Exam 2: Financial Statements: a Window on an Entity

Lennox Limited reported sales of $5,000,000, cost of goods sold of $3,200,000, operating expenses of $1,400,000, and income tax expense of $160,000 for the year.What is the gross profit for the year?

A company has current assets of $200,000 and current liabilities of $150,000.If they used cash to pay off some accounts payable, what would the effect be on their current ratio?

If a stakeholder wanted to measure the risk of a company, which of the following would they calculate?

The opening balance of retained earnings for Musicala Inc.was $325,000.During the year, it earned net income of $52,400 and paid dividends of $16,000.What is the closing balance of retained earnings?

When a company makes a sale under accrual accounting, what is the impact on the balance sheet?

Which of the following correctly describes a liability?

The assumption that a business enterprise will not be sold or liquidated in the near future is known as the:

An employee worked for a small business during the current month but he will not be paid until the next month.If the business uses accrual accounting, what would be the effect on the accounting equation in the current month?

What is the accounting equation?

The following is a list of accounts for Carleton Corporation for the year ended October 31, 2012. Advertising expense \ 130,000 Amortization expense 90,000 Cost of sales 545,000 General and administrative expenses 158,000 Income tax expense 105,000 Interest expense 60,000 Research expense 100,000 Sales revenue 1,900,000 Sales commissions 190,000 Salaries expense 376,000 Required: A) Prepare an income statement for Carleton for the year. B) What is Carleton's gross margin for the year? C) What is Carleton's gross margin percentage for the year?

The transition to International Financial Reporting Standards can be seen as enhancing which of the following qualitative characteristics?

If a company sold shares for cash, 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

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

Which of the following statements best describes the balance sheet?

A company has current assets of $200,000 and current liabilities of $150,000.If they used cash to pay off some accounts payable what would the effect be on their working capital?

If a company pays rent for the next period in advance, what is the effect of the transaction on the accounting equation?

Anvilles Inc.manufactures metal sheets for construction.Mr.Anvilles, the sole shareholder, arranges to transport two hundred metal sheets to the family cottage in Mont Orford.He tells the bookkeeper to record the cost of the metal sheets as cost of goods sold. Which of the following qualitative characteristics of accounting information has not been respected?

One drawback to the unit-of-measure assumption is:

Mr.Switch, a local business man, owns two different businesses-a lumber sawmill and a restaurant.The price of lumber has declined and therefore sawmill is in financial difficulty.However, the restaurant is thriving, and Mr.Switch would like to start paying two of the sawmill employees under the restaurant's payroll.His accountant explains that this is not in accordance with certain basic principles in accounting.Which principle is he referring to?

Which of the following statements best describes the cash flow statement?