Exam 2: Financial Statements and the Annual Report

Which of the following statements is true concerning intangible assets?

In preparing the financial statements for December 31,2017,an accountant improperly classified the payment of prepaid rent as rent expense.Which of the following amounts would not be affected by this improper classification?

Hindsville Company reported revenues of $165,000 and net income of $20,000 for 2017.Cash generated by operations was $40,000.In addition,Hindsville Company borrowed $24,000 from a bank.During 2018,Hindsville purchased new equipment for $30,000 cash and paid cash dividends of $15,000 to stockholders.Hindsville's cash balance at the beginning of 2017 was $22,000. ​ A) Identify the amount of cash flows for financing, investing, and operating activities for 2017 by filling in the amounts below. ​ Financing Cash Flows:_________ Investing Cash Flows:_________ Operating Cash Flows:__________ B) Did Hindsville Company's operating activities generate enough cash to cover its investing and financing activities? Explain. C) How much did Hindswille Company's cash bal ance increase or decrease during 2016 ?

What is the purpose of a statement of cash flows? Give an example of one of each of the three activities.

Which one of the following is not a major category for long-term assets?

What is the purpose of a statement of stockholders' equity? How does it differ from the statement of retained earnings? Which statement is required?

Smith Corporation Listed below is information from the financial records of Smith Corporation at December 31, 2017: Retained earnings \ 37,000 Notes payable-Due July 1,2020 \ 12,000 Accumulated depreciation 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 Corporation at December 31,2017.You may omit the heading.How does the concept of liquidity apply?

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?

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's profit margin?

The following information is taken from Harvey Company's balance sheet at December 31,2016: Cash \ 14,000 Retained earnings 14,000 Inventory 8,000 Equipment 38,000 Accounts payable 7,000 Bonds payable 23,000 Capital stock 26,000 Required Using the information provided for Harvey Company,answer the following questions: A) How much cash did creditors provide to Harvey Company? B) On which financial statement would an investor look to see if any stock was issued during the year?

Guinther & Sons,Inc. ,a retailer of men's clothing,earned a net profit of $77,000 for 2017.The balance sheet for Guinther & Sons includes the following items: Cash \ 29,000 Accounts receivable \ 39,000 Inventory 79,000 Prepaid insurance 3,000 Land 90,000 Accounts payable 21,000 Taxes payable 29,000 Capital stock 50,000 Retained earnings 97,000 Long-term notes payable 43,000 -Read the information for Guinther & Sons,Inc.Calculate the current ratio for Guinther & Sons.

Smith Corporation Listed below is information from the financial records of Smith Corporation at December 31, 2017: Retained earnings \ 37,000 Notes payable-Due July 1,2020 \ 12,000 Accumulated depreciation 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 Liabilities section of the balance sheet for Smith Corporation at December 31,2017.You may omit the heading.If the amount of current liabilities were larger,what effect would this have on the current ratio?

The 2017 income statement of Nasir Inc.shows operating revenues of $135,800,selling expenses of $40,310,general and administrative expenses of $33,990,interest expense of $880,and income tax expense of $13,090.Nasir's stockholders' equity was $250,000 at the beginning of the year and $345,000 at the end of the year.The company has 10,000 shares of stock outstanding at December 31,2017. ​ Required Compute Nasir's profit margin.What other information would you need in order to comment on whether this ratio is favorable?

Most financial reports contain the following list of basic elements.For each element identify the person(s)who prepared the element and describe the information a user would expect to find in each element. Elements Prepared By Information Provided Management Discussion \& Analysis Financial Statements Notes to Financial Statements Report of Independent Accountants

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

The ability of a company to pay its debt when due refers to ____________________.

What is the primary objective of financial reporting?

Excursion Corp.increased its dollar amount of working capital over the past several years.To further evaluate the company's short-run liquidity,which one of the following measures should be used?

Cory Harper,a newly hired accountant,wanted to impress his boss,so he stayed late one night to analyze the office supplies expense account.He determined the cost by month,for the past 12 months,of each of the following: computer paper,copy paper,fax paper,pencils and pens,note pads,postage,stationery,and miscellaneous items.Why do companies not include information of this nature in published financial statements?

An accountant is uncertain about the best estimate of an amount for a business transaction.If two amounts are about equally likely,the amount least likely to overstate assets and income is selected.Which of the following qualities is characterized by this action?