Exam 2: Financial Statements: a Window on an Entity

If a company used some cash to pay off some long-term liabilities, what would be the effect on the company's current ratio and debt-to-equity ratio? Current Debt-to-Equity Ratio Ratio A. increase increase B. increase decrease C. decrease increase D. decrease decrease

Whitefish Inc.bought a building worth $750,000.They paid $150,000 in cash and borrowed the remainder from a bank.What is the effect of this transaction on the accounting equation?

When a sale on credit is made under the accrual basis of accounting, at the time of the sale, how is the transaction recorded?

Tim has decided to run a lawn service business for the summer.He charges customers $100 per month to mow and maintain their lawns.In May he was able to get 10 contracts signed, for services starting June 1st.On June 1st he collected $100 from each of seven customers and $300 from the other three, who will all be out of town for the summer so have paid for all three months at once.Tim bought a second-hand mower for the summer for $240, which he picked up in May but didn't pay for until June, when he had some cash available.He estimates that it will be completely worn out by the end of the summer.He mowed and maintained the lawns for June and paid $50 for gas for his mower. Required: A) What is Tim's net income for June under the cash basis of accounting? B) What is Tim's net income for June under the accrual basis of accounting? C) What is Tim's expected net income for the summer under the cash basis of accounting? D) What is Tim's expected net income for the summer under the accrual basis of accounting? E) Which method is more appropriate for Tim? Support your answer.

If a company has a current ratio of 0.82, which of the following statements would be true?

If a company made a principal repayment on a long-term loan, which of the following statements about the repayment is true?

Below are partial balance sheets for Bancroft Inc.for three years. Required: A) Fill in the missing amounts. B) Are Bancroft's liquidity and risk improving? Support your answer.If you were a shareholder in Bancroft, would you be concerned?

What are direct investments by shareholders in a company called?

Brantford Business Ltd.(BBL) has a loan outstanding from a Canadian bank.It uses the loan to finance its working capital.The bank has asked for BBL to provide it with monthly listings of their accounts receivables and inventory items.The requested listing is an example of:

Because of the links among financial statements, they must be prepared in order.Which of the following correctly describes the order of preparation?

Prepare an income statement and balance sheet for Nipissing Ltd.from the following list of accounts as at April 30, 2012. Accounts payable 108,000 Income tax expense 135,000 Accounts receivable 305,000 Income taxes payable 34,000 Accrued wages 15,500 Interest expense 65,000 Amortization expense 105,000 Inventory 125,000 Capital Stock 200,000 Mortgage payable (non- Cash 15,000 current portion) 550,000 Cost of sales 678,500 Patents 200,000 Current portion of mortgage Prepaid expenses 6,000 payable 25,000 Prepaid expenses equipment 850,000 Dividends 30,000 Sales for cash 250,000 Dividends payable 7,500 Sales on credit 1,825,000 General, administrative Retained earnings 303,500 and selling expenses 804,000 (beginning of the year balance)

If an entity suffered a $2,000 loss for the month, which of the following statements is most likely true?

Sun Company owns 75% of Moon Inc., how would Sun's financial statements be prepared?

Which of the following would be considered as an asset for accounting purposes?

The opening balances of capital stock and retained earnings for a company were $2,200,000 and $1,325,000, respectively.During the year, they earned net income of $425,000, the shareholders invested an additional $500,000 for shares and the company paid dividends of $42,000.What was the closing amount of shareholders' equity?

Emily has been out of school and working as a physiotherapist for four years.She is in the process of buying a condo and is applying for a mortgage from the Canadian Bank.The bank has asked for a personal balance sheet for Emily before making its decision.She has come to you for help and has provided you with the following information: i) Emily bought a car four years ago for $15,000.She borrowed the money from her parents, interest free, and still owes them $3,000 and makes monthly payments of $250.She estimates the car is worth about $5,000 now. ii) Emily has $1,800 in her checking account and $12,000 in Canada Savings Bonds (CSBs), which she will use for the down payment on the condo. iii) Emily owns some jewellery given to her after her grandmother past away.Although it is priceless to Emily the local jeweller says it is worth $3,500. iv) Emily worked some overtime at another clinic over the recent holidays and is owed $2,500 for it.v) Emily has a music player and CD collection worth about $1,000. vi) Emily has old furniture in her current apartment that she paid $500 for but is hoping to buy some new things to go with her new place.She hopes a charity will come and take all of the old stuff away. vii) Emily has a $500 balance on her credit card but pays it off every month.Required: A) Prepare a personal balance sheet for Emily.She wants you to explain why things were or were not included so that she could do it herself next time. B) How will the Canadian Bank use the information to help it make a decision? C) What, if any, other information would the bank like to have?

Today, a company sold $1,000 of goods on credit.The customer took the goods with him, but will only pay in 30 days.When would the sale be reflected under the cash basis of accounting and the accrual basis of accounting? Cash Basis Accrual Basis A. today today B. today at collection C. at collection today D. at collection at collection

Trout Co.ordered and received inventory worth $45,000 on credit.What is the effect of this transaction on the accounting equation?

A shareholder invested $75,000, made up of $50,000 in cash and a vehicle worth $25,000, in a new company and received shares in exchange.What is the effect of this transaction on the accounting equation?

What is a payment of cash to a corporation's shareholders called?