Financial Accounting Homework – 90 Minute Time Limit

A debt to equity ratio of 1.0 means that half of the company’s assets are financed by creditors.

The Sarbanes-Oxley Act requires a company to guarantee that its financial statements are 100 percent accurate.

The cost-benefit convention holds that the benefits to be gained from providing accounting information should be greater than the costs of providing it.

The investments category on the balance sheet normally includes investments that are intended to be held for a long period of time.

Investors and creditors use financial statements to evaluate a company’s ability to pay dividends and interest.

Current assets divided by current liabilities is known as the

The normal operating cycle helps define which of the following balance sheet sections?

Which of the following is a measure of liquidity?

The user can depend on the accuracy of financial information when which of the following qualitative characteristics has been followed?

Relevance is comprised of all of the following except

___________ is related to both the nature of an item and its size.

The lower-of-cost-or-market method of accounting for inventories follows the convention of

A practical decision to expense a $120 printer rather than record it as property, plant, and equipment and depreciate it probably is made on the basis of the convention of

The convention of consistency refers to consistent use of accounting principles

The profit margin equals

Use this balance sheet and income statement to answer the following question. Use ending balances whenever average balances are required for computing ratios.

National Textile
Balance Sheet
December 31, 20×5
Assets		Liabilities
Current assets	$ 12,000		Current liabilities		$ 8,000
Investments	2,000		Long-term liabilities		2,000
Property, plant, and equipment	16,000		Total liabilities		$ 10,000
Intangible assets	10,000
		Stockholders’ Equity
			Common stock		30,000
			Total liabilities and
Total assets	$40,000			stockholders’ equity	$40,000

National Textile
Income Statement
For the Year Ended December 31, 20×5
Net sales	$48,000
Cost of goods sold	16,000
Gross margin	$32,000
Operating expenses	22,400
Net income	$  9,600

The current ratio for National Textile is

Use this balance sheet and income statement to answer the following question. Use ending balances whenever average balances are required for computing ratios.

National Textile
Balance Sheet
December 31, 20×5
Assets		Liabilities
Current assets	$ 12,000		Current liabilities		$ 8,000
Investments	2,000		Long-term liabilities		2,000
Property, plant, and equipment	16,000		Total liabilities		$ 10,000
Intangible assets	10,000
		Stockholders’ Equity
			Common stock		30,000
			Total liabilities and
Total assets	$40,000			stockholders’ equity	$40,000

National Textile
Income Statement
For the Year Ended December 31, 20×5
Net sales	$48,000
Cost of goods sold	16,000
Gross margin	$32,000
Operating expenses	22,400
Net income	$  9,600

The return on assets for National Textile is

Use this information to answer the following question.

Sunshine Travel
Balance Sheet
December 31, 20×5
Assets
Cash			$ 40,000
Short-term investments			20,000
Notes receivable (due in ten months)			15,000
Accounts receivable			10,000
Merchandise inventory			35,000
Land held for future use			40,000
Land			45,000
Building		$50,000
	Less accumulated depreciation	10,000	40,000
Trademark			35,000
Total assets				$280,000
Liabilities
Notes payable (due in six months)			$ 25,000
Accounts payable			10,000
Salaries payable			5,000
Mortgage payable (due in seven years)			45,000
Total liabilities				$85,000
Stockholders’ Equity
Common Stock			100,000
Retained Earnings			95,000
Total Stockholders’ Equity				195,000
Total liabilities and stockholders’ equity				$280,000

The total dollar amount of assets to be classified as current assets is

Use this information to answer the following question.

Coyle Company
Balance Sheet
December 31, 20×5
Assets
Cash			$ 70,000
Short-term investments			56,000
Accounts receivable			28,000
Notes receivable (due in six months)			42,000
Merchandise inventory			98,000
Special fund for purchasing a building			112,000
Land			140,000
Building		$150,000
	Less accumulated depreciation	28,000	122,000
Trademark			92,000
Total assets				$760,000
Liabilities
Notes payable (due in one year)			$ 70,000
Accounts payable			130,000
Salaries payable			14,000
Mortgage payable (due in seven years)			46,000
Total liabilities				$260,000
Stockholders’ Equity
Common stock				500,000
Total liabilities and stockholders’ equity				$760,000

The total amount of working capital is

Use this balance sheet and income statement for the first year of operations for Cane Construction to answer the following question. Use ending balances whenever average balances are required for computing ratios.

Cane Construction
Balance Sheet
December 31, 20×5
Assets		Liabilities
Current assets	$ 14,000		Current liabilities		$  8,000
Investments	6,000		Long-term liabilities		2,000
Property, plant, and equipment	24,000		Total liabilities		$  10,000
Intangible assets	16,000
		Stockholders’ Equity
			Common stock		50,000
			Total liabilities and
Total assets	$60,000			stockholders’ equity	$60,000

Cane Construction
Income Statement
For the Year Ended December 31, 20×5
Net sales	$80,000
Cost of goods sold	32,000
Gross margin	$48,000
Operating expenses	26,400
Net income	$21,600