CHAPTER 18 EXTRA PRACTICE Flashcards
Danbury Inc. and Dover Inc. both hold 2,000 shares of ABC Corporation stock. At the beginning of the year, each firm’s ABC shares were worth a total of $100,000. However, at the end of the year, each firm’s shares were worth a total of $120,000. If Danbury holds its ABC shares as available-for-sale securities and Dover holds them as trading securities, which of the following statements is accurate?
Danbury will need to make a direct adjustment to its stockholders’ equity as a result of the increase in ABC’s share price, but Dover will not.
Frisco Inc. and Diego Inc. both hold 5,000 shares of XYZ Corporation stock. At the beginning of the year, each firm’s XYZ shares were worth a total of $150,000. However, at the end of the year, each firm’s shares were worth a total of only $130,000. If Frisco holds its XYZ shares as trading securities and Diego holds them as available-for-sale securities, which of the following statements is true?
Frisco should report $20,000 in unrealized losses in the “Other expenses and losses” section of its income statement, while Diego should report $20,000 in unrealized losses in the “Other comprehensive income” section of its statement of comprehensive income.
Last year, Peak Manufacturing had income from continuing operations of $724,000. During that year, Peak discontinued its unprofitable parts division. The firm’s loss from the parts division’s operations (net of $80,000 taxes) was $187,000. The loss on disposal of the parts division (net of $40,000 taxes) was $93,500. Based on these figures, Peak’s statement of comprehensive income should show a net income o
443,500
Pinnacle Corporation has income before taxes of $620,000 and a loss on discontinued operations of $180,000. If the income tax rate is 30% on all items, Pinnacle’s statement of comprehensive income should show a loss from discontinued operations of
126,000
Pinnacle Corporation has income before taxes of $620,000 and a loss on discontinued operations of $180,000. If the income tax rate is 30% on all items, Pinnacle’s statement of comprehensive income should show income from continuing operations of
434,000
Copernicus, Inc. decides on January 1 to discontinue its telescope manufacturing division. On July 1, the division’s assets with a book value of $420,000 are sold for $300,000. Operating income from January 1 to June 30 for the division amounted to $50,000. Ignoring income taxes, what total amount should be reported on Copernicus’s income statement for the current year under the caption Discontinued Operations?
70,000 loss
The acid-test ratio is also referred to as the ________ ratio.
quick
Which of the following is a profitability ratio?
payout
The short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash is best measured by which of the following?
liquidity
The base amount for cash when performing vertical analysis is
total assets
The base amount for administrative expense when performing vertical analysis is generally
net sales
Waters Enterprises reported current assets of $50,000 at December 31, 20x2 and $40,000 at December 31, 20x3. If 20x2 is the base year, this is a percentage increase (decrease) of
(20%)
