Chapters 5-8
Which method of depreciation has the same amount of depreciation expense every year?
Will a bond be sold at par, a premium, or a discount if it has a stated rate of 9% when the market rate is 7%?
Premium
Decrease
Which section of the statement of cash flows includes long-term assets, such as notes receivable and plant, property, and equipment?
Using vertical analysis, income statement accounts are expressed as a percentage of what?
Total sales
Which method of inventory valuation results in the highest ending inventory value?
FIFO
Installment notes payments always include what two factors?
Interest and principal
What is the formula to calculate ending retained earnings?
Beginning RE + Net Income - Dividends
The ending balance of cash on the statement of cash flows must match the ending balance of cash on what other financial statement?
The balance sheet
A company uses what type of analysis to compare their financial data over multiple years?
Horizontal analysis.
Which time value of money (TVM) table would you use to answer the question, "how much will you have in 5 years if you invest $1,000 each year at 6% interest"?
Future value of an annuity (FVA)
Formal debt instruments issued to many lenders at one time when a company needs to borrow money is called?
A bond
Which investment is considered most risky between common stock, preferred stock, and bonds?
Common stock
The payment of dividends belongs in which section of the statement of cash flows? Is it an inflow or an outflow?
Cash Flows from Financing Activities and it is an outflow
Does a high inventory turnover lead to a high or low days in inventory value?
Low
Which method basis of accounting recognizes revenue when goods or services are provided to the customer?
Accrual basis
How is the interest expense column calculated for a bond payable amortization schedule?
Carrying value of the bond * market rate of interest * x/12
Which date related to dividends creates increases liabilities and decreases stockholder's equity?
Declaration date
Calculate the net investing cash flows for a company that bought a piece of equipment for $15,000, sold investments worth $25,000, and gave a loan to a customer for $5,000.
(=25 inflow -15 outflow -5 outflow)
If a company had a gross profit ratio of 34% last year and this year it is 36%, did the gross profit ratio improve or worsen?
Improve
A company buys a piece of machinery for $50,000. They also pay sales tax of $2,000, shipping costs of $4,000, and install fees of $1,000. There is also an annual insurance fee of $750. What is the capitalized cost of the machinery?
$57,000
(= 50,000 +2,000 +4,000 +1,000)
What is the interest owed on December 31, 2025 for a company that takes out a one year, $50,000 note payable, with 5% interest, on April 1, 2025?
$1,875
(=5,000 * .05 * 9/12)
What is the financial statement impact of issuing 1,000 shares of $1 par value common stock for $5 each? Provide each account, the dollar value impact for each account, and if each account increases or decreases.
$5,000 increase to cash
$1,000 increase to common stock
$4,000 increase to APIC
If the total change in cash is equal to ($10,000), net operating cash flows were $5,000, and net investing cash flows were ($40,000) - what is the value of net financing cash flows?
$25,000
* 5 - 40 + fin = (10)
so fin = 25
A company had assets in 2024 of $1,250,000 and assets in 2025 of $2,150,000. Calculate the percent change. It is an increase or decrease?
72%
= (2,150 - 1,250) / 1,250