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Exam 5: Communicating and Interpreting Accounting Information

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Question 31

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Which of the following are primarily responsible for the information provided in a company's financial statements?

A) The internal and external auditors.
B) The Securities & Exchange Commission (SEC) and the external auditors.
C) The chief executive officer (CEO) and the chief financial officer (CFO) .
D) The external auditors and the board of directors.

E) C) and D)
F) B) and D)

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Question 32

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Determine the effect of the following transactions on the identified financial statement components and ratios. Code your answers as follows: A: If the transaction results in an increase in the financial statement component or ratio. B: If the transaction results in a decrease in the financial statement component or ratio. C. If the transaction does not affect the financial statement component or ratio. Transaction 1: A company issued common stock at a price in excess of par value. Revenues_____ Assets_____ Stockholders' equity_____ Return on assets ratio_____ Transaction 2: A company recorded depreciation expense at year-end. Net income_____ Assets_____ Stockholders' equity_____ Asset turnover ratio_____

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Transaction 1: A company issued common s...

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Question 33

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Kryton Corp. has provided the following information: Gross profit was $620,000; Cost of goods sold was $380,000; Net income was $400,000. What was Kryton's gross profit percentage?

For the year ending December 31, 2014, the accounts of Jackson Corporation showed the following balances: $\begin{array} { | l | r | } \hline \text { Common stock, January 1, 2014 } & \$ 500,000 \\\hline \text { Retained earnings, beginning balance, January 1,2014 } & \$ 100,000 \\\hline \text { Total revenues earned during 2014 } & \$ 150,000 \\\hline \text { Total expenses incurred during 2014 } & \$ 90,000 \\\hline \text { Total dividends declared during 2014 } & \$ 10,000 \\\hline \text { Issuance of stock during 2014 } & \$ 50,000 \\\hline\end{array}$ Requirements: Determine the components of stockholders' equity as of December 31, 2014.

Anthony Inc. reported the following amounts on their 2014 and 2013 income statements: $\begin{array} { | l | r | r | } \hline & \underline { 2014 } & \underline { 2013 } \\\hline \text { Net Sales } & \$ 20,438 & \$ 20,367 \\\hline \text { Cost of sales } & 7,943 & 8,198 \\\hline\end{array}$ Requirements: A. Compute the gross profit percentage for years 2014 and 2013. B. Provide at least two potential causes for the change in Anthony's gross profit percentage.

Intangible assets are reported on the balance sheet as a current asset.

Which of the following would not typically be disclosed in the notes to the financial statements?

Which of the following is not reported as an operating expense on the income statement?

FocusMore, Inc., had the following alphabetical list of accounts taken from its adjusted trial balance at December 31, 2014: $\begin{array}{|l|r|}\hline \text { Accounts Payable } & \$ 15,000 \\\hline \text { Accounts Receivable } & 18,000 \\\hline \text { Accumulated Depreciation-Building } & 26,200 \\\hline \text { Advertising Expense } & 12,800 \\\hline \text { Building } & 100,000 \\\hline \text { Common Stock } & 60,000 \\\hline \text { Cash } & 15,000 \\\hline \text { Cost of Goods Sold } & 56,500 \\\hline \text { Depreciation Expense } & 2,000 \\\hline \text { Insurance Expense } & 3,800 \\\hline \text { Insurance Payable } & 1,900 \\\hline \text { Inventory } & 25,000 \\\hline \text { Land } & 30,000 \\\hline \text { Prepaid Insurance } & 4,600 \\\hline \text { Interest Revenue } & 2,500 \\\hline \text { Retained Earnings (Jan. 1, 2014) } & 58,000 \\\hline \text { Salaries Expense } & 48,000 \\\hline \text { Salaries Payable } & 4,600 \\\hline \text { Sales } & 150,000 \\\hline \text { Supplies Inventory } & 1,200 \\\hline \text { Supplies Expense } & 2,000 \\\hline \text { Unearned Rent Revenue } & 700 \\\hline\end{array}$ Required: Prepare a multiple step income statement for 2014. (Include gross profit, but ignore income taxes.)

Comparative financial statements are those of a company in one industry presented with another company in the same industry.

Which of the following tasks is not performed by the Securities & Exchange Commission (SEC) ?

The balance sheet for Glenwood Corporation at December 31, 2014 showed the following subtotals: $\begin{array} { | l | r | } \hline \text { Current assets } & \$ 140,000 \\\hline \text { Current liabilities } & 80,000 \\\hline \text { Property plant and equipment } & 420,000 \\\hline \text { Total stockholders' equity } & 420,000 \\\hline \text { Retained earnings } & 120,000 \\\hline \text { Total liabilities } & 210,000 \\\hline \text { Other long-term assets } & 70,000 \\\hline\end{array}$ Based on the above data, calculate the following amounts: $\begin{array} { | l | l | l | } \hline \text { A. } & \text { Total assets } & \$ \\\hline \text { B. } & \text { Long-term liabilities } & \$ \\\hline \text { C. } & \begin{array} { l } \text { Common stock and Additional paid-in } \\\text { capital }\end{array} & \$ \\\hline \text { D. } & \text { Total liabilities and stockholders' equity } & \$ \\\hline\end{array}$

The form 10-K is the annual report that publically traded companies must file with the Securities & Exchange Commission (SEC).

The Securities & Exchange Commission requires publically traded companies to have their financial statements audited by their internal auditors.

Which of the following statements is correct?

Information on all contractual agreements is included in notes as a financial statement disclosure.

Which of the following statements is false when a company sells inventory costing $700 for $1,200?

Where are shares of the reporting company's common stock issued in exchange for cash reported on a statement of cash flows?

Which of the following statements regarding earnings per share is false?

The fraud triangle conditions necessary for financial statement fraud to occur are the existence of a system of internal control, the ability to invade the system, and rationalization to commit the fraud.