QUESTION: 1517

The Jones company had a net receivable balance at the beginning of 1998 of $350,000 and ended 1998 with a receivable balance of $400,000. During the year the company had credit sales of $1,000,000 and cash sales of $200,000. How much cash did the company collect during 1998?

$1,050,000
$950,000
$1,150,000
$1,250,000

Answer(s): C

Explanation:

During the year the company sold $1,200,000 of goods or services. However, receivables increased by $50,000, which decreases the change in cash during the year. Therefore the change in cash, or the cash collected during the year was $1,050,000.

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QUESTION: 1518

Which of the following items that are reported on an income statement will directly affect the retained earnings from one accounting period to another?

The sale of new common stock.
The payment of cash dividends.
The purchase of new equipment with the proceeds of a loan.
None of these answers.
Accounts payable.

Answer(s): B

Explanation:

Only the payment of dividends will directly affect the change in a company's retained earnings from one accounting period to another. The change in retained earnings consists of a company's beginning retained earnings, plus net income, minus cash dividends paid and the repurchase (not sale) of stock.

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QUESTION: 1519

Which of the following is/are true about Goodwill?

It represents the amount paid for an acquired firm that cannot be identified with tangible assets.
II. US GAAP prohibits capitalization of Goodwill.
III. IRS does not allow amortization of Goodwill for tax purposes.
I & III
I & II
II & III
I, II & III

Answer(s): A

Explanation:

When the sum of the fair values of all identifiable assets and liabilities involved in the purchase of another entity is less than the amount paid, the excess is attributed to "intangibles." This excess is referred to as "Goodwill" and is capitalized as an asset. Under US GAAP, only Goodwill generated during acquisitions is capitalized; it does not allow capitalization of internally generated Goodwill

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QUESTION: 1520

The formula for calculating profit margin is:

net sales minus total expenses divided by net income
none of these answers
net income divided by net sales
total sales divided by total expenses

Answer(s): C

Explanation:

Profit margin, also called return on net sales, is calculated by dividing net income by net sales. This ratio measures the average portion of each dollar of revenue that ends up as profit.

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QUESTION: 1517

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QUESTION: 1518

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QUESTION: 1519

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QUESTION: 1520

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