ACCT 304 Week 8 Final Exam (A+ Guaranteed)

1. (TCO 1) The FASB’s standard-setting process includes, in the correct order, (Points : 6)
exposure draft, research, discussion paper, and accounting standards update.
research, exposure draft, discussion paper, and accounting standards update.
research, discussion paper, exposure draft, and accounting standards update.
discussion paper, research, exposure draft, and accounting standards update.

2. (TCO 1) Which of the following is not a provision of the Public Company Accounting Reform and Investor Protection Act of 2002? (Points : 6)
Corporate executive accountability
Auditor rotation
Retention of workpapers
All of the above are provisions of the Act.

3. (TCO 2)  SFAC No. 5 focuses on (Points : 6)
objectives of financial reporting.
qualitative characteristics of accounting information.
recognition and measurement concepts in accounting.
elements of financial statements.

4. (TCO 2) Enhancing qualitative characteristics of accounting information include (Points : 6)
relevance and comparability.
comparability and timeliness.
understandability and relevance.
neutrality and consistency.

5. (TCO 3) Incurring an expense for advertising on an account would be recorded by (Points : 6)
debiting liabilities.
crediting assets.
debiting an expense.
debiting assets.

6. (TCO 3) Adjusting entries are primarily needed for (Points : 6)
cash basis accounting.
accrual accounting.
current value accounting.
manual accounting systems.

7. (TCO 4) Current assets include cash and all other assets expected to become cash or be consumed (Points : 6)
within 1 year.
within 1 operating cycle.
within 1 year or 1 operating cycle, whichever is shorter.
within 1 year or 1 operating cycle, whichever is longer.

8. (TCO 4) Which of the following is never a current liability account? (Points : 6)
Accrued payroll
Dividends payable
Prepaid rent
Subscriptions collected in advance

9. (TCO 5) Popson Inc. incurred a material loss that was not unusual in character, but was clearly an infrequent occurrence. This loss should be reported as (Points : 6)
an extraordinary loss.
a separate line item between income from continuing operations and income from discontinued operations.
a separate line item within income from continuing operations.
a separate line item in the retained earnings statement.

10. (TCO 5) On May 1, Foxtrot Co. agreed to sell the assets of its Footwear Division to Albanese Inc. for $80 million. The sale was completed on December 31, 2012. The following additional facts pertain to the transaction:
The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations.

The book value of Footwear’s assets totaled $48 million on the date of the sale.

Footwear’s operating income was a pre-tax loss of $10 million in 2012.

Foxtrot’s income tax rate is 40%.
In the 2012 income statement for Foxtrot Co., which of the following would it would report?
(Points : 6)
All income taxes would be combined into one line item.
Income taxes would be separated for continuing and discontinued operations.
Income taxes would be reported for income and gains only.
None of the above

11. (TCO 5) In comparing the direct method with the indirect method of preparing the statement of cash flows, (Points : 6)
only operating activities are presented differently.
only investing activities are presented differently.
only financing activities are presented differently.
all activities are presented differently.

12. (TCO 5) Cash flows from investing activities do not include (Points : 6)
proceeds from issuing bonds.
payment for the purchase of equipment.
proceeds from the sale of marketable securities.
cash outflows from acquiring land.

13. (TCO 5) Merchandise sold FOB shipping point indicates that (Points : 6)
the seller pays the freight.
the buyer holds title after the merchandise leaves the seller’s location.
the common carrier holds title until the merchandise is delivered.
the sale is not consummated until the merchandise reaches the point to which it is being shipped.

14. (TCO 5) Todd Sweeney is an artist who sells his work under consignment. (He displays his work in local barbershops, and customers buy the work there.) Sweeney recently transferred a painting to a local barbershop. Sweeney most likely should recognize revenue when (Points : 6)
he paints the painting, as the painting is accreting.
when he transfers a painting to a barbershop.
when the barbershop sells the painting.
when the barbershop’s right of return expires.

15. (TCO 6) LeAnn wishes to know how much money she should set aside now at 7% interest in order to accumulate a sum of $5,000 in 4 years. She should use a table for the (Points : 6)
present value of 1.
future value of 1.
present value of an ordinary annuity of 1.
future value of an annuity due of 1.

16. (TCO 6) Zulu Corporation hires a new chief executive officer and promises to pay her a signing bonus of $2 million per year for 10 years, starting 5 years after she joins the company. The liability for this bonus when the CEO is hired (Points : 6)
is the present value of a deferred annuity.
is the present value of an annuity due.
is $20 million.
is zero because no cash is owed for 5 years.

17. (TCO 7) Cash may not include (Points : 6)
foreign currency.
money orders.
restricted cash.
undeposited customer checks.

18. (TCO 7) Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on June 10, assuming the customer made the correct payment on that date?

(Points : 6)
Option a
Option b
Option c
Option d

19. (TCO 8) In a periodic inventory system, the cost of purchases is debited to (Points : 6)
purchases.
cost of goods sold.
inventory.
accounts payable.

20. (TCO 8) During periods when costs are rising and inventory quantities are stable, cost of goods sold will be (Points : 6)
higher under FIFO than LIFO.
higher under FIFO than average cost.
lower under average cost than LIFO.
lower under LIFO than FIFO.

21. (TCO 8) In applying LCM, market cannot be (Points : 6)
less than net realizable value.
greater than the normal profit.
less than the normal profit margin.
greater than net realizable value.

22. (TCO 8) Included in the computation of the cost-to-retail percentage for the LIFO retail method are (Points : 6)
net markups and net markdowns.
neither net markups nor net markdowns.
net markups, but not net markdowns.
net markdowns, but not net markups.

Page 2

1. (TCO 8) Fulbright Corp. uses the periodic inventory system. During its first year of operation, Fulbright made the following purchases (listed in chronological order of acquisition):

• 40 units at $100
• 70 units at $80
• 170 units at $60

Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year. What is the ending inventory using the FIFO method? (Points : 15)

2. (TCO 5) What is an accrued liability? Please provide two examples. (Points : 28)

3. (TCO 7) A company’s investment in receivables is affected by several related variables. Give an example of this interrelationship. (Points : 25)

Page 3

1. (TCO 8) It is the end of the accounting period, and your boss asks you to help determine the inventory balance to place in the company’s balance sheet. Explain which physical quantities of inventory you will include, and which you will exclude. (Points : 25)

2. (TCO 4) You are reviewing the December 31, 2012 financial statements of Ellie’s Antiques that is considering an initial public offering of its shares. The following items come to your attention:

a. Included in long-term investments are 10-year U.S. Treasury bonds that mature March 31, 2013. The bonds were purchased November 20, 2012.

b. The property, plant, and equipment account is stated at cost, except that it includes a parcel of land purchased for investment purposes at a cost of $40,000. Because of rising land prices, the value of the land has been written up to $60,000. The company has an independent appraisal that attests to this amount.

c. The accounts receivable account includes $20,000 due in 3 years from officers and employees and a 2-year, 8% note for $25,000 due from a customer. The loan enabled the customer to buy equipment needed to process materials purchased from Ellie’s Antiques.

Please discuss how the above items should be classified and accounted for.
(Points : 25)

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Before making its year-end adjustments, the net income for Gannet Company was $80,000

Before making its year-end adjustments, the net income for Gannet Company was $80,000. Year-end adjusting entries are necessary for the following items:

1. Office supplies used up during the year totaled $3,200

2. Interest accrued to December 31 on note payable to the bank totaled $900

3. Services performed for clients but not yet collected totaled $2,600.

Calculate Gannet Company’s net income for the year after the necessary adjustments are made.

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House of Organs, Inc., purchases organs from a well-known manufacturer and sells

House of Organs, Inc., purchases organs from a well-known manufacturer and sells them at the retail level. The organs sell, on the average, for $3,000 each. The average cost of an organ from the manufacturer is $1,508. The costs that the company incurs in a typical month are presented below:

Costs       Cost Formula
Selling:
Advertising       $962 per month
Delivery of organs       $57 per organ sold
Sales salaries and commissions       $4,783 per month, plus 5% of sales
Utilities       $639 per month
Depreciation of sales facilities       $5,098 per month
Administrative:
Executive salaries       $13,481 per month
Depreciation of office equipment       $890 per month
Clerical       $2,550 per month, plus $41 per organ sold
Insurance       $718 per month

During November, the company sold and delivered 60 organs.

Prepare a traditional income statement for November.

Prepare a contribution format income statement for November.

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Tom just received his bank statement and wanted to make sure that the balance

Bank Reconciliation

Tom just received his bank statement and wanted to make sure that the balance in his check book was correct. Tom determined the following information:

  1. At the end of the month Tom’s check book showed a balance of $183
  2. The bank indicated that the balance in Tom’s account was $475
  3. Check number 104 for $60, check number 107 for $205 and check number 108 for $100 had not cleared the bank.
  4. A deposit of $140 did not show up in the bank statement.
  5. Since Tom wanted a paper statement the bank charged him $5
  6. A check of $70 which was previously deposited was returned by the bank plus a $10 service charge.
  7. Tom discovered that a check she had written for $236 had been incorrectly recorded in his check ledger at $263.
  8. A friend had wired directly to Tom’s account $125.

A.Determine the true cash balance for Tom’s checking account.

B.Determine the amount of change in cash as a result of this statement.

C.Determine the amount of change in expense as a result of this statement.

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Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore (A+ Guaranteed)

Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 135,000 kilometers during a year, the average operating cost is 14.5 cents per kilometer. If a truck is driven only 90,000 kilometers during a year, the average operating cost increases to 18.1 cents per kilometer.
1. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places and Fixed cost answer to nearest whole dollar amount.)

High Level of Activity ___

Low Level of Activity ___

Change ___

Varaible cost pe kilometer ___

Fixed cost per year___

 

2.  Express the variable and fixed costs in the form Y = a + bX. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places.)

3.  If a truck were driven 112,000 kilometers during a year, what total cost would you expect to be incurred? (Do not round intermediate calculations.)

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Wallowa Company is considering a long-term investment project called ZIP

Wallowa Company is considering a long-term investment project called ZIP. ZIP will require an investment of $121,080. It will have a useful life of 4 years and no salvage value. Annual revenues would increase by $79,460, and annual expenses (excluding depreciation) would increase by $40,590. Wallowa uses the straight-line method to compute depreciation expense. The company’s required rate of return is 11%.

Compute the annual rate of return. (Round answer to 0 decimal places, e.g. 15%.)

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ACC 400 FINAL EXAM – Zelma Company’s last financial statements provided

ACC 400 Final Exam

1.  Zelma Company’s last financial statements provided the following ratios:
Current ratio  3:2
Quick ratio  1:2
Accounts receivable turnover 9.0 times
Inventory turnover   8.0 times
Net income percentage  12.5%
Return on equity    22.6%
Return on assets     9.8%
To the nearest day, what is the operating cycle for Zelma?
a)      80 days
b)      86 days
c)      172 days
d)      129 days

 2.  The following events have been projected:
A. Cash sales and collections from customers totaling $980,000
B. Cash payments for operating expenses of $560,000
C. Cash payments for income taxes and interest expense of $45,000
D. Cash payments of prior period accruals of $80,000
E. Borrowed $50,000 cash by issuing a note payable
F. Cash dividends of $20,000
The beginning balance of cash is $45,000. What is the budgeted ending balance of cash?
a.      $325,000
b.     $370,000
c.      $275,000
d.     $245,000

3. On January 1, a business exchanged a plant asset with a cost of $18,000 and accumulated depreciation of $16,500 for a similar asset that had a list price of $23,000. The business received a trade-in allowance of $2,100 on the old plant asset. What was the result of the exchange?
a. A $600 gain on the disposal of a plant asset.
b. A $1,000 unrecognized gain on the exchange of a plant asset.
c. A cost basis of $22,400 for the new plant asset
d. A cost basis of $23,600 for the new plant asset

4. Which one of the following is not an objective of a system of internal controls?
a.   Safeguard company assets
b.   Overstate liabilities in order to be conservative
c.   Enhance the accuracy and reliability of accounting records
d.   Reduce the risks of errors

 5.    A company’s past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5 % in the second month after the sale; the remainder is never collected.  Budgeted credit sales were:
July                             $120,000
August                             72,000
September                    180,000
The cash inflow in the month of September is expected to be
a.   $135,600
b.   $102,600
c.   $108,000
d.   $129,600

6. A check for $275 is incorrectly recorded by a company as $257.  On the bank reconciliation, the $18 error should be
a.      Added to the balance per books.
b.      Deducted from the balance per book.
c.      Added to the balance per bank.
d.      Deducted from the balance per bank.

7.     The Allowance for Doubtful Accounts is necessary because
a.      when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.
b.        uncollectible accounts that are written off must be accumulated in a separate account.
c.      a liability results when a credit sale is made.
d.      management  needs to accumulate all the credit losses over the years.

8.     Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
a.   when a credit sale is past due.
b.   at the end of each accounting period.
c.   whenever a pre-determined amount of credit sales have been made.
d.   when an account is determined to be uncollectible

9. Manning Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Manning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?
a.   Bad Debts Expense ………………………………………………..          10,000
Allowance for Doubtful Accounts ……………………..         10,000
b.   Bad Debts Expense ………………………………………………..            8,000
Allowance for Doubtful Accounts ……………………..           8,000
c.   Bad Debts Expense ………………………………………………..            8,000
Accounts Receivable ………………………………………            8,000
d.   Bad Debts Expense ………………………………………………..          10,000
Accounts Receivable …………………………………                                10,000

10.       The receivables turnover ratio
a.      Is computed by dividing net credit sales for the accounting period by the cash realizable value of accounts receivable on the last day of the accounting period.
b.      Can be used to compute the average collection period.
c.      Is a method of evaluating the solvency of net accounts receivable.
d.      Is only important to internal users of accounting information.

11.       A measure of a company’s solvency is the
a.   acid-test ratio.
b.   current ratio.
c.   times interest earned ratio.
d.   asset turnover ratio.

12.       The times interest earned ratio is computed by dividing
a.   net income by interest expense.
b.   income before income taxes by interest expense.
c.   income before interest expense by interest expense.
d.   income before interest expense and income taxes by interest expense.

13.       The 2007 financial statements of Shadow Co. contain the following selected data (in millions).
Current Assets                      $  75
Total Assets                            120
Current Liabilities                     40
Total Liabilities                         85
Cash                                            8
Interest Expense                         5
Income Taxes                            10
Net Income                               16
The debt to total assets ratio is
a.   70.8%
b.   53.3%
c.   1.41%
d.   6.2 times

14. The statement “Bond prices vary inversely with changes in the market rate of interest” means that if the
a.   market rate of interest increases, the contractual interest rate will decrease.
b.   contractual interest rate increases, then bond prices will go down.
c.   market rate of interest decreases, then bond prices will go up.
d.   contractual interest rate increases, the market rate of interest will decrease.

15.  A company would not acquire treasury stock
a.   in order to reissue shares to officers.
b.   as an asset investment.
c.   in order to increase trading of the company’s stock.
d.   to have additional shares available to use in acquisitions of other companies.

16.       Which of the following is the appropriate general journal entry to record the declaration of cash dividends?
a.   Retained Earnings
Cash
b.   Dividends Payable
Cash
c.   Paid-in Capital
Dividends Payable
d.   Retained Earnings
Dividends Payable

17.       Allstate, Inc., has 10,000 shares of 6%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2007. If the board of directors declares a $50,000 dividend, the
a.   preferred stockholders will receive 1/10th of what the common stockholders will receive.
b.   preferred stockholders will receive the entire $50,000.
c.   $50,000 will be held as restricted retained earnings and paid out at some future date.
d.   preferred stockholders will receive $25,000 and the common stockholders will receive $25,000.

18.    When a change in accounting principle occurs
a.   prior years’ financial statements should not be changed to reflect the newly adopted principle.
b.   the new principle should be used in reporting the results of operations of the current year.
c.   the cumulative effect of the change in principle should be reflected on the income statement as of the beginning of the next year.
d.   the cumulative effect of the change in accounting principle should be classified as an extraordinary item on the income statement.

19.     Which of the following is not an irregular item on the income statement?
a.   Discontinued operations
b.   Extraordinary items
c.   Other revenues and expenses

20.     Vertical analysis is a technique that expresses each item in a financial statement
a.   in dollars and cents.
b.   as a percent of the item in the previous year.
c.   as a percent of a base amount.
d.   starting with the highest value down to the lowest value.

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Vrable Corporation has a defined benefit pension plan. Two alternative possibilities

Vrable Corporation has a defined benefit pension plan. Two alternative possibilities for pension- related data for the current calendar year are shown below:

Case 1 Case 2

Net loss (gain), Jan. 1 $240,000 $(230,000)

Loss (gain) on plan assets (8,000) (6,000)

Loss (gain) on PBO (17,000) 12,000

ABO, Jan 1 (1,900,000) (1,500,000)

PBO, Jan 1 (2,500,000) (1,700,000)

Plan assets, Jan 1 2,100,000 2,000,000

Average remaining service period

of active employees (years) 10 12

 

REQUIRED:

For each independent case, calculate amortization of the net loss or gain that should be included as a component of pension expense for the current year.

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McBean Company has outstanding 18 million shares of $3 par value

McBean Company has outstanding 18 million shares of $3 par value common stock and 1.8 million shares of $5 par value preferred stock. The preferred stock has a 8% dividend rate. The company declares $10,800,000 in total dividends for the year. Preferred Dividends in arrears are $540,000.

A. Compute the amount of dividends to be distributed to preffered shareholders. (Enter your answer in dollars and not millions)

Preffered dividend -

B. Compute the amount of dividends to be distributed to common shareholders. (Enter your answer in dollars and not in millions)

Common dividend -

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Horton Company began business on January 1, 2014 by issuing

Horton Company began business on January 1, 2014 by issuing all of its 1,150,000 authorized shares of its $1 par value common stock for $22 per share. On June 30, they declared a cash dividend of $1.50 per share to stockholders of record on July 31. They paid the cash dividend on August 30. On November 1, Horton reacquired 230,000 of its own shares of stock for $27 per share. On December 22 they resold half of these shares for $33 per share.

a.
Prepare all of the necessary journal entries to record the events described above
Record the issue of 1,150,000 authorized shares of $1 par value for $22 per share.
Record the issue of 1,150,000 authorized shares of $1 par value for $22 per share.Record the declaration of the cash dividends of $1.50 per share.
Record the payment of the cash dividends of $1.50 per share.
Record the repurchase of 230,000 shares for $27 per share.
Record the reissue of 115,000 share for 33 per share

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