ADM 1340 Lecture Notes - Lecture 14: Book Value
ADM 1340 Full Course Notes
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On 1 July 2017, Panda Ltd acquired all the issued shares ofSmarty Ltd. Panda Ltd paid $250,000 more than the equity itacquired in the fair value of Smarty Ltdâs net assets. At the dateof acquisition, the shareholderâs equity of S
On 1 July 2017, Panda Ltd acquired all the issued shares ofSmarty Ltd. Panda Ltd paid $250,000 more than the equity itacquired in the fair value of Smarty Ltdâs net assets. At the dateof acquisition, the shareholderâs equity of Smarty Ltd was asfollows.
$
Share capital
100,000
Retained earnings
175,000
Total
275,000
All the assets and liabilities of Smarty Ltd were recorded atamounts equal to their fair values at the acquisition date, exceptfor some assets detailed below.
Remaining useful life
Cost
Carrying amount
Fair value
$
$
$
Plant
5 years
180,000
90,000
120,000
Computer equipment
5 years
90,000
40,000
60,000
Required:
Prepare the acquisition analysis at 1 July 2017.
Prepare the consolidation worksheet entries for Panda Ltdâs groupat 1 July 2017.
Prepare the consolidation worksheet entries for Panda Ltdâs groupat 30 June 2018.
Question 1
Max. marks allocated
Acquisition analysis
3
Consolidation entries at 1 July 2017
6
Consolidation entries at 30 June 2018
10
Presentation
1
Total
20
Question 2 [35 marks]
Topic 2: Consolidation: Intra-group transactions
On 1 July 2015, Ping Pong Ltd acquired all the issued shares ofSing Song Ltd. At the date of acquisition, the shareholdersâ equityof Sing Song Ltd consisted of share capital $120,000; generalreserve $25,000 and retained earnings $55,000. The identifiable netassets of Sing Song Ltd were recorded at amounts equal to theirfair values, except for the following assets:
Carrying amount
Fair value
$
$
Land
100,000
130,000
Inventories
78,500
86,100
Machinery (cost $86,000)
52,000
56,000
Vehicles (cost $58,000)
47,000
53,000
The assets of Sing Song Ltd at acquisition date includedgoodwill recorded at $15,000 arising from a business combinationtransaction in 2011. As at the date of acquisition, the vehiclesand machinery were expected to have a further useful life of 6 and8 years respectively, with benefits to be received evenly overthose periods. Inventories on hand on 1 July 2015 was all sold by31 January 2016. The land owned at 1 July 2015 was sold inSeptember 2016 for $150,000. The machinery on hand at 1 July 2015was sold on 1 January 2018 for $38,000.
Adjustments for the differences between carrying amount and fairvalues of assets and liabilities on hand at acquisition date arerecognised on consolidation. When assets are sold or derecognised,any related valuation reserves are transferred to retainedearnings.
At 1 July 2015, Sing Song Ltd owned but had not recorded aninternally generated brand name, an identifiable asset included aspart of the business combination transaction. This brand name wasconsidered by Ping Pong Ltd to have a fair value of $29,000 and anindefinite useful life. An impairment test conducted with respectto the brand name on 30 June 2018 concluded that its recoverableamount at that date was $2,000 less than its carrying amount.
In June 2017, Sing Song Ltd paid a share dividend worth $20,000from the general reserve on hand at 1 July 2015.
The trial balances of both companies at 30 June 2018 showed thefollowing balances:
Ping Pong Ltd
Sing Song Ltd
Dr ($)
Cr ($)
Dr ($)
Cr ($)
Sales revenue
450,000
320,000
Dividend revenue
17,000
-
Other income
11,400
17,000
Proceeds on sale of equipment
18,000
-
Proceeds on sale of machinery
-
38,000
Cost of sales
210,000
192,550
Income tax expense
30,000
32,000
Depreciation and other expenses
39,000
36,000
Carrying amount of equipment sold
21,000
-
Carrying amount of machinery sold
-
30,500
Dividend paid
10,000
5,000
Dividend declared
20,000
12,000
Transfer to general reserve
10,000
5,000
Share capital
200,000
140,000
General reserve
35,000
10,000
Retained earnings (1 July 2017)
51,300
67,500
Accounts payable
69,500
36,000
Loan payable (due 30 June 2022)
25,000
15,000
Dividend payable
20,000
12,000
Provisions
12,500
9,300
Current tax liability
43,000
34,000
Deferred tax liability
11,800
5,000
Accumulated depreciation-vehicles
16,400
60,000
Accumulated depreciation-equipment
-
34,500
8%Debentures (matures 30 June 2021)
25,000
-
Cash
2,500
1,250
Receivables
27,000
13,000
Inventories
39,700
24,500
Other current assets
15,200
8,200
Deferred tax assets
7,500
3,500
Vehicles
88,000
158,000
Equipment
-
42,000
Land
140,000
180,000
Financial assets
68,000
14,800
Goodwill
28,000
15,000
Shares in Sing Song Ltd
250,000
-
Debentures in Ping Pong Ltd
-
25,000
1,005,900
1,005,900
798,300
798,300
Additional information:
On 1 January 2018, Ping Pong Ltd sold an item of equipment toSing Song Ltd for $18,000. The equipment had a carrying amount atthe date of sale of $21,000. Both companies depreciate equipment at20% on a straight line basis.
On 1 May 2017, Sing Song Ltd sold a machine to Ping Pong Ltd for$7,800. The machine had a carrying amount of $7,000 at the date ofsale. Ping Pong Ltd recorded the machine as inventories. Theinventories item was sold to an external party in November 2017 for$8,200.
All interests on the 8% debentures has been paid and brought toaccount in the records of both companies.
During the 2017-2018 financial year, Ping Pong Ltd sold inventoriesto Sing Song Ltd for $75,000. The cost of these inventories to SingSong Ltd was $70,000. Of these inventories, 25% is still on hand at30 June 2018.
The transfer to the general reserve recorded by Sing Song Ltd inthe current year was from retained earnings recorded at 1 July2015.
The tax rate is 30%.
Required:
Prepare an acquisition analysis.
Prepare the consolidation worksheet entries necessary to preparethe consolidated financial statements for the year ending 30 June2018 for the group comprising Ping Pong Ltd and Sing Song Ltd.
Note: you are not required to prepare the consolidationworksheet and the consolidated financial statements.
marty Ltd was as follows.
$ | |
Share capital | 100,000 |
Retained earnings | 175,000 |
Total | 275,000 |
All the assets and liabilities of Smarty Ltd were recorded atamounts equal to their fair values at the acquisition date, exceptfor some assets detailed below.
Remaining useful life | Cost | Carrying amount | Fair value | |
$ | $ | $ | ||
Plant | 5 years | 180,000 | 90,000 | 120,000 |
Computer equipment | 5 years | 90,000 | 40,000 | 60,000 |
Required:
Prepare the acquisition analysis at 1 July 2017.
Prepare the consolidation worksheet entries for Panda Ltdâsgroup at 1 July 2017.
Prepare the consolidation worksheet entries for Panda Ltdâsgroup at 30 June 2018.
Question 1 | Max. marks allocated |
Acquisition analysis | 3 |
Consolidation entries at 1 July 2017 | 6 |
Consolidation entries at 30 June 2018 | 10 |
Presentation | 1 |
Total | 20 |
Question 2 [35 marks]
Topic 2: Consolidation: Intra-grouptransactions
On 1 July 2015, Ping Pong Ltd acquired all the issued shares ofSing Song Ltd. At the date of acquisition, the shareholdersâ equityof Sing Song Ltd consisted of share capital $120,000; generalreserve $25,000 and retained earnings $55,000. The identifiable netassets of Sing Song Ltd were recorded at amounts equal to theirfair values, except for the following assets:
Carrying amount | Fair value | |
$ | $ | |
Land | 100,000 | 130,000 |
Inventories | 78,500 | 86,100 |
Machinery (cost $86,000) | 52,000 | 56,000 |
Vehicles (cost $58,000) | 47,000 | 53,000 |
The assets of Sing Song Ltd at acquisition date includedgoodwill recorded at $15,000 arising from a business combinationtransaction in 2011. As at the date of acquisition, the vehiclesand machinery were expected to have a further useful life of 6 and8 years respectively, with benefits to be received evenly overthose periods. Inventories on hand on 1 July 2015 was all sold by31 January 2016. The land owned at 1 July 2015 was sold inSeptember 2016 for $150,000. The machinery on hand at 1 July 2015was sold on 1 January 2018 for $38,000.
Adjustments for the differences between carrying amount and fairvalues of assets and liabilities on hand at acquisition date arerecognised on consolidation. When assets are sold or derecognised,any related valuation reserves are transferred to retainedearnings.
At 1 July 2015, Sing Song Ltd owned but had not recorded aninternally generated brand name, an identifiable asset included aspart of the business combination transaction. This brand name wasconsidered by Ping Pong Ltd to have a fair value of $29,000 and anindefinite useful life. An impairment test conducted with respectto the brand name on 30 June 2018 concluded that its recoverableamount at that date was $2,000 less than its carrying amount.
In June 2017, Sing Song Ltd paid a share dividend worth $20,000from the general reserve on hand at 1 July 2015.
The trial balances of both companies at 30 June 2018 showed thefollowing balances:
Ping Pong Ltd | Sing Song Ltd | |||
Dr ($) | Cr ($) | Dr ($) | Cr ($) | |
Sales revenue | 450,000 | 320,000 | ||
Dividend revenue | 17,000 | - | ||
Other income | 11,400 | 17,000 | ||
Proceeds on sale of equipment | 18,000 | - | ||
Proceeds on sale of machinery | - | 38,000 | ||
Cost of sales | 210,000 | 192,550 | ||
Income tax expense | 30,000 | 32,000 | ||
Depreciation and other expenses | 39,000 | 36,000 | ||
Carrying amount of equipment sold | 21,000 | - | ||
Carrying amount of machinery sold | - | 30,500 | ||
Dividend paid | 10,000 | 5,000 | ||
Dividend declared | 20,000 | 12,000 | ||
Transfer to general reserve | 10,000 | 5,000 | ||
Share capital | 200,000 | 140,000 | ||
General reserve | 35,000 | 10,000 | ||
Retained earnings (1 July 2017) | 51,300 | 67,500 | ||
Accounts payable | 69,500 | 36,000 | ||
Loan payable (due 30 June 2022) | 25,000 | 15,000 | ||
Dividend payable | 20,000 | 12,000 | ||
Provisions | 12,500 | 9,300 | ||
Current tax liability | 43,000 | 34,000 | ||
Deferred tax liability | 11,800 | 5,000 | ||
Accumulated depreciation-vehicles | 16,400 | 60,000 | ||
Accumulated depreciation-equipment | - | 34,500 | ||
8%Debentures (matures 30 June 2021) | 25,000 | - | ||
Cash | 2,500 | 1,250 | ||
Receivables | 27,000 | 13,000 | ||
Inventories | 39,700 | 24,500 | ||
Other current assets | 15,200 | 8,200 | ||
Deferred tax assets | 7,500 | 3,500 | ||
Vehicles | 88,000 | 158,000 | ||
Equipment | - | 42,000 | ||
Land | 140,000 | 180,000 | ||
Financial assets | 68,000 | 14,800 | ||
Goodwill | 28,000 | 15,000 | ||
Shares in Sing Song Ltd | 250,000 | - | ||
Debentures in Ping Pong Ltd | - | 25,000 | ||
1,005,900 | 1,005,900 | 798,300 | 798,300 |
Additional information:
On 1 January 2018, Ping Pong Ltd sold an item of equipment toSing Song Ltd for $18,000. The equipment had a carrying amount atthe date of sale of $21,000. Both companies depreciate equipment at20% on a straight line basis.
On 1 May 2017, Sing Song Ltd sold a machine to Ping Pong Ltd for$7,800. The machine had a carrying amount of $7,000 at the date ofsale. Ping Pong Ltd recorded the machine as inventories. Theinventories item was sold to an external party in November 2017 for$8,200.
All interests on the 8% debentures has been paid and brought toaccount in the records of both companies.
During the 2017-2018 financial year, Ping Pong Ltd soldinventories to Sing Song Ltd for $75,000. The cost of theseinventories to Sing Song Ltd was $70,000. Of these inventories, 25%is still on hand at 30 June 2018.
The transfer to the general reserve recorded by Sing Song Ltd inthe current year was from retained earnings recorded at 1 July2015.
The tax rate is 30%.
Required:
Prepare an acquisition analysis.
Prepare the consolidation worksheet entries necessary to preparethe consolidated financial statements for the year ending 30 June2018 for the group comprising Ping Pong Ltd and Sing Song Ltd.
Note: you are not required to prepare the consolidationworksheet and the consolidated financial statements.
Topic 2: Consolidation: Intra-grouptransactions
On 1 July 2015, Ping Pong Ltd acquired all the issued shares ofSing Song Ltd. At the date of acquisition, the shareholdersâ equityof Sing Song Ltd consisted of share capital $120,000; generalreserve $25,000 and retained earnings $55,000. The identifiable netassets of Sing Song Ltd were recorded at amounts equal to theirfair values, except for the following assets:
Carrying amount | Fair value | |
$ | $ | |
Land | 100,000 | 130,000 |
Inventories | 78,500 | 86,100 |
Machinery (cost $86,000) | 52,000 | 56,000 |
Vehicles (cost $58,000) | 47,000 | 53,000 |
The assets of Sing Song Ltd at acquisition date includedgoodwill recorded at $15,000 arising from a business combinationtransaction in 2011. As at the date of acquisition, the vehiclesand machinery were expected to have a further useful life of 6 and8 years respectively, with benefits to be received evenly overthose periods. Inventories on hand on 1 July 2015 was all sold by31 January 2016. The land owned at 1 July 2015 was sold inSeptember 2016 for $150,000. The machinery on hand at 1 July 2015was sold on 1 January 2018 for $38,000.
Adjustments for the differences between carrying amount and fairvalues of assets and liabilities on hand at acquisition date arerecognised on consolidation. When assets are sold or derecognised,any related valuation reserves are transferred to retainedearnings.
At 1 July 2015, Sing Song Ltd owned but had not recorded aninternally generated brand name, an identifiable asset included aspart of the business combination transaction. This brand name wasconsidered by Ping Pong Ltd to have a fair value of $29,000 and anindefinite useful life. An impairment test conducted with respectto the brand name on 30 June 2018 concluded that its recoverableamount at that date was $2,000 less than its carrying amount.
In June 2017, Sing Song Ltd paid a share dividend worth $20,000from the general reserve on hand at 1 July 2015.
The trial balances of both companies at 30 June 2018 showed thefollowing balances:
Ping Pong Ltd | Sing Song Ltd | |||
Dr ($) | Cr ($) | Dr ($) | Cr ($) | |
Sales revenue | 450,000 | 320,000 | ||
Dividend revenue | 17,000 | - | ||
Other income | 11,400 | 17,000 | ||
Proceeds on sale of equipment | 18,000 | - | ||
Proceeds on sale of machinery | - | 38,000 | ||
Cost of sales | 210,000 | 192,550 | ||
Income tax expense | 30,000 | 32,000 | ||
Depreciation and other expenses | 39,000 | 36,000 | ||
Carrying amount of equipment sold | 21,000 | - | ||
Carrying amount of machinery sold | - | 30,500 | ||
Dividend paid | 10,000 | 5,000 | ||
Dividend declared | 20,000 | 12,000 | ||
Transfer to general reserve | 10,000 | 5,000 | ||
Share capital | 200,000 | 140,000 | ||
General reserve | 35,000 | 10,000 | ||
Retained earnings (1 July 2017) | 51,300 | 67,500 | ||
Accounts payable | 69,500 | 36,000 | ||
Loan payable (due 30 June 2022) | 25,000 | 15,000 | ||
Dividend payable | 20,000 | 12,000 | ||
Provisions | 12,500 | 9,300 | ||
Current tax liability | 43,000 | 34,000 | ||
Deferred tax liability | 11,800 | 5,000 | ||
Accumulated depreciation-vehicles | 16,400 | 60,000 | ||
Accumulated depreciation-equipment | - | 34,500 | ||
8%Debentures (matures 30 June 2021) | 25,000 | - | ||
Cash | 2,500 | 1,250 | ||
Receivables | 27,000 | 13,000 | ||
Inventories | 39,700 | 24,500 | ||
Other current assets | 15,200 | 8,200 | ||
Deferred tax assets | 7,500 | 3,500 | ||
Vehicles | 88,000 | 158,000 | ||
Equipment | - | 42,000 | ||
Land | 140,000 | 180,000 | ||
Financial assets | 68,000 | 14,800 | ||
Goodwill | 28,000 | 15,000 | ||
Shares in Sing Song Ltd | 250,000 | - | ||
Debentures in Ping Pong Ltd | - | 25,000 | ||
1,005,900 | 1,005,900 | 798,300 | 798,300 |
Additional information:
On 1 January 2018, Ping Pong Ltd sold an item of equipment toSing Song Ltd for $18,000. The equipment had a carrying amount atthe date of sale of $21,000. Both companies depreciate equipment at20% on a straight line basis.
On 1 May 2017, Sing Song Ltd sold a machine to Ping Pong Ltd for$7,800. The machine had a carrying amount of $7,000 at the date ofsale. Ping Pong Ltd recorded the machine as inventories. Theinventories item was sold to an external party in November 2017 for$8,200.
All interests on the 8% debentures has been paid and brought toaccount in the records of both companies.
During the 2017-2018 financial year, Ping Pong Ltd soldinventories to Sing Song Ltd for $75,000. The cost of theseinventories to Sing Song Ltd was $70,000. Of these inventories, 25%is still on hand at 30 June 2018.
The transfer to the general reserve recorded by Sing Song Ltd inthe current year was from retained earnings recorded at 1 July2015.
The tax rate is 30%.
Required:
Prepare an acquisition analysis.
Prepare the consolidation worksheet entries necessary to preparethe consolidated financial statements for the year ending 30 June2018 for the group comprising Ping Pong Ltd and Sing Song Ltd.
Note: you are not required to prepare the consolidationworksheet and the consolidated financial statements.
1 of 50
Investments in debt securities, such as bonds, may be classifiedas either current or long-term assets.
True | |
False |
Question
2 of 50
Marketable securities that are held until the due date of thesecurities are
trading and held-to-maturitysecurities. | |
available-for sale securities. | |
held-to-maturity securities. | |
trading securities. |
Question
3 of 50
Which of the following business types is most common as measuredby the amount of business transacted?
Government entities | |
Proprietorships | |
Partnerships | |
Corporations |
Question
4 of 50
Depreciation is based upon cost, useful life, and salvagevalue.
True | |
False |
Question
5 of 50
Because depreciation is not cash-based, it is NOT reported inthe direct method of the statement of cash flows.
True | |
False |
Question
6 of 50
A company has a petty cash fund of $200. At the end of themonth, $6.41 remains in the fund along with $190.96 in variousreceipts. The journal entry to replenish the fund would show adebit(s) to
various expenses for $190.96 andCash Short of $2.63. | |
Cash for $190.96. | |
Cash for $193.59. | |
various expenses for $190.96 andCash Over of $2.63. |
Question
7 of 50
A 12-month, 8% note dated August 1, 2013 for $5,000 would haveaccrued interest payable on December 31, 2013 of $166.67.
True | |
False |
Question
8 of 50
Warranty expense must be estimated and matched to revenues.
True | |
False |
Question
9 of 50
Upgrading the RAM on a computer would be an example of a(n)
capital expense. | |
betterment. | |
ordinary repair. | |
extraordinary repair. |
Question
10 of 50
The formula for the quick ratio is quick assets divided bynoncurrent assets.
True | |
False |
Question
11 of 50
Which of the following are considered to be legal entities thatexist separate and distinct from their owners?
Sole proprietorships | |
Organizations with more than 100partners | |
Partnerships | |
Corporations |
Question
12 of 50
Patents and copyrights can be seen, held, or touched.
True | |
False |
Question
13 of 50
Which of the following would be considered part of the cost ofmachinery and equipment?
Repairs after start-up | |
Insurance after purchase | |
Maintenance | |
Sales taxes |
Question
14 of 50
The business or person that signs the note and promises to paythe required amount is called the payee.
True | |
False |
Question
15 of 50
Conley Company has a petty cash fund of $300. At the end of themonth, $42.38 remains in the fund along with $260.75 in variousreceipts. The journal entry to replenish the fund would bedebit
Petty Cash for $257.62 and creditCash for $257.62. | |
various expenses, $260.75 andcredit Cash for $260.75. | |
various expenses, $260.75, creditCash Over for $3.13, and credit Cash for $257.62. | |
various expenses, $254.49, debitCash Short for $3.13, and credit Cash for $257.62. |
Question
16 of 50
Neither land nor land improvements are depreciated.
True | |
False |
Question
17 of 50
Using a 365-day year, the maturity value of a 180-day note for$2,700 at 9% annual interest is (rounded to the nearest cent)
$2,819.84. | |
$2,821.50. | |
$2,943.00. | |
$ 119.84. |
Question
18 of 50
On January 1, Bestway, Inc. signed a $175,000, 8%, 30-yearmortgage that requires semiannual payments of $7,735 on June 30 andDecember 31 of each year. The journal entry to record the secondsemiannual payment would be (round interest calculation to thenearest dollar) to
debit Interest expense, $764; debitMortgage payable, $6,971; credit Cash, $7,735. | |
debit Mortgage payable, $7,735;credit Cash, $7,735. | |
debit Interest expense, $6,971;debit Mortgage expense, $764; credit Cash, $7,735. | |
debit Interest expense, $6,971;debit Mortgage payable, $764; credit Cash, $7,735. |
Question
19 of 50
Allied Industries purchased a piece of equipment for $65,000with an estimated salvage value of $15,000 on January 1. Itsestimated life is five years. To the nearest dollar, what is theequipment's depreciation using double-declining-balance for yeartwo?
$ 26,000 | |
$ 12,000 | |
$ 20,000 | |
$ 15,600 |
Question
20 of 50
Payroll is also called employee compensation and can consist ofmany parts.
True | |
False |
Question
21 of 50
The number of shares of stock that a corporation is given theright to sell is called
authorized stock. | |
issued stock. | |
outstanding stock. | |
capital stock. |
Question
22 of 50
Which of the following would NOT be considered part of the costof machinery and equipment?
In-transit insurance costs | |
Delivery charges | |
Installation costs | |
Repairs and maintenance afterstart-up |
Question
23 of 50
Equipment costing $118,000 has accumulated depreciation of$92,000. The equipment is a trade-in for new equipment costing$187,000. If the trade-in value received for the old equipment is$30,000, the journal entry to record this transaction is to
debit Equipment (New) for $187,000,debit Accumulated Depreciation â Equipment for $92,000, creditEquipment (Old) for $118,000, and credit Cash for $161,000. | |
debit Equipment (New) for $187,000and credit Cash for $187,000. | |
debit Accumulated Depreciation âTruck for $50,000, debit Loss on Disposal $6,000, and credit Truckfor $56,000. | |
debit Equipment (New) for $187,000,debit Accumulated Depreciation â Equipment for $92,000, debit Losson Exchange of Assets for $26,000, credit Equipment (Old) for$118,000 and credit Cash for $187,000. |
Question
24 of 50
Liberty Company has declared a $40,000 cash dividend toshareholders. The company has 5,000 shares of $20-par, 6% preferredstock and 10,000 shares of $15-par common stock. The preferredstock is cumulative. How much will be distributed to the preferredand common stockholders on the date of payment if the preferredstock is $12,000 in arrears?
$18,000 preferred, $22,000common | |
$20,000 preferred, $20,000common | |
$6,000 preferred, $34,000common | |
$40,000 preferred, $0 common |
Question
25 of 50
In accounting, what is the meaning of capitalized?
Capitalized means that a given cityhas been selected as a government center. | |
Capitalized means that the cost ofan asset is recorded as a debit (increase) to expense. | |
Capitalized means that a liabilityaccount is credited (increase | |
Capitalized means that an assetaccount is debited (increased) for the cost of an asset. |
Question
26 of 50
Interest is an expense to the debtor and income to thecreditor.
True | |
False |
Question
27 of 50
Cash consists of anything that a bank will take as adeposit.
True | |
False |
Question
28 of 50
The cost of long-term assets must be allocated to an expense asthe asset is used up.
True | |
False |
Question
29 of 50
The process of acquiring merchandise from a supplier begins withthe
purchase order. | |
check for payment. | |
receiving report. | |
invoice. |
Question
30 of 50
Appleway Corporation purchases a machine for $125,000. It has anestimated salvage value of $10,000 and is expected to produce50,000 units in its lifetime. During the first year of operation,it produced 14,500 units. To the nearest dollar, the depreciationfor the first year under the units of production method will be
$35,500. | |
$31,250. | |
$36,250. | |
$33,350. |
Question
31 of 50
Book value is depreciable cost minus accumulateddepreciation.
True | |
False |
Question
32 of 50
The records of Inland Equipment showed a net loss of $30,000,depreciation expense of $25,000, and an increase in supplies onhand of $5,000. The amount of net cash flow from operatingactivities using the indirect method is
($10,000). | |
$15,000. | |
$20,000. | |
($15,000). |
Question
33 of 50
Retained earnings represent internally generated capital.
True | |
False |
Question
34 of 50
A company issues 15,000 shares of its $25 par common stock for$29 per share. The amount to be debited to Cash is
$435,000. | |
$375,000. | |
$405,000. | |
$ 60,000. |
Question
35 of 50
On September 1, 2012, Juno Corp. lent $2,400 to Bill Askins on asix-month 8% promissory note. The journal entry to record the notefor Juno Corp. would be to:
debit Note Receivable/Tim, $2,400;credit Cash, $2,400. | |
debit Note Receivable/Tim, $96;credit Interest Income, $96. | |
debit Note Receivable/Tim, $2,496;credit Cash, $2,496. | |
debit Cash, $2,400; credit NotePayable/Tim, $2,400. |
Question
36 of 50
Separation of duties is essential for internal control over cashreceipts and cash payments.
True | |
False |
Question
37 of 50
Which of the following would indicate poor internal control overaccounts receivable?
The same person handling cashreceipts also records the accounts receivable transactions. | |
The person handling cash receiptspasses the receipts to someone who enters them into accountsreceivable. | |
The mailroom employees open themail and give the cash receipts to another employee. | |
The person who handles accountsreceivable would not write off accounts as uncollectible. |
Question
38 of 50
Limited liability means that the stockholders of a corporationshare a personal liability for all debts of the corporation.
True | |
False |
Question
39 of 50
Accumulated depletion is a(n)
contra-asset account. | |
cash account. | |
contra-liability account. | |
expense account. |
Question
40 of 50
Allied Industries reported net income of $52,000, depreciationexpenses of $13,000, a gain on a land sale of $3,000, and adecrease in accounts receivable of $1,500. Under the indirectmethod, net cash flows from operations is
$63,500. | |
$66,500. | |
$69,500. | |
$60,555. |
Question
41 of 50
The portion of stockholders' equity that can be used fordividends is referred to as legal capital.
True | |
False |
Question
42 of 50
Franklin Industries had total assets of $560,000; totalliabilities of $250,000; and total stockholders' equity of$310,000. Franklin Industries debt ratio is
55.4%. | |
28.7%. | |
44.6%. | |
80.6%. |
Question
43 of 50
Financial analysis is used to predict the future of abusiness.
True | |
False |
Question
44 of 50
Online banking should NOT be used to reconcile the bankaccount.
True | |
False |
Question
45 of 50
Costs of testing machinery or equipment before they are usedwould be included in the price of the machinery or theequipment.
True | |
False |
Question
46 of 50
There are two methods for accounting for uncollectiblereceivables.
True | |
False |
Question
47 of 50
Assets that are NOT expected to provide benefits for a number ofaccounting periods are called
current assets. | |
property, plant, andequipment. | |
long-term assets. | |
natural resources. |
Question
48 of 50
The allowance method of accounting for bad debts is required byGAAP because of the materiality principle.
True | |
False |
Question
49 of 50
A stock dividend affects total stockholders' equity.
True | |
False |
Question
50 of 50
Realized gains and losses only occur when the security is soldfor more or less than the original cost.
True | |
False |