Q&A Hero

Q: Using these data from the comparative balance sheet of Marin Company, perform horizontal analysis.

Q: Luke and John share income and losses in a 2:1 ratio (2/3 to Luke and 1/3 to John) after allowing for salaries of $48,000 to Luke and $60,000 to John. Net income for the partnership is $93,000. Income should be divided as a. Luke, $46,500; John, $46,500 b. Luke, $55,000; John, $38,000 c. Luke, $65,000; John, $28,000 d. Luke, $38,000; John, $55,000

Q: The following items were taken from the financial statements of Clarke, Inc., over a three-year period:InstructionsCompute the following for each of the above time periods.a. The amount and percentage change from 2011 to 2012.b. The amount and percentage change from 2012 to 2013.

Q: A new partner may be admitted to a partnership by a. inheriting a partnership interest b. contributing assets to the partnership c. purchasing a specific quantity of assets from the partnership d. a written approval under the federal law

Q: The following items were taken from the financial statements of Stine, Inc., over a three-year period:InstructionsUsing horizontal analysis and 2011 as the base year, compute the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable or unfavorable for each item.

Q: Comparative information taken from the Goreham Company financial statements is shown below:InstructionsUsing horizontal analysis, show the percentage change from 2011 to 2012 with 2011 as the base year.

Q: As part of the initial investment, Jackson contributes accounts receivable that had a balance of $22,500 in the accounts of a sole proprietorship. Of this amount, $3,000 is deemed completely worthless. For the remaining accounts, the partnership will establish a provision for possible future uncollectible accounts of $1,500. The amount debited to Accounts Receivable for the new partnership is a. $18,000 b. $22,500 c. $21,000 d. $19,500

Q: An inexperienced accountant for Carey Corporation showed the following in Carey’s 2012 income statement: Income before income taxes $300,000; Extraordinary loss from tornado (before taxes) $60,000; and Net income $132,000. The extraordinary loss and taxable income are both subject to a 30% tax rate.InstructionsPrepare a corrected income statement beginning with “Income before income taxes.”

Q: Horizontal and vertical analyses are analytical tools frequently used to analyze financial statements. What type of information or insights can be obtained by using these two techniques? Explain how the output of horizontal analysis and vertical analysis can be compared to industry averages and/or competitive companies.

Q: Listed below are some selected Items that may appear on a corporate income statement. Indicate the order in which these items would appear on an income statement. (The first one should be assigned the number “1”, the second “2,” etc.)

Q: indian river groves in central florida lost about 10% of its oranges (or $750,000) due to frost. based on this information, how will indian river groves most likely report this loss? a.as an extraordinary item net of taxes b.below discontinued operations c.as a pretax ordinary loss prior to income before income taxes d.as a discontinued operation net of taxes

Q: When a limited liability company is formed, a. the partnership activities are limited b. all partners have limited liability c. some of the partners have limited liability d. none of the partners has limited liabilityUse this information to answer the questions that follow.The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year was $258,000. The articles of partnership make no reference to the division of net income.

Q: Harriet, Mickey, and Zack decide to liquidate their partnership. All assets are sold, and the liabilities are paid. Following these transactions, the capital balances and profit and loss percentages are as follows: Harriet, $27,000 and 30%; Mickey, $(12,000) and 40%; Zack, $43,000 and 30%. Mickey is unable to contribute any assets to reduce the deficit. How much cash will Harriet receive as a result of the partnership liquidation? a. $27,000 b. $21,000 c. $23,400 d. $15,000

Q: all of the following are reported on the income statement net of tax except a.irregular items b.other comprehensive income items c.income from operations d.extraordinary items

Q: all of the following statements regarding changes in accounting principles are true except which of the following? a.most changes in accounting principles are only reported in current periods when the principle change takes place b.changes in accounting principles are allowed when new principles are preferable to old ones c.most changes in accounting principles are retroactively reported d.consistency is one of the biggest concerns when a change in accounting principle is undertaken

Q: Seth and Beth have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remainder to be divided equally. How much of the net income of $42,000 is allocated to Seth? a. $20,000 b. $23,000 c. $32,000 d. $0

Q: an income statement would not include a.other revenue and gains b.extraordinary items c.discontinued operations d.dividends paid

Q: The Calvin-Dogwood Partnership plans to form a new partnership with Alexis. The existing partnership owns inventory that was purchased for $90,000, has a current replacement cost of $85,900, and is priced to sell for $125,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted? a. $129,100 b. $85,900 c. $90,000 d. $125,000

Q: the discontinued operations section of the income statement refers to a.discontinuance of a product line b.the income or loss on products that have been completed and sold c.obsolete equipment and discontinued inventory items d.the disposal of a significant segment of a business

Q: which one of the following would be classified as an extraordinary item? a.expropriation of property by a foreign government b.losses attributed to a labor strike c.write-down of inventories d.gains or losses from sales of equipment

Q: when a change in depreciation method occurs: a.prior years' financial statements should be changed to reflect the newly adopted method b.the change should be reported in current and future years c.the cumulative effect of the change should be reflected on the income statement as of the beginning of the next year d.the cumulative effect of the change in accounting principle should be classified as an extraordinary item on the income statement

Q: A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm. As a result of this transaction, the capital account balance of the other partners in the partnership a. will increase b. will decrease c. will remain the same d. may increase, decrease, or remain the same

Q: if an item meets one (but not both) of the criteria for an extraordinary item, it a.only needs to be disclosed in the footnotes of the financial statements b.may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a loss) c.is reported as an "other revenue or gain" or "other expense and loss," net of tax d.is reported at its gross amount as an "other revenue or gain" or "other expense or loss."

Q: the order of presentation of items that may appear on the income statement is a.extraordinary items, discontinued operations, income before income taxes b.discontinued operations, extraordinary items, income before income taxes c.income before income taxes, discontinued operations, extraordinary items d.income before income taxes, extraordinary items, discontinued operations

Q: A gain or loss on realization is divided among partners according to their a. income-sharing ratio b. capital balances c. drawing balances d. contribution of assets

Q: What amount will be recorded to Sandra’s capital account? a. $18,000 b. $7,500 c. $25,500 d. $10,500

Q: which of the following items appears on the income statement before income before irregular items? a.other comprehensive income b.extraordinary items c.income tax expense d.discontinued operations

Q: which of the following items should be classified as an extraordinary item on an income statement? a.gain on the sale of property, plant or equipment b.loss due to expropriation of property by a foreign government c.loss due to discontinued operations d.excess of the selling price over the cost of treasury stock

Q: When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at their a. book values on the partners' books prior to their being contributed to the partnership b. fair market value at the time of the contribution c. original costs to the partner contributing them d. assessed values for property tax purposes

Q: which of the following statements is true with respect to financial statement reporting for all cases when a company changes from one acceptable accounting method to another? a.comparability across periods is impaired b.only a footnote is required to report the change c.changes in both depreciation methods and inventory methods are reported retroactively d.management must indicate that the accounting method change is preferable to the old method

Q: jennifers noel shoppe had severe damage done to its christmas inventory due to an escaped circus elephant rampaging through the store. the inventory loss was $120,000 before applicable taxes of $30,000. jennifers noel shoppe should record the loss as a(n) a.$120,000 loss in other expenses and losses b.$120,000 extraordinary loss c.$90,000 extraordinary loss d.$150,000 extraordinary loss

Q: bettys bunny barn has experienced a $40,000 loss due to tornado damage to their inventory. tornados have never before occurred in this area. assuming that the companys tax rate is 30%, what amount will be reported for this loss on the income statement? a.$40,000 b.$28,000 c.$12,000 d.$36,000

Q: Alpha and Beta are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000, respectively, at the time they decide to terminate the partnership. Noncash assets with a book value of $110,000 are sold for $50,000. What amount of loss on realization should be allocated to Alpha? a. $60,000 b. $20,000 c. $30,000 d. $50,000

Q: Abby and Bailey are partners who share income in the ratio of 2:1 and have capital balances of $60,000 and $30,000, respectively. With the consent of Bailey, Sandra buys one-half of Abby's interest for $35,000. For what amount will Abby's capital account be debited to record admission of Sandra to the partnership? a. $40,000 b. $15,000 c. $35,000 d. $30,000

Q: gregor company reported income before taxes of $800,000 and an extraordinary loss of $200,000. assume that the companys tax rate is 30%. what amounts will be reported on the income statement for income before irregular items and extraordinary items, respectively? a.$560,000 and $200,000 b.$560,000 and $140,000 c.$660,000 and $200,000 d.$660,000 and $140,000

Q: sweet candy company sold its lollipop division resulting in a loss of $50,000. assuming a tax rate of 25%, the loss on this disposal will be reported on the income statement at what amount? a.$62,500 b.$12,500 c.$50,000 d.$37,500

Q: which of the following would not be considered a change in accounting principle? a.changing the estimated percentage used in calculating bad debt expense b.changing the inventory costing method used from fifo to lifo c.changing from straight-line depreciation to double-declining balance depreciation d.changing from the cost method of accounting for investments to the equity method

Q: extraordinary items are reported on the income statement immediately a.below income from continuing operations b.after comprehensive income c.below income before taxes d.after discontinued operations

Q: Tanner and Teresa share income and losses in a 2:1 ratio (2/3 to Tanner and 1/3 to Teresa) after allowing for salaries of $42,000 to Tanner and $60,000 to Teresa. Net income of the partnership is $132,000. How should income be divided for Tanner and Teresa? a. Tanner, $57,000; Teresa, $75,000 b. Tanner, $58,000; Teresa, $74,000 c. Tanner, $75,000; Teresa, $57,000 d. Tanner, $62,000; Teresa, $70,000

Q: which of the following would not be considered an example of a discontinued operation? a.shifting production processes within an operation b.elimination of a major class of customers c.elimination of an entire activity d.disposal of a significant component of a business

Q: which of the following is not an irregular item on the income statement? a.discontinued operations b.extraordinary items c.other revenues and expenses d.loss on disposal of a significant component of a business

Q: Details of the division of net income for a partnership should be disclosed in the a. Assets section of the balance sheet b. partners’ subsidiary ledger c. statement of cash flows d. partnership income statementUse this information to answer the questions that follow.The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year was $258,000. The articles of partnership make no reference to the division of net income.

Q: in reporting discontinued operations, the income statement should show in a special section 1>gains on the disposal of a discontinued component. 2>losses on the disposal of a discontinued component. a.1 only b.2 only c.neither 1 nor 2 d.both 1 and 2

Q: Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and $50,000, respectively. They share income and losses in the ratio of 3:2:1. Revenue accounts for the period total $350,000. Expense accounts for the period total $380,000. The revenue and expense accounts are closed to the capital accounts. Doug withdraws from the partnership. How much cash does he receive upon withdrawal? a. $30,000 b. $20,000 c. $40,000 d. $24,000

Q: cindy cane corporation has income before taxes of $800,000 and an extraordinary gain of $200,000. if the income tax rate is 25% on all items, the income statement should show income before irregular items and extraordinary items, respectively, of a.$650,000 and $200,000 b.$650,000 and $150,000 c.$600,000 and $200,000 d.$600,000 and $150,000

Q: belfry, inc. disposes of an unprofitable segment of its business. the operation of the segment suffered a $160,000 loss in the year of disposal. the loss on disposal of the segment was $80,000. if the tax rate is 30%, and income before income taxes was $1,000,000, a.the income tax expense on the income before discontinued operations is $228,000 b.the income from continuing operations is $700,000 c.net income is $760,000 d.the losses from discontinued operations are reported net of income taxes at $120,000

Q: The Craig-Doran Partnership plans to form a new partnership with Alexis. The existing partnership owns inventory that was purchased for $85,000, has a current replacement cost of $54,500, and is priced to sell for $98,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted? a. $98,000 b. $54,500 c. $85,000 d. $79,167

Q: At the end of the accounting period, the balance in the asset revaluation account will a. appear as an asset on the balance sheet b. appear as an expense on the income statement c. be closed to the capital accounts d. be distributed to the accumulated depreciation accounts

Q: the disposal of a significant segment of a business is called a.a change in accounting principle b.an extraordinary item c.an other expense d.discontinued operations

Q: steinkuhler, inc. decided on january 1 to discontinue its telescope manufacturing division. on july 1, the divisions assets with a book value of $840,000 are sold for $600,000. operating income from january 1 to june 30 for the division amounted to $100,000. ignoring income taxes, what total amount should be reported on steinkuhlers income statement for the current year under the caption, discontinued operations? a.$100,000 b.$140,000 loss c.$240,000 loss d.$340,000

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

Q: When a partner dies, the capital account balances of the remaining partners a. will increase b. will decrease c. will remain the same d. may increase, decrease, or remain the same

Q: Jordon and Heidi share income equally. For the current year, the partnership net income is $40,000. Jordon made withdrawals of $14,000, and Heidi made withdrawals of $15,000. At the beginning of the year, the capital account balances were: Jordon, Capital, $40,000; Heidi, Capital, $58,000. Jordon’s capital account balance at the end of the year is a. $68,000 b. $54,000 c. $74,000 d. $46,000

Q: comprehensive income would not include a.dividends declared b.unrealized gains on available-for-sale securities c.discontinued operations d.extraordinary gains and losses

Q: If there is no written agreement as to the way income will be divided among partners, a. they will share income and losses equally b. they will share income and losses according to their capital balances c. they will share income and losses according to the time devoted to the business d. there really is no partnership

Q: keller, inc. has the following partial balance sheet:what effect will it have on comprehensive income?a.no effect on comprehensive incomeb.increase of $1,000,000 in comprehensive incomec.increase of $9,000,000 in comprehensive incomed.decrease of $1,000,000 in comprehensive income

Q: gregg inc. has an investment in trading securities of $100,000. this investment experienced an unrealized loss of $6,000 during the current year. assuming a 35% tax rate, the effect of this loss on comprehensive income will be a.no effect b.$100,000 increase c.$35,000 decrease d.$67,000 decrease

Q: which of the following would be considered an other comprehensive income item? a.loss on disposal of discontinued operations b.unrealized loss on available-for-sale securities c.extraordinary gain due to expropriated plant facilities d.net income

Q: Which of the following is not a characteristic of a limited liability company? a. unlimited life b. limited legal liability c. taxable d. moderate ability to raise capital

Q: all of the following statements are true regarding comprehensive income except a.companies are required to report comprehensive income b.a company would add an unrealized loss on available-for-sale securities to net income to calculate comprehensive income c.comprehensive income does not include changes resulting from investments by stockholders d.comprehensive income does not include dividends to stockholders

Q: Revenue per employee may be used to measure partnership (LLC) efficiency. a. True b. False

Q: which one of the following is not a tool in financial statement analysis? a.horizontal analysis b.circular analysis c.vertical analysis d.ratio analysis

Q: In a partnership liquidation, gains and losses on the sale of partnership assets are divided among the partners' capital accounts on the basis of their capital balances. a. True b. False

Q: comparisons of financial data made within a company are called a.intracompany comparisons b.interior comparisons c.intercompany comparisons d.industry comparisons

Q: In a general partnership, each partner is individually liable to creditors for debts incurred by the partnership. a. True b. False

Q: on january 1, 2012, cummings industries had cash and common stock of $180,000. at that date the company had no other asset, liability or equity balances. on january 2, 2012, it purchased $60,000 of equity securities for cash that it classified as available-for-sale. it received cash dividends of $9,000 during the year on these securities. in addition, it had an unrealized holding gain on these securities of $15,000 net of tax. based on this information, what is the amount of comprehensive income in 2012? a.$24,000 b.$264,000 c.$9,000 d.$96,000

Q: If the partnership agreement does not otherwise state, partnership income is divided in proportion to the individual partner's capital balance. a. True b. False

Q: danner corporation reported net sales of $600,000, $680,000, and $800,000 in the years 2011, 2012, and 2013, respectively. if 2011 is the base year, what percentage do 2013 sales represent of the base? a.113% b.133% c.75% d.33%

Q: An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $120; cumulative earnings for the year prior to this week, $5,500; social security tax rate, 6.0%; Medicare tax rate, 1.5%; state unemployment compensation tax rate, 3.4% on the first $7,000; federal unemployment compensation tax, 0.8% on the first $7,000. Journalize the entries for the payroll and the employer’s payroll tax expense.

Q: when a horizontal analysis is performed and a zero or negative amount is reported in the base year, then a.no percentage change can be computed b.the percent change will be negative c.the accountant has made a mistake d.the percentage change will be 100% of greater

Q: Journalize the following entries on the books of the borrower and creditor. (Assume a 360-day year is used for interest computations.)June 1Regis Co. purchased merchandise on account from Winthrop Co., $60,000, terms n/30. The cost of merchandise sold was $36,000. 30Regis Co. issued a 60-day, 5% note for $60,000 on account.Aug. 29Regis Co. paid the amount due.

Q: a comparison with other companies that provides insight into a company's competitive position is most commonly known as which of the following types of comparisons? a.industry average comparison b.intracompany comparison c.intercompany comparison d.comprehensive income comparison

Q: Several months ago, Maximilien Company experienced a spill of radioactive materials into the Missouri River from one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $1,750,000. The company contested the fine. In addition, an employee is seeking $975,000 damages related to the spill. Finally, a homeowner has sued the company for $580,000. Although the homeowner lives 15 miles downstream from the plant, he believes that the spill has reduced his home’s resale value by $580,000.Maximilien's legal counsel believes the following will happen in relationship to these incidents:• It is probable that the EPA fine will stand.• An out-of-court settlement for $650,000 has recently been reached with the employee, with the final papers to be signed next week.• Counsel believes that the homeowner’s case is weak and will be decided in favor of Maximilien Company.• Other litigation related to the spill is possible, but the damage amounts are uncertain.a. Based on this information, journalize the contingent liabilities associated with the spill. Use the account “Damage Awards and Fines” to recognize the expense for the period.b. Prepare a note disclosure related to the spill.

Q: under which of the following cases may a percentage change be computed? a.the trend of the amounts is decreasing but all amounts are positive b.there is no amount in the base year c.there is a negative amount in the base year and a negative amount in the subsequent year d.there is a negative amount in the base year and a positive amount in the subsequent year

Q: On October 1, Ramos Co. signed a $90,000, 60-day note at the bank to be paid on November 30. (Assume a 360-day year is used for interest computations.) a. Journalize the entries for October 1 and November 30, assuming the note was discounted at 6%.b. Journalize the entries for October 1 and November 30, assuming the note was interest-bearing at 6%.

Q: horizontal analysis is also known as a.linear analysis b.vertical analysis c.trend analysis d.common size analysis

Q: The following information is for employee Ella Dodd for the week ended March 15:Total hours worked: 48Pay rate: $15 per hour, with double time for all hours in excess of 40Federal income tax withheld: $200United Fund deduction: $50Cumulative earnings prior to current week: $6,400Tax rates: Social security: 6.0% on all earnings Medicare tax: 1.5% on all earnings State unemployment: 3.4% on maximum earnings of $7,000; paid by employer only Federal unemployment: 0.8% on maximum earnings of $7,000; paid by employer onlya. Determine (1) gross earnings, (2) total deductions, and (3) net pay for Ella Dodd.b. Determine each of the employer's payroll taxes related to the earnings of Ella Dodd for the week ended March 15.

Q: in analyzing financial statements, horizontal analysis is a a.requirement b.tool c.principle d.theory

Q: Lamar Industries warrants its products for one year. The estimated product warranty expense is 3% of sales. Sales for June were $190,000. In July, a customer received warranty repairs requiring $185 of parts and $50 of labor.a. Journalize the adjusting entry required at June 30, the end of the first month of the current fiscal year, for the estimated product warranty expense.b. Journalize the entry for the warranty work provided in July.

Q: horizontal analysis of comparative financial statements includes the a.development of common size statements b.calculation of liquidity ratios c.calculation of dollar amount and percentage changes from financial statements over a period of time, as compared to a base year d.evaluation of financial statement data that expresses each item in a financial statement as a percentage of a base amount