If a bond is sold at par
$1,000, has a life
of 5 years, and a contract rate
of 8%, how much will have to
paid to redeem the bond
on its maturity date?
If a bond is sold at par value for $1,000, it means that the bond is being sold for its face value. In this case, the bond will have to be redeemed for the same amount that it was sold for, which is $1,000. Therefore, $1,000 will have to be paid to redeem the bond on its maturity date.
The ratio that is computed by
liabilities and dividing
by total equity is called the:
B. Debt to equity ratio
The debt to equity ratio is computed by dividing total liabilities by total equity. This ratio is used to assess a company's financial leverage and risk. It indicates the proportion of a company's financing that comes from debt compared to equity. A higher ratio suggests that the company relies more on debt to finance its operations, which may indicate higher financial risk. Conversely, a lower ratio indicates a lower level of debt and a stronger equity position.
While the balance sheet is a "snapshot" of the
business, the income
statement has been compared to a "home video" because it
B. Shows the company's performance for a period of time
The income statement is compared to a "home video" because it shows the company's performance for a period of time, similar to how a home video captures a sequence of events over a period of time. It provides a summary of the company's revenues, expenses, and net income over a specific time frame, such as a month, quarter, or year. This allows stakeholders to assess the company's financial performance and profitability over a specific period.
The relationship among the accounting
elements found on the income statement
can be represented by
the following equation:
C. Answers A and B are both correct
The equation mentioned in the question, "revenues - expenses = net loss" and "revenues - expenses = net income," both represent the relationship among the accounting elements found on the income statement. The income statement calculates the net income or net loss by subtracting expenses from revenues. Therefore, both answer A and B are correct as they accurately represent this relationship.
The excess of the rewards over the sacrifices
for a given time period
is the monetary reward
business, which is also
D. All of these answers are correct.
The excess of the rewards over the sacrifices for a given time period refers to the monetary reward of doing business. This can be referred to as net earnings, earnings, or net profit. All of these terms essentially mean the same thing and can be used interchangeably to describe the financial gain from conducting business activities.
Gross margin is
an important item shown on
the income statement
D. It highlights the relationship between sales revenue and cost of goods sold
The correct answer is that gross margin highlights the relationship between sales revenue and cost of goods sold. Gross margin is a key metric that indicates how efficiently a company is generating revenue from the sale of its products. It represents the amount of money left after subtracting the cost of producing those products from the total sales revenue. By analyzing the gross margin, investors and analysts can assess the profitability and pricing strategy of a company.
The distributions to owners of proprietorships
and partnerships are also called:
The correct answer is "drawings". In the context of proprietorships and partnerships, the distributions made to the owners are referred to as drawings. This term is used to indicate that the owners are taking out funds from the business for personal use. It is different from dividends, which are typically associated with corporations. Sketches are unrelated to this concept, and net income refers to the overall profit earned by the business after deducting expenses.
accounting elements that make up the income statement are and .
C. Revenues; expenses
The income statement is a financial statement that shows a company's revenues and expenses over a specific period of time. Revenues represent the income generated from the sale of goods or services, while expenses are the costs incurred in the process of generating that revenue. By subtracting expenses from revenues, we can calculate the net income or net loss of the company. Therefore, the correct answer is "revenues; expenses".
The following information is available for a
Net sales, $750,950; Cost of goods sold, $330,418;
total expenses, $214,775; average total assets
the year, $459,785. What
company's gross profit margin ratio(round
your answer to two decimal places)?
The company's gross profit margin ratio can be calculated by subtracting the cost of goods sold from the net sales and dividing the result by the net sales. In this case, the gross profit is $750,950 - $330,418 = $420,532. Dividing this by the net sales of $750,950 gives a ratio of 0.56 or 56%.
During the month of May, $400 of services were performed by Belk & Rich, Inc. If Belk & Rich received $100 during
May and $300 during June and uses
cash basis of accounting,
when and how much revenue should
A. $100 in May; $300 in June
If the JJ Company performs services for
in the amount of
$770 during June and collects the
money from the client during July
under a cash basis accounting system, when and how much
revenue should JJ Company recognize in June and July?
B. $0 during June; $770 during July
Under a cash basis accounting system, revenue is recognized when cash is received. Since the JJ Company collected the money from the client during July, they should recognize the revenue of $770 in July. Therefore, the correct answer is $0 during June; $770 during July.
The Corner Dress shop buys $200 of
dresses during May. Corner
Dress pays $150 of that amount during May
the remainder in June. During
June, Corner Dress buys $300 of
$100 during June and the remainder in July. If the Corner
Dress Shop uses a cash basis accounting system, how much should
shop recognize as an expense during
The shop should recognize $150 as an expense during May because that is the amount they paid for the dresses during that month. The remaining amount that they paid in June and July would be recognized as expenses in those respective months.
Baaker Auto Body
Repair uses electricity
costing $200 during
February and pays for them in March. How much will Baaker recognize
under an accrual basis
system of accounting?
C. $200 expense in February
Under an accrual basis system of accounting, expenses are recognized when they are incurred, regardless of when they are paid. In this case, Baaker Auto Body Repair incurred the electricity expense in February, even though they paid for it in March. Therefore, Baaker will recognize $200 as an expense in February.
accounting we recognize revenue
when it is:
B. Earned, no matter when payment for it is received
Under accrual accounting, revenue is recognized when it is earned, regardless of when payment for it is received. This means that revenue is recorded when the goods or services have been provided, and the customer is obligated to pay for them, regardless of whether the payment is received immediately or at a later date. This method ensures that revenue is matched with the corresponding expenses and provides a more accurate representation of the financial performance of a company.
Son's Auto Repair acquires supplies costing $200
during February and
pays for the supplies in March, how much will Sanford and
Son recognize under
a cash basis system of accounting?
C. $200 expense in March only
Under a cash basis system of accounting, expenses are recognized when they are paid. Since Sanford and Son's Auto Repair pays for the supplies in March, the expense of $200 will be recognized in March only.
The Corner Dress shop uses $200 in advertising during May. Corner Dress pays $150 of that amount
during May and the remainder in
June. During June, Corner Dress uses $300 in advertising paying for $100 during June and the remainder in July. If Corner
Dress uses an accrual basis
how much should the shop recognize as an advertising expense during
According to the accrual basis accounting system, expenses should be recognized when they are incurred, regardless of when the payment is made. In this case, the Corner Dress shop incurs $200 in advertising expenses during May, even though only $150 is paid during that month. Therefore, the correct answer is $200.
What is the relationship between
a company receiving
cash and recognizing revenue?
A. All of these answers are correct.
The relationship between a company receiving cash and recognizing revenue can vary depending on the specific circumstances. In some cases, cash may be received after the revenue has been earned, indicating that the company has already provided goods or services and is now receiving payment. In other cases, cash may be received before the revenue has been earned, suggesting that the company has received an advance payment or deposit for future goods or services. Lastly, cash may be received at the time revenue is earned, indicating that the company is receiving payment simultaneously with providing goods or services. Therefore, all of these answers are correct as they represent different scenarios in which cash and revenue recognition are related.
Accrual accounting attempts to
establish a relationship between revenues and expenses. This
relationship is called:
Accrual accounting attempts to establish a relationship between revenues and expenses by matching them. Matching refers to the practice of recording revenues and the expenses associated with generating those revenues in the same accounting period. This ensures that the financial statements accurately reflect the financial performance of a company during a specific period of time. By matching revenues and expenses, accrual accounting provides a more accurate representation of a company's profitability and helps in making informed financial decisions.
The Ladybug Dress shop
uses $200 in
advertising during May. Ladybug pays $150 of that
amount during May
the remainder in
June. During June, Ladybug uses
$300 in advertising
for $200 during June and the remainder in July.
If Ladybug uses an
accrual basis accounting system, how much should the shop recognize as an advertising expense during
In accrual basis accounting, expenses are recognized when they are incurred, regardless of when the payment is made. Since Ladybug used $300 in advertising during June, the shop should recognize $300 as an advertising expense during that month.
can adopt a policy in which it
resolves to pay a set amount as a
dividend each year as long as it has:
A. Both sufficient retained earnings and sufficient cash each year to pay the amount
A company can adopt a policy to pay a set amount as a dividend each year if it has both sufficient retained earnings and sufficient cash. This means that the company should have enough profits from previous years (retained earnings) and enough cash on hand to cover the dividend payment. This ensures that the company can fulfill its commitment to pay dividends without jeopardizing its financial stability. The other options mentioned, such as sufficient net income for the current year and approval of stockholders, are not sufficient on their own to guarantee the payment of dividends.
Bowl and Space Burgers purchases
a grill for $5,000. The company expects to use it for four years. If the company
thinks that it can sell the
grill at the end of the fourth year for $500, how much is the residual value of the grill?
B. $ 500
The residual value of an asset is the estimated amount that the asset will be worth at the end of its useful life. In this case, the company expects to sell the grill for $500 at the end of the fourth year. Therefore, the residual value of the grill is $500.
step in the accrual matching
A. To determine in which income statement period a company should recognize a particular revenue
The first step in the accrual matching process is to determine in which income statement period a company should recognize a particular revenue. This means that the company needs to identify the specific period in which the revenue was earned, regardless of when the cash was received. This is important for accurately matching the revenue with the corresponding expenses incurred in generating that revenue. By recognizing the revenue in the correct period, the company can provide a more accurate representation of its financial performance for that period.
In accounting, an
asset's depreciable base
is calculated as:
A. Asset cost - residual value
The correct answer is asset cost - residual value. The depreciable base of an asset is calculated by subtracting the residual value from the asset cost. The residual value represents the estimated value of the asset at the end of its useful life, and subtracting it from the asset cost gives us the amount that can be depreciated over the asset's useful life.
An inflow of
resources that comes to the business when
it delivers services to a customer
Revenue is the correct answer because it refers to the inflow of resources that a business receives when it delivers services to a customer. Revenue is generated from the sales of goods or services and is considered as an asset for the business. It represents the income earned by the business and contributes to its profitability.
The basic formula used by a company to compute its income tax is:
A. Taxable income × tax rate
The correct answer is taxable income × tax rate. This is the basic formula used by a company to compute its income tax. The taxable income is the amount of income that is subject to tax after deducting allowable expenses and exemptions. The tax rate is the percentage of the taxable income that the company is required to pay as tax. By multiplying the taxable income by the tax rate, the company can calculate the amount of income tax it owes to the government.
four main areas of financial
efficiency, liquidity, and
Ratios that look at how a company is financed and
its prospects for making
payments to creditors and owners are:
C. Solvency ratios
Solvency ratios are used to assess a company's ability to meet its long-term debt obligations. These ratios provide insight into the company's financial stability and its capacity to repay its debts. By analyzing solvency ratios, investors and creditors can evaluate the risk associated with lending money to the company. This information helps them determine whether the company has enough assets and cash flow to cover its long-term liabilities, ensuring that it can honor its financial obligations in the future.
statement that provides a "bridge" between the information
the income statement
provides and the information the balance
sheet provides is the:
A. Statement of owners' equity
The statement of owners' equity provides a "bridge" between the income statement and the balance sheet because it shows how the net income or loss from the income statement affects the owners' equity section of the balance sheet. It includes information about changes in the owners' capital, additional investments, withdrawals, and net income or loss. By analyzing the statement of owners' equity, one can understand how the income statement impacts the overall financial position of the company as reflected in the balance sheet.
The ratio that is computed by
taking total assets
and dividing them by total liabilities
is called the:
C. Debt ratio
The ratio that is computed by taking total assets and dividing them by total liabilities is called the debt ratio. This ratio helps to assess the financial leverage of a company and indicates the proportion of a company's assets that are financed by debt. A higher debt ratio indicates a higher level of debt relative to assets, which may imply higher financial risk for the company. Conversely, a lower debt ratio indicates a lower level of debt and potentially a stronger financial position.
between a lender and a borrower that sets
terms of the loan and repayment arrangement is
B. Promissory note
A promissory note is a legal document that outlines the terms and conditions of a loan agreement between a lender and a borrower. It includes details such as the amount borrowed, interest rate, repayment schedule, and any other relevant terms. The borrower promises to repay the loan according to the agreed-upon terms, and failure to do so can result in legal consequences. Therefore, a promissory note is the correct answer as it accurately describes the agreement between a lender and a borrower for a loan.
statement of cash flows, activities that
are associated with a company's ownership of stock and
bonds of other companies are called:
C. Investing activities
The correct answer is investing activities. In the statement of cash flows, investing activities refer to the buying and selling of long-term assets such as stocks and bonds of other companies. This includes the purchase and sale of equity securities and debt securities, as well as any income generated from these investments. It is important to distinguish investing activities from other categories such as operating activities, which involve the day-to-day operations of the company, financing activities, which involve the raising and repayment of capital, and continuing activities, which encompass both operating and financing activities.
When compared to
partnerships and sole proprietorships, corporations are at
a disadvantage as a form of
B. More government regulations with which to comply
Corporations are at a disadvantage as a form of business because they have more government regulations with which to comply. Unlike partnerships and sole proprietorships, corporations are subject to stricter regulations and oversight from government authorities. This can include requirements related to financial reporting, corporate governance, compliance with labor and environmental laws, and more. These regulations can be time-consuming and costly for corporations to adhere to, creating a disadvantage compared to other forms of business.
A company invests in a new building
equipment to manufacture a new product. In the statement of cash flows, this activity
be considered a(n):
B. Investing activity
The company's investment in a new building and equipment to manufacture a new product falls under the category of investing activity in the statement of cash flows. This is because the company is using its cash to acquire assets that will generate future income and contribute to the growth of the business. Investing activities include the purchase or sale of long-term assets, such as property, plant, and equipment, as well as investments in other companies.
at financial statements to scrutinize how the
statement items and amounts relate to each other is known as:
D. Financial statement analysis
Financial statement analysis involves examining the different items and amounts in financial statements to understand their relationships and implications. It is a process of evaluating the financial health and performance of a company by analyzing its financial statements, such as the balance sheet, income statement, and cash flow statement. This analysis helps in assessing the company's profitability, liquidity, solvency, and efficiency. It is a crucial tool for investors, creditors, and managers to make informed decisions and understand the overall financial position of a company.
rate of interest printed on a bond that
is used to calculate
bond's interest payments is called the:
A. Nominal interest rate
The rate of interest printed on a bond that is used to calculate the bond's interest payments is called the nominal interest rate. This rate represents the stated or advertised interest rate that the bond issuer promises to pay to the bondholder. It is important to note that the nominal interest rate does not take into account factors such as inflation or compounding, and therefore may not reflect the actual return on investment for the bondholder.
When a bond sells
for 102, it has sold
When a bond sells for 102, it means that the bond is being sold at a price higher than its face value. A premium is the amount by which the bond's price exceeds its face value. Therefore, in this case, the bond is being sold at a premium.
If a $1,000 bond sells for 95, this bond
has sold at a:
A bond selling at a discount means that it is being sold for less than its face value. In this case, the $1,000 bond is being sold for $950 (95% of its face value), indicating a discount. This could be due to factors such as lower interest rates or a higher perceived risk associated with the bond.
You buy a used pickup truck
$3,500 in cash and borrow the rest
of the money
a bank. Using the
accounting equation, how much do
still owe for the
Based on the information provided, you bought a used pickup truck for $10,000. You paid $3,500 in cash, which means you still owe the remaining amount. Therefore, you still owe $6,500 for the truck.
The cost of
is known as:
The correct answer is "interest" because interest refers to the amount of money that is charged for borrowing or lending money. It is the cost of borrowing money and is typically expressed as a percentage of the principal amount. The interest rate is determined by factors such as the borrower's creditworthiness, the length of time the money is borrowed for, and the prevailing market rates. Therefore, interest is the correct term to describe the cost of borrowing money.
A bond is sold below its par value. The amount below
par value for which it
is sold is called the:
When a bond is sold below its par value, it means that it is sold at a price lower than its face value. The difference between the selling price and the face value is called the discount. The discount represents the amount by which the bond's price is discounted or reduced. This occurs when the bond's interest rate is lower than the prevailing market interest rate, making it less attractive to investors. As a result, the bond is sold at a discount to compensate for the lower interest payments.
wishes to purchase $5 par value
stock from Star Industries
Corporation. Li Pe is willing to pay
each of the shares
if Star Industries will sell
her 100 of them. The amount
will record as "Additional paid-in
capital" on this
The "Additional paid-in capital" is the amount that a company receives from investors in excess of the par value of its stock. In this case, Li Pe is willing to pay $12 per share for 100 shares, which amounts to $1,200. Since the par value of each share is $5, the excess amount that Star Industries will receive is $12 - $5 = $7. Therefore, the total "Additional paid-in capital" on this sale will be $7 x 100 = $700.
The amount that must be paid back upon
maturity of the bond is
known as the bond's:
D. Par value
The par value of a bond refers to the amount that the issuer promises to repay the bondholder upon maturity. It is the face value or principal amount of the bond, which is typically set at the time of issuance. The par value is important because it determines the amount that the bondholder will receive when the bond reaches its maturity date. It is not influenced by factors such as market conditions or interest rates, unlike the bond's discount or premium. Interest, on the other hand, refers to the periodic payments made to bondholders as a form of compensation for lending money.
off a bond
issue. This activity would
be considered a(n):
B. Financing activities
When a company pays off a bond issue, it is considered a financing activity. This is because bonds are a form of long-term debt that the company has taken on to finance its operations. By paying off the bond, the company is reducing its debt and therefore engaging in a financing activity. Operating activities refer to the day-to-day activities of the company, investing activities involve the acquisition or sale of long-term assets, and continuing activities is not a recognized category in accounting.
The economic sacrifices that are a normal part
of operating a business are commonly referred to
Expenses refer to the economic sacrifices that a business incurs in order to operate. These sacrifices can include costs for materials, labor, rent, utilities, and other necessary expenditures. By subtracting expenses from revenue, a business can determine its net income, which represents the amount of profit or loss generated. Owners' equity, on the other hand, refers to the residual interest in the assets of a business after deducting liabilities. Therefore, expenses are the correct answer as they represent the economic sacrifices made by a business.
Whirlwind Tours has just acquired
a new tour bus. The bus cost $45,000 to purchase, but then Whirlwind
additional $3,000 to
with the Whirlwind logo and
ready to use. If Whirlwind plans to use the bus for
five years, and then hopes to sell
it for $12,000,
how much depreciation will be recognized each year under
The depreciation expense is calculated by subtracting the expected salvage value ($12,000) from the initial cost of the bus ($45,000 + $3,000 = $48,000) and dividing it by the useful life of the bus (5 years). Therefore, the depreciation expense per year under the straight-line method is ($48,000 - $12,000) / 5 = $7,200.
The Tool Box
has just purchased a new machine for $50,000. The Tool Box plans to use the machine for 10 years, at which time they
believe that they will
able to sell it for $2,000. If
Tool Box uses straight-line depreciation, how much will they
depreciate each year?
The correct answer is $4,800. Straight-line depreciation is calculated by taking the initial cost of the machine ($50,000) and subtracting the estimated salvage value ($2,000), then dividing the result by the useful life of the machine (10 years). In this case, the calculation would be: ($50,000 - $2,000) / 10 = $4,800. Therefore, The Tool Box will depreciate the machine by $4,800 each year.
If Ruby's Video Store purchases a new cash register for $2,500 and
plans to use it
three years before disposing of it for an estimated
$400, how much depreciation will Ruby's recognize each year under the straight-line
The depreciation expense is calculated by subtracting the salvage value from the initial cost and dividing it by the useful life of the asset. In this case, the initial cost is $2,500 and the salvage value is $400. The useful life is three years. Therefore, the depreciation expense per year is ($2,500 - $400) / 3 = $700.
method calculates depreciation expense:
A. At twice (or double) the straight-line rate
The double-declining-balance method calculates depreciation expense at twice (or double) the straight-line rate. This means that the depreciation expense each year will be a higher percentage of the asset's initial cost compared to the straight-line method. It allows for a faster recognition of depreciation expense in the earlier years of an asset's life, reflecting the concept that assets tend to lose their value more rapidly in the early years. This method does not consider the asset's residual value or book value in its calculation, focusing solely on the straight-line rate.
If a stock carries
a par value,
the par value multiplied
by the number of
shares issued is classified as stock on the balance
sheet. Any amount received
in excess of the stock's par value is classified as:
C. Answers A and B are both correct.
The par value of a stock multiplied by the number of shares issued is classified as stock on the balance sheet. Any amount received in excess of the stock's par value is classified as additional paid-in capital or paid-in capital in excess of par. Both options A and B are correct because they refer to the same concept of the excess amount being classified as additional paid-in capital. Reinvested earnings, on the other hand, refer to profits that are retained and reinvested back into the company, which is not relevant to this question.
just paid $500 to
purchase 25 shares of Active Company
stock. If the par value on each
share is $10, then the amount that
records as "Common stock" is:
just purchased 50
shares of $3 par value stock from JML Corporation. He paid
a total of
$275 for the shares.
How much will JML recognize
as "Additional paid-in capital" from the sale?
JML will recognize $125 as "Additional paid-in capital" from the sale. This is calculated by subtracting the par value of the stock ($3) from the total amount paid for the shares ($275). In this case, $3 multiplied by 50 shares equals $150, so $275 - $150 = $125.