*61. The number of times interest was earned during 2018 was
a. 1,050 ÷ 150.
b. 1,500 ÷ 150.
c. 1,650 ÷ 150.
d. 1,350 ÷ 150.
Information for Ramirez Corp. is given below:
Ramirez Corp.
Balance Sheet
December 31, 2018
Assets Equities
Cash $ 300,000 Accounts payable $ 630,000
Accounts receivable (net) 1,950,000 Income taxes payable 189,000
Inventories 2,439,000 Miscellaneous accrued payables 225,000
Plant and equipment, Bonds payable (8%, due 2020) 1,875,000
net of depreciation 1,983,000 Preferred stock ($100 par, 6%
Patents 261,000 cumulative nonparticipating) 750,000
Other intangible assets 75,000 Common stock (no par, 60,000
Total Assets $7,008,000 shares authorized, issued
and outstanding) 1,125,000
Retained earnings 2,439,000
Treasury stock—1,500 shares
of preferred (225,000)
Total Equities $7,008,000
Ramirez Corp.
Income Statement
Year Ended December 31, 2018
Net sales $9,000,000
Cost of goods sold 6,000,000
Gross profit 3,000,000
Operating expenses (including bond interest expense) 1,500,000
Income before income taxes 1,500,000
Income tax 450,000
Net income $ 1,050,000
Additional information:
There are no preferred dividends in arrears, the balances in the Accounts Receivable and Inventory accounts are unchanged from January 1, 2018, and there were no changes in the Bonds Payable, Preferred Stock, or Common Stock accounts during 2018. Assume that preferred dividends for the current year have not been declared.
*62. At December 31, 2018, the book value per share of common stock was
a. $55.66.
b. $58.16.
c. $59.40.
d. $58.65.
Information for Ramirez Corp. is given below:
Ramirez Corp.
Balance Sheet
December 31, 2018
Assets Equities
Cash $ 300,000 Accounts payable $ 630,000
Accounts receivable (net) 1,950,000 Income taxes payable 189,000
Inventories 2,439,000 Miscellaneous accrued payables 225,000
Plant and equipment, Bonds payable (8%, due 2020) 1,875,000
net of depreciation 1,983,000 Preferred stock ($100 par, 6%
Patents 261,000 cumulative nonparticipating) 750,000
Other intangible assets 75,000 Common stock (no par, 60,000
Total Assets $7,008,000 shares authorized, issued
and outstanding) 1,125,000
Retained earnings 2,439,000
Treasury stock—1,500 shares
of preferred (225,000)
Total Equities $7,008,000
Ramirez Corp.
Income Statement
Year Ended December 31, 2018
Net sales $9,000,000
Cost of goods sold 6,000,000
Gross profit 3,000,000
Operating expenses (including bond interest expense) 1,500,000
Income before income taxes 1,500,000
Income tax 450,000
Net income $ 1,050,000
Additional information:
There are no preferred dividends in arrears, the balances in the Accounts Receivable and Inventory accounts are unchanged from January 1, 2018, and there were no changes in the Bonds Payable, Preferred Stock, or Common Stock accounts during 2018. Assume that preferred dividends for the current year have not been declared.
*63. The rate of return for 2018 based on the year-end common stockholders' equity was
a. 1,050 ÷ 3,519.
b. 1,050 ÷ 3,564.
c. 1,005 ÷ 3,519.
d. 1,005 ÷ 3,564.
The following data are provided:
December 31
2018 2017
Cash $ 1,500,000 $ 1,000,000
Accounts receivable (net) 1,600,000 1,200,000
Inventories 2,600,000 2,200,000
Plant assets (net) 7,000,000 6,500,000
Accounts payable 1,100,000 800,000
Income taxes payable 200,000 100,000
Bonds payable 1,400,000 1,400,000
10% Preferred stock, $50 par 2,000,000 2,000,000
Common stock, $10 par 2,400,000 1,800,000
Paid-in capital in excess of par 1,600,000 1,300,000
Retained earnings 4,000,000 3,500,000
Net credit sales 12,800,000
Cost of goods sold 8,400,000
Operating expenses 2,900,000
Net income 1,500,000
Additional information:
Depreciation included in cost of goods sold and operating expenses is $1,220,000. On May 1, 2018, 60,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2018.
*64. The accounts receivable turnover for 2018 is
a. 12,800 ÷ 1,600.
b. 8,400 ÷ 1,600.
c. 12,800 ÷ 1,400.
d. 8,400 ÷ 1,400.
The following data are provided:
December 31
2018 2017
Cash $ 1,500,000 $ 1,000,000
Accounts receivable (net) 1,600,000 1,200,000
Inventories 2,600,000 2,200,000
Plant assets (net) 7,000,000 6,500,000
Accounts payable 1,100,000 800,000
Income taxes payable 200,000 100,000
Bonds payable 1,400,000 1,400,000
10% Preferred stock, $50 par 2,000,000 2,000,000
Common stock, $10 par 2,400,000 1,800,000
Paid-in capital in excess of par 1,600,000 1,300,000
Retained earnings 4,000,000 3,500,000
Net credit sales 12,800,000
Cost of goods sold 8,400,000
Operating expenses 2,900,000
Net income 1,500,000
Additional information:
Depreciation included in cost of goods sold and operating expenses is $1,220,000. On May 1, 2018, 60,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2018.
*65. The inventory turnover for 2018 is
a. 12,800 ÷ 2,600.
b. 8,400 ÷ 2,600.
c. 12,800 ÷ 2,400.
d. 8,400 ÷ 2,400.
The following data are provided:
December 31
2018 2017
Cash $ 1,500,000 $ 1,000,000
Accounts receivable (net) 1,600,000 1,200,000
Inventories 2,600,000 2,200,000
Plant assets (net) 7,000,000 6,500,000
Accounts payable 1,100,000 800,000
Income taxes payable 200,000 100,000
Bonds payable 1,400,000 1,400,000
10% Preferred stock, $50 par 2,000,000 2,000,000
Common stock, $10 par 2,400,000 1,800,000
Paid-in capital in excess of par 1,600,000 1,300,000
Retained earnings 4,000,000 3,500,000
Net credit sales 12,800,000
Cost of goods sold 8,400,000
Operating expenses 2,900,000
Net income 1,500,000
Additional information:
Depreciation included in cost of goods sold and operating expenses is $1,220,000. On May 1, 2018, 60,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2018.
*66. The profit margin on sales for 2018 is
a. 4,400 ÷ 12,800.
b. 1,500 ÷ 12,800.
c. 4,400 ÷ 8,400.
d. 1,500 ÷ 8,400.
The following data are provided:
December 31
2018 2017
Cash $ 1,500,000 $ 1,000,000
Accounts receivable (net) 1,600,000 1,200,000
Inventories 2,600,000 2,200,000
Plant assets (net) 7,000,000 6,500,000
Accounts payable 1,100,000 800,000
Income taxes payable 200,000 100,000
Bonds payable 1,400,000 1,400,000
10% Preferred stock, $50 par 2,000,000 2,000,000
Common stock, $10 par 2,400,000 1,800,000
Paid-in capital in excess of par 1,600,000 1,300,000
Retained earnings 4,000,000 3,500,000
Net credit sales 12,800,000
Cost of goods sold 8,400,000
Operating expenses 2,900,000
Net income 1,500,000
Additional information:
Depreciation included in cost of goods sold and operating expenses is $1,220,000. On May 1, 2018, 60,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2018.
*67. The return on common stock holders’ equity for 2018 is
a. 1,500 ÷ 7,200.
b. 1,500 ÷ 8,000.
c. 1,300 ÷ 7,200.
d. 1,300 ÷ 8,000.
The following data are provided:
December 31
2018 2017
Cash $ 1,500,000 $ 1,000,000
Accounts receivable (net) 1,600,000 1,200,000
Inventories 2,600,000 2,200,000
Plant assets (net) 7,000,000 6,500,000
Accounts payable 1,100,000 800,000
Income taxes payable 200,000 100,000
Bonds payable 1,400,000 1,400,000
10% Preferred stock, $50 par 2,000,000 2,000,000
Common stock, $10 par 2,400,000 1,800,000
Paid-in capital in excess of par 1,600,000 1,300,000
Retained earnings 4,000,000 3,500,000
Net credit sales 12,800,000
Cost of goods sold 8,400,000
Operating expenses 2,900,000
Net income 1,500,000
Additional information:
Depreciation included in cost of goods sold and operating expenses is $1,220,000. On May 1, 2018, 60,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2018.
*68. The book value per share of common stock at 12/31/18 is
a. 7,800 ÷ 240.
b. 7,760 ÷ 240.
c. 7,800 ÷ 220.
d. 8,000 ÷ 220.
The following data are provided:
December 31
2018 2017
Cash $ 1,500,000 $ 1,000,000
Accounts receivable (net) 1,600,000 1,200,000
Inventories 2,600,000 2,200,000
Plant assets (net) 7,000,000 6,500,000
Accounts payable 1,100,000 800,000
Income taxes payable 200,000 100,000
Bonds payable 1,400,000 1,400,000
10% Preferred stock, $50 par 2,000,000 2,000,000
Common stock, $10 par 2,400,000 1,800,000
Paid-in capital in excess of par 1,600,000 1,300,000
Retained earnings 4,000,000 3,500,000
Net credit sales 12,800,000
Cost of goods sold 8,400,000
Operating expenses 2,900,000
Net income 1,500,000
Additional information:
Depreciation included in cost of goods sold and operating expenses is $1,220,000. On May 1, 2018, 60,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2018.
*69. At December 31, 2018, the acid-test ratio was
a. 3,100 ÷ 1,300.
b. 3,100 ÷ 2,160.
c. 4,200 ÷ 1,600.
d. 5,700 ÷ 1,300.
*70. Presented below is information related to Tolbert Company.
Current Assets
Cash $ 14,000
Short-term investments 75,000
Accounts receivable 61,000
Inventories 110,000
Prepaid expenses 30,000
Total current assets $290,000
Total current liabilities are $100,000. What is the acid-test ratio?
a. 2.9 to 1.
b. 2.6 to 1.
c. 1.5 to 1.
d. 0.9 to 1.
*71. Perez Company's net accounts receivable were $800,000 at December 31, 2017 and $880,000 at December 31, 2018. Net cash sales for 2018 were $520,000. The accounts receivable turnover for 2018 was 9.0. What were Perez's total net sales for 2018?
a. $4,680,000.
b. $7,560,000.
c. $8,080,000.
d. $7,920,000.
*72. During 2018, Quirk, Incorporated purchased $3,950,000 of inventory. The cost of goods sold for 2018 was $4,050,000 and the ending inventory at December 31, 2018, was $400,000. What was the inventory turnover for 2018?
a. 7.9.
b. 8.1.
c. 9.0.
d. 10.1.
MULTIPLE CHOICE—CPA Adapted
73. Which of the following facts concerning plant 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
74. Farr, Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. Farr should report segment financial information for each division meeting which of the following criteria?
a. Segment profit or loss is 10% or more of consolidated profit or loss.
b. Segment profit or loss is 10% or more of combined profit or loss of all company segments.
c. Segment revenue is 10% or more of combined revenue of all the company segments.
d. Segment revenue is 10% or more of consolidated revenue.
75. Unruh Corp. and its divisions are engaged solely in manufacturing operations. The following data pertain to the segments in which operations were conducted for the year ended December 31, 2018.
Assets
Industry Revenue Profit 12/31/18
A $ 8,000,000 $1,320,000 $16,000,000
B 6,400,000 1,120,000 14,000,000
C 4,800,000 960,000 10,000,000
D 2,400,000 440,000 5,200,000
E 3,400,000 540,000 5,600,000
F 1,200,000 180,000 2,400,000
$26,200,000 $4,560,000 $53,200,000
In its segment information for 2018, how many reportable segments does Unruh have?
a. Three
b. Four
c. Five
d. Six
76. The following information pertains to Nixon Corp. and its divisions for the year ended December 31, 2018.
Sales to unaffiliated customers $4,000,000
Intersegment sales of products similar to those sold to
unaffiliated customers 900,000
Interest earned on loans to other operating segments 60,000
Nixon and all of its divisions are engaged solely in manufacturing operations. Nixon has a reportable segment if that segment's revenue exceeds
a. $496,000.
b. $490,000.
c. $406,000.
d. $400,000.
77. Advertising costs may be accrued or deferred to provide an appropriate expense in each period for
Interim Year-end
Financial Reporting Financial Reporting
a. Yes No
b. Yes Yes
c. No No
d. No Yes
78. Mayo Corp. has estimated that total depreciation expense for the year ending December 31, 2018 will amount to $600,000, and that 2018 year-end bonuses to employees will total $1,200,000. In Mayo's interim income statement for the six months ended June 30, 2018, what is the total amount of expense relating to these two items that should be reported?
a. $0.
b. $300,000.
c. $900,000.
d. $1,800,000.
79. Fina Corp. had the following transactions during the quarter ended March 31, 2018:
Payment of fire insurance premium for calendar year 2018 800,000
What amount should be included in Fina's income statement for the quarter ended
March 31, 2018?
a. $ -0-
b. $200,000
c. $400,000
d. $800,000
80. For interim financial reporting, a major repair occurring in the second quarter should be
a. recognized in the second quarter.
b. recognized ratably over all four quarters with the first quarter being restated.
c. recognized ratably over the last three quarters.
d. disclosed by note only in the second quarter.
*81. How is the average inventory used in the calculation of each of the following?
Acid-Test (Quick) Ratio Inventory Turnover
a. Numerator Numerator
b. Numerator Denominator
c. Not Used Denominator
d. Not Used Numerator
*82. Which of the following ratios is(are) useful in assessing a company's ability to meet current maturing or short-term obligations?
Acid-Test Ratio Debt to Assets Ratio
a. No No
b. No Yes
c. Yes Yes
d. Yes No
*83. Which of the following ratios should be used in evaluating the effectiveness with which the company uses its assets?
Accounts Receivable Turnover Payout Ratio
a. Yes Yes
b. No No
c. Yes No
d. No Yes
BRIEF EXERCISES
BE. 24-84—Notes to financial statements.
An article in Dun's Review made the following comments:
"Every other year companies should print the notes in big type
and the base figures in smaller ones."
Instructions
(a) Are notes considered as part of the financial statements and what basic purpose do they serve?
(b) What are the general types of notes?
BE. 24-85—Segment reporting.
The Financial Accounting Standards Board requires the reporting of disaggregated financial data about the different types of business activities in which an enterprise engages.
Instructions
Identify 4 of the 6 items of disaggregated information the FASB requires that an enterprise report.
