Intermediate Accounting Test 1 Flashcards

Question 1

(400 + 600)/10,000 = 10%
How is the average days in inventory calculated?
Assume an investor provides a company with $10,000 cash by
purchasing stock at the end of 2023, receives $400 in dividends from the company during 2024, and sells the ownership interest (shares) at the end of 2024 for $10,600. What is the rate of return?
The Trident Corporation's results for the year ended December 31, 2024, include the following material items:
Sales revenue = 8,200,000
Cost of goods sold = 4,800,000
Selling and administrative expenses = 2,000,000
Gain on sale of investments = 300,000
Loss on discontinued operations = 1,200,000
Restructuring costs = 280,000
Trident Corporation's income from continuing operations before income taxes for 2024 is:
How is return on equity calculated?

Accepted Answer

Assume an investor provides a company with $10,000 cash by
purchasing stock at the end of 2023, receives $400 in dividends from the company during 2024, and sells the ownership interest (shares) at the end of 2024 for $10,600. What is the rate of return?

Question 2

5%
Creecher purchased $200,000 worth of Troman stock, received four quarterly dividends of $1,000 each, and sold the Troman shares for $206,000 after one year. What is Creecher's rate of return?
The Trident Corporation's results for the year ended December 31, 2024, include the following material items:
Sales revenue = 8,200,000
Cost of goods sold = 4,800,000
Selling and administrative expenses = 2,000,000
Gain on sale of investments = 300,000
Loss on discontinued operations = 1,200,000
Restructuring costs = 280,000
Trident Corporation's income from continuing operations before income taxes for 2024 is:
The Wazoo Company reported an $11,200 liability in its 2023 balance sheet for subscription revenue received in advance. During 2024, $62,000 was received from customers for subscriptions and the 2024 income statement reported subscription revenue of $63,700. What is the liability amount for deferred subscription revenue that will appear in the 2024 balance sheet?
If the required adjusting entry for prepaid rent that has expired for the period is omitted:
a. assets will be overstated and net income overstated.
b. assets will be understated and net income overstated.
c. assets will be understated and net income understated.
d. assets will be overstated and net income understated.

Accepted Answer

Creecher purchased $200,000 worth of Troman stock, received four quarterly dividends of $1,000 each, and sold the Troman shares for $206,000 after one year. What is Creecher's rate of return?

Question 3

b.
How is the acid-test (quick) ratio calculated?
Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $340,000; Cash paid for rent, $40,000; Cash paid to employees for services rendered during the year, $120,000; Cash paid for utilities, $50,000. In addition, you determine that customers owed the company $60,000 at the end of the year, and no bad debts were anticipated. Also, the company owed the gas and electric company $2,000 at year-end, and the rent payment was for a two-year period. Calculate accrual net income for the year.
How is profit margin calculated?
Which of the following is not an advantage of accrual accounting?
a. Spreads out the influence of one time events that affect multiple reporting periods
b. Highlights cash effects of operations
c. Captures long run performance
d. Recognizes assets and liabilities associated with receivables and payables

Accepted Answer

Which of the following is not an advantage of accrual accounting?
a. Spreads out the influence of one time events that affect multiple reporting periods
b. Highlights cash effects of operations
c. Captures long run performance
d. Recognizes assets and liabilities associated with receivables and payables

Question 4

a.
On October 1, 2024, American Medical Inc. adopted a plan to discontinue its generic drug division, which qualifies as a separate component of the business according to GAAP regarding discontinued operations. The disposal of the division was expected to be concluded by March 30, 2025. On December 31, 2024, the company's year-end, the following information relative to the discontinued division was accumulated:
Operating loss for 2024 = $195 million
Excess of book value over fair value, less costs to sell, at year-end = 25 million
In its income statement for the year ended December 31, 2024, American would report a before-tax loss on discontinued operations of:
How is working capital calculated?
Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $340,000; Cash paid for rent, $40,000; Cash paid to employees for services rendered during the year, $120,000; Cash paid for utilities, $50,000. In addition, you determine that customers owed the company $60,000 at the end of the year, and no bad debts were anticipated. Also, the company owed the gas and electric company $2,000 at year-end, and the rent payment was for a two-year period. Calculate accrual net income for the year.
Accounting standards in the United States are currently set by:
a. The FASB
b. The AICPA
c. The EITF
d. The NCAA

Accepted Answer

Accounting standards in the United States are currently set by:
a. The FASB
b. The AICPA
c. The EITF
d. The NCAA

Question 5

$208,000
How is the current ratio calculated?
How is working capital calculated?
Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $340,000; Cash paid for rent, $40,000; Cash paid to employees for services rendered during the year, $120,000; Cash paid for utilities, $50,000. In addition, you determine that customers owed the company $60,000 at the end of the year, and no bad debts were anticipated. Also, the company owed the gas and electric company $2,000 at year-end, and the rent payment was for a two-year period. Calculate accrual net income for the year.
A prepaid expense:
a. occurs when an expense is recorded in the current period but not paid until a future period.
b. occurs when a company receives cash from customers prior to providing goods and services to those customers.
c. occurs when an asset is acquired in the current period but not expensed until a future period.
d. All of these answer choices are incorrect.

Accepted Answer

Cash flows during the first year of operations for the Harman-Kardon Consulting Company were as follows: Cash collected from customers, $340,000; Cash paid for rent, $40,000; Cash paid to employees for services rendered during the year, $120,000; Cash paid for utilities, $50,000. In addition, you determine that customers owed the company $60,000 at the end of the year, and no bad debts were anticipated. Also, the company owed the gas and electric company $2,000 at year-end, and the rent payment was for a two-year period. Calculate accrual net income for the year.

Question 6

Assets = 39,000; Equity = 39,000
Show the effect on the accounting equation. Provide services to customers on account for $39,000.
Danielle Corporation received $2,000,000 from investors and issued them shares of its stock. Danielle's journal entry to record this transaction would include a:
a. debit to investments
b. credit to common stock
c. credit to retained earnings
d. credit to revenue
Which of the following is not an advantage of accrual accounting?
a. Spreads out the influence of one time events that affect multiple reporting periods
b. Highlights cash effects of operations
c. Captures long run performance
d. Recognizes assets and liabilities associated with receivables and payables
The closing process involves:
a. Recording year-end entries.
b. Transferring revenue and expense balances to retained earnings.
c. Closing out the permanent account balances.

Accepted Answer

Show the effect on the accounting equation. Provide services to customers on account for $39,000.

Question 7

Assets = 31,000; Liabilities = 31,000
Show the effect on the accounting equation. Provide services to customers on account for $39,000.
The Trident Corporation's results for the year ended December 31, 2024, include the following material items:
Sales revenue = 8,200,000
Cost of goods sold = 4,800,000
Selling and administrative expenses = 2,000,000
Gain on sale of investments = 300,000
Loss on discontinued operations = 1,200,000
Restructuring costs = 280,000
Trident Corporation's income from continuing operations before income taxes for 2024 is:
Accounting standards in the United States are currently set by:
a. The FASB
b. The AICPA
c. The EITF
d. The NCAA
Show the effect on the accounting equation. Purchase equipment by signing a note with the bank for $31,000.

Accepted Answer

Show the effect on the accounting equation. Purchase equipment by signing a note with the bank for $31,000.

Question 8

b.
How is the average days in inventory calculated?
Show the effect on the accounting equation. Provide services to customers on account for $39,000.
Which of the following is most likely to be reported as a long-term asset?
a. Accounts receivable
b. Buildings
c. Prepaid rent
d. Inventory
Danielle Corporation received $2,000,000 from investors and issued them shares of its stock. Danielle's journal entry to record this transaction would include a:
a. debit to investments
b. credit to common stock
c. credit to retained earnings
d. credit to revenue

Accepted Answer

Danielle Corporation received $2,000,000 from investors and issued them shares of its stock. Danielle's journal entry to record this transaction would include a:
a. debit to investments
b. credit to common stock
c. credit to retained earnings
d. credit to revenue

Question 9

11,200 + 62,000 - 63,700 = 9,500
The correct amount of prepaid insurance shown in a company's December 31, 2023, balance sheet was $900. On July 1, 2024, the company paid an additional insurance premium of $600. In the December 31, 2024, balance sheet, the amount of prepaid insurance was correctly shown as $500. The amount of insurance expense that should appear in the company's 2024 income statement is:
How is profit margin calculated?
The Wazoo Company reported an $11,200 liability in its 2023 balance sheet for subscription revenue received in advance. During 2024, $62,000 was received from customers for subscriptions and the 2024 income statement reported subscription revenue of $63,700. What is the liability amount for deferred subscription revenue that will appear in the 2024 balance sheet?
How is the inventory turnover ratio calculated?

Accepted Answer

The Wazoo Company reported an $11,200 liability in its 2023 balance sheet for subscription revenue received in advance. During 2024, $62,000 was received from customers for subscriptions and the 2024 income statement reported subscription revenue of $63,700. What is the liability amount for deferred subscription revenue that will appear in the 2024 balance sheet?

Question 10

c.
How is the debt to equity ratio calculated?
What are the 4 main components of a multi-step income statement?
A prepaid expense:
a. occurs when an expense is recorded in the current period but not paid until a future period.
b. occurs when a company receives cash from customers prior to providing goods and services to those customers.
c. occurs when an asset is acquired in the current period but not expensed until a future period.
d. All of these answer choices are incorrect.
Which of the following is most likely to be reported as a long-term asset?
a. Accounts receivable
b. Buildings
c. Prepaid rent
d. Inventory

Accepted Answer

A prepaid expense:
a. occurs when an expense is recorded in the current period but not paid until a future period.
b. occurs when a company receives cash from customers prior to providing goods and services to those customers.
c. occurs when an asset is acquired in the current period but not expensed until a future period.
d. All of these answer choices are incorrect.

Intermediate Accounting Test 1

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