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Multiple Choice Questions 33.Which of the following is the best description of investments in trading securities? A. Investments in bonds that management intends to hold to maturity. B. Investments in stocks or bonds that are held primarily for the purpose of selling them in the near future. C. Investments in more than fifty.
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105.Orleans Corporation purchased 1,000,000 shares of Creole Corporation's common stock, which constitutes 10% of Creole's voting stock on June 30, 2016 for $42 per share. Orleans' intent is to keep these shares beyond the current year. On December 20, 2016, Creole paid a $4,000,000 cash dividend. On December 31, 2016,.
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121.Carolina Company computed the following ratios for a two-year period:  Ratio20152016 1.Current ratio1.3.6 2.Return on equity25%16% 3.Earnings quality1.7.5 4.Cash coverage ratio346122 5.Net profit margin6%4% Required: A. Comment on the trend of each of the ratios from 2015 to 2016. State concerns or possible implications brought to light by each ratio. B. State an overall opinion of the.
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41.The FASB Accounting Standards Codification is expected to provide all of the following benefits except a.to reduce the research time necessary to solve an accounting research issue. b.to codify authoritative support such as results of academic research. c.to provide real-time updates as new standards are issued. d.to improve the usability of the authoritative accounting.
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112.During 2016, the following items were reported on ShoeCo's statement of cash flows in millions of dollars.Required: For each item, identify the type of activity it is (operating, investing, financing) and the effect it would have on the statement of cash flows. The operating activities section is prepared using the.
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11.The eight phases of the joint FASB and IASB framework project are: 1) objective and qualitative characteristics, 2) elements and recognition, 3) presentation and disclosure, 4) reporting entity, 5) measurement, 6) framework for GAAP hierarchy, 7) applicability to the not-for-profit sector, and 8) any remaining issues needing to be addressed. a.True b.False 12.Three.
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110.At the end of 2016, Doran Corporation reported net income of $70,000, gross sales revenue of $1,525,000, and sales returns of $125,000.Required: Calculate the net profit margin ratio.    111.The records of Washington Company showed the following: Average Assets$230,000Revenues$100,000 Average Liabilities 130,000Operating Expenses**(81,000) Average Stockholders’ equity*100,000Interest expense     (2,000)   Net income$17,000 *10,000 shares outstanding; current market price, $30.
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True / False Questions 1.The extent of influence and control over another company is a critical factor in determining the proper method of accounting for an investment in the common stock of another company.  2.All investments other than held-to-maturity bond investments are reported on the balance sheet at their fair value.
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Multiple Choice Questions 31.Which of the following ratios is not part of the DuPont model?  A. Total asset turnover. B. Debt-to-equity. C. Net profit margin. D. Return on equity. 32.When considering an investment, which of the following is not one of the three critical factors used to evaluate future earnings potential.
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61.Dividends that are paid to owners would affect both the a.balance sheet and statement of cash flows. b.balance sheet and income statement. c.income statement and statement of changes in equity. d.income statement and statement of cash flows. 62.Which of the following transactions would be reported in the cash flows from investing activities section in the.
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21.For an investment accounted for under the equity method, the Investment in Affiliates account along with an investment income account would be increased for an amount equal to the investor's proportionate share of the affiliate's reported net income. 22.An investment accounted for under the equity method is always reported on.
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91.Lucas Company has provided the following information: • Cash flow from operating activities, $360,000 • Net income, $306,000 • Interest expense, $30,000 • Interest cash payments, $20,000 • Income tax payments, $240,000 • Income tax expense, $246,000 What was Lucas' cash coverage ratio?  A. 21.0 B. 31.8 C. 21.2 D. 31.0 92.Lucas Company has provided the following.
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109.Donald Corporation purchased 3,000 shares of the outstanding common voting stock of Apprentice Corporation on January 2, 2016, for $80 per share. At the date of purchase Apprentice Corporation had outstanding 10,000 shares of common stock with a par value of $50 per share. During 2016, Apprentice reported net income.
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11.The balance sheet is a snapshot of a company’s financial position at a particular date. a.True b.False 12.The statement of shareholders' equity reports the effects from the recognition or valuation of certain asset or liability transactions that change Accumulated Other Comprehensive Income. a.True b.False 13.“In carrying out their responsibilities as professionals, members should exercise sensitive professional.
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124.Polk Corporation reported the following information related to its common stock (par $10) outstanding and net income: Total stockholders’ equity (no preferred stock)$125,000 Current market price per share of common stock$40.00 Dividends declared and paid during 2017$10,000 Balance in the common stock account$40,000 Net income$35,000 Required: Calculate each of the following ratios. Round your answers to.
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43.On July 1, 2016, Surf Company purchased long-term investments in available-for-sale securities as follows: Blue Corporation common stock (par $5) 2,000 shares at $16 per share. Black Company preferred stock (par $20) 1,500 shares at $30 per share. The quoted market prices per share on December 31, 2016 were as follows: Blue Corporation stock,.
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71.Potaw Company reported the following data at the end of 2016: Sales revenue (75% on credit)$300,000 Expenses (26% on credit)60,000 Accounts receivable, net at December 31, 2016 (a decrease of $4,000 during 2016)8,000 Total assets200,000 Stockholders’ equity150,000 What was the accounts receivable turnover ratio?  A. 30.0 B. 37.5 C. 36.5 D. 22.5 72.Potaw Company reported the.
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21.As a potential equity investor, what information about a company would you be least interested in prior to making an investment decision? a.What differentiates them from their competition? b.Whether they are generating a profit? c.Whether they have positive cash flows? d.What are the employee benefits and compensation packages? 22.The primary reason that financial accounting and.
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103.On January 1, 2016, Presto Corporation purchased, as a long-term investment, 5,000 shares of the outstanding voting common stock of Shazam Corporation at $30 per share. During 2016, the following events occurred at Shazam Corporation: Net Income reported for 2016$20,000 Dividends declared and paid (per share)$0.50 Market price per share of common stock.
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71.Listed below are the names of several organizations involved in the process of establishing standards for financial reporting. Following the list is a series of statements. a.Securities and Exchange Commission (SEC) b.International Accounting Standards Board (IASB) c.Financial Accounting Standards Board ____1.Reporting standards issued by this organization are legally enforceable. Failure to adhere to them.
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81.Which of the accounting ratios considers the importance of cash flows relating to required interest payments? A. Times interest earned. B. Debt-to-equity. C. Cash coverage. D. Quick. 82.Which of the following is correct? A. The times interest earned ratio is considered a better test of the ability to cover interest charges than the cash.
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101.Which of the following transactions decreases the earnings quality ratio? A. The accrual of interest expense. B. Collecting cash on an account receivable. C. Selling inventory on account for a profit. D. Making a payment of principal on a loan. 102.The year-end adjusting entry to record bad debt expense will increase which of the.
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73.Listed below are the Six Principles of AICPA’s Code of Professional Conduct. a.Responsibilities b.Scope and Nature of Services c.Due Care d.The Public Interest e.Objectivity and Independence f.Integrity Required:Match each principle with its descriptive statement by placing the appropriate letter in the space provided.Each principle choice is used only once. _______1)A member should be free from conflicts of interest.
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102.On March 1, 2017, Young Company paid cash to purchase the following stocks as long-term investments in available-for-sale securities: Old Corporation common stock (par $5), 2,000 shares at $5 per share (10% of outstanding shares) ABC Corporation common stock (par $10), 3,000 shares at $25 per share (15% of outstanding.
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113.The following return on investment ratios were computed for Steven Company:  2017201620152014 Return on assets12%15%15%18% Return on equity15%15%11%20% Required: A. Compute financial leverage percentage for each year and state whether it is positive or negative. B. Explain briefly the stockholders' advantage or disadvantage for each year, beginning with year 2014.    114.The following data were.
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80.The FASB and IASB have some ambitious accounting standards projects to complete prior to their convergence. List three of the projects currently on the agenda. 81.Define: 1) What are assets? 2) What are liabilities? 3) What is shareholder’s equity? 4) In which financial statement would one find assets, liabilities and shareholder’s equity? 82.Define: 1) What are revenues? 2).
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Essay Questions 107.Complete the following income statement for the dollar amounts and the component percentages:  Dollar $AmountComponentPercentages % Sales revenue  Cost of goods sold 40% Gross profit$120,000 Operating expenses  Interest expense 2% Income before income tax  Income tax expense (rate 20%)  Net income 6% 108.Packers Corporation reported the following data for the year ended December 31, 2016: Net sales revenue$400,000 Net income $25,000 Interest expense (net of.
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99.On January 1, 2016, Heitzman Company purchased the following shares of stock as a long-term investment in available-for-sale securities: CorporationSharesPercent OutstandingCost per Share Maars10,000 common (no par)5%$25 Nassif2,000 preferred (par $10)2%$50 The fair value of the stocks subsequently were as follows:  Dec. 31, 2016Dec. 31, 2017 Maars Corporation common stock$24.00$27.50 Nassif Corporation preferred stock51.0050.50 Required: Calculate the.
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31.The Securities Exchange Act of 1934 established extensive reporting requirements for listed companies. Which is not a commonly required report? a.Form 10-Q. An extensive quarterly report, including financial statements. b.Form S-2. A registration statement c.Form 10-K. An extensive annual report, including financial statements d.Form 8-K. A report used to describe significant events that may.
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51.Trenton Company has provided the following information: • Net income, $240,000 • Preferred shares issued, 6,000 • Weighted average number of shares of common stock issued, 24,000 • Cash dividends declared and paid on common stock, $30,000 • Market price per share, $36 • Weighted average number of treasury shares of common stock, 4,000 What is Trenton's.
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Essay Questions 97.Complete the following matrix by writing a brief explanation in each cell to indicate the appropriate approach for long-term investments.  Measurement andReporting MethodOutstandingCommon StockOwned (%)Level of Ownership:Degrees of Influenceor Control A.Fair value  B.Equity  C.Consolidated statements     98.Required: A. Discuss the similarities of accounting for available-for-sale and trading securities portfolios. B. Discuss the differences encountered.
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1.Accounting principles are theories, truths, and propositions that service as the basis for financial accounting and reporting. a.True b.False 2.The rules for accounting are based upon concepts, and principles which broad and subject to an interpretation. a.True b.False 3.Information is communicated to external users by the management of the company. Those users cannot dictate desired financial.
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118.Walkers World Company gathered the following information for 2016: Total sales revenue (65% on credit)$432,000 Cost of goods sold231,000 Sales returns and allowances (on credit)44,000 Accounts receivable at end of 2016 ($30,000 increase during 2016)100,000 Allowance for doubtful accounts:  Beginning of 20165,000  End of 20167,000 Merchandise inventory at end of 2016 ($10,000 decrease during 2016)28,000 Assume 365 days in.
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1.A problem arising from equal information is called information asymmetry. a.True b.False 2.The demand for relevant and reliable financial information stems from the needs of the internal and external stakeholders. a.True b.False 3.The mission of the Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and assist in the formation of.
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63.Which of the following statements regarding the accounting for a common stock investment using the equity method is incorrect?  A. The equity method is used for investments of ownership between 20% and 50% of the outstanding voting stock when the investor has the ability to exert significant influence. B. The.
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51.Which of the following is not a major standard-setting body responsible for the establishment of U.S. and international GAAP (Generally Accepted Accounting Principles)? a.SEC (Securities Exchange Commission) b.PCAOB (Public Company Accounting Oversight Board) c.FASB (Financial Accounting Standards Board) d.IASB (International Accounting Standards Board) 52.Certain U.S. accounting standards have been, and will be, amended to aid.
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85.Prior to 2009, the FASB issued several types of pronouncements which had differing levels of authority. Explain the differing types of pronouncements, provide a brief explanation as to what changed after 2009 and why is it still important today? 86.The SEC is considering proposals regarding the accounting principles companies may use.
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21.The quick ratio decreases when the adjusting entry to record bad debt expense is recorded. 22.A very high current ratio and a low quick ratio may indicate the company is not collecting its accounts receivable in a timely manner. 23.The inventory turnover ratio is significantly affected by the choice of.
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115.On January 1, 2016, Fall Corporation acquired 100% of the outstanding voting shares of Foliage Corporation for $600,000. The book and fair values of Foliage's assets and liabilities as of January 1, 2016 are listed below: Item    Book ValueFair value Equipment$60,000$80,000 Trucks40,00055,000 Factory300,000320,000 Other assets130,000100,000 Liabilities100,000105,000   116.On January 2, 2016, Eagle Company acquired 100% of Solly Company's common.
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61.Agnes Company reported the following data: Quick assets$55,000 Current assets150,000 Total liabilities 300,000 Average net receivables12,600 Beginning inventory38,000 Long-term liabilities200,000 Net credit sales 126,000 Cost of goods sold84,000 Ending inventory46,000 What was the inventory turnover ratio?  A. 2.2 B. 1.8 C. 2.0 D. 3.0 62.Agnes Company reported the following data: Quick assets$55,000 Current assets150,000 Total liabilities 300,000 Average net receivables12,600 Beginning inventory38,000 Long-term liabilities200,000 Net credit sales.
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116.Compete Corporation reported a quick ratio of 1.75, current assets of $50,000, and a current ratio of 2.Required: A. Calculate the total amount of quick assets. B. What is another name for the quick ratio? C. Describe what type of assets are considered quick assets and give some examples. D..
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