Question 1

Bluestar University has a fiscal year that ends on June 30.The 2019 summer session of the university runs for 60 days from June 11 through August 9.Total tuition paid by students for the summer session amounted to $240,000.How much revenue should be reflected in the fiscal year ended June 30, 2019?

Accepted Answer

The revenue should be recognized proportionally for the period within the fiscal year. From June 11 to June 30, there are 20 days, which is one-third of the 60-day session. Therefore, one-third of $240,000 is $80,000.

Question 2

Selling, general, and administrative expenses were $80,000; net sales were $390,000; interest expense was $16,000; research and development expenses were $34,000; net cash provided by operating activities was $42,000; income tax expense was $10,000; cost of goods sold was $220,000. Gross profit for the period was:

Accepted Answer

Gross profit is calculated as net sales minus cost of goods sold. Therefore, $390,000 (net sales) - $220,000 (cost of goods sold) = $170,000.

Question 3

Net income was $40,000; accounts receivable decreased by $10,000; inventory increased by $3,000; proceeds from the issuance of long-term debt were $22,500; equipment purchases were $75,000; depreciation expense was $16,000.The net cash provided (used)by operating activities for the period was:

Accepted Answer

The answer of Net income was $40,000; accounts receivable decreased...

Question 4

Cash collected from customers during the year ended December 31, 2019 amounted to $314,000, and accounts receivable decreased by $42,000 during the year.How much were sales on account for the year ended December 31, 2019? (Assume that no cash sales were made during the year and that all sales on account are collectible.)

Accepted Answer

The answer of Cash collected from customers during the year...

Question 5

The net book value of buildings increased by $170,000 during the year.No buildings were sold during the year, and depreciation expense for the year was $55,000.How much cash was paid to purchase buildings during the year?

Accepted Answer

The increase in net book value of $170,000 plus the depreciation expense of $55,000 indicates that $225,000 was spent on purchasing buildings.

Question 6

Net sales for the year were $325,000 and cost of goods sold was $240,500 for the company's existing products.A new product is presently under development and has an expected selling price of $40 per unit in order to remain competitive with similar products in the marketplace. The dollar amount of gross profit and the gross profit ratio for the year were:

Accepted Answer

Gross profit is calculated as net sales minus cost of goods sold, which is $325,000 - $240,500 = $84,500. The gross profit ratio is gross profit divided by net sales, which is $84,500 / $325,000 = 0.26 or 26%.

Question 7

The term "earned" in revenue recognition refers to which of the following?

Accepted Answer

The term "earned" in revenue recognition means that the entity has completed, or substantially completed, the activities it must perform to be entitled to the revenue benefits.

Question 8

Which of the following is not a principal category of "Other operating expenses" frequently reported on the income statement?

Accepted Answer

Cost of goods sold is typically classified separately from operating expenses on the income statement, as it directly relates to the production of goods sold by a company.

Question 9

Selling, general, and administrative expenses were $80,000; net sales were $390,000; interest expense was $16,000; research and development expenses were $34,000; net cash provided by operating activities was $42,000; income tax expense was $10,000; cost of goods sold was $220,000. Operating income for the period was:

Accepted Answer

Operating income is calculated as net sales minus the sum of cost of goods sold, selling, general, and administrative expenses, and research and development expenses. Thus, $390,000 - ($220,000 + $80,000 + $34,000) = $56,000.

Question 10

Which of the following captions would be not be reported on a single step income statement?

Accepted Answer

A single-step income statement does not report "Income from operations" as it does not separate operating and non-operating activities. It simply lists all revenues and gains together and all expenses and losses together to calculate net income.

Question 11

Selling, general, and administrative expenses were $80,000; net sales were $390,000; interest expense was $16,000; research and development expenses were $34,000; net cash provided by operating activities was $42,000; income tax expense was $10,000; cost of goods sold was $220,000. Net income for the period was:

Accepted Answer

The answer of Selling, general, and administrative expenses were $80,000;...

Question 12

Sparkle Cleaners, Inc., had net income of $258,025 for its fiscal year ended September 30, 2020.During the year, the company had outstanding 12,000 shares of 8%, $50 par value preferred stock, and 135,500 shares of common stock.Calculate the basic earnings per share of common stock for the 2020 fiscal year.

Accepted Answer

The answer of Sparkle Cleaners, Inc., had net income of...

Question 13

Net sales for the year were $325,000 and cost of goods sold was $240,500 for the company's existing products.A new product is presently under development and has an expected selling price of $40 per unit in order to remain competitive with similar products in the marketplace. What is the maximum cost per unit that can be incurred to manufacture the new product such that the product can be priced at $40 per unit and will not result in a reduction to the company's gross profit ratio?

Accepted Answer

The gross profit ratio is calculated as (Net Sales - Cost of Goods Sold) / Net Sales. For the existing products, this is ($325,000 - $240,500) / $325,000 = 0.26 or 26%. To maintain this ratio for the new product, the cost per unit must be such that the gross profit ratio remains 26%. Therefore, the cost per unit should be $40 - ($40 * 0.26) = $29.60.

Question 14

Norman's Cabinet, Inc., had net income of $213,400 for its fiscal year ended October 31, 2020.During the year, the company had outstanding 26,500 shares of 9%, $60 par value preferred stock, and 37,000 shares of common stock.Calculate the basic earnings per share of common stock for the 2020 fiscal year.

Accepted Answer

The answer of Norman's Cabinet, Inc., had net income of...

Question 15

Income tax expense for the year was $372,000.Income taxes payable decreased by $34,000 during the year, resulting in an ending balance of $71,000.How much cash was paid for income taxes during the year?

Accepted Answer

The cash paid for income taxes is calculated by adjusting the income tax expense for the change in income taxes payable. Since income taxes payable decreased by $34,000, it means that more cash was paid than the expense recorded. Therefore, cash paid = Income tax expense + Decrease in income taxes payable = $372,000 + $34,000 = $406,000.

Question 16

Sales on account (all are collectible)amounted to $560,000 during 2019.Accounts receivable were $112,000 on January 1, 2019 and $98,000 on December 31, 2019.How much cash was collected from customers during the year ended December 31, 2019?

Accepted Answer

To find the cash collected, use the formula: Beginning Accounts Receivable + Sales on Account - Ending Accounts Receivable = Cash Collected. So, $112,000 + $560,000 - $98,000 = $574,000.

Question 17

Cash payments for income taxes during the year ended December 31, 2019 were $172,000.Income taxes payable decreased from $61,000 on January 1, 2019 to $44,000 on December 31, 2019.How much was income tax expense for the year ended December 31, 2019?

Accepted Answer

The income tax expense can be calculated by adjusting the cash payments for the change in income taxes payable: $172,000 (cash payments) - ($61,000 - $44,000) (decrease in payable) = $155,000.

Question 18

Which of the following statements is true regarding the reporting of discontinued operations?

Accepted Answer

Discontinued operations are reported separately, net of taxes, to exclude their effects from continuing operations, providing a clearer view of ongoing business performance.

Question 19

Net sales for the year were $300,000 and cost of goods sold was $174,000 for the company's existing products.A new product is presently under development and has an expected selling price of not more than $55 per unit in order to remain competitive with similar products in the marketplace.
Required:
(a.)Calculate gross profit and the gross profit ratio for the year.
(b.)What is the maximum cost per unit that can be incurred to manufacture the new product so that the product can be priced competitively and will not result in a reduction to the company's gross profit ratio?

Accepted Answer

The answer of Net sales for the year were $300,000...

Question 20

Net income was $240,000 for the year.Throughout the year the company had outstanding 12,000 shares of 6%, $50 par value preferred stock and 75,000 shares of common stock.Basic earnings per share of common stock for the year were:

Accepted Answer

The answer of Net income was $240,000 for the year.Throughout...

Quiz 9: The Income Statement and the Statement of Cash Flows