Reference no: EM131059285

Intermediate Accounting

Part 1

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Compute the times interest earned ratio given the following data:

Net income	$260,000
Income from operations	485,000
Interest expense	20,000
Income tax expense	58,000

A) 14 times
B) 16.9 times
C) 13 times
D) 9.1 times

The following data represent selected information from the comparative income statement and balance sheet for ABC Company for the years ended December 31, 2014 and 2013:

	2014	2013
Cash	$15,000	$15,000
Net accounts receivable	30,000	25,000
Inventory	43,000	40,000
Prepaid expenses	5,000	7,000
Total current assets	93,000	87,000
Total noncurrent assets	112,000	114,000
Total current liabilities	70,000	60,000
Total noncurrent liabilities	40,000	45,000
Common stock, no-par*	65,000	60,000
Retained earnings	30,000	36,000
Net credit sales	370,000	333,000
Cost of goods sold	150,000	160,000
Gross profit	220,000	173,000
Income from operations	95,000	87,000
Interest expense	8,000	8,000
Net income	70,000	57,000

* 10,000 shares of common stock have been issued and outstanding since the company was established.

2)  The debt ratio for ABC Company on December 31, 2014, was:

A) 1.82
B) 0.55
C) 1.87
D) 0.54

3) The accounts receivable turnover for ABC Company for the year ended December 31, 2014, was:

A) 12.33
B) 13.32
C) 12.11
D) 13.45

4) ABC Company's gross profit ratio for the year ended December 31, 2014, was:

A) .59
B) .41
C) .23
D) .11

5) The inventory turnover for ABC Company for the year ended December 31, 2014, was:

A) 3.49
B) 3.61
C) 3.86
D) 4.00

6) The acid-test ratio for ABC Company on December 31, 2014, was:

A) 1.45
B) 0.57
C) 1.26
D) 0.67

7) For the year ending on December 31, 2006, ABC Company's rate of return on net sales was:

A) 0.19
B) 0.21
C) 0.17
D) 0.18

8) The current ratio for ABC Company on December 31, 2014, was:

A) .67
B) 1.26
C) 1.45
D) .57

9) ABC Company's days' sales in receivables for the year ended December 31, 2014, was:

A) 25
B) 33
C) 27
D) 30

Write your answer in the space provided on the sheet of paper.

10) Classify each statement below as an operating activity, investing activity, or a financing activity.

Use "1" for Operating activity
Use "2" for Investing activity
Use "3" for Financing activity
Use "4" for Noncash Investing and Financing activity

a. Sold 10,000 shares of stock for cash.
b. Paid salaries of employees.
c. Paid amount due for income taxes.
d. Paid interest expense.
e. Purchased office equipment for cash.
f. Sold old office equipment and received cash.
g. Received interest income.
h. Paid interest on a bank loan.
i. Paid dividends to stockholders.

Part 2-

Intermediate Accounting

Part 2

1) When preparing the financial statements for the year ended December 31, 2015, the controller of XYZ Inc. discovered that the income tax expense for 2012 was understated by $33,000. The controller has also gathered the following information:

Retained earnings at December 31, 2014	$447,800
Cash dividends declared during 2015	45,000
Stock dividends declared during 2015	100,000
Net income for the year ended December 31, 2015	166,120

Prepare a statement of retained earnings for XYZ Inc. for the year ended December 31, 2015.

2) Intermediate Company gathered the following information on December 31, 2015:

Cost of goods sold	$510,000
Cumulative effect of a change in inventory method (credit)	25,000
Extraordinary gain	30,000
Gain on sale of equipment	20,000
Interest expense	30,000
Loss on sale of discontinued operations	20,000
Operating expenses	190,000
Operating income from discontinued operations	35,000
Prior-period adjustment-debit to retained earnings	17,000
Sales revenue	992,000
Treasury stock, common	38,000
Income tax expense (savings):
Continuing operations	62,000
Discontinued operations:
Operating income	20,000
Loss on sale	-6,000
Extraordinary gain	8,000
Cumulative effect of change in inventory method	10,000

Prepare a single-step income statement for Intermediate Company for the year ended December 31, 2015. Ignore EPS calculations.