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) Held-to-maturity investments
b) Significant interest investments
c) Controlling interest investments
d) Available-for-sale investments
3) Held-to-maturity 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 long-term 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) held-to-maturity investments.
d) either trading investments or available-for-sale 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 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?
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.
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.
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%, 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?