During 2005, Patnode announced and paid dividends of $1,000, the only

16.During 2005, Patnode announced and paid dividends of $1,000, the only dividend-related activity during the year. What was its 2005 net income?

 

                       

$5,600

                       

$3,600

                       

$4,600

                       

Cannot be estimated

  

17.During 2005, Patnode had a cash outflow of $15,000 for investing activities and a cash inflow of

$7,000

from financing activities. Its 2005 cash flow from operations was:

                        

Outflow of $15,000

                       

Inflow of $15,000

                       

Outflow of $8,000

                       

Inflow of $8,000

  

18.Patnode’s 2005 statement of cash flows contains four items in the financing section. Three of them are: Short-term debt issued, $15,000; Short-term debt paid, (

$10,000

) and Dividends paid, ($1,000). What is the fourth item in the financing section?

                        

Retained earnings, $4,600

                       

Common stock issued,

$3,000

                       

Long-term debt paid, ($3,000)

                       

Cash from financing, $3,000

  

19.How much total depreciation and amortization expense did Patnode record during 2005?

                         $10,000                       

$6,000

                        $3,000                       

$5,000

  

20.During 2005, Patnode recorded sales of

$17,000

. How much cash did it collect from its customers?

                         $17,000                       

$14,000

                        $3,000                        Cannot be estimated  

21.Which one of the following items will not appear in the operating section of Patnode’s 2005 indirect method cash flow statement?

                        

Deduct: increase in accounts receivable $3,000

                       

Add: decrease in accounts payable $1,000

                       

Add: increase in taxes payable

$2,400

                       

Add: decrease inventories $6,000

  

22.What is Patnode’s current ratio at the end of 2004?

                        

2.46

                       

0.41

                       

1.12

                       

0.89

  

23.What is Patnode’s total debt to equity ratio at the end of 2004 (rounded to two decimal places)?

                        

5.30

                       

0.19

                       

0.25

                       

4.04

   

24.Patnode recorded a 2005 tax expense of $3,000. What amount did it pay to the tax authorities during 2005?

                         $2,400                        $7,000                       

$600

                       

$5,400

  

25.Kirby, Inc. records a sale with a gross margin of $1,400. Which one of the following statements correctly describes the effect of such a sale on its balance sheet?

                       

Common stock increases by $1,400

                       

The sales revenue account increases by $1,400

                       

The gross margin account increases by $1,400

                       

The retained earnings account increases by $1,400

   

26.Sandy Robbins is the sole owner of a hair salon. He often takes small amounts of “lunch money” from the cash register, figuring that “it is my business anyway.” His accountant, however, insists that Sandy make a note of the cash he takes, and at the end of the each accounting period, she debits owners’ equity and credits the cash account for the total amount that Sandy has taken during the period.

 

In recording the cash withdrawals even though Sandy is sole proprietor, the accountant is correctly applying the:

                       

Matching concept

                       

Entity concept

                       

Materiality concept

                       

Conservatism concept

   

27.Anderson Electronics’ 2005 return on sales percentage is 20%. Its 2005 net income is $40,000. What is its 2005 sales?

                       

$400,000

                       

$80,000

                       

$200,000

                       

$100,000

  

28.During 2005, Sunrise Foods, Inc. records an interest expense of $5,000, and pays $2,000 of it in cash. How should this accounting transaction be recorded?

                       

Debit interest expense $5,000; credit cash $2,000; credit taxes payable $3,000

                       

Debit interest expense $5,000; credit cash $2,000; credit interest payable $3,000

                       

Debit various debt accounts $5,000; credit cash $2,000; credit interest payable $3,000

                       

Debit interest expense $5,000; credit cash $2,000; credit various debt accounts $3,000

  

29.During June 2005, Bextra Inc. recorded sales of $55,000 but only $20,000 was collected in cash from customers. Cost of goods sold of $38,000. What was the effect of these sales on Bextra’s current ratio?

                       

Current ratio increases

                       

Current ratio decreases

                       

Current ratio remains unchanged

                       

Insufficient information provided to judge effect on current ratio

    

30.Which one of the following statements is not true about statements of cash flows prepared according to U.S. GAAP?

                       

The operating section of the indirect method starts with the net income of the period

                       

In the indirect method statement, the period’s depreciation is added to net income because it is a source of cash

                       

Interest payments are included in the operating section of the direct method statement

                       

The investing section of the direct method statement for a period is identical to the investing section of the indirect method statement for the same period