Intermediate Accounting
Part 1
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Compute the times interest earned ratio given the following data:
|
Net income
|
$260,000
|
|
Income from operations
|
485,000
|
|
Interest expense
|
20,000
|
|
Income tax expense
|
58,000
|
A) 14 times
B) 16.9 times
C) 13 times
D) 9.1 times
The following data represent selected information from the comparative income statement and balance sheet for ABC Company for the years ended December 31, 2014 and 2013:
|
2014
|
2013
|
|
Cash
|
$15,000
|
$15,000
|
|
Net accounts receivable
|
30,000
|
25,000
|
|
Inventory
|
43,000
|
40,000
|
|
Prepaid expenses
|
5,000
|
7,000
|
|
Total current assets
|
93,000
|
87,000
|
|
Total noncurrent assets
|
112,000
|
114,000
|
|
Total current liabilities
|
70,000
|
60,000
|
|
Total noncurrent liabilities
|
40,000
|
45,000
|
|
Common stock, no-par*
|
65,000
|
60,000
|
|
Retained earnings
|
30,000
|
36,000
|
|
Net credit sales
|
370,000
|
333,000
|
|
Cost of goods sold
|
150,000
|
160,000
|
|
Gross profit
|
220,000
|
173,000
|
|
Income from operations
|
95,000
|
87,000
|
|
Interest expense
|
8,000
|
8,000
|
|
Net income
|
70,000
|
57,000
|
* 10,000 shares of common stock have been issued and outstanding since the company was established.
2) The debt ratio for ABC Company on December 31, 2014, was:
A) 1.82
B) 0.55
C) 1.87
D) 0.54
3) The accounts receivable turnover for ABC Company for the year ended December 31, 2014, was:
A) 12.33
B) 13.32
C) 12.11
D) 13.45
4) ABC Company's gross profit ratio for the year ended December 31, 2014, was:
A) .59
B) .41
C) .23
D) .11
5) The inventory turnover for ABC Company for the year ended December 31, 2014, was:
A) 3.49
B) 3.61
C) 3.86
D) 4.00
6) The acid-test ratio for ABC Company on December 31, 2014, was:
A) 1.45
B) 0.57
C) 1.26
D) 0.67
7) For the year ending on December 31, 2006, ABC Company's rate of return on net sales was:
A) 0.19
B) 0.21
C) 0.17
D) 0.18
8) The current ratio for ABC Company on December 31, 2014, was:
A) .67
B) 1.26
C) 1.45
D) .57
9) ABC Company's days' sales in receivables for the year ended December 31, 2014, was:
A) 25
B) 33
C) 27
D) 30
Write your answer in the space provided on the sheet of paper.
10) Classify each statement below as an operating activity, investing activity, or a financing activity.
Use "1" for Operating activity
Use "2" for Investing activity
Use "3" for Financing activity
Use "4" for Noncash Investing and Financing activity
a. Sold 10,000 shares of stock for cash.
b. Paid salaries of employees.
c. Paid amount due for income taxes.
d. Paid interest expense.
e. Purchased office equipment for cash.
f. Sold old office equipment and received cash.
g. Received interest income.
h. Paid interest on a bank loan.
i. Paid dividends to stockholders.
Part 2-
Intermediate Accounting
Part 2
1) When preparing the financial statements for the year ended December 31, 2015, the controller of XYZ Inc. discovered that the income tax expense for 2012 was understated by $33,000. The controller has also gathered the following information:
|
Retained earnings at December 31, 2014
|
$447,800
|
|
Cash dividends declared during 2015
|
45,000
|
|
Stock dividends declared during 2015
|
100,000
|
|
Net income for the year ended December 31, 2015
|
166,120
|
Prepare a statement of retained earnings for XYZ Inc. for the year ended December 31, 2015.
2) Intermediate Company gathered the following information on December 31, 2015:
|
Cost of goods sold
|
$510,000
|
|
Cumulative effect of a change in inventory method (credit)
|
25,000
|
|
Extraordinary gain
|
30,000
|
|
Gain on sale of equipment
|
20,000
|
|
Interest expense
|
30,000
|
|
Loss on sale of discontinued operations
|
20,000
|
|
Operating expenses
|
190,000
|
|
Operating income from discontinued operations
|
35,000
|
|
Prior-period adjustment-debit to retained earnings
|
17,000
|
|
Sales revenue
|
992,000
|
|
Treasury stock, common
|
38,000
|
|
Income tax expense (savings):
|
|
Continuing operations
|
62,000
|
|
Discontinued operations:
|
|
Operating income
|
20,000
|
|
Loss on sale
|
-6,000
|
|
Extraordinary gain
|
8,000
|
|
Cumulative effect of change in inventory method
|
10,000
|
Prepare a single-step income statement for Intermediate Company for the year ended December 31, 2015. Ignore EPS calculations.