Exam 2: Financial Statements and the Annual Report

A question asked by stockholders is, "How much profit did the company make?" What should the stockholder examine to get the most information that will help evaluate the answer to this question?

Moore Industries began operations on January 2, 2016, with an investment of $50,000 by each of its two stockholders.Net income for its first year of business was $240,000.Moore Industries paid a total of $100,000 in dividends to its stockholders during the year. ​ -Read the information about Moore Industries.The company's dividends for the year

Crystal, Inc.reported $52,000 of net income for 2016.Crystal's balance sheet at December 31, 2016 includes the following amounts: Wages payable \ 1,000 Inventory \ 26,000 Prepaid rent 3,000 Land 40,000 Cash 15,000 Accounts receivable 22,000 Accounts payable 25,000 Capital stock 40,000 Retained earnings 29,000 Income taxes payable 11,000 ​ ​ -Read the information about Huntington Corporation. Required: Compare the profit margins for 2017 and 2016.Is the company becoming more or less profitable or staying the same? What could be contributing to this?

Forman, Inc.earned $600,000 profit during 2016.On which financial statement(s) will you find the dollar amount of the profit earned by the company?

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Interest expense

The statement of ____________________ explains changes in the components of owners' equity during the period.

Listed below is information from the financial records of Smith Corporation at December 31, 2016: Retained earnings \ 37,000 Notes payable - Due July 1,2019 \ 12,000 Accumulated depreciati on 13,000 Interest payable 1,000 Income taxes payable 24,000 Office supplies 2,000 Buildings 48,000 Accounts payable 46,000 Cash 11,000 Inventory 33,000 Accounts receivable 35,000 Land 50,000 Capital stock 60,000 Prepaid rent 4,000 ​ ​ -Read the information about Smith Corporation. ​ Required: Prepare the current assets section of the balance sheet for Smith Corp.at December 31, 2016.You may omit the heading.How does the concept of liquidity apply?

____________________ is the practice of using the least optimistic estimate when two estimates of amounts are about equally likely.

Which of the following best describes a company's financing activities?

In preparing financial statements, accountants should consider all of the following except:

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

The 2016 income statement of Kellyson Enterprises shows operating revenues of $120,500, selling expenses of $35,200, general and administrative expenses of $29,900, interest expense of $1,500, and income tax expense of $10,520.Kellyson'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, 2016. ​ Required: Compute Kellyson's profit margin.What other information would you need in order to comment on whether this ratio is favorable?

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Income taxes payable

Which one of the following subtotals or totals would appear in a multiple-step, but not a single-step income statement?

Income from operations does not include interest revenue and interest expense because these items are considered to be non-operating in nature.

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

Oreo Company has current assets of $20,000, current liabilities of $8,000, and long-term liabilities of $3,000.Oreo wants to buy new equipment.How much of its existing cash can Oreo use to acquire equipment without allowing its current ratio to decline below 2.0 to 1?

Which one of the following is an operating activity of a business?

Lottony, Inc.is concerned about its profitability for the current year, since its profit margin has dropped 10% since last year.Which of the following is the least useful comparison in evaluating the drop in Lottony' profit margin?

From the following choices, select the answer that describes the effect on working capital as a result of the transaction. -Purchased inventory on account