokerage fees of $280. The journal entry for the purchase is a. Cash 4,500 Investments—Saxton Company Stock 4,500 b. Investments—Saxton Company Stock 4,780 Cash 4,780 c. Investments—Saxton Company Stock 4,500Brokerage Fee Expense 280 Cash 4,780 d. Investments—Saxton Company Stock 4,500 Cash 4,500

Q: Which one of these statements is correct? A.Pretax income is equal to net income minus taxes. B.The addition to retained earnings is equal to net income plus dividends. C.Operating income is equal to operating revenue minus cost of goods sold. D.Only current taxes are included in the tax expense. E.Earnings per share can be negative but dividends per share cannot.

Q: All else held constant, the earnings per share will: A.decrease as net income increases. B.decrease as the number of shares outstanding increase. C.decrease as the total revenue of the firm increases. D.increase as the tax rate increases. E.decrease as the costs decrease.

Q: Blanton Corporation purchased 35% of the outstanding shares of common stock of Worton Corporation as a long-term investment. Subsequently, Worton Corporation reported net income and declared and paid cash dividends. What journal entry would Blanton Corporation use for the dividends it receives from Worton Corporation? a. debit Investments—Worton Corporation Stock; credit Cash b. debit Cash; credit Dividend Revenue c. debit Investments—Worton Corporation Stock; credit Income of Worton Corporation d. debit Cash; credit Investments—Worton Corporation Stock

Q: Interest revenue on bonds is reported as a. an addition to the investment in bonds account b. part of comprehensive income but not as part of net income c. part of Other Revenue (Loss) d. part of income from operations

Q: As seen on an income statement: A.interest is deducted from income and increases the total taxes incurred. B.the tax rate is applied to the earnings before interest and taxes when the firm has both depreciation and interest expenses. C.depreciation is shown as an expense but does not affect the tax expense. D.depreciation reduces both the pretax income and the net income. E.interest expense is added to earnings before interest and taxes to compute pretax income.

Q: If you sell an asset, you are most apt to receive which value for that asset? A.market value B.original cost minus accumulated depreciation C.historical value D.book value E.carrying value

Q: Wendell Company owns 28% of the common stock of Porter Company and accounts for the investment using the equity method. Assuming that Wendell Company purchased the stock several years ago, the balance in the investment account would be equal to the original cost of the a. investment b. investment plus Wendell’s share of Porter’s net income earned since the investment was purchased c. investment plus the total amount of dividends Wendell has received from Porter since the investment was purchased d. investment plus Wendell’s share of Porter’s net income earned since the investment was purchased minus the total amount of dividends Wendell has received from Porter since the investment was purchased

Q: Which of the following would be considered an "other comprehensive income" item? a. net income b. extraordinary loss related to flood c. gain on disposal of discontinued operations d. unrealized loss on available-for-sale securities

Q: Book value: A.is equivalent to market value for firms with fixed assets. B.is based on historical cost. C.generally tends to exceed market value when fixed assets are included. D.is more of a financial than an accounting valuation. E.is adjusted to market value whenever the market value exceeds the stated book value.

Q: Which one of the following accounts is included in stockholders' equity? A.long-term debt B.deferred taxes C.plant and equipment D.accumulated retained earnings E.intangible assets

Q: Companies may report comprehensive income on each of the following statements except a. the income statement b. a separate statement of comprehensive income c. the statement of cash flows d. None of these choices

Q: Liquidity is: A.a measure of the use of debt in a firm's capital structure. B.equal to current assets minus current liabilities. C.equal to the market value of a firm's total assets minus its total liabilities. D.valuable to a firm even though liquid assets tend to be less profitable to own. E.generally associated with intangible assets.

Q: The dividend yield is measured as a. Dividends per Share of Common Stock ÷ Market Price per Share of Common Stock b. Dividends per Share of Preferred Stock ÷ Market Price per Share of Common Stock c. Dividends per Share of Common Stock ÷ Market Price per Share of Preferred Stock d. Dividends per Share of Preferred Stock ÷ Market Price per Share of Preferred Stock

Q: Which one of the following statements concerning liquidity is correct? A.If you sold an asset today, it was a liquid asset. B.If you can sell an asset next year at a price equal to its actual value, the asset is highly liquid. C.Trademarks and patents are highly liquid. D.The less liquidity a firm has, the lower the probability the firm will encounter financial difficulties. E.Balance sheet accounts are listed in order of decreasing liquidity.

Q: A company that has 25,000 shares of $5.00 par common stock issued and outstanding paid a dividend of $0.40 per share. The market value of the stock is $16 per share. The company’s dividend yield is a. 2.5% b. 400% c. 16% d. 40%

Q: Which one of the following assets is generally the most liquid? A.inventory B.buildings C.accounts receivable D.equipment E.patents

Q: On April 1, Alliance Company purchased $50,000 of Tetter Company’s 12% bonds at 100 plus accrued interest of $2,000. On June 30, Alliance received its first semiannual interest. On February 1, Alliance sold $40,000 of the bonds at 103 plus accrued interest. The journal entry Alliance will record on April 1 for the purchase of the bonds will include a a. credit to Interest Payable for $2,000 b. debit to Investments—Tetter Company Bonds for $52,000 c. debit to Cash for $50,000 d. debit to Investments—Tetter Company Bonds for $50,000

Q: An increase in total assets: A.means that net working capital is also increasing. B.requires an investment in fixed assets. C.means that stockholders' equity must also increase. D.must be offset by an equal increase in liabilities and stockholders' equity. E.can only occur when a firm has positive net income.

Q: On January 1, Butte Company’s valuation allowance for trading investments account has a debit balance of $23,200. On December 31, the cost of the trading securities portfolio was $80,000. The fair value was $98,000. Which of the following would Butte report on the income statement for the current year? a. an unrealized loss on trading investments, $5,200 b. an unrealized gain on trading investments, $5,200 c. an unrealized gain on trading investments, $18,000 d. an unrealized loss on trading investments, $18,000

Q: On June 1, $50,000 of bonds were purchased between interest dates. The brokerage commission was $500. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. What is the total cost to be debited to Investments—Bonds? a. $50,000 b. $50,500 c. $49,500 d. $53,000

Q: Which one of the following is a current liability? A.amount due to a supplier in 18 months B.debt payable to a mortgage company in nine months C.estimated taxes just paid D.loan payment due in 13 months E.amount due from a customer in 30 days