91. Harding Corporation reports the following information:
Net income $530,000
Depreciation expense 140,000
Increase in accounts receivable 60,000
Harding should report cash provided by operating activities of
a. $330,000.
b. $450,000.
c. $610,000.
d. $730,000.
92. Sauder Corporation reports the following information:
Net income $380,000
Depreciation expense 70,000
Increase in accounts receivable 30,000
Sauder should report cash provided by operating activities of
a. $280,000.
b. $340,000.
c. $420,000.
d. $480,000.
93. Packard Corporation reports the following information:
Net cash provided by operating activities $335,000
Average current liabilities 150,000
Average long-term liabilities 100,000
Dividends declared 60,000
Capital expenditures 110,000
Payments of debt 35,000
Packard’s cash debt coverage is
a. 1.34.
b. 2.23.
c. 3.35.
d. 3.05.
94. Packard Corporation reports the following information:
Net cash provided by operating activities $335,000
Average current liabilities 150,000
Average long-term liabilities 100,000
Dividends paid 60,000
Capital expenditures 110,000
Payments of debt 35,000
Packard’s free cash flow is
a. $130,000.
b. $165,000.
c. $225,000.
d. $275,000.
95. Huge Cart Inc. gives you the following information pertaining to the year 2017.
Net sales $850,000
Cost of goods sold 500,000
Current assets 500,000
Current liabilities 250,000
Average total assets 1,000,000
Total liabilities 550,000
Net income 150,000
The asset turnover ratio of Huge Cart Inc. is
a. 0.50
b. 0.15
c. 0.85
d. 1.18
96. Huge Cart Inc. gives you the following information pertaining to the year 2017.
Net sales $850,000
Cost of goods sold 500,000
Current assets 500,000
Current liabilities 250,000
Average total assets 1,000,000
Total liabilities 550,000
Net income 150,000
The rate of return on assets Huge Cart Inc. is:
a. 85.0%.
b. 30.0%.
c. 17.6%.
d. 15.0%.
MULTIPLE CHOICE—CPA Adapted
97. Stine Corp.'s trial balance reflected the following account balances at December 31, 2017:
Accounts receivable (net) $38,000
Trading securities 12,000
Accumulated depreciation on equipment and furniture 30,000
Cash 32,000
Inventory 6,000
Equipment 50,000
Patent 8,000
Prepaid expenses 4,000
Land held for future business site 36,000
In Stine's December 31, 2017 balance sheet, the current assets total is
a. $180,000.
b. $164,000.
c. $154,000.
d. $146,000.
Use the following information for questions 98 through 100.
The following trial balance of Reese Corp. at December 31, 2017 has been properly adjusted except for the income tax expense adjustment.
Reese Corp.
Trial Balance
December 31, 2017
Dr. Cr.
Cash $ 875,000
Accounts receivable (net) 2,695,000
Inventory 2,085,000
Property, plant, and equipment (net) 7,566,000
Accounts payable and accrued liabilities $ 1,761,000
Income taxes payable 654,000
Deferred income tax liability 85,000
Common stock 2,350,000
Additional paid-in capital 3,680,000
Retained earnings, 1/1/17 3,490,000
Net sales and other revenues 13,560,000
Costs and expenses 11,180,000
Income tax expenses 1,179,000
$25,580,000 $25,580,000
Other financial data for the year ended December 31, 2017:
• Included in accounts receivable is $1,200,000 due from a customer and payable in quarterly installments of $150,000. The last payment is due December 29, 2019.
• The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose in a prior year, of which $20,000 is classified as a current liability.
• During the year, estimated tax payments of $525,000 were charged to income tax expense. The current and future tax rate on all types of income is 30%.
In Reese's December 31, 2017 balance sheet,
98. The current assets total is
a. $6,180,000.
b. $5,655,000.
c. $5,505,000.
d. $5,055,000.
99. The current liabilities total is
a. $1,910,000.
b. $1,975,000.
c. $2,435,000.
d. $2,500,000.
100. The final retained earnings balance is
a. $4,691,000.
b. $4,776,000.
c. $5,216,000.
d. $5,145,000.
101. On January 4, 2017, Kiley Co. leased a building to Dodd Corp. for a ten-year term at an annual rental of $200,000. At inception of the lease, Kiley received $800,000 covering the first two years' rent of $400,000 and a security deposit of $400,000. This deposit will not be returned to Dodd upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $800,000 should be shown as a current and long-term liability in Kiley's December 31, 2017 balance sheet?
Current Liability Long-term Liability
a. $0 $800,000
b. $200,000 $400,000
c. $400,000 $400,000
d. $400,000 $200,000
102. In a statement of cash flows, receipts from sales of property, plant, and equipment and other productive assets should generally be classified as cash inflows from
a. operating activities.
b. financing activities.
c. investing activities.
d. selling activities.
103. In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for
a. operating activities.
b. borrowing activities.
c. lending activities.
d. financing activities.
104. In a statement of cash flows, proceeds from issuing equity instruments should be classified as cash inflows from
a. lending activities.
b. operating activities.
c. investing activities.
d. financing activities.
105. In a statement of cash flows, payments to acquire debt instruments of other entities (other
than cash equivalents) should be classified as cash outflows for
a. operating activities.
b. investing activities.
c. financing activities.
d. lending activities.
106. Which of the following facts concerning fixed assets should be included in the summary of significant accounting policies?
Depreciation Method Composition
a. No Yes
b. Yes Yes
c. Yes No
d. No No
BRIEF EXERCISES
BE. 5-107—Definitions.
Provide clear, concise answers for the following.
1. What are assets?
2. What are liabilities?
3. What is equity?
4. What are current liabilities?
5. Explain what working capital is and how it is computed.
6. What are intangible assets?
7. What are current assets?
BE. 5-108—Terminology.
In the space provided at right, write the word or phrase that is defined or indicated.
1. Obligations expected to be liquidated 1.
through use of current assets.
2. Statement showing financial condition at a 2.
point in time.
3. Events that depend upon future outcomes. 3.
4. Probable future sacrifices of economic 4.
benefits.
5. Resources expected to be converted to 5.
cash in one year or the operating cycle,
whichever is longer.
6. Resources of a durable nature used in 6.
operations.
7. Economic rights or competitive advantages 7.
which lack physical substance.
8. Probable future economic benefits. 8.
9. Residual interest in the net assets of an 9.
entity.
BE. 5-109—Current assets.
Define current assets without using the word "asset."
EXERCISES
Ex. 5-110—Account classification.
ASSETS LIABILITIES AND CAPITAL
a. Current assets f. Current liabilities
b. Investments g. Long-term liabilities
c. Plant and equipment h. Preferred stock
d. Intangibles i. Common stock
e. Other assets j. Additional paid-in capital
k. Retained earnings
l. Items excluded from balance sheet
Using the letters above, classify the following accounts according to the preferred and ordinary balance sheet presentation.
1. Bond sinking fund
2. Common stock dividend distributable
3. Appropriation for plant expansion
4. Bank overdraft
5. Bonds payable (due 2020)
6. Premium on common stock
7. Securities owned by another company which are collateral for that company's note
8. Equity investments (trading)
9. Inventory
10. Discount on bonds payable
11. Patents
12. Unearned rent revenue
Ex. 5-111—Valuation of Balance Sheet Items.
Use the code letters listed below (a – l) to indicate, for each balance sheet item (1 – 13) listed below the usual valuation reported on the balance sheet.
1. Common stock 8. Long-term bonds payable
2. Prepaid insurance 9. Land (in use)
3. Natural resources 10. Land (future plant site)
4. Property, plant, and equipment 11. Patents
5. Accounts receivable 12. Equity investments (trading)
6. Copyrights 13. Accounts payable
7. Inventory
a. Par value
b. Current cost of replacement
c. Amount payable when due, less unamortized discount or plus unamortized premium
d. Amount payable when due
e. Market value at balance sheet date
f. Net realizable value
g. Lower of cost or market
h. Original cost less accumulated amortization
i. Original cost less accumulated depletion
j. Original cost less accumulated depreciation
k. Historical cost
l. Unexpired or unconsumed cost
Ex. 5-112—Balance sheet classifications.
Typical balance sheet classifications are as follows.
a. Current Assets g. Long-Term Liabilities
b. Investments h. Capital Stock
c. Plant Assets i. Additional Paid-In Capital
d. Intangible Assets j. Retained Earnings
e. Other Assets k. Notes to Financial Statements
f. Current Liabilities l. Not Reported on Balance Sheet
Indicate by use of the above letters how each of the following items would be classified on a balance sheet prepared at December 31, 2017. If a contra account, or any amount that is negative or opposite the normal balance, put parentheses around the letter selected. A letter may be used more than once or not at all.
1. Accrued salaries and wages
2. Rent revenues for 3 months collected in advance
3. Land used as plant site
4. Equity securities classified as trading
5. Cash
6. Accrued interest payable due in 30 days
7. Premium on preferred stock issued
8. Dividends in arrears on preferred
stock
9. Petty cash fund
10. Unamortized discount on bonds payable due 2020
11. Common stock at par value
12. Bond indenture covenants
13. Unamortized premium on bonds payable due in 2021
14. Allowance for doubtful accounts
15. Accumulated depreciation—equipment
Ex. 5-113—Balance sheet classifications.
The various classifications listed below have been used in the past by Maris Company on its balance sheet. It asks your professional opinion concerning the appropriate classification of each of the items 1-14 below.
a. Current Assets f. Current Liabilities
b. Investments g. Long-Term Liabilities
c. Plant and Equipment h. Common Stock and Paid-in Capital in Excess of Par
d. Intangible Assets i. Retained Earnings
e. Other Assets
Indicate by letter how each of the following items should be classified. If an item need not be reported on the balance sheet, use the letter "X." A letter may be used more than once or not at all. If an item can be classified in more than one category, choose the category most favored by the authors of your textbook.
1. Employees' payroll deductions.
2. Cash in sinking fund.
3. Rent revenue collected in advance.
4. Equipment retired from use and held for sale.
5. Patents.
6. Payroll cash fund.
7. Goods held on consignment.
8. Accrued revenue on short-term investments.
9. Advances to salespersons.
10. Premium on bonds payable due two years from date.
11. Bank overdraft.
12. Salaries which company budget shows will be paid to employees within the next year.
13. Work in process.
14. Appropriation for bonded indebtedness.
Ex. 5-114—Balance sheet classifications.
The various classifications listed below have been used in the past by Hale Company on its balance sheet.
a. Current Assets e. Current Liabilities
b. Investments f. Long-term Liabilities
c. Plant and Equipment g. Common Stock and Paid-in Capital in Excess of Par
d. Intangible Assets h. Retained Earnings
Instructions
Indicate by letter how each of the items below should be classified at December 31, 2017. If an item is not reported on the December 31, 2017 balance sheet, use the letter "X" for your answer. If the item is a contra account within the particular classification, place parentheses around the letter. A letter may be used more than once or not at all.
Ex. 5-115—Balance sheet computations.
The following accounts appeared on the trail balance of Elbert Company at December 31, 2017.
Notes Payable (short-term) $192,000 Accounts Receivable $518,400
Accumulated Depreciation - Bldg. 783,000 Prepaid Insurance 56,250
Supplies 37,800
Salaries and Wages Payable 34,200 Common Stock 1,125,000
Debt Investments (long-term) 281,400 Unappropriated Retained Earnings 318,000
Cash 170,250 Inventory 1,580,250
Bonds Payable Due 1/1/2025 1,200,000 Land 465,000
Allowance for Doubtful Accts. 7,800 Trading Securities 73,200
Copyrights 192,900 Interest Payable 5,700
Notes Receivable (due in 6 months) 138,000 Buildings 1,926
Income Taxes Payable 156,000 Accounts Payable 409,950
Preferred Stock 750,000 Additional Paid-in Capital 163,800
Appropriated Retained Earnings 294,000
Instructions
Compute each of the following:
1. Total current assets
2. Total property, plant, and equipment
3. Total assets
4. Total current liabilities
5. Total stockholders’ equity
Ex. 5-116—Balance sheet computations.
(Balance Sheet) Presented below is the trial balance of Hightower Corporation at December 31, 2017.
Debit Credit
Cash 295,000
Sales Revenue $12,150
Debt Investments (trading) (at cost, $218,000) 230,000
Cost of Goods Sold 7,200
Debt Investments (long-term) 448,000
Equity Investments (long-term) 416,000
Notes Payable (short-term) 135,000
Accounts Payable 682,000
Selling Expenses 3,000,000
Investment Revenue 95,000
Land 390,000
Buildings 1,560,000
Dividends Payable 204,000
Accrued Liabilities 144,000
Accounts Receivable 652,000
Accumulated Depreciation–Buildings 228,000
Allowance for Doubtful Accounts 38,000
Administrative Expenses 1,350,000
Interest Expense 317,000
Inventory 895,000
Gain 120,000
Notes Payable (long-term) 1,350,000
Equipment 900,000
Bonds Payable 1,500,000
Accumulated Depreciation–Equipment 90,000
Franchises 240,000
Common Stock ($5 par) 1,500,000
Treasury Stock 287,000
Patents 293,000
Retained Earnings 117,000
Paid-in Capital in Excess of Par 120,000
Totals $18,473,000 $18,473,000
Instructions
Compute each of the following:
1. Total current assets
2. Total property, plant, and equipment
3. Total assets
4. Total liabilities
5. Total stockholders’ equity
