Exam 1: Accounting As a Form of Communication

The excess of current assets over current liabilities is referred to as working capital.

Cook, Inc., a manufacturer of tires, has given you its most recent annual report in an effort to obtain a sizable loan. The company is very profitable and appears to have a sound financial position. Based on a report presented on prime-time television last night, you are aware that Cook is a defendant in several lawsuits related to its defective tires that cause vehicles to overturn. The information presented on television is an example of financial information that is:

Powder Corporation began operations on January 2, 2013, with a total investment of $150,000 by its stockholders. Net income for its first year of business was $90,000. During 2014 and 2015, net income increased to $188,000 and to $217,000, respectively. Powder paid $85,000 in dividends to its shareholders in each of the three years. A In good form, prepare a statement of retained earnings for the year ended December 31, 2014. B How much is total retained earnings on December 31, 2015? C Explain the link between the statement of retained earnings and the balance sheet.

Macon Enterprises purchased land for $2,000,000 in 2001. In 2015, an independent appraiser assessed the value at $3,400,000. What amount should appear on the financial statements in 2015 with respect to the land?

From the following choices, select the answer that describes the effect on working capital as a result of the transaction. -Borrowed cash using a six-month note

For each statement provided, choose the letter of the appropriate term from the list that each statement best describes. Some terms may be used more than once, while others are not used at all. -The owners' claims on the assets of an entity.

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Paid income taxes

Dividends declared and paid reduce a company's retained earnings balance.

Deal Mart The 2014 income statement of Deal Mart shows operating revenues of $130,800, selling expenses of $37,100, general and administrative expenses of $34,900, interest expense of $900, and income tax expense of $11,430. Deal Mart's stockholders' equity was $280,000 at the beginning of the year and $320,000 at the end of the year. The company has 20,000 shares of stock outstanding at December 31, 2014. -Read the information about Deal Mart. What is Deal Mart's profit margin to the closest tenth of a percent?

Read the information about Crystal, Inc. Has Crystal been profitable since it began operations? How do you know?

Deal Mart The 2014 income statement of Deal Mart shows operating revenues of $130,800, selling expenses of $37,100, general and administrative expenses of $34,900, interest expense of $900, and income tax expense of $11,430. Deal Mart's stockholders' equity was $280,000 at the beginning of the year and $320,000 at the end of the year. The company has 20,000 shares of stock outstanding at December 31, 2014. -Read the information about Deal Mart. What is Deal Mart's net income?

Several items from the financial statements of Standard Tires are listed below. Use the following answer choices to identify the type of account for each item listed. Place your answers in the space provided. -Accounts receivable

Which organization, in addition to the Financial Accounting Standards Board FASB, occasionally issues authoritative rules for financial statements?

Which of the following are generally supplementary information required by GAAP concerning the accounting treatments used by a company?

Potential stockholders and lenders are interested in a company's financial statements. Several financial statement items appear below. Answer the questions that follow. A Which two items would stockholders be most interested in that can either be computed from the above data or are included in the items listed above? Explain why the two you selected are important to stockholders. B In which one item would lenders be most interested? Explain why this item is important.

On the statement of cash flows, the section involves the acquisition and sale of long-term assets.

Tradewinds Corporation was organized on January 1, 2014, with the investment of $500,000 in cash by its stockholders. Tradewinds signed a ten-year, $300,000 promissory note at a local bank during 2014 and received cash in the same amount. The company immediately purchased an office building for $800,000, paying in cash. During its first year, Tradewinds generated $35,000 in cash from operations and paid $30,000 in cash dividends. A In good form, prepare a statement of cash flows for the year ended December 31, 2014. B What does this statement tell you that an income statement does not?

Which one of the following is considered a financing activity?

For each item listed, select the section of the balance sheet in which the item would be reported. -Equipment

An investor found the following in an annual report: "The financial statements, in our opinion, present fairly the financial position, operating results, and cash flows, in conformity with accounting principles generally accepted in the United States." In which section of the annual report did the investor find this?