Matlock Company reported total sales revenue of $55,000 and total expenses amounting to $45,000
(i.e., net income $10,000) on its income statement for the year ended December 31, 2005. During 2005,
accounts receivable decreased by $4,000, merchandise inventory decreased by $6,000, accounts
payable increased by $2,000 and depreciation of $8,000 was recorded. Therefore, based only on this
information, the net cash flow from operating activities for 2005 was:
The principle which holds that all of the expenses incurred in earning revenue should be identified with
the revenue recognized and reported for the same period is the
A) revenue principle.
B) liability principle.
C) timing principle.
D) matching principle.
Which of the following statements about the effective interest amortization method is false
A) We must compute interest expense before computing the amortized discount or premium.
B) The difference between interest expense and cash interest is the portion of premium or discount
C) Interest expense is computed by multiplying the stated interest rate times the book value of the
D) None of the above are false.
During 2006, Abby Corporation reacquired some shares of its own common stock. It records treasury
stock at cost. What effect did this transaction have on 2006 stockholders' equity and assets,
A) Stockholders' Equity: Decrease; Assets: No effect
B) Stockholders' Equity: Increase; Assets: No effect
C) Stockholders' Equity: Decrease; Assets: Decrease
D) Stockholders' Equity: Increase; Assets: Decrease
Schager Company purchased a computer system on January 1, 2006, at a cash cost of $25,000.
estimated useful life is 10 years, and the estimated residual value is $3,000.
The company will
use the double-declining balance (declining-balance based on a 200 percent acceleration rate)
method. Depreciation expense for the second year will be