20) 20) Analysts look for red flags in financial statements that may signal financial trouble. Which of the following is a red flag that suggests that a company may be in trouble? A) a decline in days' sales in inventory B) a decrease in days' sales in receivables from year to year C) a reduction in the debt ratio D) net cash provided by operating activities is consistently lower than net income 21) McCoy Corporation provides plumbing services. Transactions during the first year of operations are provided below. b) Received $12,000 cash and issued common stock to Sharon McCoy. Paid $1,900 cash for equipment to be used for plumbing repairs. Borrowed $10,000 from a local bank and deposited the money in the checking account. Paid $400 rent for the year. Purchased $500 of office supplies by cash. Completed a plumbing repair project for a local lawyer and received $3,200 cash. 21) Calculate the amount of total liabilities at the end of the first year. A) $10,000 B) $12,000 C) $20,100 D) $3,200 22) Dynamic Production Services started the year with total assets of $120,000 and total liabilities of $55,000. The revenues and the expenses for the year amounted to $100,000 and $80,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $50,000. Calculate Dynamic's net income for the year. A) $20,000 B) $100,000 C) $80,000 D) $120,000 23) Dynamic Services, Inc. purchased computers that are to be used in its consulting services. Based on the matching principle, the related account that should appear on the income statement for the year ended December 31, 2018 is A) Depreciation Expense - Equipment B) Service Revenue C) Accumulated Depreciation - Equipment D) Equipment Expense 24) 24) An internal document that helps summarize data for the preparation of financial statements is called a A) journal B) ledger C) worksheet D) chart of accounts 25) 25) If a company is using accrual basis accounting, when should it record revenue? A) when cash is received, even though services may be performed at a later date B) when services are performed, even though cash may be received at a later date C) before services are performed D) when cash is received, 30 days after the completion of the services