Question 1

Advertising costs may be accrued or deferred to provide an appropriate expense in each period for

Accepted Answer

The answer of Advertising costs may be accrued or deferred...

Question 2

For interim financial reporting, an extraordinary gain occurring in the second quarter should be

Accepted Answer

Extraordinary gains and losses are recognized in the period in which they occur, regardless of whether it is an interim or annual financial report. Therefore, the extraordinary gain should be recognized in the second quarter.

Question 3

Use the following information for questions 64 through 69.
The following data are provided:  Additional information:
Depreciation included in cost of goods sold and operating expenses is $610,000. On May 1, 2015, 30,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2015.
-The inventory turnover for 2015 is

Accepted Answer

The answer of Use the following information for questions 64...

Question 4

Use the following information for questions 64 through 69.
The following data are provided:  Additional information:
Depreciation included in cost of goods sold and operating expenses is $610,000. On May 1, 2015, 30,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2015.
-The book value per share of common stock at 12/31/15 is

Accepted Answer

The book value per share is calculated by dividing the total equity available to common shareholders by the number of outstanding shares. Here, 3,900 is divided by 120, which represents the total equity and the number of shares, respectively.

Question 5

The following information pertains to Nixon Corp. and its divisions for the year ended December 31, 2015. $\begin{array}{l}\text { Sales to unaffiliated customers }&\$3,000,000\
\text { Intersegment sales of products similar to those sold to }\
\text { unaffiliated customers } &900,000\
\text { Interest earned on loans to other operating segments } &60,000
\end{array}$ Nixon and all of its divisions are engaged solely in manufacturing operations. Nixon has a reportable segment if that segment's revenue exceeds

Accepted Answer

The answer of The following information pertains to Nixon Corp....

Question 6

Unruh Corp. and its divisions are engaged solely in manufacturing operations. The following data (consistent with prior years' data) pertain to the industries in which operations were conducted for the year ended December 31, 2015.  In its segment information for 2015, how many reportable segments does Unruh have?
A) Three
B) Four
C) Five
D) Six

Accepted Answer

The answer of Unruh Corp. and its divisions are engaged...

Question 7

Use the following information for questions 64 through 69.
The following data are provided:  Additional information:
Depreciation included in cost of goods sold and operating expenses is $610,000. On May 1, 2015, 30,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2015.
-The return on common stock equity for 2015 is

Accepted Answer

The answer of Use the following information for questions 64...

Question 8

Fina Corp. had the following transactions during the quarter ended March 31, 2015: $\begin{array}{l}
\text { Loss from hurricane damage } & \$ 420,000\
\text { Payment of fire insurance premium for calendar year } 2015&700,000
\end{array}$ What amount should be included in Fina's income statement for the quarter endedMarch 31, 2015?

Accepted Answer

The answer of Fina Corp. had the following transactions during...

Question 9

Use the following information for questions 64 through 69.
The following data are provided:  Additional information:
Depreciation included in cost of goods sold and operating expenses is $610,000. On May 1, 2015, 30,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2015.
-At December 31, 2015, the acid-test ratio was

Accepted Answer

The acid-test ratio is calculated by dividing quick assets (cash, marketable securities, and receivables) by current liabilities. Choice A correctly represents this calculation with the given numbers.

Question 10

Use the following information for questions 64 through 69.
The following data are provided:  Additional information:
Depreciation included in cost of goods sold and operating expenses is $610,000. On May 1, 2015, 30,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2015.
-The accounts receivable turnover for 2015 is

Accepted Answer

The accounts receivable turnover ratio is calculated by dividing the net credit sales by the average accounts receivable. Choice C correctly represents this calculation with hypothetical numbers, assuming 6,400 represents net credit sales and 700 represents average accounts receivable.

Question 11

Farr, Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. Farr should report segment financial information for each division meeting which of the following criteria?

Accepted Answer

Farr, Inc. should report segment financial information for each division whose revenue is 10% or more of combined revenue of all the company segments. This is because revenue is a better indicator of segment size than profit or loss, and it reflects the importance of the segment to the overall company performance.

Question 12

Use the following information for questions 64 through 69.
The following data are provided:  Additional information:
Depreciation included in cost of goods sold and operating expenses is $610,000. On May 1, 2015, 30,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2015.
-The profit margin on sales for 2015 is

Accepted Answer

The profit margin on sales for 2015 can be calculated as follows:
Net income = Gross profit - Operating expenses - Depreciation expense
Net income = $750,000 - $2,540,000 - $610,000
Net income = -$400,000 (Note: Negative net income means a loss)
Sales = Gross sales - Sales returns and allowances
Sales = $6,400,000 - $200,000
Sales = $6,200,000
Profit margin on sales = (Net income ÷ Sales) × 100%
Profit margin on sales = (-$400,000 ÷ $6,200,000) × 100%
Profit margin on sales = -6.45%
Therefore, the closest option to the calculated profit margin is B) 750 ÷ 6,400.

Question 13

Use the following information for questions 60 through 63.
Information for Ramirez Corp. is given below:  Additional information:
There are no preferred dividends in arrears, the balances in the Accounts Receivable and Inventory accounts are unchanged from January 1, 2015, and there were no changes in the Bonds Payable, Preferred Stock, or Common Stock accounts during 2015. Assume that preferred dividends for the current year have not been declared.
-At December 31, 2015, the book value per share of common stock was

Accepted Answer

Book value per share of common stock = (Total stockholders' equity – Preferred stock) ÷ Common shares outstanding
Since there were no changes in the Preferred Stock account during the year, the Preferred Stock balance is the same as on January 1, 2015, which is $1,500,000. Therefore, the total stockholders’ equity is:
$11,200,000 (common stock) + $7,500,000 (retained earnings) + $1,500,000 (preferred stock) = $20,200,000
The common shares outstanding are:
$7,040,000 (common stock account balance) ÷ 80,000 (par value per share) = 88, 000 shares
Book value per share of common stock = ($20,200,000 – $1,500,000) ÷ 88,000 = $197 ÷ 1, = $78.20.

Question 14

Presented below is information related to Tolbert Company. $\begin{array}{lr}\text { Current Assets }\
\text { Cash } & \$ 4,000 \
\text { Short-term investments } & 75,000 \
\text { Accounts receivable } & 61,000 \
\text { Inventories } & 110,000 \
\text { Prepaid expenses } & 30,000\
\text { Total current assets }&\$280,000
\end{array}$ Total current liabilities are $100,000. What is the acid-test ratio?

Accepted Answer

The acid-test ratio is calculated as (Cash + Short-term investments + Accounts receivable) / Current liabilities = ($4,000 + $75,000 + $61,000) / $100,000 = $140,000 / $100,000 = 1.4 to 1.

Question 15

Use the following information for questions 60 through 63.
Information for Ramirez Corp. is given below:  Additional information:
There are no preferred dividends in arrears, the balances in the Accounts Receivable and Inventory accounts are unchanged from January 1, 2015, and there were no changes in the Bonds Payable, Preferred Stock, or Common Stock accounts during 2015. Assume that preferred dividends for the current year have not been declared.
-The number of times interest was earned during 2015 was

Accepted Answer

To calculate the number of times interest was earned, we need to use the formula:
Interest coverage ratio = (Net income + Interest expense + Income tax expense) ÷ Interest expense

From the given information, we are not provided with the values for net income, income tax expense, or interest expense, however, we are given the value of Earnings Before Interest and Taxes (EBIT) which is $1,124. Therefore, we can use this value to calculate interest coverage ratio as follows:

Interest coverage ratio = ($1,124 + $0 + $0) ÷ $125
Interest coverage ratio = $1,124 ÷ $125
Interest coverage ratio = 8.99 times or rounded to 9 times.

Therefore, the number of times interest was earned during 2015 was 9, and the best choice is C.

Question 16

Perez Company's net accounts receivable were $800,000 at December 31, 2014 and $880,000 at December 31, 2015. Net cash sales for 2015 were $520,000. The accounts receivable turnover for 2015 was 8.0. What were Perez's total net sales for 2015?

Accepted Answer

The answer of Perez Company's net accounts receivable were $800,000...

Question 17

Mayo Corp. has estimated that total depreciation expense for the year ending December 31, 2015 will amount to $450,000, and that 2015 year-end bonuses to employees will total $900,000. In Mayo's interim income statement for the six months ended June 30, 2015, what is the total amount of expense relating to these two items that should be reported?

Accepted Answer

For interim financial reporting, companies should estimate the annual expenses and then allocate them evenly across the reporting periods. Therefore, for the six months ended June 30, 2015, Mayo Corp. should report half of the estimated annual depreciation expense ($450,000 / 2 = $225,000) and half of the estimated annual bonuses ($900,000 / 2 = $450,000). The total expense for these two items for the six-month period is $225,000 + $450,000 = $675,000.

Question 18

During 2015, Quirk, Incorporated purchased $3,500,000 of inventory. The cost of goods sold for 2015 was $3,600,000 and the ending inventory at December 31, 2015, was $400,000. What was the inventory turnover for 2015?

Accepted Answer

The answer of During 2015, Quirk, Incorporated purchased $3,500,000 of...

Question 19

Use the following information for questions 60 through 63.
Information for Ramirez Corp. is given below:  Additional information:
There are no preferred dividends in arrears, the balances in the Accounts Receivable and Inventory accounts are unchanged from January 1, 2015, and there were no changes in the Bonds Payable, Preferred Stock, or Common Stock accounts during 2015. Assume that preferred dividends for the current year have not been declared.
-The rate of return for 2015 based on the year-end common stockholders' equity was

Accepted Answer

The rate of return is calculated by dividing the net income by the year-end common stockholders' equity. Option C correctly represents this calculation with 670 (net income) divided by 2,346 (year-end common stockholders' equity).

Question 20

Which of the following facts concerning plant assets should be included in the summary of significant accounting policies?

Accepted Answer

The answer of Which of the following facts concerning plant...

Quiz 24: Full Disclosure in Financial Reporting