ESLSCA UNIVERSITY

Accounting for Managers

Exercise Sheet
PART ONE

Instructor
Dr. Maha Ramadan
Associate Professor of Accounting and Auditing
e-mail [email protected]
cell phone 01001047652
Extra Practice Exercises for Lectures One and Two

TASK ONE:
Gail's Greenhouse, Inc., a small retail store that sells houseplants, started business on
January 1, 2019. At the end of January 2019, the following information was available:

Sales of plants for cash $75,000

Sales of plants for credit (not yet collected) 15,000
Cost of plants which were sold and paid
for during January 45,000

Expenses during January incurred, and paid for, during January unless otherwise
noted:

Salaries $5,000
Telephone 250
Office supplies (all used) 150
Electricity 300
Rent on the store for January, 2019 (will not
1,000
be paid until February, 2019)
Required:
Using the above information, prepare the income statement for Gail's Greenhouse for
the month ended January 31, 2019.

Answer:

Gail’s Green house

Income Statement
For the month ended January 31, 20xx
Sales Revenues 90,000
Less: Cost of Goods Sold 45000
Gross Profit 45000
Less
Salaries Exp 5000
Telephone exp 250
Supplies exp 150
Electricity 300
Rent 1000 (6700)
Net income 38300

1
TASK TWO
Fulton Company was established at the beginning of 2019 when several investors
paid a total of $200,000 to purchase Fulton common stock. No additional investments
in common stock were made during the year. By December 31, 2019, Fulton had cash
on hand of $45,000, office equipment of $40,000, inventory of $156,000, and
accounts payable of $10,000. Sales for the year were $812,000. Of this amount,
customers still owed $20,000. Fulton declared and paid dividends of $25,000 to its
stockholders during 2019.

Required
1. Based on the information above, prepare a balance sheet for Fulton Company at
December 31, 2019. In the process of preparing the balance sheet, you must calculate
the ending balance in retained earnings.
2. Prepare a statement of stockholders' equity for the year ended December 31, 2019.
3. What was the amount of Fulton's expenses for 2019?
4. Was Fulton successful during its first year in operation? Explain your answer.
Answer:
Fulton Co
Balance Sheet
At the year ended December 31, 2019
Assets Liabilities
Cash 45000 A/P 10000
Office equipment 40000
Inventory 156000
A/Receivables 20000
Owners’ Equity
Common Stocks 200,000
R/E end ? 51000
Total Assets 261000 261000
R/E end = R/E beg + Net income – Dividends
51000 = 0 +x – 25,000
51000+ 25000 =x
Net income 76000

Fulton Co
Stockholders’ equity statement
For the year ended December 31, 2019
Common Stocks Retained Earnings
1/1/2019 200,000 0
+ Net income 76000
- Dividends (25000)
Balances31/12/2019 200,000 51000

Revenues – Expenses = Net income

812000- EXP= 76000
Expenses= 736000

2
TASK THREE
Calculate the missing items for Craig and Mills Co.

Craig Cantrel Mills Enterprises

Beginning of the year
Total Assets $95,000 129,000
Total Liabilities 85,000 (c )
Total Owner's equity (a) 80,000
End of the Year
Total Assets 160,000 180,000
Total Liabilities 120,000 50,000
Total Owner's Equity 40,000 130,000
Changes during the year
in owner's equity
Additional Investment (b) 25,000
Drawings 24,000 (d)
Total Revenues 215,000 100,000
Total Expenses 175,000 55,000

Answer:
10000 +b -24000 +215000-175000 =40000
26000+b= 40000
B=14000
[c] =129000-80000= 49000
80,000+25000-d+45000=130000
150000-d= 130000
D=20000

3
TASK FOUR

Use the following data to prepare a single step income statement

Administrative Expenses
Office salaries $4900
Depreciation 3960

Cost of Goods Sold 63,570

Rental Revenue 17230
Selling Expenses
Transportation-out 2960
Sales Commission 7980
Depreciation 6480

Sales 96500
Income tax expense 7580
Interest expense 1860

Answer:
XXXXX company
Income Statement for the year ended December 31, 20xx
Revenues
Sales 96500
Rental Revenues 17230 113730
-Expenses
Cost of Goods Sold 63570
Administrative Exp 8860
Selling expenses 17420
Income tax expenses 7580
Interest exp 1860 99290
Net income 14440

4
TASK FIVE
The Filzinger Corporation's December 31, 2021 year-end trial balance contained the
following income statement items:

Account Title Debits Credits

Sales revenue 6,700,000
Interest revenue 70,000
Gain on sale of investments 52,000
Cost of goods sold 4,200,000
Selling expense 350,000
General and administrative expense 948,000
Interest expense 30,000
Research and development expense 600,000
Income tax expense 145,000

Required: Calculate the company's operating income for the year using a single-step
income statement format.

Answer:
Sales revenue $6,700,000
Less operating expenses:
Cost of goods sold $4,200,000
Selling expense 350,000
General and administrative expenses 948,000
Research and development expenses 600,000 6,098,000
Operating income $ 602,000

5
TASK SIX
The following income statement items appeared on the adjusted trial balance of
Foxworthy Corporation for the year ended December 31, 2021 ($ in 000s): sales
revenue, $22,300; cost of goods sold, $14,500; selling expense, $2,300; general and
administrative expense, $1,200; dividend revenue from investments, $200; interest
expense, $300. Income taxes have not yet been accrued. The company's income tax
rate is 25% on all items of income or loss. These revenue and expense items appear in
the company's income statement every year. The company's controller, however, has
asked for your help in determining the appropriate treatment of the following
nonrecurring transactions that also occurred during 2021 ($ in 000s). All transactions
are material in amount.

1. Investments were sold during the year at a loss of $300. Foxworthy also had an
unrealized loss of $200 for the year on investments. The unrealized loss represents a
decrease in the fair value of debt securities and is classified as part of other
comprehensive income.
2. One of the company's factories was closed during the year. Restructuring costs
incurred were $2,000.
3. During the year, Foxworthy completed the sale of one of its operating divisions
that qualifies as a component of the entity according to GAAP regarding discontinued
operations. The division had incurred operating income of $800 in 2021 prior to the
sale, and its assets were sold at a loss of $1,800.
4. A positive foreign currency translation adjustment for the year totaled $600.

Required:
Prepare Foxworthy's single, continuous statement of comprehensive income for 2021,
including earnings per share disclosures. Use a multiple-step income statement
format. Three million shares of common stock were outstanding throughout the year.

6
Answer:
Foxworthy Manufacturing Corporation
Statement of Comprehensive Income
For the Year Ended December 31, 2021
($ in 000s)

Sales revenue $22,300

Cost of goods sold 14,500
Gross profit 7,800
Operating expenses:
Selling expense $2,300
General and administrative expense 1,200
Restructuring costs 2,000
Total operating expenses 5,500
Operating income 2,300
Other income (expense):
Loss on sale of investments (300)
Interest expense (300)
Dividend revenue 200
Total other income, net (400)
Income from continuing operations before income taxes 1,900
Income tax expense 475
Income from continuing operations 1,425
Discontinued operations:
Loss from operations of discontinued component
(including loss on disposal of $1,800) (1,000)
Income tax benefit 250
Loss on discontinued operations (750)
Net income 675
Other comprehensive income (net of tax):
Loss on debt securities (150)
Foreign currency translation adjustment 450
Total other comprehensive income 300
Comprehensive income $ 975

Earnings per share:

Income from continuing operations $0.475
Discontinued operations (0.250)
Net income $0.225

7
LECTURE THREE
(BALANCE SHEET AND CASH FLOW STATEMENT)

TASK ONE
Presented below are a number of balance sheet items for Santana, Inc., for the current year

Good will $110,000 Accumulated Depreciation- 292,000

equipment
Payroll taxes payable 177,591 Inventories 239,000
Bonds Payable 290,000 Rent payable-short term 45,000
Discount on Bonds 15,000 Taxes Payable 195,991
Payable
Cash 260,000 Long term rental obligations 480,000
Land 450,000 Common stock, $1 par value 250,000
Accounts Receivable 600,000 Preferred Stock, $10 par value 150,000
Notes Payable to Banks 265,000 Prepaid Expenses 87,920
Accounts Payable 690,000 Equipment 1,470,000
Retained Earnings ????? Marketable Securities (Short 81,000
term)
Allowance for Doubtful 54,300 Accumulated Depreciation- 170,000
Accounts building
Notes Payable (long term) 1,600,000 Building 1,640,000
Treasury Stock 50,000

Instructions
Prepare a classified balance sheet in good form. Common stock authorized was
400,000 shares and preferred stock authorized was 20,000 shares. Assume that notes
receivable and notes payable are short-term, unless stated otherwise. Cost and fair
value of marketable securities are the same.

8
TASK TWO
The calendar year-end adjusted trial balance for Blessinger Co. follows:

BLESSINGER CO.
Adjusted Trial Balance
December 31

Cash $ 112,000
Accounts receivable 27,000
Prepaid rent 15,000
Prepaid Insurance 9,000
Office supplies 3,300
Office equipment 38,000
$ 3,200
Accumulated depreciation–Equipment 3,200
Building 288,000
Accumulated depreciation–Building 42,000
Land 700,000
Accounts payable 25,800
Salaries payable 14,500
Interest payable 2,500
Long-term note payable 72,000
P. Blessinger, Capital 910,000
P. Blessinger, Withdrawals 200,500
Service fees earned 430,800
Salaries expense 90,000
Insurance expense 5,200
Rent expense 5,000
Depreciation expense–Equipment 800
Depreciation expense–Building 7,000
Totals $1,500,800 $1,500,800
Required:
(a) Prepare a classified year-end balance sheet. (Note: A $9,000 installment on the
long-term note payable is due within one year.)

9
TASK THREE
Bruno Company has decided to expand its operations. The bookkeeper recently
completed the balance sheet presented on the current page in order to obtain
additional funds for expansion.
Assets
Current assets
Cash $260,000
Accounts receivable (net) of 17000 340,000
Inventories at lower of average cost or market 401,000
Trading securities—at cost (fair value $120,000) 140,000
Property, plant, and equipment
Building (net) 570,000
Office equipment (net) 160,000
Land held for speculation 175,000
Intangible assets
Goodwill 80,000
Cash surrender value of life insurance 90,000
Prepaid expenses 12,000
Liabilities and stockholders’ Equity
Current liabilities
Accounts payable 135,000
Pension obligation 82,000
Rent payable 49,000
Long-term liabilities
Bonds payable 500000
Notes payable (due next year) 125,000
Stockholders’ equity
Preferred Stock and Common stock (each $10.00 par,
10,000 shares preferred and 19,000 shares common) 290,000
Additional paid-in capital 180,000
Treasury Stocks 90000
Retained earnings 80000

Additional Information
1. The cash balance is net of a bank overdraft of $20000 from a different bank where
the cash account is deposited
2. The accumulated depreciation balance for the buildings is $160,000 and for the
office equipment, $105,000.
3. The allowance for doubtful accounts has a balance of $17,000.
Required
1. Indicate your criticisms of the above statement of financial position (mention 10
mistakes) and briefly explain the proper treatment of the item being criticized.
2. Calculate the correct amount of current assets and current liabilities
3. Compute the company’s working capital

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Solution:
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10………………………………………………………………………………………
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TASK FOUR
The bookkeeper for Angeles Ochoa Company has prepared the
following balance sheet as of July 31, 2016
Angeles Ochoa Co.
Balance Sheet
As of July 21, 2016
Cash $69,000 Notes and $44,000
Accounts Payable
Accounts 40,500 Long term 75,000
Receivable Liabilities
Inventories 60,000 Stockholders 155,500
equity
Equipment 84,000
Patents 21,000
Total $274,500 Total $274,500

The following additional information is provided

1. Cash includes $1200 in a petty cash fund and $9000 in a bond sinking fund.
2. The net accounts receivable balance comprises the following three items:
accounts receivable debit balance $50,000, accounts receivable credit balance
$6,000 and AFDA $3,500
3. Merchandise inventory costing $5,300 was shipped out on consignment on
July 31, 2016. The ending inventory balance does not include the consigned
goods. Receivables in the amount of $5,300 were recognized on the consigned
goods.
4. Equipment had a cost of $98,000 and an accumulated depreciation balance of
$14,000.
5. Taxes payable of $6,000 were accrued on July 31. Angeles co. had set up a
cash fund to meet this obligation. This cash fund was not included in the cash
balance but was offset against the taxes payable amount.

Required:

12
Prepare a corrected classified balance sheet as of July 31,2016 from the
available information adjusting the account balances using the additional
information.

13
TASK FIVE
The following incomplete balance sheet for Sanderson Manufacturing Companay was
prepared by the company’s controller. As accounting manager for Sanderson, you are
attempting to reconstruct and revise the balance sheet
Sandersonn Manufacturing Company
Balance Sheet
At Decmber 31, 2019
(in $000s)
Assets
Current Assets
Cash 1250
Accounts Receivable 3500
Allowance for uncollectible Accounts (400)
Finished Goods Inventory 6000
Prepaid Expenses 1,200
Total Current assets 11,550
Non Current Assets
Investments 3000
Raw Materials and Work in process Inventory 2,250
Equipment 15,000
Accumulated Depreciation-equipment (4200)
Patent ???
Total Assets ????
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable $5200
Notes Payable 4,000
Interest payable – note 100
Unearned Revenue 3,000
Total Current liabilities 12,300
Long term liabilities
Bonds Payable 5500
Interest payable- bonds 200
Shareholders’ equity
Common Stock ?
Retained Earnings ?
Total liabilities and Shareholders’ Equity ?

Additional Information ($in 000s)

1. Certain records that include the account balances for the patent and
shareholders’ equity items were lost. However, the controller told u that
a complete, preliminary balance sheet prepared before the records were
lost showed a debt to equity ratio of 1.2. That is, total liabilities are 120%
of total shareholders’ equity. Retrained earnings at beginning of the year
was $4000. Net income for 2019 was $1560 and $560 cash dividends
were declared and paid to shareholders.
2. Management intends to sell investments in the next months
3. Interest on both the note and bonds is payable annually

14
4. The note payable is due in annual installments of $1000 each
5. Unearned revenue will be earned equally over the next two fiscal years
6. The common stock represents 400,000 shares of no-par stock authorized
250,000 shares issued and outstanding
Required:
Prepare a complete, corrected, classified balance sheet

15
TASK SIX
The following is the 2019 balance sheet for the Nagoda Corporation does not conform
with the accounting principles:

The Nagoda Corporation

Balance Sheet (Asset Portion Only)
December 31, 2019
Current Assets
Cash including a bank overdraft of ($5000) 46,500
Available-for-sale securities at cost (Fair value $159,800) 185,800
Accounts Receivable (gross value) 745,000
Inventories valued at replacement cost (cost equals 1,455,000) 1,800,000
Notes Receivable (will be paid in 2021) 310,000
Total Current Assets 3,087,300

Long term Investments

Treasury Stocks 251,540
Trademarks 70,000
321,540

Property, Plant and Equipment

Land held for speculation 2,575,000
Buildings at (fair value) 3,475,540
Equipment at book value (less of Accumulated Depreciation) 332,100
Total Property, Plant and Equipment 8,382,640

Intangible Assets
Goodwill (generated by the business since its beginning) 2,000,000
Cash Surrender value of Life Insurance Policy 450,000
Total Intangible Assets 2,450,000
Total Assets 12,241480

Additional information
1. Allowance for Doubtful accounts are 45000
2. Historical cost of the building is 3,000,000 and its accumulated depreciation is
50,000.
3. Equipment have an accumulated depreciation of 72,000
Required:
Find all the errors that you can notice (10 errors at least) in the asset portion of the
balance sheet of Nagoda Corporation and explain how each error should be corrected
according to the accounting principles

TASK SEVEN

16
The following is a December 31, 2019 trial balance for the Weismuller Publishing
Company
Account Title Debits Credits
Cash 65,000
Accounts Receivable 160,000
Inventories 285,000
Prepaid Expenses 148,000
Machinery and equipment 320,000
Accumulated Depreciation 110,000
Machinery
Investments 140,000
A/payable 60,000
Interest Payable 20,000
Unearned Revenue 80,000
Taxes Payable 30,000
Notes Payable 200,000
Allowance for uncollectible 16,000
accounts
Common Stock 400,000
Retained Earnings 202.000
Totals 1118000 1118000

Additional Information:
1. Prepaid expenses include $120,000 paid on December 31, 2019, for a two year
rent on the building.
2. Investments include $30,000 in treasury bills purchased on November 30, 2019.
The bills mature on January 30, 2020. The remaining $110,000 includes
investments in marketable equity securities that the company intends to sell in
the next year.
3. Unearned Revenues represent customer prepayments for magazine subscriptions
for a period of less than one year.
4. The notes payable account consists of the following:
a. $40,000 note in due in six months
b. $100,000 note due in six years.
c. $60,000 due in three annual installments of $20,000 each, with the
next installment due August 31, 2020
5. The common stock account represents $400,000 shares of no par value common
stock issued and outstanding, the corporation has 80,000 shares authorized.
Required:
Prepare a classified balance sheet for the Weimuller Publishing company at December
31, 2019

Cash flow statement

17
Notes that can help you
Concerning cash flows from operating activities
We start by net income then we

 Add: Depreciation exp (either directly given in the income statement or

calculated by the difference in accumulated depreciation from beginning of the
period to the end)
 Any increase in Current assets (A/R, Prepaid Exp, Inventory) will be
subtracted
 Any decrease in Current assets (A/R, Prepaid Exp, Inventory) will be added
 Any increase in current liabilities (A/P, Accrued exp, exp payable) will be
added
 Any decrease in current liabilities (A/P, Accrued exp, exp payable) will be
subtracted

Cash flows from investing

 An increase in property, plant and equipment (Land, building, furniture,
vans….) or any investment account, means we purchased, then this is a cash
outflow (subtracted)
 A decrease in property, plant and equipment (Land, building, furniture,
vans….) or any investment account, means we sold, then this is a cash inflow
(added)
Cash flows from financing activities

 An increase in common stocks or bonds payable means we issued stocks or

bonds, then this is a cash inflow that should be added
 A decrease in common stocks or bonds payable means we purchased the
stocks or paid the bonds, then this is a cash outflow that should be subtracted
Dividends always result in cash outflow that should be subtracted

18
TASK EIGHT

A comparative balance sheet for Oprah Winfrey Company is

:presented below
Assets December 31, 2019 December 31, Change
2018=1/1/2019
Cash $63,000 22,000 41,000
Accounts Receivable 85,000 66,000 19000
Inventories 180,000 189,000 )9000(
Land 75,000 110,000 )35000(
Equipment 260,000 200,000 60000
Accumulated )66,000( )42,000( 24000
Depreciation
Total 597000 545,000
Liabilities and
Stockholders’ equity
Accounts Payable 34,000 47,000 (13000)
Bonds Payable 150,000 200,000 )50000(
Common Stock 214,000 164,000 50,000
Retained Earnings 199,000 134,000 65000
Treasury stock 20000 0 20000+
Total 597,000 545,000
Additional information
Net income for 2019 was $105,000

Cash dividends of $40,000 were declared and paid 105000-D= 65000

R/E +net income -dividends= R/E end

Required

Prepare a cash flow statement for the year ended December 31, 2019

19
 Cash flow statement for the year ended December 31, 2019
Cash flow from operating activities
Net income 105000
Adjustments to reconcile net income to net cashflows from
operations

Cash flows from investing activities

NCF (used) by investing activities

Cash flows from financing activities

NCF provided (used) by financing activities

Net change in cash Balance
Beginning cash Balance+
Ending Cash Balance=

20
TASK NINE
The following is the financial data for Gully company

Assets December 31, 2019 December 31, Change

2018
Cash 54000 37000
Accounts Receivable 68000 26000
Inventories 54000 -0-
Prepaid expenses 4000 6,000
Land 45000 70,000
Building 200,000 200,000
Accumulated )21000( )11000(
Depreciation
Equipment 193000 68000
Accumulated )28000( )10,000(
Depreciation
Total 569000 386000
Liabilities and
Stockholders’ equity
Accounts Payable 23000 40,000
Accrued Expense 10,000 -0-
payable
Bonds Payable 110,000 150,000
Common Stock 220,000 60,000
Retained Earnings 206000 136,000
Total 569,000 386000
Additional Information:

Net Income for the period is 125000

Cash dividends of 55000 were declared and paid

Required: Prepare a cash flow statement for the year 2019

21
 Cash flow statement for the year ended December 31, 2019
Cash flow from operating activities
Net income
Adjustments to reconcile net income to net cashflows from
operations

Cash flows from Investing activities

Cash flows from financing activities

22
TASK TEN
The following is a comparative balance sheet for Anne Boleyn Corporation:

December 31
Assets 2018 2017
Cash $69,000 22,000
Accounts Receivable 82,000 66,000
Inventories 180,000 189,000
Land 75,000 110,000
Equipment 260,000 200,000
Accumulated Depreciation- (69,000) (42,000)
equipment
597,000 545,000
Total
Liabilities and Stockholders'
Equity
Accounts Payable $34,000 47,000
Bonds Payable 150,000 200,000
Common Stock 214,000 164,000
Retained Earnings 199,000 134,000
Total 597,000 545,000

Additional Information
1. Net income for 2018 was $115,000
2. Cash Dividends of $50,000 were declared and paid
3. Bonds Payable amounting to $50,000 were retired through the issuance of
common stock

Required:
Prepare a statement of cash flows for 2018 for Anne Boeyn Corpration

23
MULIPLE CHOICE QUESTIONS
Choose the Correct Answer
1. Which of the following is a limitation of the balance sheet?
a. Many items that are of financial value are omitted.
b. Judgments and estimates are used.
c. Current fair value is not reported.
d. All of these

Answer: d
2. The statement of financial position is useful for analyzing all of the following
except
a. Liquidity. c. Solvency.
b. Profitability. d. Financial flexibility.

Answer: b

3. The balance sheet contributes to financial reporting by providing a basis for all of
the following except
a. Computing rates of return.
b. Evaluating the capital structure of the enterprise.
c. Determining the increase in cash due to operations.
d. Assessing the liquidity and financial flexibility of the enterprise.

Answer: a
\
4. The current assets section of the balance sheet should include
a. Machinery. c. Patents.
b. Goodwill. d. Inventory.

Answer: d

5. Which of the following should not be considered as a current asset in the balance
sheet?
a. Installment notes receivable due over 10 months in accordance with normal
trade practice.
b. Prepaid taxes which cover assessments of the following operating cycle of the
business.
c. Equity or debt securities purchased for trading.
d. The cash surrender value of a life insurance policy carried by a corporation on
its president.
Answer: d

6. Which of the following is not a long-term investment?

a. Cash surrender value of life insurance c. Franchise
b. Land held for speculation d. A sinking fund

Answer: c

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7. Which item below is not a current liability?
a. Unearned revenue c. Accounts receivable
b. The currently maturing portion of long-term debt d. Trade accounts payable

Answer: c

8. An example of an item which is not an element of working capital is

a. Accrued interest on notes receivable. c. Goodwill.
b. Goods in process. d. Trading investments.

Answer: c
9. Company had assets of $100,000 and liabilities of $60,000. What is the balance of
stockholders’ equity?
a. $0 c. $40,000
b. $60,000. d. $100,000

Answer: b

10. Treasury stock should be reported as a(n)

a. Current asset. C. Investment.
b. Other asset. D. Reduction of stockholders' equity.

Answer: d

11. Which of the following is not an acceptable major asset classification?

a. Current assets c. Long-term investments
b. Property, plant, and equipment d. Deferred charges

Answer: d

12. Which of the following is a contra account?

a. Premium on bonds payable c. Unearned revenue
b. Patents d. Accumulated depreciation

Answer : d

13. In preparing a statement of cash flows, sale of treasury stock would be classified
as a(n)
a. Operating activity. c. Financing activity.
b. Extraordinary activity. d. Investing activity.

Answer: c

14. In preparing a statement of cash flows, which of the following transactions would
be considered an investing activity?
a. Sale of equipment c. Sale of merchandise on credit
b. Payment of a cash dividend d. Issuance of bonds payable at a discount

Answer: a

25
15. For Grimmett Company, the following information is available:
Goodwill $200,000 Trademarks 65,000 Long-term
receivables 75,000
In Grimmett’s balance sheet, intangible assets should be reported at
a. $65,000. c. $75,000.
b. $265,000. d. $275,000.

Answer: b

16. Houghton Company has the following items: common stock, $720,000; treasury
stock, $85,000; Taxes payable $100,000 and retained earnings, $313,000. What total
amount should Houghton Company report as stockholders’ equity?
a. $848,000. c. $948,000.
b. $1,048,000. d. $1,118,000.

Answer: Common stock 720,000 – Treasury stock 85,000 +R/E 313,000=c

17. Which of the following is not a major characteristic of a plant asset?

a. Possess physical substance c. Acquired for resale
b. Acquired for use d. Long-term in nature

Answer: c

18. Stine Corp.'s trial balance reflected the following account balances at December
31, 2010:
Accounts receivable (net) $24,000
Trading securities 6,000
Accumulated depreciation on equipment and furniture 15,000
Cash 11,000
Inventory 30,000
Equipment 25,000
Patent 4,000
Prepaid expenses 2,000
Land held for future business site 18,000
In Stine's December 31, 2010 balance sheet, the current assets total is
a. $90,000. c. $82,000.
b. $77,000. d. $73,000.

Answer: A/R 24,000 + trading securities 6000 + cash 11000 + inventory 30,000 +
prepaid exp 2000= 73000 d

19.Kinder Company purchased equipment for $210,000 on 1/1/2015. The estimated

residual value is $10,000, and the estimated useful life is 10 years. The straight
line method is used for depreciation.
What is the annual depreciation expense on this asset?
a. $19,000 c. $20,000
b. $22,000 d. $190,000

Answer : annual dep exp = [210,000- 10000]/10= 20000 [c]

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20. Refer to the previous problem, the book value of the equipment at end of the third
year is:
a. $180,000 c. $200,000
b. $ 170,000 d. $150,000
Answer : Book value = cost 210000 – [Acc dep for 3 years 60,000]= 150,000 [d]

21-The primary difference between revenues and gains is: 

 
A. Gains are increases in net assets from peripheral activities while revenues are
increases from ongoing activities.

B. Revenues increase operating income and gains have no impact on net income.

C. Revenues cause increases in net assets as a result of peripheral activities and gains
cause increases through ongoing activities.

D. Gains result in an increase in operating income whereas revenues do not impact

operating income.

Answer: A

22. Lanz company has provided the following information

Cash Sales totaled $255,000 Credit Sales totaled $479,000
Cash collections from customers for services to be provided =$88,000
A $22,000 loss from the sale of property, plant and equipment occurred
Interest income was $7,700 Interest Expense was $19,900
Cost of Goods Sold $336,000 Rent Expense was 36,000
Salaries Expense was $49,000 Other operating expenses totaled
$79,00
Unearned Revenue $4000
Lantz Company has provided the following information:

How much was Lantz's operating income? 

A. 219,700 B. 322,000 C.199,800 D.234,000

Answer: Revenues [255000 +479000]- Expenses[336000 +49000+ 36000+79000]= d

23) A payment on bonds payable will be reported in the ________ section of the
statement of cash flows.
A) operating activities only
B) investing activities
C) financing activities
D) noncash investing and financing activities
Answer: C

24) Which of the following events do NOT affect cash flows from operating
activities? Assume the direct method is used.
A) cash sale of merchandise inventory
B) cash purchase of equipment

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C) cash purchase of inventory
D) cash paid for employees' wages

25) The cash paid to settle a long-term note payable is included in the ________
section of the statement of cash flows.
A) operating
B) investing
C) financing
D) noncash
Answer: C

26) The cash paid for taxes is included in the ________ section of the statement of
cash flows. Assume the direct method is used.
A) operating
B) investing
C) financing
D) noncash
Answer: A

27) The cash paid for employees' wages is included in the ________ section of the
statement of cash flows. Assume the direct method is used.
A) operating
B) financing
C) investing
D) noncash
Answer: A

28) The cash paid to purchase equipment is included in the ________ section of the
statement of cash flows.
A) operating
B) investing
C) financing
D) noncash
Answer: B

29) Cash collections from customers are included in the ________ section of the
statement of cash flows. Assume the direct method is used.
A) operating
B) investing
C) financing
D) noncash
Answer: A

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Old equipment having a book value of $12,000 was sold for $20,000 cash. New )30
equipment was purchased for $25,000 cash. Additional equipment was acquired in
exchange for a $17,000 long-term note payable. The net cash flow from investing
.________ activities was
A) $5,000 cash outflow
B) $22,000 cash outflow
C) $25,000 cash outflow
D) $42,000 cash outflow
Answer: A

31) California Company reports the following information:

12/31/14 12/31/15
Fixed Assets $330 $581
Less: Accumulated Depreciation (110) (127)
Net Fixed Assets $220 $454

Depreciation expense for the year ending December 31, 2015 is $17. No fixed assets
were sold during 2015. What is the net cash flow from investing activities for the year
?ending December 31, 2015
A) $17 cash inflow
B) $251 cash inflow
C) $251 cash outflow
D) $268 cash outflow
Answer: C

32 Listed below are selected accounts for Dentice Corporation:

December 31, 2013 December 31, 2014

Accounts Receivable $20,000 $40,000
Inventory $70,000 $30,000
Accounts Payable $20,000 $88,000
Wages payable $22,000 $1,000

For the year ended December 31, 2014, net income was $50,000 and depreciation
expense was $0. The net cash provided by operating activities for the year ending
December 31, 2014 was ________. Assume the indirect method is used.
A) $70,000
B) $90,000
C) $108,000
D) $117,000
Answer: D

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