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Exam 5: Communicating and Interpreting Accounting Information

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Question 51

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Examples of nonoperating items that would appear on an income statement are:

A) Interest income, sales salaries, gain on sale of land.
B) Income taxes, interest expense, loss on sale of investments.
C) Interest expense, gain on sale of equipment, loss on sale of investments.
D) Depreciation expense, interest income, interest expense.

E) B) and C)
F) None of the above

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Question 52

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Which of the following transactions will decrease both the return on assets ratio and the asset turnover ratio?

A) Purchasing land by signing a note payable.
B) Accruing interest expense at year-end.
C) Accruing interest revenue at year-end.
D) Collecting cash from an account receivable.

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

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Question 53

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Which of the following would not be included within the operating activities section of a cash flow statement?

Which of the following tasks does the Financial Accounting Standards Board (FASB) perform?

Denmark Inc. is preparing a statement of stockholders' equity for 2014. On January 1, 2014, Denmark started the year with a $100,000 credit balance in its retained earnings account. During 2014, the company earned net income of $70,000 and declared dividends of $10,000. Also, the company received cash of $15,000 as an additional investment by its owners. What is the balance in retained earnings on December 31, 2014?

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 paid for research and development costs incurred to develop a patent. Net income_____ Property, plant, and equipment_____ Stockholders' equity_____ Net profit margin ratio_____ Transaction 2: Inventory was purchased on account. Net income_____ Current assets_____ Current liabilities_____ Return on assets ratio_____

The Willie Company has provided the following information: Operating expenses were $345,000; Income from operations was $215,000; Net sales were $1,100,000; Interest expense was $71,000; Discontinued operations loss was $87,000; Income tax expense was $58,000. What was Willie's gross profit?

Brimmel Corp. has provided the following information: Sales were $780,000; Cost of goods sold was $429,000; Net income was $195,000. What was Brimmel's gross profit percentage?

Which of the following would not be reported in the operating activities section of the statement of cash flows, which has been prepared using the indirect method?

At the beginning of 2014, Jeffrey Company disposed of a segment of its business and incurred a pre-tax loss of $40,000 on the disposal, which resulted in an after-tax loss on disposal of $32,000. In the same year, a flood caused $15,000 of damages to the building. The flood damage qualified as an extraordinary item. The resulting extraordinary loss net of tax was $12,000. Income from continuing operations before taxes was $100,000 for 2014 and a 20% tax rate applied to all of the items above. Prepare a partial income statement starting with income from continuing operations before taxes for the year ending 2014 and concluding with net income.

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 net noncurrent assets?

Ridgetop Corporation reported the following amounts on its balance sheet at December 31, 2014: $\begin{array} { | l | r | } \hline \text { Total current assets } & \$ 1,800,000 \\\hline \text { Total long-term assets } & 900,000 \\\hline \text { Total current liabilities } & 1,300,000 \\\hline \text { Total long-term liabilities } & 500,000 \\\hline \text { Total stockholders' equity } & 900,000 \\\hline \text { Net income } & 100,000 \\\hline\end{array}$ On January 1, 2014, total assets were $2,000,000, total liabilities were $1,200,000 and total stockholders' equity was $800,000. Calculate Ridgetop's return on assets.

The Financial Accounting Standards Board (FASB) oversees the work of the Public Company Accounting Oversight Board (PCAOB).

Which of the following is true about gross profit (gross margin) ?

The Callie Company has provided the following information: Operating expenses were $231,000; Cost of goods sold was $376,000; Net sales were $940,000; Interest expense was $32,000; Gain on sale of a building was $76,000; Income tax expense was $151,000. What was Callie's gross profit?

The Callie Company has provided the following information: Operating expenses were $231,000; Cost of goods sold was $376,000; Net sales were $940,000; Interest expense was $32,000; Gain on sale of a building was $76,000; Income tax expense was $151,000. What was Callie's income from operations?

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

Which of the following is an objective of the external audit of a company's financial statements?

Stockholders' equity, also called shareholders' equity, includes which of the following two accounts?

The return on assets ratio is affected by both the net profit margin ratio and the asset turnover ratio.