Preparation of Balance sheet and Income Statement and computation of ratios.
1. Unearned rent revenue would be listed under which of the following categories on a balance sheet?
a. current assets
b. long-term investments
c. current liabilities
d. stockholders' equity
e. Unearned rent revenue would not appear on the balance sheet.
2. Expense should be included in the income statement in the period in which (hint: the matching principle applies here)
a. it is paid.
b. the related revenue is collected.
c. the related revenue is subject to tax.
d. the related revenue is earned.
e. it is deductible for tax purposes.
3. A firm sells inventory for $100 that it acquired for $60. The customer pays $25 at the time of the sale and promises to pay the remaining $75 in the following month. The firm should recognize
a. $100 of revenue and $60 of expense in the following month when the customer's payment is complete.
b. $25 of revenue and $60 of expense at the time of the sale and another $75 of revenue when the rest of the sale price is collected.
c. $25 of revenue and $15 of expense at the time of the sale and another $75 of revenue and $45 of expense when the rest of the sale price is collected.
d. $100 of revenue and $60 of expense at the time of the sale.
e. None of the above.
4. A firm performed services for a client in September for $100. It collected $70 in September and $30 in October. Based on this information, for the month of October the firm should recognize
a. no revenue.
b. revenue of $30.
c. revenue of $100.
d. None of the above.
5. Basic earnings per share is computed as
a. net income from operations divided by the average number of shares outstanding during the period.
b. net income before the expenses of interest and taxes divided by the average number of shares outstanding during the period.
c. net income divided by the average number of shares outstanding during the period.
d. net income divided by the number of shares outstanding on the last day of the period.
e. dividends paid on each share of common stock during the period.
6. The following are the year-end balances of Salter Corporation for 2006 and 2007:
|
|
31-Dec-07
|
31Dec06
|
|
Cash
|
$ 65,000
|
$ 45,000
|
|
Accounts Receivable
|
80,000
|
50,000
|
|
Inventory
|
55,000
|
25,000
|
|
Property, Plant, and Equip
|
500,000
|
400,000
|
|
Total assets
|
$700,000
|
$520,000
|
|
|
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|
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|
|
Accounts Payable
|
75,000
|
60,000
|
|
Bonds Payable (due in 2010)
|
100,000
|
100,000
|
|
Capital Stock
|
300,000
|
200,000
|
|
Retained Earnings
|
225,000
|
160,000
|
|
Total liabilities & Equity
|
$700,000
|
$520,000
|
|
|
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|
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Required: If income for 2007 was $150,000, provide the following information as of December 31, 2007: (Don't forget the articulation of statements discussed during Week 2 and 3- including retained earnings).
a. Dividends declared (2007 only) = $__________
b. Current ratio (2007 only) = ___________
c. Debt-to-equity ratio (2007 only) = __________
d. Debt ratio (2007 only) = __________
7. The accounts of the Capitan Company are shown below:
Capitan Company
List of Accounts
December 31, 2007
|
Accounts Payable
|
$20,000
|
|
Accounts Receivable
|
18,000
|
|
Accumulated Depreciation
|
11,000
|
|
Capital Stock
|
75,000
|
|
Cash
|
85,000
|
|
Cost of Goods Sold
|
12,000
|
|
Equipment and Buildings
|
81,000
|
|
Inventory
|
15,000
|
|
Long-Term Investment
|
30,000
|
|
Land
|
27,000
|
|
Marketable Securities
|
3,000
|
|
Mort-gage Payable
|
89,000
|
|
Patents
|
4,000
|
|
Prepaid Rent
|
6,000
|
|
Rent Expense
|
24,000
|
|
Retained Earnings
|
?
|
|
Sales
|
49,000
|
|
Salary Expense
|
19,000
|
|
Supplies
|
6,000
|
|
Taxes Payable
|
11,000
|
|
Unearned Revenue
|
19,0
|
Required:
Prepare in good form a classified balance sheet at December 31, 2007, for the Capitan Company. Assume that no dividends were declared during 2007.
8. The following information is available for the Koufax Company for the year ending Dec. 31, 2007:
|
Sales
|
400,000
|
|
Depreciation expense
|
50,000
|
|
Insurance expense
|
10,000
|
|
Salaries expense
|
60,000
|
|
Delivery expense
|
2,000
|
|
Cost of goods sold
|
180,000
|
|
Interest expense
|
12,000
|
|
Rental income
|
4,000
|
|
Income tax rate
|
30%
|
|
Beginning Retained Earnings
|
50,000
|
|
Dividends
|
25,000
|
Required:
Prepare two income statements and the Retained Earnings Statement. Use the single-step format and multiple-step income formats.