Questions and Answers of Principles Of Financial Accounting

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
Laskova A/S had accounts receivable of €100,000 on January 1, 2025. The only transactions that affected accounts receivable during 2025 were net credit sales of €1,000,000, cash collections of
Under GAAP, receivables are reported on the balance sheet (statement of financial position) at:a. gross amount.b. gross amount less allowance for doubtful accounts.c. historical cost.d. replacement
Under IFRS:a. the entry to record estimated uncollectible accounts is the same as GAAP.b. all impairments should be debited to Accounts Receivable.c. it is always acceptable to use the direct
Chang Industries purchased a piece of equipment on January 1, 2025. The equipment cost HK$$600,000$ and has an estimated life of 8 years and a residual value of HK$$80,000.$ What was the
Able Towing purchased a tow truck for £60,000 on January 1, 2023. It was originally depreciated on a straight-line basis over 10 years with an assumed residual value of £12,000. On December 31,
Wales Remodeling applies revaluation accounting to equipment that is recorded on its books at €800,000, with €100,000 of accumulated depreciation after depreciation for the year recorded. It has
Which of the following statements is false?a. If an intangible asset has a finite life, it should be amortized.b. The amortization period of an intangible asset can exceed 20 years.c. Goodwill is
Tianzi Coffee reported net sales of HK$$1,800,000,$ net income of HK$$540,000,$ beginning total assets of HK$$2,000,000,$ and ending total assets of HK$$3,000,000.$ What was the company’s
On January 1, 2025, the Vasquez SA ledger shows Equipment €32,000 and Accumulated Depreciation—Equipment €9,000. The depreciation resulted from using the straight-line method with a useful life
Arma Ltd. sells equipment on September 30, 2025, for £20,000 cash. The equipment originally cost £72,000 and as of January 1, 2025, had accumulated depreciation of £42,000. Depreciation for the
Felipe Engineering purchases a patent for R$120,000 on January 2, 2025. Its estimated useful life is 8 years.a. Prepare the journal entry to record amortization expense for the first year.b. Show how
Information related to plant assets, extractable natural resources, and intangibles at the end of 2025 for Loomis Energy is as follows: buildings £1,300,000, accumulated depreciation—buildings
The following expenditures (in thousands) relating to plant assets were made by Lee Jung Ltd. during the first 2 months of 2025.1. Paid ₩5,000 of accrued taxes at time plant site was acquired.2.
Bliesmer Electronics incurred the following costs.Instructions Indicate to which account Bliesmer would debit each of the costs. 1. Sales tax on factory machinery purchased 5,000 2. Painting of and
On March 1, 2025, Rollinger Group acquired real estate on which it planned to construct a small office building. The company paid €86,000 in cash. An old warehouse on the property was razed at a
Xanadu A/S purchased a new machine on October 1, 2025, at a cost of €96,000. The company estimated that the machine will have a residual value of €12,000. The machine is expected to be used for
Tanger Interiors purchased a delivery truck for R$$38,000$ on January 1, 2025. The truck has an expected residual value of R$$6,000,$ and is expected to be driven 100,000 miles over its estimated
Mooney Ltd. completed construction of an office building for £2,400,000 on December 31, 2024. The company estimated that the building would have a residual value of £0 and a useful life of 40
Steve Grant, the new controller of Greenbriar Ltd., has reviewed the expected useful lives and residual values of selected depreciable assets at the beginning of 2025. His findings are as follows.All
Barton Enterprises purchased equipment on January 1, 2025, at a cost of €350,000. Barton uses the straight-line depreciation method, a 5-year estimated useful life, and no residual value. At the
At December 31, 2025, the end of its first year of operations, Franklin SA chose to use the revaluation framework allowed under IFRS. Franklin’s ledger shows Equipment €750,000 and Accumulated
Presented below are selected transactions at Ingles Company for 2025.Jan. 1 Retired a piece of machinery that was purchased on January 1, 2015. The machine cost£58,000 on that date. It had a useful
Francis Manufacturing owns equipment that cost €50,000 when purchased on January 1, 2022. It has been depreciated using the straight-line method based on an estimated residual value of €8,000 and
On July 1, 2025, Ticino AG invested CHF736,000 in a mine estimated to have 800,000 tons of ore of uniform grade. During the last 6 months of 2025, 124,000 tons of ore were mined.Instructionsa.
The following are selected 2025 transactions of Yosuke Ltd.Jan. 1 Purchased a small company and recorded goodwill of €150,000. Its useful life is indefinite.May 1 Purchased for €84,000 a patent
Nelson Company, organized in 2025, has the following transactions related to intangible assets.Instructions Prepare the necessary entries to record these intangibles. All costs incurred were for
During 2025, Otaki Cellular reported net sales of €5,200,000 and net income of €1,500,000.Its statement of financial position reported average total assets of €1,600,000.Instructions Calculate
Jay’s Delivery Company and Astro’s Express Delivery exchanged delivery trucks on January 1, 2025. Jay’s truck cost €22,000. It has accumulated depreciation of €16,000 and a fair value of
Rando Company has land that cost $$450,000$ but now has a fair value of $$600,000.$ Rando Company follows GAAP to account for the land. Which of the following statements is correct?a. Rando
Ong Imports borrows ₩88,500 (amounts in thousands) on September 1, 2025, from Seoul City Bank by signing an ₩88,500, 12%, one-year note. What is the accrued interest at December 31, 2025?a.
RS Company borrowed €70,000 on December 1 on a 6-month, 6% note. At December 31:a. neither the note payable nor the interest payable is a current liability.b. the note payable is a current
Becky Sherrick Company has total proceeds from sales of $4,515. If the proceeds include sales taxes of 5%, the amount to be credited to Sales Revenue is:a. $4,000.b. $4,300.c. $4,289.25.d. None of
Employers’ payroll taxes include:a. salaries and wages expense.b. union dues payable.c. income taxes payable.d. Social Security taxes payable.
A provision should be recorded in the accounts when:a. it is probable the cash outflow will happen, but the amount cannot be reliably estimated.b. it is possible the cash outflow will happen, and the
At December 31, Beijing Supply prepares an adjusting entry for a product warranty contract. Which of the following accounts is/are included in the entry?a. Miscellaneous Expense.b. Warranty
Working capital is calculated as:a. current assets minus current liabilities.b. total assets minus total liabilities.c. non-current liabilities minus current liabilities.d. either total assets minus
The current ratio is computed as:a. total assets divided by total liabilities.b. total assets divided by current liabilities.c. current assets divided by total liabilities.d. current assets divided
South Ulsan University sold 15,000 season football tickets at NT$80 (in thousands) each for its six-game home schedule. What entries should be made (a) when the tickets were sold, and (b) after each
What is a provision? Give an example of a provision.
Are the income taxes withheld from employee paychecks a payroll tax expense for the employer?Explain your answer.
Dillons AS made credit sales of €30,000 which are subject to 6% VAT. The company also made cash sales which totaled €20,670 including the 6% VAT. (a) Prepare the entry to record Dillons’ credit
Sport Pro Magazine sold 12,000 annual subscriptions of its monthly magazine on August 1, 2025, for €18 each. Prepare Sport Pro’s August 1, 2025, journal entry and the December 31, 2025, annual
Mayaguez Ltd. provides its officers with bonuses based on net income. For 2025, the bonuses total £350,000 and are paid on February 15, 2026. Prepare Mayaguez’s December 31, 2025, adjusting entry
Data for Rachel Shinnar are presented in BE10.9. Prepare the journal entries to record (a) Rachel’s pay for the period and (b) the payment of Rachel’s wages. Use January 15 for the end of the pay
On December 1, New Belgium Appliances introduces a new product that includes a one-year warranty on parts. In December, 1,000 units are sold. Management believes that 5% of the units will be
Scorcese A.Ş. is involved in a lawsuit at December 31, 2025. (a) Prepare the December 31 entry assuming it is probable that Scorcese will be liable for ₺900,000 as a result of this suit. (b)
How are contingent liabilities accounted for under GAAP?a. Disclosed in the notes if it is probable that the company will incur a loss but the amount cannot be reasonably estimated.b. Reported on the
Under GAAP, obligations related to warranties are considered:a. contingent liabilities.b. provisions.c. possible obligations.d. None of the answer choices is correct.
Four-Nine Shops issued bonds that pay interest every January 1. The entry to accrue bond interest at December 31 includes a:a. debit to Interest Payable.b. credit to Cash.c. credit to Interest
For 2025, Kim Ltd. reported net income of ₩300,000. Interest expense was ₩40,000 and income taxes were ₩100,000. The times interest earned was:a. 3 times.b. 4.4 times.c. 7.5 times.d. 11 times.
Which of the following statements is not true.a. Capitalized leases should be reported on the statement of financial position.b. All leases must be capitalized.c. The lessor is the owner of the
On January 1, Dias SA issued R$1,000,000, 10%, 5-year bonds with interest payable annually on December 31. The bonds sold for R$1,072,096. The market rate of interest for these bonds was 12%. On the
On January 1, 2025, Hurley Ltd. issued NT$5,000,000, 5-year, 12% bonds at 96 with interest payable annually on December 31. The entry on December 31, 2026, to record payment of bond interest and the
What is a lease agreement?
Jhutti Company rents a warehouse for the storage of its excess inventory. In the months when its production greatly exceeds actual sales, the company rents the space. As a result, Jhutti does not
Redbone AG issues CHF500,000 of 8%, 5-year bonds on January 1, 2025, at 104. If Redbone uses the effective-interest method in amortizing the premium, will the annual interest expense increase or
Fleming Ltd. issues £400,000 of 7%, 5-year bonds on January 1, 2025, at 105. Assuming that the straight-line method is used to amortize the premium, what is the total amount of interest expense for
Meera Ltd. issued 4,000, 8%, 5-year, £1,000 bonds dated January 1, 2025, at 100.Interest is paid each January 1.a. Prepare the journal entry to record the sale of these bonds on January 1, 2025.b.
Nasreen Company issues €2 million, 10-year, 8% bonds at 97, with interest payable each January 1.a. Prepare the journal entry to record the sale of these bonds on January 1, 2025.b. Assuming
Frankum SpA has issued three different bonds during 2025. Interest is payable annually on each of these bonds.1. On January 1, 2025, 1,000, 8%, 5-year, €1,000 bonds dated January 1, 2025, were
The statement of financial position for Miley Consulting reports the following information on July 1, 2025.Miley decides to redeem these bonds at 101 (face value of bonds £1,000,000) after paying
Hanschu plc issues an £800,000, 10%, 10-year mortgage note on December 31, 2025, to obtain financing for a new building. The terms provide for annual installment payments of £130,196.Prepare the
Presented below are non-current liability items for Suarez AG at December 31, 2025.Prepare the non-current liabilities section of the statement of financial position for Suarez. Bonds payable, due
Zhu Ltd. issues HK$5 million, 10-year, 9% bonds at 96, with interest payable annually on January 1. The straight-line method is used to amortize bond discount.a. Prepare the journal entry to record
Golden plc issues £4 million, 5-year, 10% bonds at 102, with interest payable annually January 1. The straight-line method is used to amortize bond premium.a. Prepare the journal entry to record the
On January 1, 2025, Klosterman Ltd. issued £500,000, 10%, 10-year bonds at face value.Interest is payable annually on January 1.Instructions Prepare journal entries to record the following.a. The
On January 1, 2025, Forrester SA issued R$400,000, 8%, 5-year bonds at face value.Interest is payable annually on January 1.Instructions Prepare journal entries to record the following.a. The
Pueblo Company issued €500,000 of 5-year, 8% bonds at 97 on January 1, 2025. The bonds pay interest annually.Instructionsa. 1. Prepare the journal entry to record the issuance of the bonds.2.

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