Cambridge College

Josh Reilly is the owner of Dispatch Delivery Service. Recently Josh paid interest of $4,500 on a personal loan of $75,000 that he used to begin the business. Should Dispatch Delivery Service record the interest payment? Explain.

A business had revenues of $640,000 and operating expenses of $715,000. Did the business (a) incur a net loss or (b) realize net income?

1. Twenty percent of all businesses in the United States are corporations and they account for 80% of the total business dollars generated. True False 2. A corporation is a separate entity for accounting purposes but not for legal purposes. True False 3. The financial loss that each stockholder in a corporation can incur is usually limited to the amount invested by the stockholder. True False 4. Under the Internal Revenue Code, corporations are required to pay federal ...

U.S. GAAP Term IFRS International Term Statement of comprehensive income* Statement of comprehensive income Balance sheet Statement of financial position Interest expense Finance costs Net income Profit for the year Trading investments Financial assets at fair value through profit or loss Excess of issue price over par Share premium Examples: Accumulated other comprehensive income, treasury stock, unrealized gain (loss) on available-for-sale investments Reserves Notes payable Lo...

1. Horizontal analysis is the percentage analysis of increases and decreases in corresponding statements. The percent change in the cash balances at the end of the preceding year from the end of the current year is an example. Vertical analysis is the percentage analysis showing the relationship of the component parts to the total in a single statement. The percent of cash as a portion of total assets at the end of the current year is an example. 2. Comparative statements provide informatio...

1. A company may temporarily have excess cash that is not needed for use in its current operations. Instead of letting excess cash remain idle in a checking account, most companies invest their excess cash in temporary investments. The primary objective of investing in temporary investments is to: a. earn interest revenue. b. receive dividends. c. realize gains from increases in the market price of the securities. 2. A gain or loss can occur when the selling price of the bond differs ...

1. (1) To pay the face (maturity) amount of the bonds at a specified date. (2) To pay periodic interest at a specified percentage of the face amount. 2. a. Bonds that may be exchanged for other securities under specified conditions. b. The issuing corporation reserves the right to redeem the bonds before the maturity date. c. Bonds issued on the basis of the general credit of the corporation. 3. More than face amount. Because comparable bonds provide a market interest rate (11%...

1. No. Common stock with a higher par is not necessarily a better investment than common stock with a lower par because par is an amount assigned to the shares. 2. The broker is not correct. Corporations are not legally liable to pay dividends until the dividends are declared. If the company that issued the preferred stock has operating losses, it could omit dividends, first, on its common stock and, later, on its preferred stock. 3. The company may not have had enough cash on hand to p...

1. a. Proprietorship: Ease of formation and nontaxable entity. b. Partnership: Expanded owner expertise and capital, nontaxable entity, and moderate complexity of formation. c. Limited liability company: Limited liability to owners, expanded access to capital, nontaxable entity, and moderate complexity of formation. 2. The disadvantages of a partnership are that its life is limited, each partner has unlimited liability, one partner can bind the partnership to contracts, and raising...

1. Merchandising businesses acquire merchandise for resale to customers. It is the selling of merchandise, instead of a service, that makes the activities of a merchandising business different from the activities of a service business. 2. Yes. Gross profit is the excess of (net) sales over cost of merchandise sold. A net loss arises when operating expenses exceed gross profit. Therefore, a business can earn a gross profit but incur operating expenses in excess of this gross profit and end u...