Review Chpts 10-12

QUESTION 21

On January 1, 2019, Entity B issued $500,000, 8% bonds payable at 103 in order to finance a plant expansion. The bonds mature in 5 years and pay interest annually on December 31. The journal entry to record issuance of the bonds includes:

1. a debit to cash of $515,000
2. a credit to bonds payable of $515,000
3. a debit to discount on bonds payable of $15,000
4. a debit to bond interest expense of $37,000.

QUESTION 22

When a company records depreciation on equipment, the entry will include:

1. a debit to Accumulated depreciation
2. a debit to Depreciation expense
3. a debit to Equipment expense
4. a credit to Equipment

QUESTION 23

Entity L reported net income of $125,000 for the current year and uses the indirect method to report operating activities cash flow.Accounts Receivable increased by $12,000 during the year.Choose the appropriate category on the statement of cash flows to report the increase in Accounts Receivable.

1. Cash Flows From Operating Activities-Add to Net Income
2. Cash Flows From Operating Activities-Deduct from Net Income
3. Cash Flows From Investing Activities
4. Cash Flows From Financing Activities
5. Non-cash

QUESTION 24

In a common size balance sheet, the 100 percent figure is

1. total current assets.
2. total liabilities.
3. total assets.
4. total property, plant and equipment.

2 points

QUESTION 25

Which of the following ratios are indicators of solvency?

1. current ratio
2. profit margin
3. debt-to-total assets ratio
4. return on common stockholders' equity

QUESTION 26

Short-term creditors are usually most interested in assessing

1. profitability.
2. solvency.
3. marketability.
4. liquidity.

QUESTION 27

Entity L reported net income of $125,000 for the current year and uses the indirect method to report operating activities cash flow.During the year, Entity L exchanged its common stock valued at $50,000 for vacant land on which it plans to build car wash. Choose the appropriate category on the statement of cash flows to report this transaction.

1. Cash Flows From Operating Activities-Add to Net Income
2. Cash Flows From Operating Activities-Deduct from Net Income
3. Cash Flows From Investing Activities
4. Cash Flows From Financing Activities
5. Non-cash Investing and Financing Activity

QUESTION 28

Entity L reported net income of $125,000 for the current year and uses the indirect method to report operating activities cash flow.Taxes Payable increased by $5,000 during the year.Choose the appropriate category on the statement of cash flows to report the increase in Taxes Payable.

1. Cash Flows From Operating Activities-Add to Net Income
2. Cash Flows From Operating Activities-Deduct from Net Income
3. Cash Flows From Investing Activities
4. Cash Flows From Financing Activities
5. Non-cash

QUESTION 29

Entity E uses the allowance method for uncollectible accounts. Accounts receivable has a normal balance of $60,000. After adjustment, Allowance for Doubtful Accounts has a normal balance of $5,000. What is the net realizable (cash) value of accounts receivable after adjustment?

1. $65,000
2. $60,000
3. $55,000
4. none of the answers are correct

QUESTION 30

Entity A has the following Income Statement (in millions):

1. Entity A .
2. Income Statement
3. For the Year Ended December 31, 2021
4. Net Sales $160
5. Cost of Goods Sold 100
6. Gross Profit 60
7. Operating Expenses 40
8. Net Income $ 20
9. Using vertical analysis, what percentage is assigned to gross profit?

• 37.5%
• 60%
• 62.5%
• 100%