Q&A Hero

Q: During the first year of operations, a company granted warranties on its products at an estimated cost of $8,500. The product warranty expense should be recorded in the years of the expenditures to repair the products covered by the warranty payments. a. True b. False

Q: reese corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2012. the weighted average number of shares outstanding in 2012 was 50,000 shares. reese corporation's common stock is selling for $40 per share on the new york stock exchange. reese corporation's price-earnings ratio is a.2 times b.8 times c.10 times d.5 times

Q: Federal unemployment compensation tax becomes an employer's liability at the time the employee is paid. a. True b. False

Q: gonzalez corporation reported net income $48,000; net sales $600,000; and average assets $800,000 for 2012. what is the 2012 profit margin? a.6% b.8% c.48% d.60%

Q: The proceeds of a discounted note are equal to the face value of the note. a. True b. False

Q: which situation below might indicate a company has a low quality of earnings? a.revenue is recognized when earned b.repair costs are capitalized and then depreciated c.the financial statements are prepared in accordance with generally accepted accounting principles d.the same accounting principles are used each year

Q: The amount borrowed is equal to the face amount of the note on an interest-bearing note payable. a. True b. False

Q: the use of alternative accounting methods a.is not a problem in ratio analysis because the footnotes disclose the method used b.may be a problem in ratio analysis even if disclosed c.is not a problem in ratio analysis since eventually all methods will lead to the same end d.is only a problem in ratio analysis with respect to inventory

Q: For a current liability to exist, the liability must be due usually within a year and must be paid out of current assets. a. True b. False

Q: Form W-2 is called the Wage and Tax Statement. a. True b. False

Q: all of the following may be indicators of channel stuffing except a.deep discounts to customers b.customers incentives for buying early c.an extremely good earnings period followed by several subsequent bad periods d.inventory levels that reflect seasonal demand levels

Q: The total net pay for a period is determined from the payroll register. a. True b. False

Q: all of the following are ways that a company's current ratio would decrease except a.purchasing inventory on account b.adding equal amounts to the numerator and denominator c.paying off one-third of its accounts payable d.paying cash for new equipment

Q: ______________ analysis, also called trend analysis, is a technique for evaluating a series of financial statement data over a period of time.

Q: Federal income taxes withheld increase the employer's payroll tax expense. a. True b. False

Q: a change in depreciation methods during the year would be classified as a change in ____________________.

Q: One of the more popular defined contribution plans is the 401k plan. a. True b. False

Q: the two criteria necessary for an item to be classified as an extraordinary item are that the transaction or event must be (1) _______________ and (2) ________________.

Q: Perez Company has the following information for the pay period of January 15–31:Gross payroll $20,000 Federal income tax withheld $2,500Social security rate 6.0% Federal unemployment tax rate 0.8%Medicare rate 1.5% State unemployment tax rate 5.4%Assuming no employees have reached the maximum earnings for any taxes, compute salaries payable and the employer’s payroll tax expense.

Q: discontinued operations refers to the disposal of a __________________ of a business.

Q: According to a summary of the payroll of Sinclair Company, $505,000 was subject to the 6.0% social security tax and $545,000 was subject to the 1.5% Medicare tax. Also, $10,000 was subject to state and federal unemployment taxes.a. Compute the employer’s payroll taxes using the following rates: State unemployment, 4.2%; Federal unemployment, 0.8%.b. Journalize the entry for the employer's payroll tax expense.

Q: all of the following situtations below might indicate a company has a low quality of earnings except: a.a lack of disclosure about guaranteed payments that were mentioned in the md&a of the annual report b.maintenance costs are capitalized and then depreciated c.revenue is recognized when earned d.adoption of a different inventory method for each of the last three years

Q: Blake Green’s weekly gross earnings for the week ending December 7 were $2,500, and her federal income tax withholding was $525. Assuming the social security tax rate is 6.0%, the Medicare tax rate is 1.5%, and Green’s earnings to date have not reached the maximum subject to FICA taxes, what is Green’s net pay?

Q: which of the following ratios may be used to measure a companys quality of earnings? a.price-earnings ratio b.return on assets ratio c.current ratio d.times interest earned ratio

Q: Journalize the following transactions:Dec. 31The accrued product warranty expense for the year is estimated to be 1.5% of sales. Sales for the year totaled $7,760,000. 31The accrued vacation pay for the year is estimated to be $46,000. 31Paid Reliable Insurance Co. $85,000 as fund trustee for the pension plan. The annual pension cost is $109,000.

Q: hobson corporation had net sales for the year of $300,000 and average total assets of $200,000. the asset turnover ratio is ____________ times.

Q: List five internal controls that relate directly to payroll.

Q: if the inventory turnover ratio is 7.3 times, and the average inventory was $600,000, the cost of goods sold during the year was $______________ and the average days to sell the inventory was ______________ days.

Q: the receivables turnover ratio is calculated by dividing ________________ by average ___________________.

Q: Florida Keys Construction installs swimming pools. It estimates warranty obligations to be 3% of sales. For the year just ending, Florida Keys’ sales were $1,450,000. Previous quarterly entries debiting Warranty Expense totaled $28,700. Determine the estimated warranty expense for the year, and journalize the entry necessary to bring the account to the needed balance.

Q: the liquidity ratio, known as the _______________ ratio, has a disadvantage that it uses year-end balances for current assets and current liabilities. the ___________ ratio partially corrects for this problem by using cash provided by operating activities and average current liabilities rather than point in time numbers.

Q: the times interest earned ratio is calculated by dividing ___________________ before __________________ and __________________ by interest expense.

Q: Ecco Company sold $150,000 of kitchen appliances with six-month warranties during September. The cost to repair defects under the warranty is estimated at 6% of the sales price. On October 15, a customer required a $200 part replacement, plus $85 labor under the warranty.​Journalize the entries for (a) the estimated expense on September 30 and (b) the October 15 warranty work.

Q: for analysis of the financial statements, ratios can be classified into three types: (1)_____________ ratios, (2)_____________ ratios, and (3)______________ ratios.

Q: Dixon Sales has seven sales employees that receive weekly paychecks. Each employee earns $10.25 per hour and has worked 40 hours in the pay period. Total federal income tax withholdings are $344.40. Each employee pays 3.0% in state income tax, 6.0% in social security tax, 1.5% in Medicare tax, and 0.5% toward retirement savings. Journalize the recognition of the pay period ending January 19 that will be paid to the employees on January 26.

Q: expressing each item in a financial statement as a percent of a base amount is called ______________ analysis.

Q: Roseland Design borrowed $700,000 on a 90-day note from CorpOne Funding Company. CorpOne discounts the note at 8%. (Assume a 360-day year is used for interest computations.)a. Journalize Roseland’s entries for: (1) The issuance of the note. (2) The payment of the note at maturity. b. Journalize CorpOne’s entries for: (1) The receipt of the note. (2) The receipt of the payment of the note at maturity.

Q: Journalize the following transactions for Howard Company:Dec. 31The accrued product warranty expense for the year is estimated to be 2.3% of sales. Sales for the year totaled $6,005,000.​​ 31The accrued vacation pay for the year is estimated to be $75,225.​​ 31Paid Reliable Insurance Co. $275,000 as fund trustee for the pension plan. The annual pension cost is $350,000.

Q: for each of the ratios listed below, indicate by the appropriate code letter, whether it is a liquidity ratio, a profitability ratio, or a solvency ratio. Code:L = Liquidity ratioP = Profitability ratioS = Solvency ratio____ 1. Price-earnings ratio____ 2. Return on assets ratio____ 3. Receivables turnover ratio____ 4. Earnings per share ratio____ 5. Payout ratio____ 6. Current cash debt coverage ratio____ 7. Current ratio____ 8. Debt to total assets ratio____ 9. Free cash flow____ 10. Inventory turnover ratio

Q: the lower the _______________ to _______________ ratio, the more equity "buffer" is available to the creditors if the company becomes insolvent.

Q: The current assets and current liabilities for Kolbie Company and Newton Company are as follows at the end of a recent fiscal period: Kolbie Company(in millions)Newton Company(in millions)Current assets: Cash and cash equivalents$ 8,352$ 8,546 Short-term investments6,034752 Accounts receivable3,0295,152 Inventories446660 Other current assets* 2,195 2,829Total current assets$20,056$17,939 Current liabilities: Accounts payable$ 4,970$10,430 Accrued and other current liabilities 3,329 6,361Total current liabilities$ 8,299$16,791​*These represent prepaid expenses and other nonquick current assets.a. Determine the quick ratio for both companies. Round to two decimal places.b. Interpret the quick ratio difference between the two companies.

Q: A business issued a 120-day, 6% note for $10,000 to a creditor on account. The company uses a 360-day year for interest computations. Journalize the entries for (a) the issuance of the note and (b) the payment of the note at maturity, including interest.

Q: the ______________ ratio measures the percentage of earnings distributed in the form of cash dividends.

Q: Aqua Construction installs swimming pools. It estimates warranty obligations to be 5% of sales. For the year just ending, Aqua’s sales were $1,500,000. Previous quarterly entries debiting Warranty Expense totaled $48,700. Determine the estimated warranty expense for the year, and journalize the entry necessary to bring the account to the needed balance

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Q: Match each of the following items to the type of intangible asset (a–d) it represents.a. Patentb. Copyrightc. Trademarkd. GoodwillNike swoosh

Q: Indicate whether the following items would be reported as an ordinary or an extraordinary item in Bentley Corporation's income statement.(a) Loss attributable to labor strike.(b) Gain on sale of fixed assets.(c) Loss from fire. Bentley is a chemical company.(d) Loss from sale of marketable securities.(e) Expropriation of property by a foreign government.(f) Loss from tornado damage. Bentley Corporation is located in the Midwest's tornado alley.(g) Loss from government condemnation of property through newly enacted law.

Q: match the ratios with their formulas by entering the appropriate letter in the space provided.A. Current ratio B. Current cash debt coverage ratio C. Profit margin ratio D. Asset turnover ratio E. Price-earnings ratio F. Times interest earnedG. Inventory turnoverH. Average collection periodI. Average days in inventoryJ. Payout rati1>cost of goods sold average inventory 2>net income net sales 3>cash dividends declared on common stock net income 4>net sales average total assets 5>current assets current liabilities 6>365 days receivables turnover 7>market price per share of stock earnings per share 8>365 days inventory turnover 9>income before income taxes and interest expenseinterest expense 10>cash provided by operations average current liabilities

Q: explain sustainable income. what relationship does this concept have to the treatment of irregular items on the income statement?

Q: raphael mendoza, the ceo of mystical products, is a successful entrepreneur and his focus is his products, not his accounting system. he asks you to explain to him, in a memo, the bases of comparison for ratio analysis.

Q: what issues must be considered when determining whether or not a loss from earthquake destruction should be treated as an extraordinary item?

Q: what does each type of ratio measure? (a)liquidity ratios. (b)solvency ratios. (c)profitability ratios.

Q: identify and explain factors that affect quality of earnings.

Q: Overnight Delivery specializes in the overnight transportation of medical equipment and laboratory specimens. The company has selected the following information from its most recent annual report to be the subject of an immediate press release.The financial statements are being released.Net income this year was $3.1 million. Last year's net income had been $2.8 million.The current ratio has changed to 2:1 from last year's 1.6:1.The debt/total assets ratio has changed to 4:6 from last year's 3:6.The company expanded its truck fleet substantially by purchasing ten new delivery vans.The company already had twelve delivery vans. The company is now the largest medical courier in the mid-Atlantic region.Required:Prepare a brief press release incorporating the above information. Include all information. Think carefully which information (if any) is good news for the company, and which (if any) is bad news.

Q: Match each of the following costs related to XYZ Co.’s office building to its proper classification (a or b).a. Capital expenditureb. Revenue expenditureInstalled window shutters on all windows

Q: Under IFRS, there is no classification fora. changes in accounting estimates.b. changes in accounting principles.c. discontinued operations.d. extraordinary items.

Q: The accounting for each of the following is the same under IFRS and GAAP except fora. extraordinary items.b. discontinued operations.c. changes in accounting principles.d. changes in accounting estimates.

Q: All revenue and expense items are considered ordinary in nature undera. both IFRS and GAAP.b. GAAP.c. IFRS.d. neither IFRS or GAAP.

Q: distinguishing normal levels of income from irregular items is of interest for the

Q: Under IFRS, the components of other comprehensive income can be reported in each of the following ways excepta. the one-statement approach.b. the two-statement approach.c. the statement of stockholders' equity approach.d. All of the above are acceptable.

Q: Under IFRS, the statement of comprehensive income can be prepared undera. the one-statement approach only.b. the two-statement approach only.c. either the one-statement approach or the two-statement approach.d. either the two-statement approach or the stockholders' equity statement approach.

Q: Match each of the following costs with its classification and treatment (a–c) as a revenue or capital expenditure. Each term may be used more than once.a. Ordinary maintenance and repairs to be treated as a revenue expenditure, increasing an expense accountb. Asset improvements to be treated as a capital expenditure, decreasing an accumulated depreciation accountc. Extraordinary repairs to be treated as a capital expenditure, increasing an asset account Fixing damage due to a car accident

Q: which of the following is not an acceptable way of displaying the components of other comprehensive income? a. combined statement of retained earnings b. second income statement c. combined statement of comprehensive income d. all of the above are acceptable

Q: Under IFRS, other comprehensive income must be displayed(reported) ina. the equity section of the statement of financial position.b. a second income income statement.c. the income statement.d. the retained earnings statement.

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Q: Mossman Company completed its first year of operations on December 31, 2012. Its initial income statement showed that Mossman had revenues of $177,000 and operating expenses of $88,000. Accounts receivable and accounts payable at year-end were $80,000 and $28,000, respectively. Assume that accounts payable related to operating expenses. Ignore income taxes.InstructionsCompute net cash provided by operating activities using the direct method.

Q: The financial statements of Ferguson Company appear below:The following additional data were provided:1. Dividends declared and paid were $16,000.2. During the year equipment was sold for $12,000 cash. This equipment cost $28,000 originally and had a book value of $12,000 at the time of sale.3. All depreciation expense is in the selling expense category.4. All sales and purchases are on account.5. Accounts payable pertain to merchandise suppliers.6. All operating expenses except for depreciation were paid in cash.InstructionsPrepare a statement of cash flows for Ferguson Company using the direct method.

Q: The income statement of Decker Company is shown below:Additional information:1. Accounts receivable increased $600,000 during the year.2. Inventory increased $250,000 during the year.3. Prepaid expenses increased $150,000 during the year.4. Accounts payable to merchandise suppliers increased $125,000 during the year.5. Accrued expenses payable increased $180,000 during the year.InstructionsPrepare the operating activities section of the statement of cash flows for the year ended December 31, 2012, for Decker Company, using the direct method

Q: Condensed financial data of Sauder Company appear below:Additional information:1. New plant assets costing $85,000 were purchased for cash in 2012.2. Old plant assets costing $25,000 were sold for $5,000 cash when book value was $13,000.3. Bonds with a face value of $20,000 were converted into $20,000 of common stock.4. A cash dividend of $24,000 was declared and paid during the year.5. Accounts payable pertain to merchandise purchases.Instructions1. Prepare a statement of cash flows for the year using the direct method.2. Compute the following cash basis ratios:a. Current cash debt coverage ratiob. Cash debt coverage ratio

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Q: Match each of the following account names to the financial statement section (a–i) in which it would appear. Sections may be used more than once or may not be used at all.a. Current Assetsb. Fixed Assetsc. Intangible Assetsd. Current Liabilitiese. Long-Term Liabilitiesf. Owner's Equityg. Revenuesh. Operating Expensesi. Other Revenue and ExpenseResearch and Development Costs

Q: A comparative balance sheet for the Visser Corporation is presented below:Additional information:1. Net loss for 2012 is $15,000. Net sales for 2012 are $250,000.2. Cash dividends of $9,000 were declared and paid in 2012.3. Land was sold for cash at a loss of $5,000. This was the only land transaction during the year.4. Equipment with a cost of $15,000 and accumulated depreciation of $10,000 was sold for $5,000 cash.5. $12,000 of bonds were retired during the year at carrying (book) value.6. Equipment was acquired for common stock. The fair value of the stock at the time of the exchange was $25,000.Instructions1. Prepare a statement of cash flows for the year ended 2012 using the indirect method.2. Compute the following cash based ratios:a. Current cash debt coverage ratiob. Cash debt coverage ratio

Q: The comparative balance sheets for Gallup Company appear below:Additional information:1. Net income for the year ending December 31, 2012, was $20,000.2. Cash dividends of $12,000 were declared and paid during the year.3. Long-term investments that had a book value of $18,000 were sold for $13,000.4. Sales for 2012 are $120,000.Instructions1. Prepare a statement of cash flows for the year ended December 31, 2012, using the indirect method.2. Compute the following cash based ratios:a. Current cash debt coverage ratiob. Cash debt coverage ratio

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Q: Hansen Company prepared the tabulation below at December 31, 2012.Net Income $350,000Adjustments to reconcile net income to net cash provided by operating activities:InstructionsShow how each item should be reported in the statement of cash flows. Use parentheses for deductions.

Q: The following information is available for Mehring Corporation for the year ended December 31, 2012:Collection of principal on long-term loan to a supplier $35,000Acquisition of equipment for cash 10,000Proceeds from the sale of long-term investment at book value 22,000Issuance of common stock for cash 20,000Depreciation expense 25,000Redemption of bonds payable at carrying (book) value 34,000Payment of cash dividends 14,000Net income 30,000Purchase of land by issuing bonds payable 40,000In addition, the following information is available from the comparative balance sheet for Mehring at the end of 2012 and 2011:InstructionsPrepare Mehring's statement of cash flows for the year ended December 31, 2012, using the indirect method.

Q: Use the following information to perform the calculations below (using the indirect method). Clearly label the amount of each answer as positive or negative and show all your calculations.

Q: Match each of the following costs associated with long-lived assets to the account (a–e) to which the cost would ultimately be debited. Each account may be used more than once, and some accounts may not be used.a. Land Improvementsb. Buildingsc. Landd. Machinery and Equipmente. Other ExpenseArchitect’s fee for building plans and supervision of construction