Your Questions About Under The Equity Method The Receipt Of Cash Dividends On An Investment In Common Stock Of

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Under the cost principle, a company capitalizes:
any interest incurred in borrowing money to help pay for asset acquisitions.
all reasonable and necessary costs of acquiring an asset and preparing it for use.
all ordinary repair expenditures incurred in the use of an asset.
the total market value of individual assets acquired in a ‘basket purchase’.

All else equal, when a company uses excess cash to buy back some of its outstanding common stock, which of the following ratios will be affected directly in the manner described below?
Earnings per share (EPS) will increase.
The receivables turnover ratio will increase.
The return on equity (ROE) will decrease.
The inventory turnover ratio will increase.

Which of the following accounts could have a non-zero balance on a post-closing trial balance?
Dividends declared
Income tax expense
Interest expense
Premium on bonds payable

Sales tax collected by a company is normally reported as
income tax expense.
a current liability.
an asset.
an operating expense.

The date of record for a dividend is the date on which the company:
debits Dividends Payable and credits Cash for the dividend amount.
debits Dividends Declared and credits Dividends Payable for the amount of the dividend.
debits Dividend Expense and credits Cash for the dividend amount.
establishes who will receive the dividend payment.

Flynn Corporation had the following cash flows for the current year. The company uses the direct method in preparing the statement of cash flows

Cash receipts from issuance of stock $120,000
Bonds payable issued at face value $500,000
Dividends received from long-term investments $9,000
Cash paid for wages $40,000
Cash paid for dividends $10,000
Cash received from customers $85,000
Cash paid for other operating expenses $39,000
Cash paid to purchase equipment $200,000

What is the net cash flows from operating activities?
$5,000
$15,000
($4,000)
($75,000)

What is the net cash flows from investing activities?
$410,000
($190,000)
($200,000)
$420,000

If the cash balance at the beginning of the current year was $0, what is the amount of cash at the end of the year?
$112,500
$311,500
$425,000
$737,500

When a company sells stock to the public for the first time, the sale is called a(n):
initial public offering (IPO).
first time issue (FTI).
seasoned new issue (SNI).
initial stock offering (ISO).

If a company’s P/E ratio suddenly decreases:
you should buy more of the stock to increase your average gain.
the company probably announced higher earnings forecasts.
you should sell the stock as soon as possible.
the market must have reacted to some bad news that is expected to affect the company in the future.

Which of the following statements is true when the straight-line method is used to compute depreciation?
Depreciation expense per period is the depreciable cost divided by the number of periods in the asset’s useful life.
The carrying value of an asset is a constant amount during the asset’s useful life.
Accumulated depreciation is a constant amount during the asset’s estimated useful life.
The book value of an asset is an increasing amount during the asset’s useful life.

The effect of a stock dividend is to:
increase the market value per share of common shares.
decrease total assets and total liabilities.
decrease total assets and stockholders’ equity.
change the composition of stockholders’ equity.

If the double-declining balance method were used to depreciate a building that has a 10-year useful life and a residual value equal to 10% of the building’s original cost, what depreciation rate would be used?
9%
20%
18%
10%

A loss on disposal of an asset is reported:
in the Operating Revenues section of the income statement.
as a direct decrease to the asset account on the balance sheet.
as a direct increase to the asset account on the balance sheet.
in the Operating Expenses section of the income statement.

financi4 answers:

Under the cost principle, a company capitalizes:
all reasonable and necessary costs of acquiring an asset and preparing it for use.

All else equal, when a company uses excess cash to buy back some of its outstanding common stock, which of the following ratios will be affected directly in the manner described below?
Earnings per share (EPS) will increase.

Which of the following accounts could have a non-zero balance on a post-closing trial balance?
Premium on bonds payable

Sales tax collected by a company is normally reported as
a current liability.

The date of record for a dividend is the date on which the company:
establishes who will receive the dividend payment.

Flynn Corporation had the following cash flows for the current year. The company uses the direct method in preparing the statement of cash flows

Cash receipts from issuance of stock $120,000
Bonds payable issued at face value $500,000
Dividends received from long-term investments $9,000
Cash paid for wages $40,000
Cash paid for dividends $10,000
Cash received from customers $85,000
Cash paid for other operating expenses $39,000
Cash paid to purchase equipment $200,000

What is the net cash flows from operating activities?
$15,000

What is the net cash flows from investing activities?
($200,000)

If the cash balance at the beginning of the current year was $0, what is the amount of cash at the end of the year?
$425,000

When a company sells stock to the public for the first time, the sale is called a(n):
initial public offering (IPO).

If a company’s P/E ratio suddenly decreases:
the market must have reacted to some bad news that is expected to affect the company in the future.

Which of the following statements is true when the straight-line method is used to compute depreciation?
Depreciation expense per period is the depreciable cost divided by the number of periods in the asset’s useful life.

The effect of a stock dividend is to:
change the composition of stockholders’ equity.

If the double-declining balance method were used to depreciate a building that has a 10-year useful life and a residual value equal to 10% of the building’s original cost, what depreciation rate would be used?
20%

A loss on disposal of an asset is reported:
in the Operating Expenses section of the income statement.

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