Financial
Statements
Statements
On December 31, 2023, Vivid Corporation prepared adjusting entries that included the following items:
Depreciation expense: $43,400.
Accrued sales revenue: $40,600.
Accrued expenses: $16,800.
Used insurance: $12,600; the insurance was initially recorded as prepaid.
Rent revenue earned: $9,800; the rent was initially prepaid by the tenant and credited to unearned rent revenue.
If Vivid Corporation reported stockholders' equity of $392,000 prior to the adjusting entries, how much is Vivid's stockholders' equity after the adjusting entries?
A) $392,000
B) $366,800
C) $413,000
D) $369,600
A) $392,000
or
D) $369,600
Sherwood Company began the year with a balance in inventory of $66,000 and ended the year with a balance of $61,200. The net sales for the year were $589,800 with a gross profit on sales of $177,000. The inventory turnover ratio is closest to:
A) 9.27
B) 6.49
C) 2.89
D) 2.78
B) 6.49
Eastline Industries sold a productive asset, a machine, for cash. It originally cost Eastline $60,000. The accumulated depreciation at the date of disposal was $45,000. A gain on the disposal of $6,000 was reported. What was the asset's selling price?
A) $15,000.
B) $9,000.
C) $21,000.
D) $12,000
C) $21,000.
If a bond is issued at 98, the coupon rate was:
A) equal to the market rate of interest.
B) lower than the market rate of interest.
C) higher than the market rate of interest.
D) not related to the market rate of interest.
B) lower than the market rate of interest.
Of the following, which is not a reason for having controls to safeguard inventories?
A) Protect inventory items from theft.
B) Avoid stock-outs from not having enough inventory on hand.
C) Reduce costs of maintaining the LIFO Reserve.
D) Keep track of overstocked items.
C) Reduce costs of maintaining the LIFO Reserve.
Athena Company is preparing a statement of stockholders' equity for 2023. On December 31, 2023, Athena’s retained earnings balance was $160,000. During the year, Athena earned $70,000 of net income and declared dividends of $10,000. Additionally, during the year Athena received $15,000 as an additional investment from its owners. What was the balance in Athena’s retained earnings on January 1, 2023?
A) $50,000
B) $85,000
C) $80,000
D) $100,000
D) $100,000
Grand Maple Company reported the following data:
Ending inventory $92,000
Cost of goods sold 168,000
Net credit sales 252,000
Long-term liabilities 400,000
Beginning inventory 76,000
Average net receivables 25,200
Total liabilities 600,000
Current assets 300,000
Quick assets 110,000
What was the average number of days to sell inventory?
Note: Assume 365 days in a year.
A) 121.7
B) 182.5
C) 165.9
D) 202.7
B) 182.5
Benwick Industries purchased a computer system on January 1, 2022, at a cash cost of $50,000. The estimated useful life is 10 years, and the estimated residual value is $6,000. The company will use the double declining-balance depreciation method.
How much is the 2023 depreciation expense?
A) $7,040.
B) $8,240.
C) $8,000.
D) $10,000.
C) $8,000.
Mayberry, Incorporated, issued $100,000 of 10-year, 12% bonds dated April 1, 2022, for $102,360 on April 1, 2022. The bonds pay interest annually on April 1, beginning in 2020. Straight-line amortization is used by the company. Is the following entry correct for the first interest payment April 1, 2023 ?
DR. CR
Interest expense $11,764
Premium on bonds payable. $236
Cash $12,000
Yes!
Accrued revenues are revenues that have been earned, but the customer has not yet paid for the goods or services.
True or False?
True!
Lockhart Industries reported total stockholders' equity of $340,000 on its balance sheet dated December 31, 2021. During the year ended December 31, 2022, the company declared and paid a cash dividend of $8,000, declared and distributed a 10% stock dividend with a $10,000 total market value, and issued additional common stock for $80,000. If total stockholders' equity as of December 31, 2022 is $452,000, what was the amount of net income for the year ended December 31, 2022?
A) $72,000.
B) $40,000
C) $50,000.
D) $62,000.
B) $40,000
Grand Maple Company reported the following data:
Ending inventory $92,000
Cost of goods sold 168,000
Net credit sales 252,000
Long-term liabilities 400,000
Beginning inventory 76,000
Average net receivables 25,200
Total liabilities 600,000
Current assets 300,000
Quick assets 110,000
What was the current ratio?
A) 2.5
B) 0.5
C) 1.5
D) 0.75
C) 1.5
On January 1, 2022, Nervin Company purchased an asset that cost $100,000 and had no estimated residual value. The estimated useful life of the asset is 8 years and straight-line depreciation is used. An error was made in 2022 because the total amount of the asset's cost was debited to an expense account for 2022 and no depreciation was recorded. Pretax income for 2022 was $84,000. How much is the correct 2022 pretax income?
A) $71,500.
B) $171,500.
C) $184,000.
D) $96,500.
B) $171,500.
Which of the following statements correctly describes the accounting for bonds that were issued at a premium?
A) The amount of amortization of the premium on bonds payable decreases as the bonds mature when the effective interest method is used.
B) The interest expense over the life of the bonds increases as the bonds mature when the effective interest method is used.
C) The book value of the bond liability increases when interest payments are made on the due dates when the effective interest method of amortization is used.
D) The interest expense over the life of the bond is less than the total cash interest payments.
D) The interest expense over the life of the bond is less than the total cash interest payments.
Employees who are awarded stock options as compensation can vote their shares.
True or False?
False! They need to vest, then buy the shares as granted before they have voting rights.
Hibiscus Company reported the following asset and liability balances at the end of 2021 and 2022:
2021 2022
Total Assets $3,400,000 $3,800,000
Total Liabilities $1,600,000. $1,800,000
During 2022, cash dividends of $25,000 were declared and paid, and common stock was issued for $50,000. What was the amount of net income for 2022?
A) $240,000.
B) $150,000.
C) $200,000.
D) $175,000.
D) $175,000.
Hickory Company has provided the following information:
What is Hickory's price/earnings ratio?
A) 3.0
B) 3.4
C) 5.1
D) 4.5
A) 3.0
Soledad Company purchased a truck at a cost of $120,000. It has an estimated useful life of five years and estimated residual value of $10,000. At the beginning of year three, Soledad's managers concluded that the total useful life would be four years, rather than five years. There was nochange in the estimated residual value. What is the amount of depreciation that Soledad should record for Year 3 under the straight-line depreciation method?
A) $31,000.
B) $33,000.
C) $22,000.
D) $16,500.
B) $33,000.
Zero coupon bonds are bonds that are issued:
A) At a rate that provides a large discount at issuance.
B) As bonds that will have zero amortization recorded over the life of the bond.
C) With a zero effective interest rate.
D) At a rate that has zero difference between the coupon rate and the market rate of interest.
A) At a rate that provides a large discount at issuance.
Which of the following is not a component of the gross profit calculation?
A) Cost of sales.
B) Sales returns and allowances.
C) Allowance for doubtful accounts.
D) Credit card discounts.
C) Allowance for doubtful accounts.
For the year ended December 31, 2023, Teton Company had gross profit of $1,258,000, cost of goods sold of $940,000, interest expense of $34,000, operating expenses of $230,000, and income tax expense of $398,000. What was Teton’s net sales?
A) $2,198,000
B) $2,428,000
C) $2,596,000
D) $2,164,000
A) $2,198,000
Grand Maple Company reported the following data:
Ending inventory $92,000
Cost of goods sold 168,000
Net credit sales 252,000
Long-term liabilities 400,000
Beginning inventory 76,000
Average net receivables 25,200
Total liabilities 600,000
Current assets 300,000
Quick assets 110,000
What was the inventory turnover ratio?
A) 1.8
B) 2.2
C) 3.0
D) 2.0
D) 2.0
Which of the following properly describes the accounting for goodwill?
A) Goodwill is amortized over its useful life.
B) Goodwill is the difference between the amount paid for a company and the fair value of its net assets.
C) Goodwill is recorded when it is internally generated.
D) Goodwill is the difference between the amount paid for a company relative to the book value of the acquired company's net assets.
B) Goodwill is the difference between the amount paid for a company and the fair value of its net assets.
On January 1, 2022, Pipestone Corporation issued a four-year, $40,000, 7% bond. The interest is payable annually each December 31. The issue price was $38,672 based on an 8% effective interest rate. Pipestone uses the effective-interest amortization method.
The interest expense on the income statement for the year ended December 31, 2022 is closest to:
A) $2,800.
B) $3,532.
C) $3,094.
D) $2,707.
C) $3,094.
Which of the following transactions does not affect gross profit?
A) A customer returning merchandise that was sold for a profit.
B) The collection of cash on an account receivable, which was paid for by the customer within the discount period.
C) The journal entry to record bad debt expense.
D) Accepting a credit card for a sale and paying a service fee to the credit card company.
C) The journal entry to record bad debt expense.