Question

The following are categories of accounts reported in the financial statements:

A.Current Assets                                                E. Long-Term Liabilities

B.Fixed Assets                                                   F. Stockholders’ Equity

C.Intangible Assets                                            G. Revenue

D.Current Liabilities                                           H. Expense

Indicate where each of the following accounts would be reported (classified) in the financial statement categories noted above (categories may be used more than once or not at all). Identify only one category for each account listed below.

_______Retained Earnings                              ________Accounts Receivable

_______Cash                                                    ________Machinery & Equipment

_______Accounts Payable                              ________Subscription Revenue

_______Wages Expense                                  ________Notes Payable, Long-term

2. i. What is total Stockholders’ Equity based on the following account balances?   _____________

   

          Paid in Capital:

Common Stock	$     750,000
Paid-in-Capital in excess of par	8,225,000
Retained Earnings	22,952,000
Other Comprehensive Income	200,000
Treasury Stock	65,000

ii.____Treasury stock represents

Cash

The cost of company shares repurchased by the company

A reduction of stockholders’ equity

b and c are both correct

a and c are both correct

____3. The time it takes McDonald’s to purchase beef patties, cook and sell burgers, and collect cash from customers is known as the:

a.	Investing cycle
b.	Financing cycle
c.	Inventory cycle
d.	Operating cycle
e.	Accounting cycle

Accy 306 Quiz #3, page 2 of 2

4. The following information has been provided about the restaurant building:              

                        Original Cost              $160,000

                        Residual Value            $    2,000

                        Estimated Life            40 years

                        Depreciation Method = Straight-line

      i. ____The depreciation expense for year 2 equals:

      a. $3,000

      b. $4,000

      c. $3,950

      d. none of the above

    

ii.       T or F: The building is classified as an Intangible Asset because of its long life and it is held for use in the business. (If false, correct the error.)

        

_____5. Which of the following is a current liability?

Prepaid insurance

Retained earnings

Salaries expense

Bonds payable

Unearned rent revenue

_____ 6. The Notes to the financial statements indicate the types of sales included in the receivables accounts along with the uncollectible amounts balance (Allowance for Doubtful Accounts). If gross receivables are $200,000 and the allowance for doubtful accounts is 25,000, the Balance Sheet will indicate a line item for “Receivables, net” = $175,000.

____The valuation method for receivables is called:

Net realizable value

Lower of cost or net realizable value (LCNRV)

Fair value

Historical cost

Net present value

ii.        Which of the above methods is used for inventory? ________

_____7. Bonds are popular source of financing because:

Financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issue of stock.

A company having cash flow problems can postpone payment of interest to bondholders.

Bond interest expense is deductible for tax purposes, while dividends paid on stock are not.

The bondholders can always convert their bonds into stock if they choose.

None of the above is correct.

Answer 1

Answere :-

_Stockholder's Equity______Retained Earnings                              __Current Assets______Accounts Receivable

__Current Assets______Cash                                                    _Fixed Assets_______Machinery & Equipment

__Current liabilities_____Accounts Payable                              ____Revenue____Subscription Revenue

___Expenses____Wages Expense                                  ___Current liabilities____Notes Payable, Long-term

2. i) Total stock holder Equity is $31,862,000

Common Stock+Paid-in-Capital in excess of par+Retained Earnings-Treasury Stock

$750,000+$8,225,000+$22,952,000-$65,000 =$31,862,000.

ii) The cost of company shares repurchased by the company it represent the Treasury Stock

3. The time it takes McDonald’s to purchase beef patties, cook and sell burgers, and collect cash from customers is known as the:Operating cycle

Operating cycle includes Purchses, Production sales and convertion of cash from customers

4.i The depreciation expense for year 2 equals:

Cost-Residual value/ useful Life

=160,000-2,000/40 = $3,950

ii) False:- The building is classified as an Tangible Asset because of its long life and it is held for use in the business.