Questions and Answers of Horngrens Financial And Managerial Accounting

Assume all sales are on credit. During 2025, Liberty’s days’ sales in receivables ratio was (amounts rounded)a. 34 days.b. 30 days.c. 32 days.d. 28 days.
Liberty’s rate of return on common stockholders’ equity can be described asa. weak.b. normal.c. strong.d. average.
The company has 2,500 shares of common stock outstanding. What is Liberty’s earnings per share?a. $1.62b. $1.75c. $2.73 d. 2.63 times
The company has 2,500 shares of common stock outstanding and the market price is $20 per share. What is Liberty’s price/earnings ratio?a. 0.08b. $0.08 c. 12.35 d. 12.35 times
What part of the Liberty’s annual report is written by the company and could present a biased view of financial conditions and results?Data from reporta. Balance Sheetb. Management’s Discussion
Horizontal analysis of Liberty’s balance sheet for 2025 would report Data from balance sheeta. Cash as 9.50% of total assets.b. a 17% increase in Cash and Cash Equivalents.c. a current ratio of
Vertical analysis of Liberty’s balance sheet for 2025 would report Data from balance sheeta. Cash as 9.50% of total assets.b. inventory turnover of 6 times.c. a current ratio of 1.01.d. a 17%
Which statement best describes Liberty’s acid-test ratio for 2025?a. Greater than 1b. Equal to 1c. Less than 1d. None of the above
The three main tools to analyze financial statements are horizontal analysis, vertical analysis, and ratio analysis. Explain each method.
Mary Brown Cookies’ income statement appears as follows (amounts in thousands):Use the following ratio data to complete Mary Brown Cookies’ income statement:a. Inventory turnover is 4.0
Smart Kids’ Tuition Company has the following data:Perform a vertical analysis of Smart Kids’ Tuition Company’s balance sheet for each year. SMART KIDS' TUITION COMPANY Comparative Balance
Data for Fun Travel Company follows:Compute the euro amount of change and the percentage of change in Fun Travel Company’s working capital each year during 2025 and 2024. What do the calculated
The following data (dollar amount in millions) are adapted from the financial statements of Coco Chocolate Company:Prepare Coco Chocolate Company’s condensed balance sheet as of December 31, 2024.
Financial statement data of Junior Sports Shop include the following items:Requirements 1. Compute Junior Sports Shop’s current ratio, debt ratio, and earnings per share. Round all ratios to two
Which of the following benefits of an effective accounting information system provides safeguards for a business’s assets and reduces the likelihood of fraud and errors?a. Flexibilityb. Relevancec.
The outputs of a computerized accounting information system are calleda. reports.b. software.c. processing.d. purchase invoices.
Which of the following is not a special journal?a. Sales journalb. General journalc. Cash receipts journald. Purchases journal
Mountain Day Spa sold merchandise inventory on credit, terms n/30, to Marvin Smith, $400. Cost of goods sold was $250. When using a manual accounting information system, where should Mountain record
Which of the following correctly describes the posting of transactions from the sales journal?a. Individual accounts receivable are posted daily to the general ledger.b. At the end of the month, the
Centex Sound Systems purchased merchandise inventory costing $8,000 from Flower Co. on account. Where should Centex record this transaction, and what account is credited?a. Cash payments journal;
Every transaction recorded in the cash payments journal includes aa. credit to Cash.b. debit to Accounts Receivable.c. debit to Sales Discounts.d. debit to Cash.
When using a manual accounting information system, which of the following transactions would be recorded in the general journal?a. Depreciation of office furnitureb. Cash payment of rentc. Sale of
Which is a disadvantage of an enterprise resource planning (ERP) system?a. Helps companies adjust to changesb. Can replace separate software systemsc. Can reduce operating costsd. Implementation
What are two common accounting software systems used by small businesses?
Use the following abbreviations to indicate the journal in which you would record transactions a through n. J = General journal S = Sales journal CR = Cash receipts journal P = Purchases journal CP =
Use the following sales journal to record the preceding transactions. All credit sales are terms of n/30. Date 2024 Invoice No. Customer Account Debited Sales Journal Post. Ref. Accounts Receivable
Use the following cash receipts journal to record the preceding transactions. Cash Receipts Journal Page 3 Sales Discounts Other Cost of Goods Sold DR Forfeited CR Accounts CR Merchandise Inventory
Use the following purchases journal to record the preceding transactions. Vendor Date Account Credited 2024 Terms Purchases Journal Post. Accounts Merchandise Office Ref. Payable CR Inventory DR
Use the following cash payments journal to record the preceding transactions. Date 2024 Ck. No. Account Debited Cash Payments Journal Other Accounts DR Post. Ref. Accounts Payable DR Merchandise
Journalize the above transactions that should be recorded in the general journal. If a transaction should not be recorded in the general journal, identify the special journal that should be used.
Assume Intervale Railway is considering investing in Pale Co. stock for three months.The investment will represent 5% of the voting stock of Pale Co. How would the investment be classified?a.
Which of the following investments is most likely classified as a held-to-maturity debt investment?a. 80% stock ownership in a subsidiaryb. 100% ownership in voting stock of a supplierc. 10-year
If Intervale Railway invests $100,000 in 5% bonds at face value that the company intends to hold until the bond maturity date, the interest revenue recognized when each semiannual interest payment is
A company invested $45,000 in Yale Co. stock. The investment represented 5% of the voting stock of Yale Co. If the Yale Co. stock investment paid dividends, what account would be credited?a. Equity
If a company owns 25% of the voting stock of Pink Co. and can exercise significant influence, dividends received will bea. credited to Equity Investments––Pink Co.b. credited to Dividend
Best Appliances owns 90% of the voting stock of Wratchet, Inc. Which of the following is true?a. The financial statements of Best would be consolidated into Wratchet.b. Wratchet would be considered
Yale Co. purchased a bond on October 4 of the current year for $45,000 and classified it as available-for-sale. The market value of the investment at year-end is $42,000.What value will be reported
Harvard Co. purchased a bond on December 1 of the current year for $30,000 and classified the investment as trading. The market value of the investment at year-end is$36,000. What value will be
Bendi Corp. purchased 1,000 shares of Kala Corp. for $16 per share. The investment represents 5% ownership, and Bendi does not have significant influence. The fair value at year-end is $15 per share.
Panjab Company reported the following information on its financial statements:What is Panjab’s rate of return on total assets?a.10.0%b.9.5%c.10.5%d. None of the above Total Assets, December 31,
The beginning balance sheet of Text Source Co. included a $700,000 investment in Taylor stock (20% ownership).During the year, Text Source completed the following investment
On January 1, 2024, a business borrowed $18,000 on a five-year, 5% note payable.At December 31, 2024, the business should recorda. interest payable of $900.b. note receivable of $18,000.c. cash
A company sells $180,000 (sales price) of goods and collects sales tax of 8%. Whatcurrent liability does the sale create?a. Sales tax payable of $14,400b. Sales revenue of $194,400c. Unearned revenue
Jade Larson Antiques owes $20,000 on a truck purchased for use in the business. Assume the company makes timely principal payments of $5,000 each year at December 31 plus interest at 8%. Which of the
An employee has year-to-date earnings of $129,800. The employee’s gross pay for the next pay period is $5,000. If the FICA—OASDI is6.2% and the wage base is $132,900, how much FICA—OASDI tax
The employer is responsible for which of the following payroll taxes?a. 6.2% FICA—OASDI taxb. 1.45% FICA—Medicare taxc. Federal and state unemployment taxesd. All of the above
Known liabilities of estimated amounts area. ignored. (Record them when paid.)b. reported on the balance sheet.c. reported on the income statement.d. reported only in the notes to the financial
Wells Electric (WE) owed Estimated Warranty Payable of $1,200 at the end of 2023.During 2024, WE made sales of $120,000 and expects product warranties to cost thecompany 3% of the sales. During 2024,
Vega Company expects to pay a 4% bonus on net income after deducting the bonus.Assume the company reports net income of $130,000 before the calculation of thebonus. The journal entry to record the
Swell Company has a lawsuit pending from a customer claiming damages of$100,000. Swell’s attorney advises that the likelihood the customer will win is remote.GAAP requires at a minimum that this
McDaniel and Associates reported the following amounts on its 2024 income statement:What was McDaniel’s times-interest-earned ratio for 2024?a. 12.10b. 15.52 c. 13.10 d. 14.52 Net income Income
Rios Raft Company had the following liabilities.a. Accounts Payableb. Note Payable due in three yearsc. Salaries Payabled. Note Payable due in six monthse. Sales Tax Payablef. Unearned Revenue due in
Lily Carter works for JDK all year and earns a monthly salary of $12,300. There is no overtime pay. Lily’s income tax withholding rate is 15% of gross pay. In addition to payroll taxes, Lily elects
Consider the following note payable transactions of Creative Video Productions.Journalize the transactions for the company. 2023 Aug. 1 Dec. 31 2024 Aug. 1 Purchased equipment costing $16,000 by
Erin O’Neil Associates reported short-term notes payable and salaries payable as follows:During 2024, O’Neil paid off both current liabilities that were left over from 2023, borrowed cash on
Ricardo’s Mexican Restaurant incurred salaries expense of $62,000 for 2024. The payroll expense includes employer FICA tax, in addition to state unemployment tax and federal unemployment tax. Of
Stream Company had the following partially completed payroll register:Requirements 1. Complete the payroll register. Round to two decimals.2. Journalize Stream Company’s salaries and wages expense
The accounting records of Sculpted Ceramics included the following at January 1, 2024:In the past, Sculpted’s warranty expense has been 9% of sales. During 2024, Sculpted made sales of $113,000 and
McNight Industries completed the following transactions during 2024:Journalize the transactions. Explanations are not required. Round to the nearest dollar. Nov. 1 20 Dec. 31 31 Made sales of
The following financial information was obtained from the year ended 2024 income statements for Cash Automotive and Pennington Automotive:Requirements 1. Compute the times-interest-earned ratio for
The general ledger of Seal-N-Ship at June 30, 2024, the end of the company’s fiscal year, includes the following account balances before payroll and adjusting entries.The additional data needed to
Lenny Worthington is general manager of Countrywide Salons. During 2024, Worthington worked for the company all year at a $13,400 monthly salary. He also earned a year-end bonus equal to 10% of his
The following transactions of Plymouth Pharmacies occurred during 2023 and 2024:Journalize the transactions in Plymouth’s general journal. Explanations are not required. Round to the nearest
The following transactions of Jasmine Reef occurred during 2024:Requirements 1. Journalize required transactions, if any, in Reef ’s general journal. Explanations are not required.2. What is the
The income statement for California Communications follows. Assume California Communications signed a three-month, 9%, $3,000 note on June 1, 2024, and that this was the only note payable for the
The income statement for Vermont Communications follows. Assume Vermont Communications signed a three-month, 3%, $6,000 note on June 1, 2024, and that this was the only note payable for the
Flipco signed a 10-year note payable on January 1, 2024, of $800,000. The note requires annual principal payments each December 31 of $80,000 plus interest at 5%.The entry to record the annual
Daniels’ bonds payable carry a stated interest rate of 5%, and the market rate of interest is 7%. The issue price of the Daniels’ bonds will be ata. par value.b. a premium.c. face value.d. a
A bond that matures in installments at regular intervals is aa. term bond.b. serial bond.c. periodic bond.d. terminal bond.
Alan Smith Antiques issued its 7%, 20-year bonds payable at a price of $846,720(face value is $900,000). The company uses the straight-line amortization method for the bond discount or premium.
Nicholas Smith Fitness Gym has $700,000 of 20-year bonds payable outstanding.These bonds had a discount of $56,000 at issuance, which was 10 years ago. The company uses the straight-line amortization
Vasquez issued a $400,000 face value, 8%, 20-year bond at 95. Which of the following is the correct journal entry to record the retirement of the bond at maturity? Date a. b. C. d. Accounts and
Sassy’s trial balance shows $200,000 face value of bonds with a discount balance of $2,000. The bonds mature in 10 years. How will the bonds be presented on the balance sheet?a. Bonds payable
The debt to equity ratio is calculated asa. Total assets / Total equity.b. Current liabilities / Total equity.c. Total liabilities / Total assets.d. Total liabilities / Total equity.
Mike Gordon wishes to have $80,000 in five years. If he can earn annual interest of 2%, how much must he invest today?a. $42,170b. $72,480c. $76,080d. $88,320
Hicks Corporation issued $500,000 of 5%, 10-year bonds payable at a price of 92.The market interest rate at the date of issuance was 6%, and the bonds pay interest semiannually. The journal entry to
Computing the debt to equity ratio Jackson Corporation has the following amounts as of December 31, 2024.Compute the debt to equity ratio at December 31, 2024. Total assets Total liabilities Total
Consider the following note payable transactions of Caleb Video Productions.Requirements 1. Journalize the transactions for the company.2. Considering the given transactions only, what are Caleb
SB Electronics is considering two plans for raising $4,000,000 to expand operations. Plan A is to issue 9% bonds payable, and plan B is to issue 500,000 shares of common stock. Before any new
CoastalView Magazine issued $600,000 of 15-year, 5% callable bonds payable on July 31, 2024, at 94. On July 31, 2027, CoastalView called the bonds at 101. Assume annual interest
Which characteristic of a corporation is a disadvantage?a. Mutual agencyb. Double taxationc. Limited liabilityd. None are disadvantages.
The two basic sources of stockholders’ equity area. assets and equity.b. preferred and common.c. retained earnings and dividends.d. paid-in capital and retained earnings.
Suppose Value Home and Garden Imports issued 400,000 shares of $0.10 par commonstock at $4 per share. Which journal entry correctly records the issuance of this stock? Date a. Common Stock-$0.10 Par
Suppose Yummy Treats Bakery issues common stock in exchange for a building. Yummy Treats Bakery should record the building ata. the par value of the stock given.b. its book value.c. its market
A company’s own stock that it has issued and repurchased is calleda. outstanding stock.b. dividend stock.c. issued stock.d. treasury stock.
Assume that a company paid $6 per share to purchase 1,100 shares of its $3 par common stock as treasury stock. The purchase of treasury stocka. increased total equity by $3,300.b. decreased total
Winston Corporation has 9,000 shares of 4%, $10 par cumulative preferred stock and 47,000 shares of common stock outstanding. Winston declared no dividends in 2023 and had no dividends in arrears
A small stock dividenda. decreases common stock.b. has no effect on total equity.c. increases Retained Earnings.d. Items a, b, and c are correct.
Which of the following is not included in continuing operations?a. Loss on the sale of equipmentb. Gain on the sale on a segment of a business that has been discontinuedc. Salaries expensed. Interest
Jackson Health Foods has 8,000 shares of $2 par common stock outstanding, which were issued at $15 per share. Jackson also has a deficit balance in Retained Earnings of $86,000. How much is
Dale Corporation has the following data:Dale’s rate of return on common stockholders’ equity isa. 24%b. 50%c. 12%d. 36% Net income Preferred dividends Average common stockholders' equity $ 24,000
If stock is issued for assets other than cash, describe the recording of this transaction.
What is a prior-period adjustment?
Star Home Company has the following classes of stock:Requirements 1. How much preferred stock dividends must Star Home declare each year before common stockholders receive any cash dividends for the
Nelly, Inc. had 320,000 shares of $2 par value common stock issued and outstanding as of December 15, 2024. The company is authorized to issue 1,300,000 common shares. On December 15, 2024, Nelly
HEB Corporation had net income for 2024 of $60,450. HEB had 15,500 shares of common stock outstanding at the beginning of the year and 20,100 shares of common stock outstanding as of December 31,
Consider the following key terms and definitions, and match each key term to the definition: 1. Dividend 2. Common stock 3. Corporation 4. Retained earnings 5. Par value 6. Preferred stock 7. Capital
Stock transactions for Careful Driving School, Inc. follow:Journalize the transactions. Mar. 4 May 22 Sep. 22 Oct. 14 Issued 27,000 shares of $1 par value common stock at $10 per share. Purchased
Bianchi Company reported these figures for 2024 and 2023:Requirements 1. Compute Bianchi Company’s earnings per share for 2024. Assume the company paid the minimum preferred dividend during 2024.
C-Mobile Wireless needed additional capital to expand, so the business incorporated.The charter from the state of Georgia authorizes C-Mobile to issue 120,000 shares of 9%, $150 par value cumulative

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