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Exam 9: The Income Statement and the Statement of Cash Flows

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Question 1

Multiple Choice

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Bluestar University has a fiscal year that ends on June 30.The 2019 summer session of the university runs for 60 days from June 11 through August 9.Total tuition paid by students for the summer session amounted to $240,000.How much revenue should be reflected in the fiscal year ended June 30, 2019?

A) $60,000.
B) $80,000.
C) $120,000.
D) $240,000.

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Question 2

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Selling, general, and administrative expenses were $80,000; net sales were $390,000; interest expense was $16,000; research and development expenses were $34,000; net cash provided by operating activities was $42,000; income tax expense was $10,000; cost of goods sold was $220,000. Gross profit for the period was:

A) $56,000.
B) $90,000.
C) $170,000.
D) $390,000.

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Question 3

Multiple Choice

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Most entities satisfy the accounting criteria for recognizing revenue when:

Which of the following is not a principal category of "Other operating expenses" frequently reported on the income statement?

Revenue may be recognized:

Use the appropriate information from the data provided below to calculate operating income for the year ended December 31, 2020. $\begin{array}{lr}\text { Research and development expenses } & \$ 22,000 \\\text { Loss from discontinued operations } & 8,000 \\\text { Provision for income taxes } & 17,000 \\\text { Net sales } & 255,000 \\\text { Interest expense } & 18,000 \\\text { Net cash provided by operations } & 38,000 \\\text { Gross profit } & 73,000 \\\text { Selling, general and administrative expenses } & 15,000 \\\text { Accounts receivable } & 34,000\end{array}$

The net book value of buildings increased by $170,000 during the year.No buildings were sold during the year, and depreciation expense for the year was $55,000.How much cash was paid to purchase buildings during the year?

Gwinnett Park Co.reported net income of $253,300 for its fiscal year ended September 30, 2020.At the beginning of that year, 150,000 shares of common stock were outstanding.On February 1, 2020, an additional 30,000 shares were issues.On September 1, 2020, 12,000 shares were purchased as treasury stock.During the year, the company paid the annual dividend on 7,000 shares of its 8%, $60 par value preferred stock that were outstanding during the entire fiscal year.Calculate the basic earnings per share of common stock for the year ended September 30, 2020.

Under most circumstances, in order to recognize revenue:

In the statement of cash flows, an increase in the accounts receivable balance from the beginning of the period to the end of the period would be:

The gross profit ratio is useful to the manager for each of the following purposes except that:

Net income was $40,000; accounts receivable decreased by $10,000; inventory increased by $3,000; proceeds from the issuance of long-term debt were $22,500; equipment purchases were $75,000; depreciation expense was $16,000.The net cash provided (used) by operating activities for the period was:

The term "earned" in revenue recognition refers to which of the following?

Cash collected from customers during the year ended December 31, 2019 amounted to $314,000, and accounts receivable decreased by $42,000 during the year.How much were sales on account for the year ended December 31, 2019? (Assume that no cash sales were made during the year and that all sales on account are collectible.)

Which of the following accounts/captions are not included in the calculation of Gross Profit?

Income tax expense for the year was $372,000.Income taxes payable decreased by $34,000 during the year, resulting in an ending balance of $71,000.How much cash was paid for income taxes during the year?

The first caption in most income statements in annual reports is:

Use the appropriate information from the data provided below to calculate the net cash provided (used)by operating activities for the period. $\begin{array}{lr}\text { Net income } & \$ 113,000 \\\text { Accounts receivable increase (for the period) } & 24,000 \\\text { Inventory decrease (for the period) } & 19,000 \\\text { Proceeds from the issuance of long-term debt } & 260,000 \\\text { Accounts payable decrease (for the period) } & 11,000 \\ \text { Purchases of equipment } & 175,000 \\\text { Depreciation and amortization expense } & 42,000\end{array}$

In the statement of cash flows, depreciation and amortization expense is added back to net income because:

Norman's Cabinet, Inc., had net income of $213,400 for its fiscal year ended October 31, 2020.During the year, the company had outstanding 26,500 shares of 9%, $60 par value preferred stock, and 37,000 shares of common stock.Calculate the basic earnings per share of common stock for the 2020 fiscal year.