TIMED ASSIGNMENT

QUESTION 1

1. A typical investment to house excess cash until needed is

	A.	stocks of companies in a related industry.
	B.	stock securities.
	C.	debt securities.
	D.	low-risk, highly liquid securities.

6 points   

QUESTION 2

1. If an investor owns less than 20% of the common stock of another corporation as a long-term investment,

	A.	the equity method of accounting for the investment should be employed.
	B.	it is presumed that the investor has significant influence on the investee.
	C.	no dividends can be expected.
	D.	it is presumed that the investor has relatively little influence on the investee.

6 points   

QUESTION 3

1. Which of the following would not be considered a motive for making a stock investment in another corporation?

	A.	Appreciation in the market value of the stock investment
	B.	An increase in the amount of interest revenue from the stock investment
	C.	Use of the investment to diversify its own operations
	D.	Use of the investment for expanding its own operations

6 points   

QUESTION 4

1. Locke Co. purchased 50, 6% Johnston Company bonds for $50,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the July 1 semiannual interest payment would include a

	A.	debit to Interest Receivable for $1,500.
	B.	credit to Interest Revenue for $1,500.
	C.	credit to Debt Investments for $1,515.
	D.	credit to Interest Revenue for $1,515.

6 points   

QUESTION 5

1. Temper Co. purchased 60, 6% Irick Company bonds for $60,000. Interest is payable semiannually on July 1 and January 1. If 30 of the securities are sold on July 1 for $32,000, the entry would include a credit to Gain on Sale of Debt Investments for

	A.	$2,300.
	B.	$1,400.
	C.	$1,700.
	D.	$2,000.

6 points   

QUESTION 6

1. Laramie industries owns 45% of McCook Company. For the current year, McCook reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which of the following correctly presents the journal entries to record Laramie's equity in McCook's net income and the receipt of dividends from McCook?

	A.	Dec. 31 Revenue from Stock Investments 112,500       Stock Investments     112,500 Dec. 31 Stock Investments 27,000       Cash     27,000
	B.	Dec. 31 Stock Investments 85,500       Revenue from Stock Investments     85,500
	C.	Dec. 31 Stock Investments 112,500       Revenue from Stock Investments     112,500 Dec. 31 Cash 60,000       Stock Investments     60,000
	D.	Dec. 31 Stock Investments 112,500       Revenue from Stock Investments     112,500 Dec. 31 Cash 27,000       Stock Investments     27,000

6 points   

QUESTION 7

1. Jenner Company had the following transactions pertaining to its short-term stock investments.

Jan.	1		Purchased 600 shares of Pork Company stock for $8,400.
June	1		Received cash dividends of $0.60 per share on the Pork Company stock.
Sept.	15		Sold 300 shares of the Pork Company stock for $3,600.
Dec	1		Received cash dividend of $0.75 per share on the Pork Company Stock

Instructions Journalize the transactions (5 points each).

20 points   

QUESTION 8

1. The statement of cash flows reports each of the following except

	A.	the net change in cash.
	B.	cash receipts from operating activities.
	C.	cash payments from investing activities.
	D.	cash sales.

6 points   

QUESTION 9

1. Investing activities include

	A.	repaying money previously borrowed.
	B.	obtaining capital from owners.
	C.	collecting cash on loans made.
	D.	obtaining cash from creditors.

6 points   

QUESTION 10

1. Which one of the following affects cash during a period?

	A.	Declaration of a cash dividend
	B.	Payment of an accounts payable
	C.	Write-off of an uncollectible account receivable
	D.	Recording depreciation expense

6 points   

QUESTION 11

1. In Garland Company, land decreased $140,000 because of a cash sale for $140,000, the equipment account increased $40,000 as a result of a cash purchase, and Bonds Payable increased $130,000 from issuance for cash at face value. The net cash provided by investing activities is

	A.	$100,000.
	B.	$140,000.
	C.	$230,000.
	D.	$110,000.

6 points   

QUESTION 12

1. Carrot Company issued common stock for proceeds of $381,000 during 2012. The company paid dividends of $90,000 and issued a long-term note payable for $95,000 in exchange for equipment during the year. The company also purchased treasury stock that had a cost of $18,000. The financing section of the statement of cash flows will report net cash inflows of

	A.	$489,000.
	B.	$273,000.
	C.	$363,000.
	D.	$183,000.

6 points   

QUESTION 13

1. Plough Company reported net income of $180,000 for the current year. Depreciation recorded on buildings and equipment amounted to $80,000 for the year. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:

End of Year

Beginning of Year

2.

	Cash	$20,000	$15,000
	Accounts receivable	24,000	32,000
	Inventories	50,000	65,000
	Prepaid expenses	9,500	5,000
	Accounts payable	12,000	18,000
	Income taxes payable	1,600	1,200

3. Instructions Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method.

16 points   

QUESTION 14

1. Which one of the following is not a tool in financial statement analysis?

	A.	Circular analysis
	B.	Ratio analysis
	C.	Horizontal analysis
	D.	Vertical analysis

6 points   

QUESTION 15

1. In performing a vertical analysis, the base for cost of goods sold is

	A.	total selling expenses.
	B.	net sales.
	C.	total revenues.
	D.	total expenses.

6 points   

QUESTION 16

1. A liquidity ratio measures the

	A.	income or operating success of an enterprise over a period of time.
	B.	ability of the enterprise to survive over a long period of time.
	C.	number of times interest is earned.
	D.	short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash.

6 points   

QUESTION 17

1. A successful grocery store would probably have

	A.	low volume.
	B.	a low inventory turnover.
	C.	a high inventory turnover.
	D.	zero profit margin.

6 points   

QUESTION 18

1. West Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $75,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on West Company's current ratio?

	A.	The change in the current ratio cannot be determined.
	B.	The ratio decreased.
	C.	The ratio increased.
	D.	The ratio remained unchanged.

6 points   

QUESTION 19

1. Harvey Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year. Net credit sales during the year amounted to $3,000,000. The average collection period of the receivables in terms of days was

	A.	48.7 days.
	B.	365 days.
	C.	30 days.
	D.	274 days.

6 points   

QUESTION 20

1. Assume the following sales data for a company:

	2013	$945,000
	2012	877,500
	2011	650,000

2. If 2011 is the base year, what is the percentage increase in sales from 2011 to 2012?

	A.	135%
	B.	35%
	C.	76%
	D.	24%

6 points   

QUESTION 21

1. Star Corporation had net income of $300,000 and paid dividends to common stockholders of $40,000 in 2012. The weighted average number of shares outstanding in 2012 was 50,000 shares. Star Corporation's common stock is selling for $36 per share on the New York Stock Exchange.   Star Corporation's price-earnings ratio is

	A.	5.2 times.
	B.	6.9 times.
	C.	18 times.
	D.	6 times.