Quiz 3

• Multiple choice (5 pts each) (highlight or clearly mark your answer)

On the ________, cash dividends become a liability of a corporation.

declaration date

date of record

end of the fiscal year

payment date

________ are equity securities in which the investor owns 20% or more, but less than 50%, of the investee's voting stock.

Held-to-maturity investments

Significant interest investments

Controlling interest investments

• Available-for-sale investments

Held-to-maturity investments applies only to debt securities because:

these securities earn periodic interest.

equity securities do not mature on a specific date.

these are long-term investments.

equity securities are held for a very short period.

Equity securities in which the investor owns less than 20% ownership in the voting stock of the investee can be:

significant interest investments.

controlling interest investments.

held-to-maturity investments.

either trading investments or available-for-sale investments (security).

A bond is issued at premium :

when a bond's stated interest rate is equal to the market interest rate.

when a bond's stated interest rate is less than the effective interest rate.

when a bond's stated interest rate is less than the market interest rate.

when a bond's stated interest rate is higher than the market interest rate.

The date on which the principal amount is repaid to the bondholder is known as:

issuing date.

interest date.

maturity date.

installment date.

The following is summary of information presented on the financial statements of a company on December 31, 2015.

Account	2015	2014
Net Sales Revenue	$600,000	$500,000
Cost of Goods Sold	450,000	400,000
Gross Profit	$150,000	$100,000
Selling Expenses	50,000	50,000
Net income before income tax expense	$100,000	$50,000
Income tax expense	35,000	18,000
Net Income	$65,000	$32,000

What would a horizontal analysis report show with respect to net income?

The accounts receivable turnover ratio of a merchandiser is 9.8 times. Calculate the days' sales in receivables for the merchandiser. (Round to the nearest day.)

Zebra Inc. cost of goods sold for the year is $1,900,000 and average merchandise inventory for the year is $129,000. Calculate the inventory turnover ratio of the company.

A $30,000, three-month, 7% note payable was issued on December 1, 2015. What is the journal entry to record the accrued interest on December 31, 2015?

Revival Corporation's annual report is as follows.

	March 31, 2014	March 31, 2015
Net Income	$350,000	$423,500
Preferred Dividends	0	0
Total Stockholders' Equity	$4,200,000	$5,082,000
Stockholders' Equity attributable to Preferred Stock	0	0
Number of Common Shares Outstanding	275,464	192,168

If the current market price is $15 on March 31, 2015, find the price/earnings ratio on March 31, 2015.

The Avatar Company uses the direct method to prepare its statement of cash flows. Refer to the following information reported for the year 2015:

Sales Revenue, $515,000

Accounts Receivable, beginning balance, $92,000

Accounts Receivable, ending balance, $57,000

Accounts Payable, beginning balance, $43,000

Accounts Payable, ending balance, $27,500

In the operating activities section of the statement of cash flows, what amount will be shown for collections from customers?

Trek Company signed a 9%, 10-year note for $150,000. The company paid $1,900 as the installment for the first month. After the first payment, what is the updated principal balance?

Quiz 3 Multiple choice (5 pts each) (highlight or clearly mark your answer) 1) On the ________, cash dividends become a liability of a corporation. a) declaration date b) date of record c) end of the fiscal year d) payment date 2) ________ are equity securities in which the investor owns 20% or more, but less than 50%, of the investee's voting stock. a) Heldtomaturity investments b) Significant interest investments c) Controlling interest investments d) Available-for-sale investments 3) Heldtomaturity investments applies only to debt securities because: a) these securities earn periodic interest. b) equity securities do not mature on a specific date. c) these are longterm investments. d) equity securities are held for a very short period. 4) Equity securities in which the investor owns less than 20% ownership in the voting stock of the investee can be: a) significant interest investments. b) controlling interest investments. c) heldtomaturity investments. d) either trading investments or availableforsale investments (security). 5) A bond is issued at premium : a) when a bond's stated interest rate is equal to the market interest rate. b) when a bond's stated interest rate is less than the effective interest rate. c) when a bond's stated interest rate is less than the market interest rate. d) when a bond's stated interest rate is higher than the market interest rate. 6) The date on which the principal amount is repaid to the bondholder is known as: a) issuing date. b) interest date. c) maturity date. d) installment date. Problems (10 pts each) (please show your work for partial credit) 1) The following is summary of information presented on the financial statements of a company on December 31, 2015. Account Net Sales Revenue Cost of Goods Sold Gross Profit Selling Expenses Net income before income tax expense Income tax expense Net Income 2015 $600,000 450,000 $150,000 50,000 $100,000 35,000 $65,000 2014 $500,000 400,000 $100,000 50,000 $50,000 18,000 $32,000 What would a horizontal analysis report show with respect to net income? 2) The accounts receivable turnover ratio of a merchandiser is 9.8 times. Calculate the days' sales in receivables for the merchandiser. (Round to the nearest day.) 3) Zebra Inc. cost of goods sold for the year is $1,900,000 and average merchandise inventory for the year is $129,000. Calculate the inventory turnover ratio of the company. 4) A $30,000, three-month, 7% note payable was issued on December 1, 2015. What is the journal entry to record the accrued interest on December 31, 2015? 5) Revival Corporation's annual report is as follows. Net Income Preferred Dividends Total Stockholders' Equity Stockholders' Equity attributable to Preferred Stock Number of Common Shares Outstanding March 31, 2014 $350,000 0 $4,200,000 0 275,464 March 31, 2015 $423,500 0 $5,082,000 0 192,168 If the current market price is $15 on March 31, 2015, find the price/earnings ratio on March 31, 2015. 6) The Avatar Company uses the direct method to prepare its statement of cash flows. Refer to the following information reported for the year 2015: Sales Revenue, $515,000 Accounts Receivable, beginning balance, $92,000 Accounts Receivable, ending balance, $57,000 Accounts Payable, beginning balance, $43,000 Accounts Payable, ending balance, $27,500 In the operating activities section of the statement of cash flows, what amount will be shown for collections from customers? 7) Trek Company signed a 9%, 10year note for $150,000. The company paid $1,900 as the installment for the first month. After the first payment, what is the updated principal balance