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principles of financial accounting
Questions and Answers of
Principles Of Financial Accounting
Rijo SA uses the equity method to account for its ownership of 30% of the ordinary shares of Pippen Packing. During 2025, Pippen reported a net income of €80,000 and declares and pays cash
At December 31, 2025, the end of its first year of operations, the trading securities for Geneva AG are as follows.Instructionsa. Prepare the adjusting entry at December 31, 2025, to report the
At the end of the first year of operations, the total cost of the trading securities portfolio is ₩120,000,000. Total fair value is ₩115,000,000. The financial statements should show:a. a
Distinguish between the fair value and equity methods of accounting for investments in shares.
Zippydah SE has the following data at December 31, 2025.The non-trading securities are held as a long-term investment. This is the first year of the company’s operations.Instructionsa. Prepare the
In the statement of financial position, a debit balance in Unrealized Gain or Loss—Equity results in a(n):a. increase to equity.b. decrease to equity.c. loss in the income statement.d. loss in the
What are the classification guidelines for investments at a statement of financial position date?
Pate Ltd. pays £175,000 for 100% of Sinko’s ordinary shares when Sinko’s equity consists of Share Capital—Ordinary £100,000 and Retained Earnings £60,000. In the worksheet for the
Hashmi Group’s investments in non-trading securities at December 31 show total cost of£195,000 and total fair value of £205,000. Prepare the adjusting entry.
Altoona Wholesale Supply owns shares in Key Ltd. Altoona intends to hold the shares indefinitely because of some negative tax consequences if sold. Should the investment in Key be classified as a
(a) What asset and equity balances are eliminated in preparing a consolidated statement of financial position for a parent and a wholly owned subsidiary?(b) Why are they eliminated?
Yinhu Finance pays HK\($318,000,000\) to purchase all the outstanding ordinary shares of Lia Ltd. At the date of purchase, the net assets of Lia have a book value of HK\($290,000,000.\) Yinhu’s
Each of the items below must be considered in preparing a statement of cash flows for Aksu A.Ş. for the year ended December 31, 2025. For each item, state how it should be shown in the statement of
Laurent AG had these transactions during 2025.a. Issued CHF50,000 par value ordinary shares for cash.b. Purchased a machine for CHF30,000, giving a long-term note in exchange.c. Issued CHF200,000 par
Classify each item as an operating, investing, or financing activity. Assume all items involve cash unless there is information to the contrary.a. Purchase of equipment.b. Proceeds from sale of
The following T-account is a summary of the Cash account of Wiegman Ltd.What amount of net cash (in £) provided (used) by financing activities should be reported in the statement of cash
Which is an example of a cash flow from an operating activity?a. Payment of cash to lenders for interest.b. Receipt of cash from the issuance of ordinary shares.c. Payment of cash dividends to the
Mokena Ltd. reported net income of €2.0 million in 2025. Depreciation for the year was €160,000, accounts receivable increased€350,000, and accounts payable increased €280,000. Compute net
Bracewell Ltd. reported net income of £195,000 for 2025. Bracewell also reported depreciation expense of £40,000 and a gain of£5,000 on disposal of plant assets. The comparative statements of
The current sections of Nasreen SA’s statements of financial position at December 31, 2024 and 2025, are presented here. Nasreen’s net income for 2025 was €147,000. Depreciation expense was
The net income for Lodi Ltd. for 2025 was £250,000. For 2025, depreciation on plant assets was £65,000, and the company incurred a gain on disposal of plant assets of £12,000. Compute net cash
The three accounts shown below appear in the general ledger of Chaudry NV during 2025.Instructions From the postings in the accounts, indicate how the information is reported on a statement of cash
Cash dividends paid to shareholders are classified on the statement of cash flows as:a. an operating activity.b. an investing activity.c. a combination of an operating activity and an investing
Which is an example of a cash flow from a financing activity?a. Receipt of cash from sale of land.b. Issuance of debt for cash.c. Purchase of equipment for cash.d. Receipt of interest.
The T-accounts for Equipment and the related Accumulated Depreciation—Equipment for Gao Ltd. at the end of 2025 are shown here.In addition, Gao’s income statement reported a loss on disposal of
Why is it necessary to use comparative statements of financial position, a current income statement, and certain transaction data in preparing a statement of cash flows?
Meera Ltd.’s comparative statements of financial position are presented below.Additional information:1. Net income was £22,590. Dividends declared and paid were £16,500.2. All other changes in
Here are comparative statements of financial position for Syal SE.Additional information:1. Net income for 2025 was €103,000.2. Depreciation expense was €32,000.3. Cash dividends of €45,000
Distinguish between the direct and indirect methods of preparing the statement of cash flows. Are both methods acceptable? Which method is preferred by the IASB? Which method is more popular?
Cassandra SA’s comparative statements of financial position are presented below.Additional information:1. Net income was €23,300. Dividends declared and paid were €14,600.2. Equipment that cost
The following data are available for Allen Clapp Ltd.Net cash provided by operating activities is:a. HK$1,600,000.b. HK$2,200,000.c. HK$2,400,000.d. HK$2,800,000. Net income Depreciation expense
Recife Company completed its first year of operations on December 31, 2025. Its initial income statement showed that Recife had revenues of R\($195,000\) and operating expenses of R\($78,000.\)
The following data are available for Orange Peels Ltd.Net cash provided by investing activities is:a. NT$1,200,000.b. NT$1,300,000.c. NT$1,500,000.d. NT$1,900,000. Sale of land NT$1,000,000 Sale of
Suppose a recent income statement for McDonald’s Corporation (USA) shows cost of goods sold \($4,527.8\) million and operating expenses (including depreciation expense of \($1,120\) million)
The 2025 accounting records of Liz Ten Transport Ltd. reveal these transactions and events.Instructions Prepare the cash flows from operating activities section using the direct method. (Not all of
The following information is taken from the 2025 general ledger of Okonedo ASA.Instructions In each case, compute the amount that should be reported in the operating activities section of the
Kinsey Ltd. reported income taxes of £360,000,000 on its 2025 income statement, income taxes payable of £277,000,000 at December 31, 2024, and £525,000,000 at December 31, 2025. What amount of
Yaddof SE reports operating expenses of €70,000 excluding depreciation expense of €19,000 for 2025. During the year, prepaid expenses decreased €6,800 and accrued expenses payable increased
Financial information for Gallup SA is presented below.Instructions Prepare a schedule showing a horizontal analysis for 2025 using 2024 as the base year.Prepare vertical analysis. December 31, 2025
Free cash flow provides an indication of a company’s ability to:a. generate net income.b. generate cash to pay additional dividends.c. generate cash to invest in new capital expenditures.d.
Maria Fierro SpA reported the following amounts in 2023, 2024, and 2025.Instructions(a) Identify and describe the three tools of financial statement analysis.(b) Perform each of the three types of
Operating data for Conard Limited are presented below.Instructions Prepare a schedule showing a vertical analysis for 2025 and 2024.Prepare horizontal and vertical analyses. 2025 2024 Net sales
The comparative condensed statements of financial position of Garcia SLU are presented below.Instructionsa. Prepare a horizontal analysis of the statement of financial position data for Garcia using
Using the same data presented above in BE15.3 for Dotte NV, illustrate vertical analysis.Calculate percentage of change.BE15.3Using the following data from the comparative statements of financial
Sammy plc reported net sales of £300,000, £330,000, and £360,000 in the years, 2023, 2024, and 2025, respectively. If 2023 is the base year, what is the trend percentage for 2025?a. 77%.b. 108%.c.
The comparative condensed income statements of Hendi A.Ş. are shown below.Instructionsa. Prepare a horizontal analysis of the income statement data for Hendi using 2024 as a base.(Show the amounts
Bates Company issued \($1,000,000,\) 12-year bonds and agreed to make annual sinking fund deposits of \($60,000.\) The deposits are made at the end of each year into an account paying 6% annual
a. If Nimoy SA had net income of €350,000 in 2024 and it experienced a 22.4% increase in net income for 2025, what is its net income for 2025?b. If five cents of every euro of Nimoy revenue is net
Nordstrom, Inc. (USA), operates department stores in numerous states. The following is selected financial statement data for a recent year.For the year, net sales were $12,166 and cost of goods sold
Net income was €550,000 in 2023, €500,000 in 2024, and €525,000 in 2025. What is the percentage of change from(a) 2023 to 2024 and(b) 2024 to 2025? Is the change an increase or a
If Valdamorte plc had net income of £560,000 in 2025 and it experienced a 40%increase in net income over 2024, what was its 2024 net income?Calculate change in net income.
For KDK Co., beginning capital balances on January 1, 2025, are Deepika Kapoor INR20,000 and Kareena Dutt INR18,000 (amounts in thousands). During the year, drawings were Kapoor INR8,000 and Dutt
Bennis SA had the following transactions occur involving current assets and current liabilities during February 2025.Instructionsa. Compute the current ratio as of the beginning of the month and
Horizontal analysis (trend analysis) percentages for Kemplar Company’s sales revenue, cost of goods sold, and expenses are shown below.Did Kemplar’s net income increase, decrease, or remain
Hugh Curtin borrowed $35,000 on July 1, 2025. This amount plus accrued interest at 8% compounded annually is to be repaid on July 1, 2030. How much will Hugh have to repay on July 1, 2030?
Willingham Ltd. has the following comparative statements of financial position data.Additional information for 2025:1. Net income was £28,000.2. Sales on account were £418,000. Sales returns and
Arif, Falel, and Bayu are forming The Doctor Partnership. Arif is transferring Rs30,000 of personal cash and equipment worth Rs25,000 to the partnership (amounts in thousands). Falel owns land worth
A measure useful in evaluating the efficiency in managing inventories is:a. inventory turnover.b. days in inventory.c. either the inventory turnover or days in inventory.d. None of the answer choices
Vertical analysis (common size) percentages for Dagman Company’s sales revenue, cost of goods sold, and expenses are shown below.Did Dagman’s net income as a percentage of sales increase,
Selected comparative statement data for Molini Products are presented below. All statement of financial position data are as of December 31.Instructions Compute the following ratios for 2025.a.
Selected condensed data taken from a recent statement of financial position of Morino Ltd. are as follows.What are the(a) working capital,(b) current ratio, and(c) acid-test ratio?Calculate
The income statement for Christiansen A/S appears below.Additional information:1. The weighted-average ordinary shares outstanding in 2025 were 32,000 shares.2. The market price of Christiansen A/S
Rees Company experienced a fire on December 31, 2025, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following
Huntsinger SE has net income of €12.76 million and net revenue of €88 million in 2025. Its assets are €14 million at the beginning of the year and €18 million at the end of the year.What are
The following data are taken from the financial statements of Gladow Company.a. Compute for each year (1) the accounts receivable turnover and (2) the average collection period. At the end of 2023,
Yadier NV’s comparative statements of financial position are presented below.Yadier’s 2025 income statement included net sales of €100,000, cost of goods sold of €60,350, and net income of
Compute the return on ordinary shareholders’ equity for 2025.a. 47.9%.b. 51.7%.c. 61.2%.d. 59.4%.Use the following financial statement information as of the end of each year to answer Question.
The following data are from the income statements of Charles A.Ş.a. Compute for each year (1) the inventory turnover and (2) the days in inventory.b. What conclusions concerning the management of
Which ratios should be used to help answer the following questions?a. How efficient is a company in using its assets to produce sales?b. How near to sale is the inventory on hand?c. How many dollars
For its fiscal year ending October 31, 2025, Douglas Limited reports the following partial data shown below.The loss on discontinued division consists of £60,000 loss from operations of the division
Feng Company has equity of HK\($4,000,000\) and net income of HK\($680,000.\) It has a payout ratio of 22% and a return on assets of 16%. How much did Feng pay in cash dividends, and what were its
Trayer plc has income from continuing operations of £290,000 for the year ended December 31, 2025. It also has the following items (before considering income taxes).1. An unrealized loss of £80,000
In reporting discontinued operations, the statement of comprehensive income should show in a special section:a. gains and losses on the disposal of the discontinued component.b. gains and losses from
On June 30, Blevins ASA discontinued its operations in Europe. During the year, the operating loss was €320,000 before taxes. On September 1, Blevins disposed of its European facilities at a pretax
Scout Ltd. has income before taxes of £400,000, loss on operation of a discontinued division of £40,000, and a £60,000 loss on disposal of a division. If the income tax rate is 25% on all items,
The return on assets for Miller Limited is 7.6%. During the same year, Miller’s return on ordinary shareholders’ equity is 12.8%. What is the explanation for the difference in the two rates?
Gleason Enterprises issued 6%, 8-year, $2,500,000 par value bonds that pay interest semiannually on October 1 and April 1. The bonds are dated April 1, 2025, and are issued on that date. The discount
Frazier Company issues a 10%, 5-year mortgage note on January 1, 2025, to obtain financing for new equipment. Land is used as collateral for the note.The terms provide for semiannual installment
Tillman SA has net income of R\($160,000,\) weighted-average ordinary shares outstanding of 50,000, and preference dividends for the period of R\($30,000.\) What is Tillman’s earnings per share?Pat
You are considering investing in Cherokee Transportation. The company reports 2025 earnings per share of €6.50 on income from continuing operations and €4.75 on net income. Which EPS figure would
MRT Ltd. reported 2024 earnings per share of £3.20 and had no discontinued operations. In 2025, EPS on income from continuing operations was £2.99, and EPS on net income was £3.49. Is this a
Carly Simon wishes to invest \($18,000\) on July 1, 2025, and have it accumulate to \($50,000\) by July 1, 2035. Use a financial calculator to determine at what exact annual rate of interest Carly
On July 17, 2025, James Taylor borrowed \($66,000\) from his grandfather to open a clothing store. Starting July 17, 2026, James has to make 8 equal annual payments of \($11,225\) each to repay the
Using a financial calculator, provide a solution to each of the following situations.a. Lynn Anglin owes a debt of $42,000 from the purchase of her new sport utility vehicle. The debt bears annual
Using a financial calculator, solve for the unknowns in each of the following situations.a. On June 1, 2024, Holly Golightly purchases lakefront property from her neighbor, George Peppard, and agrees
Accounts receivable at the end of the month are €800,000. Bad debts are expected to be 1.5% of accounts receivable. If Allowance for Doubtful Accounts has a credit balance of €1,000 before
At December 31, 2025, Carlson Enterprises had accounts receivable of ₺750,000. On January 1, 2025, Allowance for Doubtful Accounts had a credit balance of ₺18,000. During 2025, ₺30,000 of
Ginter Ltd. holds Kolar Co.’s NT$10,000, 120-day, 9% note (amounts in thousands).The entry made by Ginter when the note is collected, assuming no interest has been previously accrued, is: a. Cash
Accounts and notes receivable are reported in the current assets section of the statement of financial position at:a. cash (net) realizable value.b. net book value.c. lower-of-cost-or-net realizable
Shin Industries had net credit sales during the year of ¥800,000 and cost of goods sold of ¥500,000 (amounts in thousands). The balance in accounts receivable at the beginning of the year was
Indicate the maturity date of each of the following promissory notes: Date of Note a. March 13 Terms one year after date of note 3 months after date b. May 4 c. June 20 30 days after date d. July 1
What percentage does TSMC’s 2020 allowance for doubtful accounts represent as a percentage of its gross receivables?
At the end of 2025, Chin Appliances has accounts receivable of ¥700,000 and an allowance for doubtful accounts of ¥54,000 (amounts in thousands). On January 24, 2026, the company learns that its
Compute interest and find the maturity date for the following notes (NT$ in thousands).Determine maturity dates and compute interest and rates on notes. Date of Note Principal Interest Rate (%) Terms
On January 10, 2025, Wilfer Ltd. sold merchandise on account to Robertsen Co. for HK$84,600, n/30. On February 9, Robertsen Co. gave Wilfer Ltd. a 10% promissory note in settlement of this account.
The financial statements of Minnesota Mining and Manufacturing Company (3M) (USA) report net sales of \($20.0\) billion. Accounts receivable (net) are \($2.7\) billion at the beginning of the year
Min Yachts has accounts receivable of 95,400 at March 31, 2025 (amounts in thousands). Credit terms are 2/10, n/30. At March 31, 2025, there is a 2,100 credit balance in Allowance for Doubtful
At December 31, 2024, Blanda Creations had a credit balance of €15,000 in Allowance for Doubtful Accounts. During 2025, Blanda wrote off accounts totaling €11,000. One of those accounts
On December 31, 2025, Ling Industries estimated that 2% of its net accounts receivable of ¥450,000 will become uncollectible (amounts in thousands). The company recorded this amount as an addition
Vandiver Company had the following select transactions.Instructions Prepare journal entries to record the transactions. Vandiver prepares adjusting entries once a year on December 31. Apr. 1, 2025
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