Deck 4: Understanding Accounting Information

Question 1

Current assets are cash and other assets that will be converted into cash or used up during the normal operating cycle of the business or one year, whichever is shorter.

Answer 1

False

Question 2

Assets are listed on the balance sheet in order of liquidity and liabilities are listed in order of amount.

Answer 2

False

Question 3

The report form of the balance sheet displays assets on the left side and liabilities and stockholders' equity on the right side.

Answer 3

False

Question 4

Trend analysis is a process in which we compare a company's results, or the results of a ratio, over time.

Question 5

The current ratio of a company is its current assets divided by its current liabilities.

Question 6

If Morton Company paid $100,000 cash dividends to its shareholders, retained earnings would be reduced by $100,000.

Question 7

If stockholders' equity is $150,000 on January 1, 2019, and decreases to $50,000 on December 31, 2019, this could only be due to a net loss of $100,000.

Question 8

The statement of cash flows separates cash flows into operating, nonoperating, and investing categories.

Question 9

In a merchandising firm, sales minus cost of goods sold equals income before income taxes.

Question 10

Gross profit on sales is obtained by deducting selling expenses from sales.

Question 11

Profit margin answers the question: how much net income does a company generate from each dollar of gross profit?

Question 12

Which one of the following is included in current assets?

A) Accounts receivable
B) Taxes payable
C) Automobiles
D) Common stock

Question 13

Assets are recorded in the balance sheet in order of:

A) Market value
B) Historic value
C) Liquidity
D) Maturity

Question 14

Which one of the following is not a current liability?

A) Taxes payable
B) Accounts payable
C) Wages payable
D) Wage expense

Question 15

Current assets are usually listed in the order of their:

A) Size: smallest to largest
B) Liquidity: most liquid to least liquid
C) Size: largest to smallest
D) Lack of liquidity: least liquid to most liquid
E) None of the above

Question 16

Current assets are cash and other assets that will be converted into cash or used up within

A) One year
B) The normal operating cycle of the business or one year, whichever is longer
C) The normal operating cycle of the business
D) The normal operating cycle of the business or one year, whichever is shorter
E) None of the above

Question 17

The balance sheet format that reports assets first and then, beneath the assets, reports the liabilities and stockholders' equity is called the:

A) Account form
B) Stack form
C) Classified form
D) Report form
E) None of the above

Question 18

Which of the following assets would not be classified as a current asset?

A) Accounts receivable
B) Prepaid rent
C) Supplies
D) Equipment
E) None of the above

Question 19

The primary components of the stockholders' equity section of a balance sheet for a corporation are

A) A capital amount for each stockholder in the corporation
B) Net income and retained earnings
C) Common stock and dividends
D) Common stock and retained earnings
E) None of the above

Question 20

Data from the financial statements of Kroger King and SuperDeal, Inc., are presented below (in millions):

To the nearest hundredth, what is the 2019 debt-to-total-assets ratio for Kroger King?

A) 0.81
B) 0.26
C) 3.78
D) 44.16

Question 21

Data from the financial statements of Kroger King and SuperDeal, Inc., are presented below (in millions):

To the nearest hundredth, what is the 2019 debt-to-total-assets ratio for SuperDeal, Inc.?

A) 0.21
B) 0.79
C) 4.96
D) 4.69

Question 22

Traynham Tractors has a debt-to-total-assets ratio of 0.61 and Adel Automotive has 0.99. Which of the following statements is true?

A) Adel reported more dollars of profit than Traynham.
B) Adel has more total debt than does Traynham.
C) Adel is able to bring its product to market more efficiently than Traynham.
D) Traynham would likely be able to borrow money at a lower interest rate than would Adel.

Question 23

The current ratio is computed as:

A) Current liabilities divided by current assets
B) Current assets divided by current liabilities
C) Current assets minus current liabilities
D) Current assets divided by total assets
E) None of the above

Question 24

Data from the financial statements of Kroger King and SuperDeal Inc. are presented below (in millions):

To the nearest hundredth of a percent, what is the 2019 profit margin for Kroger King?

A) 0.30%
B) 0.38%
C) 0.64%
D) Not enough information provided

Question 25

Data from the financial statements of Kroger King and SuperDeal Inc. are presented below (in millions):

To the nearest hundredth of a percent, what is the 2019 profit margin for SuperDeal, Inc.?

A) 2.16%
B) 2.39%
C) 2.90%
D) Not enough information is provided

Question 26

Traynham Tractors has a profit margin of 16.4% and Adel Automotive has a profit margin of 18.3%. Which of the following statements is true?

A) Adel Automotive reported more dollars of profit than Traynham Tractors
B) Adel Automotive has more of the firm financed with debt than Traynham does
C) Adel Automotive is able to bring its product to market more efficiently than Traynham Tractors
D) Traynham Tractors would likely be able to borrow money at a lower interest rate than would Adel Automotive

Question 27

Which statement is true of the statement of stockholders' equity?

A) It reports a company's assets, liabilities, and equities.
B) It reports a company's revenue and expenses for a period.
C) It reports a company's cash flows from operating activities, investing activities, and financing activities.
D) It shows a company's stock issuances and dividends paid to shareholders.

Question 28

Which of the following is not shown in the statement of stockholder's equity?

A) Unearned revenue
B) Dividends
C) Retained earnings
D) Common stock

Question 29

Which one of the following does not impact retained earnings directly?

A) Net income
B) Net loss
C) Dividends
D) Stock issuances

Question 30

Which of the following is not a category for classifying cash flows in a statement of cash flows?

A) Operating activities
B) Nonoperating activities
C) Financing activities
D) Investing activities

Question 31

Fran Company has beginning equity of $300,000, net income of $50,000, dividends of $30,000 and investments by owners in exchange for stock of $10,000. Its ending equity is:

A) $223,000
B) $240,000
C) $268,000
D) $330,000

Question 32

During the current year, Pierce Company's total assets increased $25,000, and total liabilities decreased $15,000. During the same year, the company's investors invested an additional $30,000 and the company paid dividends of $15,000.
What must have been the company's net income for year?

A) $25,000
B) $15,000
C) $20,000
D) $10,000

Question 33

A company reported total stockholders' equity of $145,000 on its December 31, 2018, balance sheet. The following information is available for the year ended December 31, 2019:

What are the total assets of the company on December 31, 2019?

A) $ 92,000
B) $190,000
C) $210,000
D) $362,000

Question 34

Terry Company began operations on January 1, 2019, with an investment of $62,000 by each of its two stockholders, or a total of $124,000. Net income for its first year of business was $218,000. During the year, the company paid dividends of $30,000 each to its two stockholders.
How much is the company's ending Stockholders' Equity on December 31, 2019?

A) $278,000
B) $216,000
C) $248,000
D) $282,000

Question 35

As of December 31, 2018, Brookshire Company had assets of $925,000 and liabilities of $285,000. During 2019, the stockholders invested an additional $50,000 and paid dividends of $30,000 from the business.
What is the net income for the company during 2019, assuming that as of December 31, 2019, assets were $980,000, and liabilities were $255,000?

A) $ 85,000
B) $ 65,000
C) $105,000
D) $ 20,000

Question 36

On September 1, Baxter Inc. reported Retained Earnings of $136,000. During the month of September, Baxter generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and paid dividends of $6,000.
What is the balance in Retained Earnings on September 30?

A) $136,000
B) $ 8,000
C) $137,000
D) $138,000

Question 37

Sheehan Company presented the following data on December 31:

Determine the current ratio for Sheehan Company (rounded).

A) 4.41
B) 4.23
C) 2.79
D) 2.38

Question 38

Russell Company presented the following data on December 31:

Determine the debt-to-total assets ratio for Russell Company (rounded).

A) 0.57
B) 0.38
C) 0.08
D) 0.66

Question 39

Fields Company presented the following data for the current year:

Determine the company's profit margin (rounded)

A) 31%
B) 28%
C) 33%
D) 30%

Question 40

Net sales less cost of goods sold equals:

A) Net income
B) Net profit margin
C) Gross profit
D) Gross profit percentage

Question 41

The accounting record for Kotan Company reported the following selected information:

Determine Kotan Company's Gross Profit.

A) $154,000
B) $178,000
C) $140,000
D) $166,000

Question 42

Determine Sales Revenue for a company with the following data:

A) $795,000
B) $815,000
C) $870,000
D) $700,000

Question 43

Minty Company reported the following year-end amounts:

What are the company's Operating Expenses for the year?

A) $ 720
B) $ 990
C) $2,300
D) $3,200

Question 44

According to the FASB's Conceptual Framework, who are the primary users of external financial reports?

A) Existing and potential investors
B) Managers
C) Bankers and hedge fund managers
D) Accounting professors

Question 45

Financial statements are comparable when they:

A) Are available to users in time to influence their decisions.
B) Faithfully report the events and transactions they purport to represent.
C) Allow users to identify similarities in, and differences between, two or more items or companies.
D) Present information clearly and concisely.

Question 46

The Securities and Exchange Commission (SEC) mandates that public companies

A) Issue quarterly reports every three months, as well as an annual financial statement.
B) Report all of the primary financial statements, as well as footnotes and discussion by management of any major changes in the company's financial condition.
C) Have an outside independent auditor audit the annual reports..
D) All of the above.

Question 47

Listed below are selected accounts for Tercek Company, Inc. Select a letter from the following key and place it in the space to the left of the account title to indicate the proper balance sheet classification for the accou

-Accounts payable

A) Current asset
B) Property, Plant, and Equipment
C) Current liability
D) Long-term liability
E) Stockholders' equity
F) Not a balance sheet account

Question 48

Listed below are selected accounts for Tercek Company, Inc. Select a letter from the following key and place it in the space to the left of the account title to indicate the proper balance sheet classification for the accou

-Long-term notes payable

A) Current asset
B) Property, Plant, and Equipment
C) Current liability
D) Long-term liability
E) Stockholders' equity
F) Not a balance sheet account

Question 49

Listed below are selected accounts for Tercek Company, Inc. Select a letter from the following key and place it in the space to the left of the account title to indicate the proper balance sheet classification for the accou

-Prepaid rent

A) Current asset
B) Property, Plant, and Equipment
C) Current liability
D) Long-term liability
E) Stockholders' equity
F) Not a balance sheet account

Question 50

Listed below are selected accounts for Tercek Company, Inc. Select a letter from the following key and place it in the space to the left of the account title to indicate the proper balance sheet classification for the accou

-Dividends

A) Current asset
B) Property, Plant, and Equipment
C) Current liability
D) Long-term liability
E) Stockholders' equity
F) Not a balance sheet account

Question 51

Listed below are selected accounts for Tercek Company, Inc. Select a letter from the following key and place it in the space to the left of the account title to indicate the proper balance sheet classification for the accou

-Equipment

A) Current asset
B) Property, Plant, and Equipment
C) Current liability
D) Long-term liability
E) Stockholders' equity
F) Not a balance sheet account

Question 52

Listed below are selected accounts for Tercek Company, Inc. Select a letter from the following key and place it in the space to the left of the account title to indicate the proper balance sheet classification for the accou

-Cash

A) Current asset
B) Property, Plant, and Equipment
C) Current liability
D) Long-term liability
E) Stockholders' equity
F) Not a balance sheet account

Question 53

Listed below are selected accounts for Tercek Company, Inc. Select a letter from the following key and place it in the space to the left of the account title to indicate the proper balance sheet classification for the accou

-Wages payable

A) Current asset
B) Property, Plant, and Equipment
C) Current liability
D) Long-term liability
E) Stockholders' equity
F) Not a balance sheet account

Question 54

Listed below are selected accounts for Tercek Company, Inc. Select a letter from the following key and place it in the space to the left of the account title to indicate the proper balance sheet classification for the accou

-Retained earnings

A) Current asset
B) Property, Plant, and Equipment
C) Current liability
D) Long-term liability
E) Stockholders' equity
F) Not a balance sheet account

Question 55

Listed below are selected accounts for Tercek Company, Inc. Select a letter from the following key and place it in the space to the left of the account title to indicate the proper balance sheet classification for the accou

-Accounts receivable

A) Current asset
B) Property, Plant, and Equipment
C) Current liability
D) Long-term liability
E) Stockholders' equity
F) Not a balance sheet account

Question 56

Listed below are selected accounts for Tercek Company, Inc. Select a letter from the following key and place it in the space to the left of the account title to indicate the proper balance sheet classification for the accou

-Supplies

A) Current asset
B) Property, Plant, and Equipment
C) Current liability
D) Long-term liability
E) Stockholders' equity
F) Not a balance sheet account

Question 57

Compute the missing amounts in the table below:

Question 58

Identify the following as an asset (A), liability (L), or equity (E) by writing the letter of the correct classification in the space provided.

Question 59

For the two unrelated situations below, compute the unknown amounts indicated by the letters (a) and (b).

Question 60

For the two unrelated situations below, compute the unknown amounts indicated by the letters (a) and (b).

Question 61

Langston, Inc. has a debt-to-total-assets ratio of 0.65 and a profit margin of 14.3%. The median profit margin for similar companies in the same industry as Langston is about 5.1%. The median debt-to-total-assets ratio for similar companies in the same industry is 0.24.
Based on this industry information, how does Langston compare to similar companies and what are the causes of these differences?

Question 62

Accutune Audio reported the following amounts in its December 31, 2019, and 2018 financial statements.
Calculate to the nearest hundredth:
a. Profit margin for 2019
b. Debt-to-total-assets ratio as of December 31, 20139

Question 63

Prepare an income statement for the month ended July 31, 2019 for Wiseman Toys. Wiseman's account balances for the month ending July 31, 2019 are:

Question 64

Prepare an income statement for the year ended December 31, 2019 for Winkleman Music. Winkleman's account balances for the year ending December 31, 2019 are:

Question 65

The following is selected financial information for Walkmart, Inc. for its year ending January 31, 2019:
Prepare a statement of stockholders' equity for 2019 for Walkmart. All amounts are in millions.

Question 66

Campbell reported the following selected information at August 2, 2019 ($ millions):
Use this information to prepare a statement of stockholders' equity for Campbell's for the year ending August 2, 2019.

Question 67

Crandall Company reported the following amounts on its balance sheet on December 31 of the current year:
Answer each of the following independent questions:
a. Assume that Crandall's stockholders' equity on January 1 was $132,000. Crandall did not issue common stock during the year, but it paid $18,000 cash in dividends. How much is Crandall's net income or loss for the year?
b. Assume that Crandall's stockholders' equity on January 1 was $118,000, and that Crandall issued additional common stock of $35,000 and paid $30,000 in cash dividends before the end of the year. What was Crandall's net income or net loss for the year?

Question 68

Compute the missing amounts for each of the last 3 years for the Cummins Company. Compute the current ratio and debt-to-total-assets ratio for each year.

Question 69

Prepare a statement of stockholders' equity for the month ended July 31, 2019 for Wiseman Toys. There was no issuance of common stock during the month. Wiseman's account balances for the month ending July 31, 2019 are:

Question 70

The following items and amounts are taken from the 2019 financial records of Cynatech:

There was no issuance of common stock during the year. Prepare a statement of stockholders' equity for Cynatech for the year ending December 31, 2019.

Question 71

The records of Jersey T's show the following information after all transactions are recorded for 2019.

Jersey T's raised $8,000 cash through the issuance of additional common stock during the year. Based on this information, prepare Jersey T's statement of stockholders' equity for the year ending December 31, 2019.

Question 72

Presented below are income statement data for Pink & Company for the current year:

Prepare a multi-step income statement for the current year and calculate the company's profit margin. If Pink's profit margin was 26 percent in the prior year, did the company's profitability increase or decrease?