What are some reasons that a corporation might not pay dividends?
> Give an example of an asset exchange transaction. What is the effect of this transaction on the accounting equation?
> Name the accounting term used to describe a business’s obligations to creditors.
> Describe the differences between creditors and investors.
> To whom do the assets of a business belong?
> What role do assets play in business profitability?
> Sarah Bale is an auditor. Her work at two companies disclosed inappropriate recognition of revenue. Both cases involved dollar amounts in the $100,000 range. In one case, Bale considered the item material and required her client to restate earnings. In t
> What does the term unearned revenue mean?
> What is the effect on the right side of the accounting equation when cash is collected in advance of performing services?
> What are the U.S. rules of accounting information measurement called?
> Describe a not-for-profit or nonprofit enterprise. What is the motivation for this type of entity?
> How do financial and managerial accounting differ?
> What type of income or profit does an investor expect to receive in exchange for providing financial resources to a business? What type of income does a creditor expect from providing financial resources to an organization or business?
> Give an example of a financial resource, a physical resource, and a labor resource.
> What market trilogy components are involved in the process of transforming resources into finished products?
> In a business context, what does the term market mean?
> What is the primary mechanism used to allocate resources in the United States?
> John Simmons is a CPA with a secret. His secret is that he gambles on sports. John knows that his profession disapproves of gambling, but considers the professional standards to be misguided in his case. John really doesn’t consider his bets to be gambli
> Use the Target Corporation’s Form 10-K to answer the following questions related to Target’s 2015 fiscal year (year ended January 30, 2016). Target’s Form 10-K is available on the company’s website or through the SEC’s EDGAR database. Appendix A provides
> Why is accounting called the language of business?
> What does accrual accounting attempt to accomplish?
> What is an indirect cost? Provide examples of product costs that would be classified as indirect.
> Why are the salaries of production workers accumulated in an inventory account instead of being directly expensed on the income statement?
> What is a value chain?
> What does the term reengineering mean? Name some reengineering practices. (Appendix)
> Which ratios are used to measure long-term debt paying ability? How is each calculated?
> What is the difference between return on investment and return on equity?
> Why are absolute amounts of limited use when comparing companies?
> What is the difference between the current ratio and the quick ratio? What does each measure?
> Raula Kato discovered a material reporting error in the accounting records of Sampoon, Inc. (SI) during the annual audit. The error was so significant that it will certainly have an adverse effect on the price of the client’s stock which is actively trad
> What is the significance of inventory turnover, and how is it calculated?
> What is apparent from a horizontal presentation of financial statement information? A vertical presentation?
> What do the terms liquidity and solvency mean?
> What environmental factors must be considered in analyzing companies?
> What is information overload?
> What is the function of the stock certificate?
> What is meant by the phrase separate legal entity? To which type of business organization does it apply?
> What is a widely held corporation? What is a closely held corporation?
> What is meant by equity financing? What is meant by debt financing?
> What is the largest source of financing for most U.S. businesses?
> Name and provide a brief explanation of the six Principles of Professional Conduct of the AICPA Code of Professional Conduct.
> When a company appropriates retained earnings, does the company set aside cash for a specific use? Explain.
> What is the primary reason that a company would declare a stock split?
> What is the price-earnings ratio? Explain the difference between it and the dividend yield.
> What is the formula for calculating return on investment (ROI)?
> Why are ratios and trends used in financial analysis?
> What is a limited liability company? Discuss its advantages and disadvantages.
> What are the advantages and disadvantages of the corporate form of business organization?
> What prompted Congress to pass the Securities Act of 1933 and the Securities Exchange Act of 1934? What is the purpose of these laws?
> What is the purpose of the articles of incorporation? What information do they provide?
> Nickleson Company had an unadjusted cash balance of $7,750 as of May 31. The company’s bank statement, also dated May 31, included a $72 NSF check written by one of Nickleson’s customers. There were $700 in outstanding checks and $950 in deposits in tran
> Discuss the purpose of a partnership agreement. Is such an agreement necessary for partnership formation?
> If Best Co. had 10,000 shares of $20 par value common stock outstanding and declared a 5-for-1 stock split, how many shares would then be outstanding and what would be their par value after the split?
> What is the difference between a stock dividend and a stock split?
> What is the importance of the declaration date, record date, and payment date in conjunction with corporate dividends?
> Assume that Day Company repurchased 1,000 of its own shares for $30 per share and sold the shares two weeks later for $35 per share. What is the amount of gain on the sale? How is it reported on the balance sheet? What type of account is Treasury Stock?
> Why might a company repurchase its own stock?
> What is the difference between par value stock and stated value stock?
> What is no-par stock? How is it recorded in the accounting records?
> What is the difference between cumulative preferred stock and noncumulative preferred stock?
> What is the meaning of each of the following terms with respect to the corporate form of organization: (a) Legal capital (b) Par value of stock (c) Stated value of stock (d) Market value of stock (e) Book value of stock (f) Authorized shares of stock (g
> The following information is available for Trinkle Company for the month of June: 1. The unadjusted balance per the bank statement on June 30 was $81,500. 2. Deposits in transit on June 30 were $3,150. 3. A debit memo was included with the bank statement
> What are the similarities and differences in the equity structure of a sole proprietorship, a partnership, and a corporation?
> What is the difference between contributed capital and retained earnings for a
> How does the term double taxation apply to corporations? Give an example of double taxation.
> What are the three major forms of business organizations? Describe each.
> How does the going concern assumption discussed in Chapter 1 affect the way liabilities are reported in the financial statements?
> When the effective interest rate is higher than the stated interest rate, will interest expense be higher or lower than the amount of interest paid?
> Gay Co. has a balance in the Bonds Payable account of $25,000 and a balance in the Discount on Bonds Payable account of $5,200. What is the carrying value of the bonds? What is the total amount of the liability?
> What factors may cause the effective interest rate and the stated interest rate to be different?
> When the effective interest rate is higher than the stated interest rate on a bond issue, will the bond sell at a discount or premium? Why?
> If Roc Co. issued $100,000 of 5 percent, 10-year bonds at the face amount, what is the effect of the issuance of the bonds on the financial statements? What amount of interest expense will Roc Co. recognize each year?
> As of June 30, 2018, the bank statement showed an ending balance of $19,500. The unadjusted Cash account balance was $15,200. The following information is available: 1. Deposit in transit, $2,400. 2. Credit memo in bank statement for interest earned in J
> Why can a company usually issue bonds at a lower interest rate than the company would pay if the funds were borrowed from a bank?
> What are the primary sources of debt financing for most large companies?
> What is the purpose of a line of credit for a business? Why would a company choose to obtain a line of credit instead of issuing bonds?
> At the beginning of year 1, B Co. has a note payable of $72,000 that calls for an annual payment of $16,246, which includes both principal and interest. If the interest rate is 8 percent, what is the amount of interest expense in year 1 and in year 2?
> Explain the historical cost concept as it applies to long-term operational assets. Why is the book value of an asset likely to be different from the current market value of the asset?
> How can judgment and estimation affect information reported in the financial statements?
> List several common intangible assets. How is the life determined that is to be used to compute amortization?
> Define depletion. What is the most commonly used method of computing depletion?
> When a long-term operational asset is sold at a gain, how is the balance sheet affected? Is the statement of cash flows affected? If so, how?
> How are capital expenditures made to improve the quality of a capital asset accounted for? Would the answer change if the expenditure extended the life of the asset but did not improve quality? Explain.
> Emma Emerson is a proud woman with a problem. Her daughter has been accepted into a prestigious law school. While Ms. Emerson beams with pride, she is worried sick about how to pay for the school; she is a single parent who has worked hard to support her
> Why may it be necessary to revise the estimated life of a plant asset? When the estimated life is revised, does it affect the amount of depreciation per year? Why or why not?
> Why would a company choose to depreciate one piece of equipment using the double-declining- balance method and another piece of equipment using straight-line depreciation?
> Assume that a piece of equipment cost $5,000 and had accumulated depreciation of $3,000. What is the book value of the equipment? Is the book value equal to the fair market value of the equipment? Explain.
> Why is depreciation that has been recognized over the life of an asset shown in a contra account? Why not just reduce the asset account?
> What type of account (classification) is Accumulated Depreciation?
> MalMax purchased a depreciable asset. What would be the difference in total assets at the end of the first year if MalMax chooses straight-line depreciation versus double- declining-balance depreciation?
> Explain straight-line, units-of-production, and double-declining-balance depreciation. When is it appropriate to use each of these depreciation methods?
> What is a basket purchase of assets? When a basket purchase is made, how is cost assigned to individual assets?
> Which inventory cost flow method produces the highest net income in a deflationary period?
> Refer to Questions 35 and 36. Which method might be preferable for financial statements? For income tax reporting? Explain. Data from Question 35: Assume that Key Co. purchased 1,000 units of merchandise in its first year of operations for $25 per unit.
> Use the January 3, 2015, Form 10-K for Stanley Black & Decker, Inc. (Stanley) to complete the following requirements. To obtain the Form 10-K, you can use the EDGAR system following the instructions in Appendix A, or it can be found under “Corporate Info
> Assume that Key Co. purchased 1,500 units of merchandise in its second year of operation for $27 per unit. Its beginning inventory was determined in Question 35. Assuming that 1,500 units are sold, what is the amount of cost of goods sold using FIFO? LIF
> Assume that Key Co. purchased 1,000 units of merchandise in its first year of operations for $25 per unit. The company sold 850 units for $40. What is the amount of cost of goods sold using FIFO? LIFO? Weighted average?
> Does the choice of cost flow method (FIFO, LIFO, or weighted average) affect the statement of cash flows? Explain.
> What is the difference between the flow of costs and the physical flow of goods?
> In an inflationary period, which inventory cost flow method will produce the highest net income? Explain.
> What are some advantages and disadvantages of using the LIFO method of inventory valuation?
