On November 1, Year 1 Shelter Company loaned $4,000 cash to Cove Company. The one-year note carried a 5% rate of interest. Which of the following shows how the loan will affect Shelter’s financial statements on November 1, Year 1? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders’ EquityCash+Net Receivable=Accounts Payable+Common Stock+Retained EarningsRevenue−Expense=Net IncomeA.(4,000)+4,000= + + − = (4,000) IAB.(4,000)+4,000= + + − = (4,000) OAC.4,000+ = 4,000+ + − = 4,000 IAD.(4,000)+ =(4,000)+ + − = (4,000) OA

Alberta Company accepts a credit card as payment for $450 of services provided for the customer. The credit card company charges a 4% fee for handling the transaction. Select the answer that shows how the entry to record the sale would affect Alberta’s financial statements. Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders’ EquityRevenue−Expense=Net IncomeA.432= +432432− =432432 OAB.432= +432450−18=432432 OAC.432= +432450−18=432 D.450= +450450− =450

On January 1, Year 1, McGraw Company paid $1,055,000 to obtain a copyright. McGraw expected the copyright to have a 10-year useful life. Which of the following shows the amount of the book value of the copyright, the amortization expense, and the cash flow from operating activities on the Year 3 financial statements? Book Value of CopyrightAmortization ExpenseCash Flow from Operating ActivitiesA.$ 738,500$ 316,500ZeroB.$ 738,500$ 105,500ZeroC.$ 738,500$ 316,500$ (316,500) OAD.$ 738,500$ 105,500$ (105,500) OA

Perry Corporation was established on January 1, Year 1 when it issued 21,800 shares of $50 par, 5 percent, cumulative preferred stock and 66,000 shares of $10 par value common stock. The company’s earnings history is as follows: Year 1$121,360Net lossYear 2$200,000Net incomeYear 3$210,000Net income The corporation paid the maximum amount of dividends possible in each year of operation. The dividend paid to preferred stockholders at the end of Year 2 is

Which method of depreciation is used by most U.S. companies for financial reporting purposes?

How does the amortization of the discount on a note payable affect a company’s financial statements?

The Miller Company earned $190,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $136,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account.What is the net realizable value of Miller’s receivables at the end of Year 1?

Baltimore Company issued a $9,000 face value discount note to Bank of the Chesapeake on March 1, Year 1. The note had a 5% discount rate and a one-year term to maturity.After accruing all interest expense due as of April 1, Year 1, Baltimore Company made the cash payment for the full amount due (i.e., principal and interest) to Bank of the Chesapeake. How does the cash payment affect Baltimore’s financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders’ EquityRevenue−Expense=Net Incomea.(9,450)=(9,450)+ − = (9,000) FA,(450) FAb.(8,550)=(8,550)+ − = (8,550) FAc.(9,000)=(9,000)+ − = (9,000) FAd.(9,000)=(9,000)+ − = (8,550) FA,(450) OA

On January 1, Year 1, Gemstone Mining Company (GMC) paid $10,610,000 cash to purchase the rights to extract raw stone from a surface pit estimated to hold 55,500 pounds of useable material. GMC extracted 15,500 pounds of stone in Year 1, 25,500 pounds of stone in Year 2, and 30,500 pounds of stone in Year 3. The rights to the surface pit were expected to have a $511,000 salvage value at the end of Year 3. Which of the following statements models shows how the purchase will affect GMC’s financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders’ EquityCash+Stone ReservesRevenue−Expenses=Net IncomeA.$(10,610,000)+$10,610,000= + − = $(10,610,000) OAB.$(10,610,000)+$10,610,000= + − = $(10,610,000) IAC.$10,610,000+$(10,610,000)= + − = $(10,610,000) IAD.$10,610,000+$(10,610,000)= + − = $(10,610,000) OA

On January 1, Year 1, Niagara Corporation arranges a $6,000 line of credit with Centennial Bank. It accepted the bank’s offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and repayments are to take place on January 1 of each year.Niagara begins its loan transactions with Centennial Bank by borrowing $2,000 on January 1, Year 1. Niagara records the first year’s interest payment on December 31, Year 1. Centennial’s prime rate is 4% for Year 1. Which of the following shows the effect of this event on the financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders’ EquityRevenue−Expense=Net IncomeA.(100)= +(100) −100=(100)(100) OAB.(100)=(100)+ − = (100) FAC.(80)=(80)+ − = (80) FAD.(80)= +(80) −80=(80)(80) OA