ADM 1340 Chapter Notes - Chapter 5: Trial Balance, Profit Margin, The Royal And Ancient Golf Club Of St Andrews

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3 types of inventory for manufacturing companies: The time it takes to go from cash to cash in producing revenues (longer for merchandising companies compared to service companies) Service company does services for cash or a/r. Merchandising company has to purchase the merchandise for cash or. A/p before it can sell for cash or a/r. Merchandise companies have the same accounting cycle. Refer to revenue as sales revenue (revenue is also called income) Cogs directly related to the revenue that"s recognized from the sale of goods. After gross profit is calculated, operating expenses are deducted to determine profit before income tax. Operating expenses expenses that are incurred in the process of earning sales revenue. Merchandising companies keep track of inventory to determine what"s available for sale and what has been sold. Flow of costs: beginning inventory + cog purchased = total cost of gas. Gas are assigned to cogs as they"re sold.

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12 ACCOUNTING QUESTIONS

4. Using a perpetual inventory system, the buyer'sjournal entry to record the return of merchandise purchased onaccount includes a:

Select one:

A. Credit to Cost of Goods Sold

B. Credit to Accounts Payable

C. Credit to Purchase Returns

D. Credit to Inventory

6.Using a perpetual inventory system, the buyerâsjournal entry to record the payment for merchandise within thediscount period includes a:

Select one:

A. Debit to Accounts Payable

B. Debit to Cost of Goods Sold

C. Debit to Purchases

D. Debit to Inventory

7.Which of the following statements regarding cost flows istrue?

Select one:

Cost of goods available for sale is equal to beginning inventoryminus cost of goods purchased.

CGAS = beginning inventory minus ending inventory.

Cost of goods available for sale is equal to beginning inventoryplus cost of goods purchased.

CGAS = cost of goods sold minus cost of goods purchased.

10. Using a perpetual inventory system, the buyerâsjournal entry to record the purchase of merchandise on creditincludes a:

Select one:

A. Debit to Inventory

B. Debit to Freight In

C. Debit to Cost of Goods Sold

D. Debit to Purchases

11. Which of the following is not shown in thestatement of stockholder's equity?

Select one:

A. Unearned revenue

B. Common stock

C. Retained earnings

D. Dividends

13. Using a perpetual inventory system, the sellerâsjournal entry to record the sale of merchandise on account includesa:

Select one:

A. Debit to Accounts Receivable

B. Credit to Cost of Goods Sold

C. Credit to Purchases

D. Debit to Inventory

14. A merchandising company's multi-step income statementdiffers from that of a service company in what way?

Select one:

A service company does not include a line for cost of goodssold.

A service company has a line for selling expenses whereas amerchandising company does not.

There is no difference.

A merchandising company will have a line for income fromoperations whereas a service company will not.

16.Using a perpetual inventory system, the sellerâs journalentry to record the return, by the buyer, of merchandise purchasedon account includes a:

Select one:

A. Credit to Purchase Returns

B. Debit to Cost of Goods Sold

C. Debit to Accounts Receivable

D. Debit to Sales and Allowances

20. For a firm that uses the perpetual inventory system, theSales Returns and Allowances account:

Select one:

A. Is not a contra account

B. Is not used

C. Is debited by the firm receiving returned goods from acustomer

D. Has a normal credit balance

21. Current assets are cash and other assets that will beconverted into cash or used up within:

Select one:

A. One year

B. The normal operating cycle of the business

C. The normal operating cycle of the business or one year,whichever is longer

D. The normal operating cycle of the business or one year,whichever is shorter

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

Select one:

A. Account form

B. Report form

C. Stack form

D. Classified form

23. Safari Monkey Company sold $2,400,000 worth of merchandise,had $200,000 returned, and then the balance was received during the2% discount period.

What were the companyâs net sales?

Select one:

A. $1,800,000

B. $1,760,000

C. $2,156,000

D. $2,040,000

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The comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form.

1		Year 2	Year 1
2	Cash	$53,000.00	$50,000.00
3	Accounts Receivable (net)	37,000.00	48,000.00
4	Inventories	108,500.00	100,000.00
5	Investments		70,000.00
6	Equipment	573,200.00	450,000.00
7	Accumulated Depreciation-Equipment	(142,000.00)	(176,000.00)
8		$629,700.00	$542,000.00
9	Accounts Payable	$62,500.00	$43,800.00
10	Bonds Payable, Due Year 2		100,000.00
11	Common Stock, $10 par	325,000.00	285,000.00
12	Paid-In Capital in Excess of ParâCommon Stock	80,000.00	55,000.00
13	Retained Earnings	162,200.00	58,200.00
14		$629,700.00	$542,000.00

The income statement for the current year is as follows:

1	Sales		$625,700.00
2	Cost of merchandise sold		340,000.00
3	Gross profit		$285,700.00
4	Operating expenses:
5	Depreciation expense	$26,000.00
6	Other operating expenses	68,000.00	94,000.00
7	Income from operations		$191,700.00
8	Other revenue and expense:
9	Gain on sale of investment	$4,000.00
10	Interest expense	(6,000.00)	(2,000.00)
11	Income before income tax		$189,700.00
12	Income tax		60,700.00
13	Net income		$129,000.00

Additional data for the current year are as follows:

(a)	Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for $183,200.
(b)	Bonds payable for $100,000 were retired by payment at their face amount.
(c)	5,000 shares of common stock were issued at $13 for cash.
(d)	Cash dividends declared and paid, $25,000.

Required:

Prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the heading of the statement. Use the minus sign to indicate cash outflows, cash payments, decreases in cash, or any negative adjustments.

Labels and Amount Descriptions

Labels
For the Year Ended December 31, Year 2
Amount Descriptions
Cash from sale of common stock
Cash from sale of investments
Cash paid for dividends
Cash paid for purchase of equipment
Cash paid to retire bonds payable
Decrease in accounts payable
Decrease in accounts receivable
Decrease in cash
Decrease in inventories
Depreciation
Gain on sale of investment
Increase in accounts payable
Increase in accounts receivable
Increase in cash
Increase in inventories
Loss on sale of investment
Net cash flow from financing activities
Net cash flow from investing activities
Net cash flow from operating activities
Net cash flow used for financing activities
Net cash flow used for investing activities
Net cash flow used for operating activities
Net income
Net loss

Statement of Cash Flows

Posner Company

Statement of Cash Flows

1	Cash flows from operating activities:
2
3	Adjustments to reconcile net income to net cash flow from operating activities:
4
5
6	Changes in current operating assets and liabilities:
7
8
9
10
11	Cash flows from investing activities:
12
13
14
15	Cash flows from financing activities:
16
17
18
19
20
21	Cash at the beginning of the year
22	Cash at the end of the year

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1-)Please refer to the following information for PeartreeCompany: â¢ Common stock, $1.00 par, 100,000 issued, 95,000outstanding â¢ Paid-in capital in excess of par: $2,150,000 â¢Retained earnings: $910,000 â¢ Treasury stock: 5,000 sharespurchased at $20 per share If Peartree resold 1,000 shares oftreasury stock for $24 per share, what journal entry would berequired?

A) Debit Cash $24,000 and credit Treasury stock $24,000.

B) Debit Treasury stock $24,000 and credit Cash $24,000.

C) Debit Treasury stock $20,000, debit Paid-in capital $2,000and credit Cash $24,000.

D) Debit Cash $24,000, credit Treasury stock $20,000 and creditPaid-in capital $4,000.

2-)Which of the following is a common reason for companies toretire preferred stock?

A) To stop paying out dividends to preferred shareholders

B) To increase stockholders' equity

C) To reward the preferred shareholders

D) To make a profit on the retirement of preferred stock

3-)At January 1, 2014, Foxmore Company had 80,000 shares ofcommon stock outstanding and no preferred stock. During the year,they issued 40,000 additional shares of common stock. At December31, 2014, Foxmore had 120,000 shares of common stock outstanding,and no preferred stock. In addition, Foxmore reported the followingresults for the year 2014: Sales revenues from regular businessoperations $3,000,000 Cost of goods sold 900,000 Operating expensesfrom their regular business operations 600,000 Gain on disposal ofseveral items of property, plant & equipment 15,000 Income taxexpense on continuing operations 330,000 Loss on the termination ofa discontinued business segment, net of tax 120,000 Losses ondamage caused by earthquake, net of tax 280,000 At December 31,2014, how much is the earnings per share for income (loss) fromcontinuing operations? (Please round all calculations to thenearest cent.)

A) $(1.20)

B) $10.65 C)

$7.85

D) $11.85

4-)) A corporation has net income of $365,000 for the currentyear. It paid its required preferred dividend of $17,500 and had noother stock transactions during the year. The average number ofcommon shares outstanding during the year was 69,500. What is theearnings per share?

A) $1.00

B) $4.37

C) $5.84

D) $5.00

5-)Qtopia Company uses the direct method to prepare itsstatement of cash flows. It has reported sales revenues of $100,000on its income statement for the year 2012. If the balance inaccounts receivable has gone up by $4,000 during the year, then$4,000 will have to be added to $100,000 to calculate collectionsfrom customers. True or false

6-)Qtopia Company uses the direct method to prepare itsstatement of cash flows. It has reported operating expenses of$21,000 on its income statement for the year 2012. If the balancein accrued liabilities has gone up by $1,000 during the year, then$1,000 will have to be added to $21,000 as part of the process tocalculate payments to suppliers for operating expenses. true orfalse.

7-Please refer to the following information for Petra SalesCompany: â¢ Common stock, $1.00 par, 200,000 issued, 180,000outstanding â¢ Paid-in capital in excess of par: $1,600,000 â¢Retained earnings: $2,440,000 â¢ Treasury stock: 20,000 sharespurchased at $12 per share If Petra Sales sells 10,000 shares oftreasury stock at $14 per share, the company will record a gain onthe sale of treasury stock of $20,000. True or false

8- Public companies are required to publish financialstatements, but privately held companies are generally not requiredto do so.true or false

ADM 1340 Chapter Notes - Chapter 5: Trial Balance, Profit Margin, The Royal And Ancient Golf Club Of St Andrews

ADM 1340 Full Course Notes

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