Exam 3: Operating Decisions and the Accounting System

Which of the following is correct when land costing $20,000 is sold for $29,000? The land was a component of property and equipment on the balance sheet.

The following accounts for Carthage Enterprises, Inc. are listed randomly. Enter the number associated with each transaction to identify the accounts that would be used in the journal entry for each transaction given below.

The following information has been provided by Hable Company: • Advertising expense $9,900 • Interest expense $3,700 • Rent expense for store $12,000 • Loss on sale of property and equipment $5,700 • Cost of goods sold $21,300 • Depreciation expense $7,100 • Prepaid insurance expense $1,000 What is the amount included in the Other Items section of Hable's income statement?

Describe the debit and credit logic pertaining to items reported on the income statement.

Collections from customers are cash flows from operating activities.

Lantz Company has provided the following information: • Cash sales totaled $255,000. • Credit sales totaled $479,000. • Cash collections from customers for services yet to be provided totaled $88,000. • A $22,000 loss from the sale of property and equipment occurred. • Interest income was $7,700. • Interest expense was $19,900. • Supplies expense was $336,000. • Rent expense for the store was $36,000. • Wages expense was $49,000. • Other operating expenses totaled $79,000. • Unearned revenue was $4,000. What is the amount of Lantz's operating revenues?

Which of the following statements does not properly describe the accrual basis of accounting?

Zeppelin Company received cash during January for services to be provided in February. Which of the following statements does not accurately describe the impact on the financial statements when Zeppelin provides the services during February?

Under accrual basis accounting, revenues are recognized when goods or services are transferred to customers, and expenses are recognized when incurred to generate that revenue.

On December 31, 2016, Pack-and-Deliver Company completed its first year of operations. The following information has been provided for the year: a. Sold packing supplies for $30,000 and provided $280,000 of delivery services. b. All packing supplies sales were for cash. c. Collected $212,000 of delivery service revenue. d. Paid $15,000 cash to rent packing equipment, with $10,000 for rental in 2016 and the remaining amount for rental in 2017. e. Spent $4,000 cash to repair delivery equipment during the year. f. Bought packing supplies at a total cost of $46,000 and paid for $25,000 of these supplies. There were $20,000 of these supplies that have not yet been sold or used. g. Paid employees $80,000 during the year. h. Paid $16,000 for advertising for the year. i. Paid $$55,000 to rent facilities. Pack-and-Deliver has not yet paid the $5,000 rent for December, 2016. j. Used $14,000 in fuel for the delivery equipment. k. Sold investments for $8,000 that had been purchased earlier in the year for $7,000. l. Ordered $500 in spare parts and supplies. m. Income tax expense for the year is $18,000. Required: Prepare an income statement for Pack-and-Deliver Company for the year ended December 31, 2016.

The following income statement was reported for Bauer Inc. for the first year of operations ending December 31, 2016 reported (in thousands of dollars): Sales revenue $24,500 Expenses: Cost of sales $12,100 Wages 5,300 Rent 900 Utilities 500 Miscellaneous 600 Total expenses 19,400 Income before taxes 5,100 Income tax expense 1,785 Net income $3,315 Required: A.Calculate net profit margin. B.Calculate earnings per share if there are 200,000 weighted average shares of common stock outstanding.

Garret Company has provided the following selected information for the year ended December 31, 2016: Cash collected from customers was $783,000. Cash received from stockholders in exchange for common stock totaled $91,000. Cash paid to suppliers was $361,000. Cash paid to employees was $204,000. Cash to stockholders for dividends was $33,000. Cash received from sale of a building was $250,000. Cash paid for store rent was $39,000. Cash received for interest and dividends was $7,000. Cash paid for income taxes was $55,000. Based on the selected information provided, how much was Garret's cash flow from operating activities?

Lantz Company has provided the following information: • Cash sales totaled $255,000. • Credit sales totaled $479,000. • Cash collections from customers for services yet to be provided totaled $88,000. • A $22,000 loss from the sale of property and equipment occurred. • Interest income was $7,700. • Interest expense was $19,900. • Supplies expense was $336,000. • Rent expense for the store was $36,000. • Wages expense was $49,000. • Other operating expenses totaled $79,000. • Unearned revenue was $4,000. What is the amount of Lantz's income before income taxes?

An example of operating revenue would be the revenue created by the sale of an automobile by a car dealership.

Dividends declared decrease net income.

Which of the following transactions will not decrease the net profit margin ratio?

Application of generally accepted accounting principles requires that the accrual basis of accounting be used for reporting revenues and expenses on the income statement.

Which of the following describes the reporting of interest expense on the income statement?

Colby Corporation has provided the following information: • Operating revenues from customers were $199,700. • Operating expenses for the store were $111,000. • Interest expense was $9,200. • Gain from sale of plant and equipment was $3,300. • Dividend payments to Colby's stockholders were $7,700. • Income tax expense was $36,000. • Prepaid rent expense was $5,000. What is the amount of Colby's operating income (income from operations)?

A gain resulting from the sale of buildings and equipment is not reported as operating income on the income statement.