Which of the following is/are TRUE?
I. Losses due to union strike at a plant are classified as extraordinary items.
II. Unusual and infrequent items appear as part of income from continuing operations.
III. Gains from debt retirement are classified as extraordinary items.
IV. The loss from the sale of a portion of business segment is included in income from continuing operations.
A. II and III
B. I and IV
C. I and II
D. III and IV
Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting periods.
A. To reduce the federal income tax liability.
B. To adhere to the concept of conservatism.
C. To aid management in the decision-making process.
D. To match the costs of production with the revenues as earned.
E. To maximize accounting income.
Marine Corp. uses the direct method to prepare its statement of cash flows. Marine's trial balance at December 31, 1996 and 1995 are as follows:
Dec. 31, 1996 Dec. 31, 1995
Debits:
Cash $35,000 $32,000 Accounts receivable 33,000 30,000 Inventory 31,000 47,000 Property, plant and equipment1 00,000 95,000 Unamortized bond discount 4,500 5,000 Cost of goods sold250,000 380,000 Selling expenses 141,500172,000 General and administrative expenses 137,000 151,300 Interest expense 4,300 2,600 Income tax expense 20,400 61,200 Total debits $756,700 $976,100
Allowance for doubtful accounts $1,300 $1,100 Accumulated depreciation 16,500 15,000 Trade accounts payable 25,000 17,500 Income taxes payable 21,000 27,100 Deferred income taxes 5,300 4,600 8% callable bonds payable 45,000 20,000 Common stock 50,000 40,000 Additional paid-in capital 9,100 7,500 Retained earnings 44,700 64,600 Sales 538,800 778,700
Total credits $756,700 $976,100
Marine purchased $5,000 in equipment during 1996. Marine allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses.
What amount should Marine report in its statement of cash flows for the year ended December 31, 1996 for cash paid for interest?
A. $1,700
B. $3,800
C. $3,600
D. $4,300
E. $4,800
A firm has long-term assets worth 3,812 and total assets worth 5,937. It has a total equity of 3,934 and long term debt of 879. The firm's current ratio equals ________.
A. 1.32
B. 0.92
C. 1.03
D. 1.89
Depreciation expense for fixed assets is recorded
A. for each period the asset is in use
B. as a liability until the asset is sold
C. at the end of each fiscal period during the asset's useful life
D. when the asset is sold
The Income Summary account
A. is used to facilitate the closing process
B. all of these answers are correct
C. is a temporary account D. should have a zero balance at period-end
The following data are available for a firm for a given year:
Net Sales 21,896 Sales and marketing expenses 4,346 Administrative expenses 2,143 COGS 10,084 Depreciation 967 Interest expense 573 Tax rate35% Dividends paid 3,445 Preferred Dividends 897 Average total equity 37,432 Average common equity 26,782 Average total liabilities1 8,583
In the above example, the firm's operating profit margin equals ________.
A. 0.24
B. 0.35
C. 0.18
D. 0.54
A firm's financial statements reveal the following data:
interest coverage ratio 3.6X
interest expense rate 7.2% depreciation 678 total assets 10,946 total asset turnover 1.46
The firm's operating margin equals ________.
A. 13.84%
B. 23.18%
C. 21.99%
D. 25.93%
Under what condition would a firm report marketable securities as a long-term asset?
A. None of these answers.
B. When funds are set aside for a specific long-term purpose such as plant expansion.
C. When the value of a firm's investment in marketable securities is less than cost.
D. All of these answers.
E. When a firm maintains excess trading securities.
The following data are available for a firm for a given year:
Net Sales 21,896 Sales and marketing expenses 4,346 Administrative expenses 2,143 COGS 10,084 Depreciation 967 Interest expense 573 Tax rate 35% Dividends paid 3,445 Preferred Dividends 897 Average total equity 37,432 Average common equity 26,782 Average total liabilities 18,583
The firm's gross profit margin equals ________.
A. 0.45
B. 0.39
C. 0.24
D. 0.54
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