ACCT 504 ALL EXAMS


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ACCT 504 ALL EXAMS

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ACCT 504 ALL  EXAMS

 

 

ACCT 504 Final Exam

 

  1. (TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5)
    Reduced legal liability for investors
    Harder to transfer ownership
    Lower taxes
    Most common form of organization

    2. (TCO A) When a corporation distributes a dividend, _____. (Points : 5)
    the most common form of distribution is a cash dividend
    the Dividends account will be increased with a credit
    the Retained Earnings account will be directly increased with a debit
    the Dividends account will be decreased with a debit

    3. (TCOs A, B) Below is a partial list of account balances for Cerner Company:

    Cash $5,000
    Prepaid insurance 500
    Accounts receivable 2,500
    Accounts payable 2,000
    Notes payable 3,000
    Common stock 1,000
    Dividends 500
    Revenues 15,000
    Expenses 12,500

    What did Cerner Company show as total credits? (Points : 5)
    $21,500
    $21,000
    $20,500
    $22,000
  2. (TCOs B, E) Using accrual accounting, expenses are recorded and reported only _____. (Points : 5)
    when they are incurred, whether or not cash is paid
    when they are incurred and paid at the same time
    if they are paid before they are incurred
    if they are paid after they are incurred

    5. (TCO D) Three companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)
    LIFO will have the highest ending inventory
    FIFO will have the highest cost of goods sold
    All three companies will have the same value for ending inventory.
    average cost will have an ending inventory value that falls between FIFO and LIFO

    6. (TCOs A, E) Equipment with a cost of $192,000 has an estimated salvage value of $18,000 and an estimated life of 4 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours? (Points : 5)
    $48,000
    $52,500
    $49,500
    $43,500

    7. (TCOs D, G) Joyce Corporation issues 1,000 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 102. The journal entry to record the issuance will show a _____. (Points : 5)
    debit to Cash of $1,020,000
    debit to Discount on Bonds Payable for $20,000
    credit to Bonds Payable for $1,020,000
    credit to Cash for $1,000,0008. (TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $240,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)
    $240,000
    $250,000
    $310,000
    $230,000

    9. (TCO F) One variation of the horizontal analysis is known as _____. (Points : 5)
    nonlinear analysis
    vertical analysis
    trend analysis
    common-size analysis

    10. (TCO F) Comparisons of data within a company are an example of the following comparative basis. (Points : 5)
    Industry averages
    Intercompany
    Intracompany
    Interregional

    11. (TCO F) Which one of the following is not a characteristic generally evaluated in ratio analysis? (Points : 5)
    Liquidity
    Profitability
    Marketability of the product
    Solvency

    12. (TCO F) Short-term creditors are usually most interested in assessing _____. (Points : 5)
    solvency
    liquidity
    marketability
    profitability

    13. (TCO F) Long-term creditors are usually most interested in evaluating _____. (Points : 5)
    liquidity
    marketability
    profitability
    solvency

    14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)
    find out the present value of all of the future cash payments promised by the bond
    calculate the present value of the principal only
    calculate the present value of the interest only
    multiply the bond price by the interest rate
  3. (TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5)


Reduced legal liability for investors
Harder to transfer ownership
Lower taxes
Most common form of organization

  1. (TCO A) When a corporation distributes a dividend, _____. (Points : 5)


the most common form of distribution is a cash dividend
the Dividends account will be increased with a credit
the Retained Earnings account will be directly increased with a debit
the Dividends account will be decreased with a debit

  1. (TCOs A, B) Below is a partial list of account balances for Cerner Company:

    Cash $5,000
    Prepaid insurance 500
    Accounts receivable 2,500
    Accounts payable 2,000
    Notes payable 3,000
    Common stock 1,000
    Dividends 500
    Revenues 15,000
    Expenses 12,500

    What did Cerner Company show as total credits? (Points : 5)


$21,500
$21,000
$20,500
$22,000

  1. (TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____. (Points : 5)


sales under $1,000,000
no accountants on staff
insignificant receivables and payables
all sales and purchases on account

  1. (TCO D) Three companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)


LIFO will have the highest ending inventory
FIFO will have the highest cost of goods sold
All three companies will have the same value for ending inventory.
average cost will have an ending inventory value that falls between FIFO and LIFO

  1. (TCOs A, E) Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)


$14,160
$11,760
$9,840
$9,600

  1. (TCOs D, G) Mendez Corporation issues 2,000 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 103. The journal entry to record the issuance will show a _____. (Points : 5)


debit to Cash of $2,000,000
debit to Premium on Bonds Payable for $60,000
credit to Bonds Payable for $2,000,000
credit to Cash for $2,060,000

  1. (TCO C) Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is_____. (Points : 5)


$120,000
$125,000
$155,000
$115,000

  1. (TCO F) One variation of the horizontal analysis is known as _____. (Points : 5)


nonlinear analysis
vertical analysis
trend analysis
common-size analysis

  1. (TCO F) In a common-size balance sheet, the 100% figure is _____. (Points : 5)


total current assets
total property, plant, and equipment
total liabilities
total assets

  1. (TCO F) In vertical analysis, the base amount for studying salary and wages expense is generally _____. (Points : 5)


net sales
salary and wages expense in a previous year
gross profit
net income

  1. (TCO F) A common measure of profitability is the _____. (Points : 5)


current ratio
current cash debt coverage ratio
return on common stockholder's equity ratio
debt to total assets

  1. (TCO F) Return-on-assets ratio is most closely related to _____. (Points : 5)


profit margin and debt-to-total-assets ratio
profit margin and asset-turnover ratio
times interest earned and debt-to-stockholders equity ratio
profit margin and free cash flow

  1. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)


find out the present value of all of the future cash payments promised by the bond
calculate the present value of the principal only
calculate the present value of the interest only
multiply the bond price by the interest rate

  1. (TCO A) An advantage of the corporate form of business is that _____. (Points : 5)

it has limited life
its owner's personal resources are at stake
its ownership is easily transferable via the sale of shares of stock
it is simple to establish

  1. (TCO A) When a corporation distributes a dividend, _____. (Points : 5)

the most common form of distribution is a cash dividend
the Dividends account will be increased with a credit
the Retained Earnings account will be directly increased with a debit
the Dividends account will be decreased with a debit

  1. (TCOs A, B) Below is a partial list of account balances for Denton Company:

    Cash $7,000
    Prepaid insurance 700
    Accounts receivable 3,500
    Accounts payable 2,800
    Notes payable 4,200
    Common stock 1,400
    Dividends 700
    Revenues 21,000
    Expenses 17,500

    What did Denton Company show as total credits? (Points : 5)

$30,100
$29,400
$28,700
$30,800

  1. (TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____. (Points : 5)

sales under $1,000,000
no accountants on staff
insignificant receivables and payables
all sales and purchases on account

  1. (TCO D) In a period of increasing prices, which inventory cost flow assumption will result in the lowest amount of income tax expense? (Points : 5)

FIFO
LIFO
The average cost method
Income tax expense for the period will be the same under all assumptions.

  1. (TCOs A, E) Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)

$14,160
$11,760
$9,840
$9,600

  1. (TCOs D, G) Lopez Corporation issues 500 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 96. The journal entry to record the issuance will show a _____. (Points : 5)

debit to Cash of $500,000
credit to Discount on Bonds Payable for $20,000
credit to Bonds Payable for $480,000
debit to Cash for $480,000

  1. (TCO C) Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)

$120,000
$125,000
$155,000
$115,000

  1. (TCO F) Which one of the following is not a tool in financial statement analysis? (Points : 5)

Horizontal analysis
Circular analysis
Vertical analysis
Ratio analysis

  1. (TCO F) In vertical analysis, the base amount for studying salary and wages expense is generally _____. (Points : 5)

net sales
salary and wages expense in a previous year
gross profit
net income

  1. (TCO F) Ratios are most useful in identifying _____. (Points : 5)

trends
differences
causes
relationships among different numbers

  1. (TCO F) A common measure of liquidity is _____. (Points : 5)

return on assets
current ratio
profit margin
debt to equity

  1. (TCO F) Return-on-assets ratio is most closely related to _____. (Points : 5)

profit margin and debt-to-total-assets ratio
profit margin and asset-turnover ratio
times interest earned and debt-to-stockholders equity ratio
profit margin and free cash flow

  1. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

find out the present value of all of the future cash payments promised by the bond
calculate the present value of the principal only
calculate the present value of the interest only
multiply the bond price by the interest rate


  1. (TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report:
    .........................................................................................................................................................................

    Required:
    1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.
    2. Using the Balance Sheet from your answer above calculate; Current Ratio, Days in Inventory, Average Collection Period, Return on Assets Ratio, Debt to Total Assets and Return on common stockholders’ equity ratio. (Make sure to show all your work)


    2. (TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013:
    ........................................................................................................................................................................................................................

Required:

Using the information provided above:
1. Prepare a multiple-step income statement
2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.

  1. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:

................................................................................................................................................................................................................

Required:

1) Please calculate the percentage increase or decrease in cash for the operating, investing, and financing sections and explain the major reasons for the increase or decrease for each of these sections.

2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio.

  1. (TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”

    Assuming the goal is to maximize net income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported Net Income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet.

    Required:
  2. Goforit carries significant electronics inventory in a competitive environment where prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.

  3. Goforit has a large investment in warehouse equipment including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: Straight line (SL) or double declining balance (DDB)?
  4. (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.

..................................................................................................................................................................................................................

Required:

1) Please explain the meaning of each of the Pfizer ratios above.

2) Please state which company performed better for each ratio. 

 

ACCT 504 Final Exam


Question 1.1. (TCO D) Please describe the purpose of the Income Statement and the interrelationship between the income statement and the other major financial statements that we covered in this class. In your answer, please also address which financial statements should be created before the Income Statement, if any, and which financial statements need to be completed after the Income Statement, if any. (Points : 25)

 

 Question 1—Set 2

  1.  Please describe the purpose of the Balance Sheet and the interrelationship between the balance sheet and the other major financial statements that we covered in this class. In your answer, please also address which financial statements should be created before the Balance Sheet, if any, and which financial statements need to be completed after the Balance Sheet, if any

 

 

Question 2.2. (TCO E) Your friend, Lisa, plans to open a nail salon. Lisa states that she does not have time to develop and implement a system of internal controls.

(a) Explain to Lisa the components of internal control. (10 points)

(b) Explain to Lisa at least 5 internal control procedures she must establish to protect herself against fraud. You should state specific internal control procedures from the textbook, and relate your answer to her nail salon business. (15 points) (Points : 25)

Q-2-Set 2

  1. Your friend, John, plans to open a parking garage business. John states that he does not have time to develop and implement a system of internal controls.

(a) Explain to John the objectives of a system of internal control. 

(b) Explain to John at least 5 internal control procedures that he must establish to protect himself against fraud. You should state specific internal control procedures from the textbook and relate your answer to his parking garage business. 

solution

 

 

 

 

Question 3. (TCO A) The following items are taken from the financial statements of PQR Company for 2013:

Cash  $100,000

 

 

 

Instructions:

(1) Create a classified balance sheet in good form for the year ended 2013. (30 points)

(2) Calculate the current ratio and debt ratio and explain your findings. (6 points) (Points : 36)

 

 

Question 3—Set 2

(TCO H) Corporations in need of cash can either issue stock or bonds to raise capital. What are the differences between these two activities and why might a company choose one over the other? (Points : 20)

 

Q-3 Set 3

Question 4.4. (TCO A) The following items are taken from the financial statements of BCT Company for 2013:

Instructions:

(1) Create a classified balance sheet in good form for the year ended 2013. (30 points)

(2) Calculate the current ratio and debt ratio and explain your findings. (6 points) (Points : 36)

 

 

Question 4. (TCO B) The Caldor Company gathered the following condensed data for the year ended December 31, 2014:

Instructions:

 

(1) Prepare a multiple-step income statement for the year ended December 31, 2014. (30 points)

 

(2) Compute the gross margin percentage and net profit margin ratio. Caldor Company’s assets at the beginning of the year were $900,000, and the assets were $950,000 at the end of the year. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings. (6 points) (Points : 36)

 

 

Q-4 Set 2

Question 3.3. (TCO H) Simpson Inc. purchased 5, $4,000, 11% bonds of Hillsdale Corporation when the market rate of interest was 10%. Interest is paid semiannually on the bonds, and the bonds mature in 4 years. 

 

Instructions:

Compute the total price paid by Simpson Inc. for the bonds showing your calculation for the present value of the principal and the present value of the interest payments. 

 

Present value tables (Exhibit 8-14 and Exhibit 8-15) are available on pages 452 and 453 of your Harrison, Horngren, and Thomas textbook.  NOTE:  Be sure you review the PV Tables completely to ensure you find the correct period and interest rate for the calculation. (Points : 20) 

 

 

Question 5. (TCO C) This is a 2-part question.  

Part 1) Indicate which section of the statement of cash flows should contain each of the following items, and whether each item would result in an inflow or outflow of cash. The sections are Operating, Investing, and Financing. (30 points)

Part 2) Please explain how to calculate free cash flow and the importance of free cash flow to investors. (6 points) (Points : 36)

 

 

Q-5 Set 2

  1. The Alpha Company gathered the following condensed data for the year ended December 31, 2014:

Instructions:

(1) Prepare a multiple-step income statement for the year ended December 31, 2014. 

 

(2) Compute the gross margin percentage and net profit margin ratio. Alpha Company’s assets at the beginning of the year were $1,500,000, and the assets were $1,400,000 at the end of the year. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings.

 

 

 

Question 6. (TCO F) This is a 2-part question. 

 Part 1) Journalize the adjusting entries below at year-end December 31, XXXX. Please share your supporting calculations for the adjusting entries requiring computations.

(a) The unadjusted balance of the Supplies account is $2,200. The total cost of supplies remaining is $1,000.

(b) Accrued Service Revenue of $9,000. 

(c) Equipment was purchased at the beginning of the year for $45,000. The equipment’s useful life is 5 years, and the residual value is $5,000. Record the depreciation for this year. 

(d) The weekly payroll is $25,000. Employees are owed for 3 days of a 5-day work week. 

(e) Beginning unearned service revenue is $7,500, and ending unearned service revenue is $3,500. 

(f) The business has interest expense of $750 that is due in January. 

  (30 points)

 

 

 

Q-7

(TCO G) Please review the following 6 ratios for Langley Company and XYZ Inc. for the year ended 2014, and address the 2 questions below.

Instructions: This is a 2-part question.

(1) Explain the meaning of each of the Langley Company ratios above. (18 points)

(2) State which company performed better for each ratio. (18 points) (Points : 36)

 

 

Question 7 – Set 2

 

 (TCO F) This is a 2-part question. 

Part 1) Journalize the adjusting entries below at year-end December 31, XXXX. Please share your supporting calculations for the adjusting entries requiring computations.

Beginning prepaid insurance, $500. Payments for insurance during the period are $900. Ending prepaid insurance is $600. 

(b) Interest revenue of $1,500 has been earned but not yet received. 

(c) Accrued Service Revenue of $12,000

(d) The weekly payroll is $20,000. Employees are owed for 4 days of a 5-day work week. 

The unadjusted balance of the Supplies account is $1,200. The total cost of supplies remaining is $300.

(f) Equipment was purchased at the beginning of the year for $25,000. The equipment’s useful life is 5 years, and the residual value is $5,000. Record the depreciation for this year. 

 

 

Question 8.8. 

(TCO G) Please review the following 6 ratios for Johnson Company and Lee Enterprises for the year ended 2014, and address the 2 questions below.

Instructions: This is a 2-part question. 

(1) Explain the meaning of each of the Johnson Company ratios above. (18 points)

(2) State which company performed better for each ratio. (18 points) (Points : 36)

 

 

ACCT 504 Midterm Exam

 

 

  1. Question : (TCOs A and E) Your friend, Ellen, has hired you to evaluate the following internal control procedures.

Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which internal control procedure relates to each of the internal controls.

 

For the weaknesses, you also need to state a recommendation for improvement.

 

 

(1) The cashier counts the total receipts and reconciles the receipts with the cash register total.

(2) Electronic documents are password-protected.

(3) The accountant is completely independent of the sales department.

(4) Invoices are not numbered.

(5) Large purchase orders must be approved by a manager.

 

 

 

 

TCOs A and E) Your friend, Ellen, has hired you to evaluate the following internal control procedures.

Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which internal control procedure relates to each of the internal controls.

 

For the weaknesses, you also need to state a recommendation for improvement.

 

 

(1) The cashier counts the total receipts and reconciles the receipts with the cash register total.

(2) Electronic documents are password-protected.

(3) The accountant is completely independent of the sales department.

(4) Invoices are not numbered.

(5) Large purchase orders must be approved by a manager. (Points : 30)

 

Set 2

1: Invoices are pre-numbered.

2: The controller approves of the purchases and makes the payment since he or she is familiar with the purchases.

3: The office manager is in charge of the petty cash fund.

4: Blank checks are stored in the safe.

5: At the end of the day, the total receipts are counted by the cashier on duty and reconciled to the cash register total. (Points : 30)

 

Set 3

Invoices are pre-numbered.

The controller approves of the purchases and makes the payment since he

or she is familiar with the purchases.

The office manager is in charge of the petty cash fund.

Blank checks are stored in the safe.

At the end of the day, the total receipts are counted by the cashier on duty

and reconciled to the cash register total

 

 

Set 4

Question 14. Question : (TCO D)  Your friend Dean has hired you to evaluate the following internal control procedures. 

a: Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which principle relates to each of the internal controls.

b: For the weaknesses, you also need to state a recommendation for improvement. 

 

 

1: Bonding of the cashiers is not required because all of the cashiers have significant experience.

2: The treasurer is the only one allowed to sign checks.

3: All employees may operate cash registers. 

4: Blank checks are stored in the safe. 

5: Supervisors count cash receipts daily.

 

 

  1. (TCOs E and F) Please prepare the following journal entries. Indicate which account should be debited and which account should be credited, along with the dollar amount of the debit and credit.

 

(1) Investors invest $500,000 in exchange for 50,000 shares of common stock.

(2) Company purchased equipment for $25,000 on account.

(3) Company paid Rent for $4,000.

(4) Company received $15,000 for services not yet performed.

(5) Employees work Monday through Friday and are paid on Friday. Salary expense is $10,000 per day and this year, December 31 falls on a Wednesday. (Points : 30)

 

 

Set 2

Question

Please prepare the following journal entries. Indicate which account should be debited and which account should be credited, along with the dollar amount of the debit and credit.

 

(1) Investors invest $300,000 in exchange for 30,000 shares of common stock.

(2) Company made payment on account for $500.

(3) Employees work Monday through Friday and are paid on Friday. Salary expense is $20,000 per day, and December 31 falls on a Tuesday.

(4) Company purchased Supplies for $2,000.

(5) The company needs to record Supplies used for $500.

 

 

 

Set 3

  1. Question : (TCOs D and E) Please prepare the following journal entries. Indicate

which account should be debited and which account should be credited,

along with the dollar amount of the debit and credit.

Investors invest $50,000 in exchange for 1,000 shares of common stock.

Company purchased equipment for $10,000 on credit.

Company received $5,000 for services performed.

Company made payment on account for $2,000.

 

Set 4

Question 13. Question : (TCO D and TCO E) Please prepare the following journal entries. Indicate which account should be debited and which account should be credited, along with the dollar amount of the debit and credit.  

a: Investors invest $100,000 in exchange for 10,000 shares of common stock. 

b: Company paid a utility bill for $600. 

c: Company received cash of $15,000 for services performed. 

d: Company made payment on account for $1,000. 

e: Company received $12,000 for services not yet performed.

 

 

 

Set 5

Question 12. Question : (TCOs B and D) Please prepare the following journal entries. Indicate which account should be debited and which account should be credited, along with the dollar amount of the debit and credit.

 

(1) Investors invest $300,000 in exchange for 30,000 shares of common stock.

(2) Company made payment on account for $500.

(3) Employees work Monday through Friday and are paid on Friday. Salary expense is $20,000 per day, and December 31 falls on a Tuesday.

(4) Company purchased Supplies for $2,000.

(5) The company needs to record Supplies used for $500.

 

 

Question 3

.The following items are taken from the financial statements of BGS Company for 2012:

Cash $500,000

Accounts Receivable 200,000

Supplies 70,000

Accounts Payable 147,300

Unearned Service Revenue 18,000

Equipment, net of accumulated depreciation 212,000

Common Stock 500,000

Retained Earnings 12/31/2011 78,300

Long-term debt 142,400

Service revenue 240,000

Cost of Goods Sold 72,000

Rent expense 36,000

Supplies expense 12,000

 

Set 2

  1. (TCO D) The following items are taken from the financial statements of SRW Company for 2012:

 

 

Cash $375,000

Accounts Receivable 125,000

Prepaid Insurance 100,000

Accounts Payable 88,000

Unearned Service Revenue 15,000

Equipment, net of accumulated depreciation 177,000

 

 

 

Question 4

  1. (TCOs B and D) The following items are taken from the financial statements of Lacey Company for 2012:

 

 

Advertising Expense $14,000

Accounts Receivable 12,000

Cost of Goods Sold 65,000

Accumulated Depreciation—Equipment 20,000

Accounts Payable 21,000

Cash 44,000

Depreciation Expense 17,000

Common Stock 100,000

 

 

 

Instructions

 

(a) Calculate the net income. (18 points)

(b) Calculate the balance of Retained Earnings that would appear on a balance sheet at December 31, 2012. (7 points)

(c) Calculate the gross profit percentage. (5 points) (Points : 30

Lacey Company 

Income Statement

 

 

Question 13. Question : (TCOs B and D) The following items are taken from the financial statements of Ashe Company for 2012:

 

Equipment $100,000

Accounts Receivable 12,000

Accounts Payable 9,000

Cost of Goods Sold 72,000

Utilities Expense 11,000

Depreciation Expense 17,000

Insurance Expense 9,000

 

 

Question 14. Question : (TCO D) The following items are taken from the financial statements of BGS Company for 2012: 

 

Cash  $500,000 

Accounts Receivable  200,000 

Supplies  70,000 

Accounts Payable  147,300 

Unearned Service Revenue  18,000 

Equipment, net of accumulated depreciation  212,000 

 

 

Instructions 

 

(a) Please create a classified balance sheet in good form for the year ended 2012. (25 points)

 

(b) Please calculate the current ratio. (5 points)

 

 

Question 12. Question : (TCOs B and E) The adjusted trial balance of Gertz Company included the following selected accounts.

 

                                                     

  Debit Credit

Sales   $575,000

Sales returns and allowances $ 50,000

Sales discounts 9,500

Cost of goods sold 347,000

 

 

Instructions: 

1: Use the above information to prepare a multiple-step income statement for the year ended December 31, 2010. 

2: Calculate the profit margin ratio and gross profit rate. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings.

 

 

 

Question 11. Question : (TCO D) A classmate is considering dropping his or her accounting class because he or she cannot understand the rules of debits and credits.

Explain the rules of debits and credits in a way that will help him or her understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities and stockholders' equity) and the income statement (revenues and expenses).

 

 

  1. Question : (TCO D) Describe the process of preparing a trial balance. What is the

purpose of preparing a trial balance? If a trial balance does not balance,

identify what might be the reasons why it does not balance. If the trial

balance does balance, does that ensure that the ledger accounts are

correct? Explain.

 

 

  1. Question : (TCO D) An account is an important accounting record where financial information is stored until needed. Briefly explain (1) the nature of an account, (2) the different types of accounts, and (3) the manner in which an account is increased and decreased, and the normal balance of each type of accounts.

 

 

 

Question 1.1. (TCO A) Assets include (Points : 3)

       prepaid insurance and prepaid rent.

       dividends paid to shareholders.

       loans obtained by the company.

       stockholders’ investment in the business.

 

 

Question 2.2. (TCO B) For 2014, CAP Corporation reported net income of $96,000; net sales $1,440,000; and weighted average shares outstanding of 9,600. There were no preferred dividends. What was the 2014 earnings per share? (Points : 3)

       $100.00

       $150.00

       $10.00

       $15.00

 

 

Question 3.3. (TCO C) Issuing debt is an example of a(n) (Points : 3)

       operating activity.

       investing activity.

       financing activity.

       noncash investing and financing activity.

 

 

Question 4.4. (TCO D) Dividends declared are reported on which of the following statements? (Points : 3)

       Income Statement

       Statement of Retained Earnings

       Balance Sheet

       Statement of Financial Position

 

 

Question 5.5. (TCO E) Which of the following describes the normal balance and classification of the Unearned Revenue account? (Points : 3)

       Credit, liability

       Debit, liability

       Debit, stockholders’ equity

       Credit, stockholders’ equity

 

 

Question 6.6. (TCO F) The accrual accounting term used to indicate recording an expense before paying cash for the item is (Points : 3)

       deferral.

       accrual.

       depreciation.

       prepayment.

 

 

Question 7.7. (TCO A) LBJ Company recorded the following events involving a recent purchase of merchandise.

 

 

- Received goods for $95,000, terms 2/10, n/30. 

- Returned $4,500 of the shipment for credit due to damaged goods. 

- Paid $1,000 for freight in. 

- Paid the invoice within the discount period.

 

 

As a result of these events, the company's merchandise inventory (Points : 3)

       increased by 89,580.

       increased by $89,690.

       increased by $89,600.

       increased by $91,500.

= (95000-4500)*0.98+ 1000

 

 

Question 8.8. (TCO B) In periods of rising prices, which of the following inventory methods results in the highest gross profit figure? (Points : 3)

       FIFO

       LIFO

       Average cost method

       Cannot be determined based on the information given

 

 

Question 9.9. (TCO A) On a classified balance sheet, prepaid expenses are classified as (Points : 3)

       current liabilities.

       long-term liabilities.

       current assets.

       Prepaid expenses do not belong on the Balance Sheet.

 

 

Question 10.10. (TCO E) Which of the following is an internal control procedure? (Points : 3)

       Control environment

       Comparisons and compliance monitoring

       Promote operational efficiency

       Encourage employees to follow company policies

 

Question 1. Question : (TCO A) Which of the following accounts is recorded as part of stockholders’ equity on the Balance Sheet?

 

Question 2. Question : (TCO B) For 2014, CAP Corporation reported net income of $96,000; net sales $1,440,000; and weighted average shares outstanding of 9,600. There were no preferred dividends. What was the 2014 earnings per share?

 

Question 3. Question : (TCO C) Purchasing inventory is an example of a(n)

 

Question 4. Question : (TCO D) Dividends declared are reported on which of the following statements?

 

Question 5. Question : (TCO E) Which of the following describes the normal balance and classification of the Unearned Revenue account?

 

Question 6. Question : (TCO F) The accrual accounting term used to indicate recording an expense before paying cash for the item is

 

Question 7. Question : (TCO A) XYZ Company recorded the following events involving a recent merchandise purchase. 

 

 

Question 8. Question : (TCO B) In periods of rising prices, which of the following inventory methods results in the highest gross profit figure?

 

Question 9. Question : (TCO A) Which of the following is not a current liability?

 

 

Question 10. Question : (TCO E) Which of the following is an internal control procedure?

 

  1. Question : (TCOs A, B, and C) Which type of corporate information is available to

investors?

 

  1. Question : (TCO C) Collecting cash from customers would be an example of which

type of activity?

 

  1. Question : (TCO A) Resources owned by a business are referred to as

 

  1. Question : (TCO A) In a classified balance sheet, assets are usually classified as

 

  1. Question : (TCO B) For 2012, LBJ Corporation reported net income of $25,000; net

sales $250,000; and weighted average shares outstanding of 5,000. There

were no preferred stock dividends. What was the 2012 earnings per share?

 

  1. Question : (TCO D) Which of the following accounts has a normal balance of a credit?

 

  1. Question : (TCO E) The accrual accounting term used to indicate recording an

expense before paying cash for the item is _____

:

  1. Question : (TCOs A and B) A periodic inventory system would most likely be used by

a(n) _____

 

  1. Question : (TCOs A and B) LBJ Company recorded the following events involving a

recent purchase of merchandise.

 

 

Comments:

  1. Question : (TCO A) In a period of declining prices, which of the following inventory

methods generally results in the lowest gross profit figure?

 

Question : (TCOs A, B, and C) Shareholders want answers to all of the following questions except:

 

Question 2. Question : (TCO C) Paying cash dividends is an example of a(n)

 

Question 3. Question : (TCO C) Buying a new plant would be an example of which type of activity?

 

Question 4. Question : (TCO A) Which of the following should not be classified as a current liability?

 

Question 5. Question : (TCO B) For 2012, LBJ Corporation reported net income of $75,000; net sales $750,000; and weighted average shares outstanding of 7,500. There were no preferred stock dividends. What was the 2012 earnings per share? 

 

Question 6. Question : (TCO D) Which of the following describes the normal balance and classification of the Unearned Revenue account?

 

Question 7. Question : (TCO E) Which of the following statements is correct?

 

Question 8. Question : (TCOs A and B) A periodic inventory system would most likely be used by a(n)

 

Question 9. Question : (TCOs A and B) LBJ Company recorded the following events involving a recent merchandise purchase. 

 

- Received goods for $40,000, terms 2/10, n/30 

- Returned $1,200 of the shipment for credit due to damaged goods

- Paid $1,000 for freight in

- Paid the invoice within the discount period

 

Question 10. Question : (TCO A) In a period of declining prices, which of the following inventory methods generally results in the lowest gross profit figure?

 

Question 1. Question : (TCOs A, B, and C) Which of the following statements concerning users of accounting information is incorrect?

 

Question 2. Question : (TCO C) Paying cash dividends is an example of a(n)

 

Question 3. Question : (TCO C) Buying a new plant would be an example of which type of activity?

 

Question 4. Question : (TCO A) On a classified balance sheet, prepaid expenses are classified as

 

Question 5. Question : (TCO B) For 2012, LBJ Corporation reported net income of $75,000; net sales $750,000; and weighted average shares outstanding of 7,500. There were no preferred stock dividends. What was the 2012 earnings per share? 

 

Question 6. Question : (TCO D) Which of the following accounts has a normal balance of a credit?

 

Question 7. Question : (TCO E) The accrual accounting term used to indicate recording an expense before paying cash for the item is

 

 

Question 8. Question : (TCOs A and B) A periodic inventory system would most likely be used by a(n)

 

Question 9. Question : (TCOs A and B) LBJ Company recorded the following events involving a recent merchandise purchase. 

 

 

Question 10. Question : (TCO A) In a period of increasing prices, which of the following inventory methods generally results in the highest gross profit?

 

Question 11. Question : (TCO D) A classmate is considering dropping his or her accounting class because he or she cannot understand the rules of debits and credits.

Explain the rules of debits and credits in a way that will help him or her understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities and stockholders' equity) and the income statement (revenues and expenses).

 

 

 

Question 12. Question : (TCOs B and E) The Caltor Company gathered the following condensed data for the Year Ended December 31, 2010.

 

Cost of goods sold $ 710,000

Net sales 1,279,000

Administrative expenses 239,000

Interest expense 68,000

Dividends paid 38,000

Selling expenses 45,000

 

 

Instructions:

1: Prepare a multiple-step income statement for the year ended December 31, 2010. 

2: Compute the profit margin ratio and gross profit rate. Caltor Company’s assets at the beginning of the year were $770,000 and were $830,000 at the end of the year. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings.

 

 

Question 13. Question : (TCO D and E) Please prepare the following journal entries. Indicate which account should be debited and which account should be credited, along with the dollar amount of the debit and credit.  

 

a: Investors invest $50,000 in exchange for 1,000 shares of common stock. 

b: Company purchased equipment for $10,000 on credit. 

c: Company received $5,000 for services performed. 

d: Company made payment on account for $2,000. 

e: Company received $7,000 for services not yet performed.

 

 

 

Question 14. Question : (TCO D) Your friend Wendy plans to open a hair salon. Wendy states that she does not have time to develop and implement a system of internal controls.

 a: Explain to Wendy the objectives of a system of internal control.

 b: Explain to Wendy at least four key controls she must establish to protect herself against fraud. You should state specific internal control principles and relate your answer to her hair salon business.

 

 

 

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