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Exam 5: Communicating and Interpreting Accounting Information

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Question 41

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Panmar Inc. is preparing a statement of stockholders' equity for 2014. On January 1, 2014, Panmar started the year with a $200,000 credit balance in its retained earnings account. During 2014, the company earned net income of $140,000. Panmar declared dividends of $80,000 and paid $50,000 of those dividends. Also, the company received cash of $100,000 for additional shares of common stock issued and then paid $30,000 to repurchase shares of common stock. What is the balance in retained earnings on December 31, 2014?

A) $260,000.
B) $290,000.
C) $330,000.
D) $390,000.

E) A) and D)
F) None of the above

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Question 42

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The following data were taken from the adjusted trial balance of Kent Corporation. $\begin{array}{c}\text { Kent Corporation } \\\text { Adjusted Trial Balance Data } \\\text { December 31, } 2014\end{array}$ $\begin{array}{|l|r|}\hline \text { Accounts Payable } & \$ 12,000 \\\hline \text { Accounts Receivable } & 13,000 \\\hline \text { Accumulated Depreciation-Building } & 6,000 \\\hline \text { Accumulated Depreciation-Furniture \& Fixtures } & 9,000 \\\hline \text { Building } & 60,000 \\\hline \text { Common Stock } & 40,000 \\\hline \text { Cash } & 24,000 \\\hline \text { Copyrights } & 22,000 \\\hline \text { Dividends Declared } & 12,000 \\\hline \text { Furniture \& Fixtures } & 15,000 \\\hline \text { Land } & 25,000 \\\hline \text { Note Payable }(10 \% \text {, due in 5 years }) & 40,000 \\\hline \text { Office Supplies } & 1,000 \\\hline \text { Prepaid Insurance } & 3,000 \\\hline \text { Retained Earnings (January 1, 2014) } & 23,000 \\\hline \text { Salaries Payable } & 2,000 \\\hline \text { Service Revenue } & 85,000 \\\hline \text { Salaries Expense } & 28,000 \\\hline \text { Utilities Expense } & 2,000 \\\hline \text { Depreciation Expense } & 5,000 \\\hline \text { Insurance Expense } & 2,000 \\\hline \text { Office Supplies Expense } & 1,000 \\\hline \text { Interest Expense } & 4,000\\\hline\end{array}$ Required: Prepare a classified balance sheet in good form at December 31, 2014. (Ignore income taxes).

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*$23,000 (January 1...

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Question 43

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Determine the effect of the following transactions on the identified financial statement components and ratios. Code your answers as follows: A: If the transaction results in an increase in the financial statement component or ratio. B: If the transaction results in a decrease in the financial statement component or ratio. C. If the transaction does not affect the financial statement component or ratio. Transaction 1: A company accrued interest expense at year-end. Net income_____ Assets_____ Stockholders' equity_____ Asset turnover ratio_____ Transaction 2: A company declared and paid dividends to stockholders. Net income_____ Assets_____ Stockholders' equity_____ Return on assets ratio_____

Huron has provided the following year-end balances: Cash, $25,000 Patents, $7,900 Accounts receivable, $9,300 Property, plant, and equipment, $98,700 Prepaid insurance, $3,600 Accumulated depreciation, $10,000 Inventory, $37,000 Trademarks, $12,600 Goodwill, $11,000 How much are Huron's current assets?

Financial analysts utilize a company's financial reports to assist them in making earnings forecasts and earnings per share projections.

Which of the following statements is true?

The Nellie Company has provided the following information: Operating expenses were $115,000; Gross profit was $629,000; Cost of goods sold was $470,000; Interest expense was $17,000; Extraordinary loss was $29,000; Income tax expense was $199,000. What was Nellie's income before taxes?

Information disclosed in a balance sheet about shares of common stock includes the number of shares that are:

Determine the effect of the following transactions on the identified financial statement components and ratios. Code your answers as follows: A: If the transaction results in an increase in the financial statement component or ratio. B: If the transaction results in a decrease in the financial statement component or ratio. C. If the transaction does not affect the financial statement component or ratio. Transaction 1: A company acquired land by signing a long-term note payable. Property, plant, and equipment_____ Asset turnover ratio_____ Net profit margin ratio_____ Return on assets ratio_____ Transaction 2: Cash was used to pay a current liability. Net income_____ Asset turnover ratio_____ Net profit margin ratio_____ Return on assets ratio_____

Marino Company has provided the following information: Net sales, $480,000 Net income, $24,000 Average total assets, $200,000 What is Marino's return on assets ratio?

Which of the following statements correctly describe the effect of accruing interest revenue at year-end?

Which of the following is not true about the audit committee of the board of directors?

Which of the following would not be included on an income statement?

The following income statement was reported for Bauer Inc. for the first year of operations ending December 31, 2014 reported (in thousands of dollars): $\begin{array}{|l|r|r|}\hline \text { Sales revenue } & & \$ 24,500 \\\hline \text { Expenses: } & & \\\hline \text { Cost of Sales } & \$ 14,700 & \\\hline \text { Salaries and Wages } & 3,300 & \\\hline \text { Rent } & 700 \\\hline \text { Utilities } & 500 \\\hline \text { Miscellaneous } & \underline{200} \\\hline \text { Total Expenses } & & \underline{19.400} \\\hline \text { Income before taxes } & & 5,100 \\\hline \text { Income tax expense } & & \underline{1.785} \\\hline \text { Net income } & & \$ .3 .315 \\\hline\end{array}$ Requirements: A. Calculate gross profit percentage. B. Calculate net profit margin. C. Calculate earnings per share if there are 200,000 shares of common stock outstanding.

The primary responsibility for the information in a corporation's financial statements lies with the chief executive officer (CEO) and the chief financial officer (CFO).

Which of the following statements is false?

The summary of significant accounting policies is a required financial statement disclosure.

Which of the following would not be used to calculate income from operations?

The Statement of Comprehensive Income includes items in which order?

On January 1, 2014 Gucci Brothers Inc. had a $500,000 credit balance in retained earnings and $600,000 balance in common stock. During 2014, the company earned net income of $100,000, declared a dividend of $15,000, and issued additional stock for $25,000. What is total stockholders' equity on December 31, 2014?