CapEx/Deprecaition
On July 1, Campbell Company purchased new equipment for $90,000 by paying cash. Other costs associated with the equipment were: transportation costs, $1,800; sales tax paid, $7,200; and installation cost, $4,500. At what amount will the equipment be recorded on a balance sheet?
a) $103,500.
b) $91,800.
c) $96,300.
d) $97,200.
a) $103,500.
Which of the following statements is correct?
a) Current liabilities are initially recorded at the amount of their principal plus interest.
b) Current liabilities are those liabilities due within the shorter of one year or one operating cycle.
c) Liquidity refers to the ability to pay all debts within one year.
d) Current liabilities affect working capital and the cash flows from operating activities.
d) Current liabilities affect working capital and the cash flows from operating activities.
Which of the following represents the number of shares currently owned by investors?
a) Issued shares.
b) Outstanding shares.
c) Authorized shares.
d) Treasury shares.
b) Outstanding shares.
Which of the following transactions does not result in either a cash inflow or a cash outflow?
a) A company purchased some of its own stock from a stockholder.
b) Sale of equipment at book value.
c) Amortization of a patent.
d) Payment of a cash dividend.
c) Amortization of a patent.
On January 1, 2022, Pyle Company purchased an asset that cost $50,000 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 $42,000. How much is the correct 2022 pretax income?
a) $85,750.
b) $48,250.
c) $92,000.
d) $35,750.
a) $85,750.
If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure, instead of as repairs and maintenance expense, which of the following statements is true?
a) The current year's net income will be lower and future depreciation expense will be higher.
b) The current year's net income will be higher and future depreciation expense will be lower.
c) The current year's net income will be higher and future depreciation expense will be higher.
d) The current year's net income will be lower and future depreciation expense will be lower.
c) The current year's net income will be higher and future depreciation expense will be higher.
Which of the following is incorrect?
a) Current liabilities are those that will be satisfied within one year or the operating cycle, whichever is longer.
b) Interest that will be paid in the future is included in the reported amount of a current liability.
c) Current liabilities impact a company's liquidity.
d) Working capital is equal to current assets minus current liabilities.
b) Interest that will be paid in the future is included in the reported amount of a current liability.
Treasury stock shares are shares of stock that are:
a) authorized and outstanding.
b) authorized, issued, and outstanding.
c) authorized but not issued.
d) authorized and issued, but not outstanding.
d) authorized and issued, but not outstanding.
Which of the following transactions would not create a cash flow from operating activities?
a) Collecting cash from a customer.
b) Paying cash dividends to stockholders.
c) Paying cash for a utility bill.
d) Paying cash to a supplier.
b) Paying cash dividends to stockholders.
Landseeker's Restaurants reported cost of goods sold of $322 million and accounts payable of $84 million for 2022. In 2021, cost of goods sold was $258 million and accounts payable was $72 million. Landseeker's accounts payable turnover ratio in 2022 is closest to:
a) 4.13
b) 3.45
c) 4.25
d) 3.31
a) 4.13
Which of the following best describes the objective of depreciation?
a) To estimate the current market value of the asset.
b) To estimate the remaining useful life of the asset.
c) To report the asset on the balance sheet at the estimated amount for which the asset could be sold on the balance sheet date.
d) To allocate the cost of a tangible asset to the periods in which its use contributes to earning revenue.
d) To allocate the cost of a tangible asset to the periods in which its use contributes to earning revenue.
Which of the following best describes the accrual of interest?
a) Expenses and liabilities increase.
b) Assets and stockholders' equity decrease.
c) Net income and expenses decrease.
d) Assets and liabilities decrease.
a) Expenses and liabilities increase.
Rye Company has provided the following information:
What is Rye's earnings per share (EPS)?
a) $1.08
b) $1.88
c) $2.10
d )$1.02
c) $2.10
Which of the following would not be a cash flow from investing activities?
a) Collection of principal on a long-term note receivable.
b) Collection of interest revenue on a long-term note receivable.
c) Purchase of long-term investments.
d) Sale of a patent.
b) Collection of interest revenue on a long-term note receivable.
RKJ Company has provided the following information:
Which of the following statements is correct?
a) RKJ has 35,000 shares of treasury stock.
b) RKJ has 30,000 shares of treasury stock.
c) RKJ can issue an additional 30,000 shares of common stock.
d) RKJ can issue an additional 35,000 shares of common stock.
c) RKJ can issue an additional 30,000 shares of common stock.
Which of the following is correct?
a) If a company fails to record depreciation expense, stockholders' equity, net income, and assets are understated.
b) If a company fails to record depreciation expense, net income and assets are overstated.
c) If a company overstates depreciation expense, net income is overstated and assets are understated.
d) If a company fails to record depreciation expense, net income and expenses are overstated.
b) If a company fails to record depreciation expense, net income and assets are overstated.
Benwick Company borrowed $50,000 cash on October 1, 2022, and signed a nine-month, 8% interest-bearing note payable with interest payable at maturity. Assuming that adjusting entries have not been made during the year, the amount of accrued interest payable to be reported on the December 31, 2022 balance sheet is which of the following?
a) $1,000.
b) $1,500.
c) $500.
d) $600.
a) $1,000.
Claire Company has provided the following information:
What is Claire's earnings per share (EPS)?
a) $4.44
b) $4.00
c) $5.00
d) $5.72
c) $5.00
Which of the following would be subtracted from net income when determining cash flows from operating activities under the indirect method?
a) A gain on the sale of a depreciable asset.
b) An increase in accounts payable.
c) Depreciation expense.
d) A decrease in prepaid insurance.
a) A gain on the sale of a depreciable asset.
A company reported the following asset and liability balances at the end of 2021 and 2022:
2021 2022
Total Assets $ 6,800,000 $7,600,000
Total Liabilities $3,200,000. $3,600,000
During 2022, cash dividends of $50,000 were declared and paid, and common stock was issued for $100,000. What was the amount of net income for 2022?
a) $480,000.
b) $350,000.
c) $300,000.
d) $400,000.
b) $350,000.
On January 1, 2022, Woodstock, Incorporated purchased a machine costing $40,000. Woodstock also paid $1,000 for transportation and installation. The expected useful life of the machine is 6 years and the residual value is $5,000.
How much is the annual depreciation expense, assuming use of the straight-line depreciation method?
a) $5,950.
b) $6,100.
c) $6,000.
d) $5,750.
c) $6,000.
Failure to make a necessary adjusting entry for accrued interest on a note payable would result in which of the following?
a) Net income would be overstated and assets would be understated.
b) Net income would be understated and liabilities would be understated.
c) Liabilities and stockholders' equity would both be understated.
d) Net income and stockholders' equity would be overstated and liabilities would be understated.
d) Net income and stockholders' equity would be overstated and liabilities would be understated.
Which of the following statements about earnings per share (EPS) is correct?
a) Issuance of more common shares would cause earnings per share to increase.
b) Increased net income would cause earnings per share to decrease.
c) Purchasing treasury shares would cause earnings per share to decrease.
d) EPS is calculated using the weighted average number of common shares of stock outstanding.
d) EPS is calculated using the weighted average number of common shares of stock outstanding.
Red Rock Company has provided the following information pertaining to its recent year of operation:
Using the indirect method, how much was Red Rock's net cash provided by operating activities?
a) $222,000
b) $250,000
c) $230,000
d) $178,000
a) $222,000
Red Rock Company has provided the following information pertaining to its recent year of operation:
Using the indirect method, how much was Red Rock's net cash provided by operating activities?
a) $1,814,000
b) $269,600
c) $281,000
d) $301,000
b) $269,600