What does the difference between the totals of the Income Statement columns represent? What does the difference between the Balance Sheet columns totals represent?
> What are the main differences between the financial statements of a manufacturing and a merchandising business?
> Describe the flow of materials, labor, and overhead into Work in Process.
> Describe and give three examples of factory overhead.
> Distinguish between direct and indirect labor.
> What are the two major types of materials, and how do they differ?
> Describe the process followed when estimating uncollectible accounts under the percentage (aging) of receivables method.
> What are the three primary elements of manufacturing cost?
> Distinguish between departmental gross profit, departmental operating income, and departmental direct operating margin.
> Why must management be cautious in interpreting departmental operating income results?
> What information is contained in a departmental operating expense summary?
> On what basis are indirect expenses allocated to departments?
> On what basis are direct expenses assigned to departments?
> What is the difference between direct and indirect operating expenses?
> Why was the increase in FCI’s operating income so much greater than the increase in its net sales?
> What is the difference between a cost center and a profit center?
> Explain the procedure for verifying the accuracy of the statement of cash flows.
> List four items of information about each cash payment entered in the cash payments journal.
> Briefly describe five limitations of financial statement analysis.
> Identify the two market measures calculated by FCI.
> Identify the three primary components of return on common stockholders’ equity.
> In what ways can an income statement showing departmental direct operating margin be used by management?
> For what purposes are departmental reports useful to management?
> Identify three measures of the extent of leverage calculated by FCI.
> Identify four measures of profitability calculated by FCI.
> Identify three activity measures calculated by FCI.
> Identify three measures of liquidity calculated by FCI.
> List five ratios that are automatically provided by the vertical analysis of income statements.
> List the three steps followed under the gross profit method of estimating inventory.
> What were the main causes of the decrease in FCI’s current liabilities?
> Name the four principal financial statements comprising a full set of financial statements.
> Identify the two primary components of return on assets.
> What is the primary purpose of the statement of cash flows?
> What information is needed to prepare a statement of cash flows?
> Where is cash received for interest reported on the statement of cash flows?
> If a company pays cash dividends, where on the statement of cash flows should the payment be reported?
> How is Premium on Bonds Payable shown on the balance sheet? How is Discount on Bonds Payable shown?
> What accounts are affected when bonds are issued at face value?
> Explain the meaning of a bond price quotation of 95. Of 102.
> A firm is preparing to make adjusting entries at the end of the accounting period. The balance of the merchandise inventory account is $100,000. If the firm is using the perpetual inventory system, what does this balance represent?
> What are the three categories of cash flows shown on a statement of cash flows?
> Under the indirect method of preparing a statement of cash flows, what adjustment is made to net income if accounts receivable increased from last year?
> Under the indirect method of preparing a statement of cash flows, what adjustment is made to net income if accounts payable increased from last year?
> Who usually administers a bond sinking fund?
> Describe the direct method of reporting cash flows from operating activities.
> How is the periodic interest expense affected by the amortization of the discount on bonds payable?
> How is the periodic interest expense affected by the amortization of the premium on bonds payable?
> How is the amount of bond premium or discount to be amortized in a period determined using the straight-line method?
> Will a bond sell at a discount or at a premium if the stated rate is greater than the market rate on the bond? If the stated rate is less than the market rate?
> What is goodwill? When is it recognized?
> What is the function of a statement of owner’s equity?
> What are the two major sources of capital for every type of business?
> What is a trademark?
> How should the unamortized portion of the cost of a copyright be reported on the balance sheet?
> Over what period of time the cost of a patent should be allocated if its economic life is expected to be less than its legal life?
> Which depreciation method is similar to the method used to compute depletion expense?
> What is the purpose of depletion?
> How should the bond sinking fund be reported on the corporation balance sheet?
> How should sinking fund earnings be reported on the corporation income statement?
> When bonds are redeemed before maturity, how is the gain or loss on redemption determined? Why does the calculation differ for bonds issued at face value, at a premium, and at a discount?
> List the five steps taken to prepare a work sheet.
> Describe the differences between corporate bonds and stock from the standpoint of the issuing corporation.
> What effect does a stock dividend have on the accounts of the corporation? A stock split?
> Where should stock dividends distributable be reported on the balance sheet? Why?
> How is paid-in capital in excess of par usually reported on the balance sheet?
> What is the effect of a cash dividend on the corporation accounts?
> How do owners’ equity accounts in a corporation differ from those in a sole proprietorship or partnership?
> Describe how to account for organization costs.
> For what reason do corporations retain earnings in the business?
> When a plant asset is sold, what must be known about the asset in order to determine the proper amount of gain or loss on the sale?
> For what time interval should depreciation expense be entered on the date of an asset’s disposal?
> Explain the function of each of the four closing entries made by Sunflower Cycle.
> Under the allowance method, what journal entries are made if an account is collected that was previously written off?
> How are appropriated and unappropriated retained earnings shown on the statement of retained earnings?
> What is the primary reason for appropriating retained earnings?
> What expense do corporations incur that sole proprietorships and partnerships do not?
> How is common stock subscriptions receivable usually reported on the balance sheet?
> If stock is issued for noncash assets, at what amount should the assets be recorded?
> What factors generally are considered in determining the allocation of profits and losses?
> Who elects the permanent board of directors?
> How should the cost of such activities as planting trees and shrubs be entered?
> How is paid-in capital from sale of treasury stock usually shown on the balance sheet?
> How is treasury stock usually shown on the balance sheet?
> What is an unearned revenue?
> What costs should be included when measuring the total cost to acquire a long-term asset?
> How should additions or improvements representing an increase in the usefulness of plant assets be entered?
> When a new partner who has been the sole owner of a business is admitted to a partnership by having the partnership take over the old business, what usually serves as the basis for preparing the opening entry?
> Identify three ways in which a partnership may be dissolved.
> What accounts are affected when employer payroll tax expenses are properly recorded?
> When two sole proprietors decide to combine their businesses, at what values should the noncash assets be taken over by the partnership?
> What are the two major types of depreciation?
> What are the three major ways of disposing of a plant asset?
> Explain what is meant by the “replacement” of a component of a plant asset.
> For assets acquired after 1986, what depreciation methods are allowed for federal income tax purposes?
> Why are both the debit and credit amounts in the Adjustments columns on the Income Summary line of the work sheet extended to the Adjusted Trial Balance columns?
> Explain how the depreciation method selected affects the balance sheet and income statement.
> Which depreciation method provides the fastest write-off of an asset?
> What is meant by the “depreciable cost” of a plant asset?
> If a note receivable that was discounted at a bank is dishonored by its maker, what is the responsibility of the person or business discounting the note?
> If a note receivable is discounted at a bank, on what amount and for what time period does the bank compute the discount?
> What is the primary purpose of reversing entries?
