Old Exam Packet – Acct 284Fall 2009
Exam 1 – Fall 2008
Investing activities:
a.involve day to day events like selling goods and services, which occur when running a business.
b.involve the buying or selling of land, buildings, equipment, and other longer-term investments.
c.only involve financial exchanges.
d.All of these.
Accumulated depreciation:
a.is an expense account.
b.is a liability account.
c.is a regular asset account.
d.is an asset contra-account.
At the end of last year, the company's assets totaled $860,000 and its liabilities totaled $740,000. During the current year, the company's total assets increased by $58,000 and its total liabilities increased by $24,000. At the end of the current year, stockholders' equity was
a.$154,000.
b.$120,000.
c.$34,000.
d.$178,000.
In the U.S., generally accepted accounting principles are established:
a.directly by the 1933 Securities Act.
b.by the Public Company Accounting Oversight Board.
c.by the Financial Accounting Standards Board.
d.by the Association of Certified Public Accountants.
On March 1, 2006, the premium on a two-year insurance policy on equipment was paid amounting to $1,800. At the end of 2006 (end of the accounting period), the financial statements for 2006, would report
a.Insurance expense, $750; Prepaid insurance $1,050.
b.Insurance expense, $900; Prepaid insurance $900.
c.Insurance expense, $1,800; Prepaid insurance $0.
d.Insurance expense, $0; Prepaid insurance $1,800.
Which of the following would be listed as a current liability?
a.Cash in the bank.
b.Notes payable due in two years.
c.Supplies.
d.Accounts payable.
Which of the following describes the classification and normal balance of the retained earnings account?
a.Asset, debit
b.Stockholders' equity, credit
c.Liability, credit
d.Stockholders' equity, debit
- A company buys equipment for $500,000 and signs a promissory note for the full amount. How does this transaction affect the accounting equation?
a.Assets: Property and equipment, Cash; Liabilities: no change; Stockholders' Equity: no change.
b.Assets: Property and equipment; Liabilities: Notes payable; Stockholders' Equity; no change.
c.Assets: Property and equipment; Liabilities: no change; Stockholders' Equity: Retained earnings.
d.Assets: Property and equipment; Liabilities: no change; Stockholders' Equity: Contributed capital.
At the end of the month, the adjusting journal entry to record the use of supplies would include:
a.An increase to supplies and an increase to expenses.
b.A decrease to supplies and an increase to expenses.
c.An increase to supplies and an increase to revenue.
d.A decrease to supplies and a decrease to cash.
- According to the principle of conservatism, when faced with uncertainty about the value of an item, a company should use the measure that avoids:
a.overstating assets and liabilities.
b.overstating assets and understating liabilities.
c.understating assets and overstating liabilities.
d.understating assets and liabilities.
Which of the following is not considered to be a liability?
a. accounts payable
b.unearned revenue
c.wages payable
d.cost of goods sold
Cy’s Bar and Grill has $10,000 in utilities expense during the year. At the beginning of the year, Cy’s had utilities payable amounting to $520. At the end of the year, utilities payable totaled $470. What amount of cash did Cy’s pay for utilities during the year? (Hint: use a T-account of utilities payable)
a.$9,950
b.$10,000
c.$10,050
d.$10,990
During 2007, Sensa Corporation incurred operating expenses amounting to $100,000 of which $75,000 was paid in cash; the balance will be paid in January 2008. Transaction analysis of operating expenses for 2007, should reflect only the following
a.decrease stockholders' equity, $75,000; decrease assets, $75,000.
b.decrease assets, $100,000; decrease stockholders' equity, $100,000.
c.decrease assets, $100,000; increase liabilities, $25,000; decrease stockholders' equity, $100,000.
d.decrease stockholders' equity, $100,000; decrease assets, $75,000; increase liabilities, $25,000.
The primary objective of financial reporting is to:
a.provide accurate historical information.
b.provide useful information to external decision makers.
c.provide operating information to managers.
d.meet legal requirements.
Adjusting entries:
a.always affect one balance sheet account and one income statement account.
b.never involve cash.
c.are necessary to get revenues and expenses into the proper time periods.
d.all of the above.
Primary responsibility for the information in a corporation's financial statements rests with
a.the shareholders of the corporation.
b.the managers of the corporation.
c.the Securities and Exchange Commission.
d.the certified public accountant who audited the financial statements.
Failure to make an adjusting entry to recognize accrued salaries payable would cause an
a. understatement of expenses and liabilities and an overstatement of stockholders'
equity.
b. overstatement of expenses and liabilities.
c. understatement of expenses, liabilities and stockholders' equity.
d. understatement of assets and stockholders' equity.
One of the disadvantages of a corporation when compared to a partnership is that
a. the stockholders have limited liability.
b. the stockholders are treated as a separate legal entity from the corporation.
c. the corporation and its stockholders are subject to double taxation of dividends.
d. the corporation provides continuity of life.
Brown Corporation reported the following amounts at the end of the first year of operations: contributed capital $20,000; total revenue $95,000; total assets $85,000, no dividends, and total liabilities $35,000. Stockholders’ equity and total expenses would be:
Stockholders’ equityTotal expenses
a.$60,000$75,000
b.$80,000$40,000
c.$50,000$65,000
d.$70,000$85,000
Which of the following characteristics of accounting allows users to examine the financial results of one company over an extended period of time?
a. relevance
b. reliability
c. comparability
d. consistency
Exam 2 – Fall 2008
1.Cyclone Corporation reports the following on its most recent income statement:
Cost of goods sold……..$800,000
Operating expenses…… 150,000
Pretax income…………. 250,000
Assuming there are no “other revenues and expenses” and that the company faces a 30% tax rate, what is the amount of net sales and net income reported for the year?
Net SalesNet Income
A.$1,200,000$175,000
B.$ 950,000$550,000
C.$1,150,000$350,000
D.$1,050,000$ 75,000
2.Maxell Company uses the periodic FIFO method to assign costs to inventory and cost of goods sold. Given the following information, what would be reported as the cost of goods sold and ending inventory balances for the period?
Date / Transaction / # of units / Cost per unitJanuary 1 / Beg balance / 100 / $5
January 2 / Purchase / 75 / $4
January 5 / Sale / 75
January 6 / Sale / 50
COGSEnding Inventory
A.$625 $175
B.$575$225
C.$550$250
D.$600$200
3.The group that uses accounting information to evaluate companies' past performance, predict future results, and make recommendations about the companies to current and potential investors is known as:
A. auditors.
B. managers.
C. creditors.
D. analysts.
4.A company has an asset turnover ratio of 1.15. Which of the following statements is true?(Hint: Asset turnover = Net sales ÷ Average total assets)
A. The company generates $1.15 of net income for every $1 in reported assets.
B. The company buys assets more frequently than it sells them.
C. The company generates $1.15 of sales revenue for every $1 in reported assets.
D. This is an improvement over the previous period when the asset turnover rate was 1.7.
5.The Tuck Shop began the current month with inventory costing $10,000, then purchased inventory at a cost of $35,000. The perpetual inventory system indicates that inventory costing $30,000 was sold during the month for $40,000. If an inventory count shows that inventory costing $14,500 is actually on hand at month-end, what amount of shrinkage occurred during the month?
A.$500.
B.$5,000.
C.$14,495.
D.$15,000.
6.The name for comparing across companies that compete in the same section of an industry at the same point in time is:
A. ratio analysis
B. cross-sectional analysis
C. time-series analysis
D. financial analysis
7.The conditions required for an employee to commit fraud include all of the following EXCEPT:
A. opportunity
B. lack of character
C. job security
D. incentive
8.Which of the following statements is false?
A. A perpetual inventory system can detect inventory shrinkage.
B. A perpetual inventory system updates the inventory account for each purchase and sale.
C. A perpetual inventory system uses a purchases account.
D. A periodic inventory system uses the physical count of inventory to infer cost of goods sold.
9. A company files a Form 10-K with the SEC to submit its:
A.quarterly report.
B. annual report.
C. press releases.
D. report of current events of financial importance.
10.If costs are rising, which of the following will be true?
A. Cost of goods sold will be smaller if LIFO is used rather than FIFO.
B. Ending inventory will be smaller if LIFO is used rather than FIFO.
C. Net income will be greater if LIFO is used rather than FIFO.
D. Tax expense will be greater if LIFO is used rather than FIFO.
11.Before reconciling to its bank statement, Lauren Cosmetics Corporation's general ledger had a month-end balance in the cash account of $5,250. The bank reconciliation for the month contained the following items:
Deposits in transit / $750Outstanding checks / $465
Interest earned / $ 20
NSF check returned to bank / $100
Bank service charge / $ 10
Given the above information, what adjusted cash balance should Lauren report at month-end?
A.$4,500.
B.$4,820.
C.$5,160.
D.$5,590.
12.Central Company sold goods for $5,000 to Western Company on March 12 on credit. Terms of the sale were 2/10, n/30. At the time of the sale, Central recorded the transaction by increasing accounts receivable for $5,000 and increasing sales revenue for $5,000. Western paid the balance due, less the discount, on March 21. To record the March 21 transaction, Central would increase:
A. Cash for $4,900.
B. Accounts Receivable for $4,900.
C. Cash for $5,000.
D. Accounts Receivable for $5,000.
13.At the beginning of the quarter Purrfect Pets has $30,000 in inventory. During the quarter the company purchases $7,900 of new inventory. At the end of the quarter the balance in the Inventory account is $26,500. What is the cost of goods sold?
A.$10,500
B.$11,400
C.$3,500
D.$11,900
14.Your company has 500 units in inventory that had been purchased for $12 each and that would currently cost $15 to replace. Your supplier has just announced the cost of these goods is rising to $16.50.
A. Your company should make no adjustments to the inventory account.
B. Your company should adjust the inventory account using the lower of the recent marketvalues, which is $15.
C. Your company should adjust the inventory account using the higher of the recent market values, which is $16.50.
D. Your company should adjust the inventory account using the average of the recent market values, which is $14.50.
15.Coca-Cola reported cost of goods sold of $19.8 billion and gross profit for $6.0 billion. Its reported net sales was:
A.$25.8 billion
B.$19.8 billion
C.$13.8 billion
D.$ 6.0 billion
16.Which of the following is not a type of inventory held by a manufacturer?
A. manufacturing inventory
B. work in process inventory
C. raw materials inventory
D. finished goods inventory
17.A company has net sales of $612,850 and cost of goods sold of $441,252. The company's gross profit percentage is: (Hint: Gross profit percentage = Gross profit ÷ Net sales)
A. 72.1%.
B. 3.57%.
C. 38.9%.
D. 28.0%.
18.The Acme Corporation buys 300 units of merchandise in January at $5 each. Acme buys 500 units at $4 each in February and 200 units at $6 each in March. Acme sells 300 units during this quarter. Acme uses the periodic LIFO method. What is its cost of goods sold for the quarter?
A. $1,600
B. $1,400
C. $1,500
D. $1,800
19.Increasing inventory turnover ratio indicates: (Hint: Inventory turnover ratio = Net sales ÷ average inventory)
A.longer time span between the ordering and receiving of inventory.
B.shorter time span between the ordering and receiving of inventory.
C.shorter time span between the purchase and sale of inventory.
D.longer time span between the purchase and sale of inventory.
20.The Knot, Inc. includes in its year-end inventory, goods that were in transit to a customer, Winston Wedding Consultants. The Knot must use ______to determine ownership of goods in transit.
A. FOB consignment
B. FOB shipping point
C. FOB destination
D. FOB inventory
Exam 3 – Fall 2008
1.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 amortized.
C)Interest expense is computed by multiplying the stated interest rate times the book value of the bonds payable.
D)None of the above are false.
2.Schager Company purchased a computer system on January 1, 2006, at a cash cost of $25,000. The estimated useful life is 10 years, and the estimated residual value is $3,000. The company will use the double-declining balance method. Depreciation expense for the second year will be
A)$5,000.
B)$4,000.
C)$3,800.
D)$2,200.
3.If a bond is sold (issued) above its face value(par), the stated rate of interest was
A)higher than market rate.
B)lower than market rate.
C)equal to market rate.
D)not related to market rate.
4.During 2006, Avalon Company recorded bad debt expense of $10,000 and wrote off an uncollectible account receivable amounting to $15,000. Assuming a January 1, 2006, balance in the allowance for doubtful accounts of $18,000, the December 31, 2006, balance in the allowance account would be
A)$23,000.
B)$15,000.
C)$13,000.
D)$ 5,000.
5.Newton Corporation sold its $1,000,000, 7%, ten-year bonds to the public on January 1, 2006. The bonds pay interest annually, beginning on December 31, 2006. Newton received $1,153,420 in cash at the issuance of the bonds. The market rate of interest when the bonds were sold was 5%. Compute the amount of the premium that Newton Corporation should amortize on December 31, 2006, assuming the “effective-interest” method is used.
A)$15,342
B)$14,865
C)$12,329
D)$10,276
6.What is the effect of writing off an account receivable on total assets?
A)total assets increase
B)total assets decrease
C)total assets don’t change
D)can not be determined without additional information
7.Boone Industries purchased a truck for $35,000 on January 1, 2009. The truck had an estimated useful life of 80,000 miles and an estimated residual value of $8,000. In the third year of ownership (2010), the car was driven 25,000 miles. Using the units of production method, the amount of depreciation expense for 2010 was
A)$10,938.
B)$ 8,438.
C)$ 9,538.
D)$11,238.
8.On December 31, 2010, Hamilton Inc. sold a used industrial crane for $600,000 cash. The original cost of the crane was $5,000,000 and its accumulated depreciation equaled $4,200,000 on December 31, 2010; they had been using the straight-line depreciation method. The estimated residual value was zero and its useful life was 25 years. What is the gain or loss on the equipment on December 31, 2010?
A)$250,000 loss
B)$400,000 gain
C)$200,000 loss
D)$200,000 gain
9.Which of the following is a typical example of a current liability?
A)Revenue collected in advance.
B)Accrued interest payable.
C)The current portion of a long-term debt.
D)All of the above are correct.
10.Assume Thomas Trucks Corporation uses the allowance method. During the year, Thomas made cash sales of $1,000,000 and credit sales of $3,000,000. At the end of the year, $500,000 still remained to be collected on the credit sales and the allowance for doubtful accounts had a balance of $15,000. If Thomas estimates 3% of all credit sales will be uncollectible, what amount of bad debt expense should Thomas recognize for the year?
A)$15,000
B)$75,000
C)$90,000
D)$120,000
11.Straight-line depreciation
A)results in higher net income numbers in early years than accelerated methods.
B)results in higher expense in early years than accelerated methods.
C)results in less total depreciation during the entire life of an asset than accelerated methods.
D)results in a lower tax burden in early years.
12.Nell Computers, Inc. purchased a new machine which cost $25,000. In addition, Nell had to pay shipping charges related to the computer of $500. Training costs for employees related to using the machine totaled $1,500. Finally, Nell paid an additional $250 per year to insure the machine. At what amount should the machine be recorded?
A)$25,000
B)$25,500
C)$27,000
D)$27,250
13.In 2003, Starbucks reported a current ratio of 1.52 and Krispy Kreme reported a ratio of 1.94. Which of the following is false? (Current Ratio = Current assets / Current liabilities)
A)Starbucks has a higher level of liquidity.
B)Krispy Kreme has more in current assets than current liabilities for the year.
C)Starbucks lower current ratio could indicate an aggressive cash management strategy.
D)Krispy Kreme is doing a better job of having cash available for payment of current liabilities.
14.Miranda Company lent $100,000 cash on September 1, 2007, and received a one-year 6%, interest-bearing note receivable. The required adjusting entry at the end of the accounting period, December 31, 2007, would be
A) / Interest receivable / +2,000Interest revenue / +2,000
B) / Interest receivable / +6,000
Interest revenue / +6,000
C) / Notes receivable / -100,000
Interest receivable / +6,000
Cash / -106,000
D) / Interest revenue / -2,000
Interest receivable / -2,000
15.On January 1, 2009, Dorley Corporation issued $1 million of bonds for $1,073,613 when the market rate of interest was 6%. They are 10-year bonds paying 8% interest annually. If Dorley is using the effective interest amortization method, interest expense on December 31, 2009 will be
A)$60,000
B)$64,417
C)$65,361
D)$67,361
16.The unadjusted balance of the allowance for doubtful accounts of Johnstone Supplies, Inc., is a credit balance in the amount of $28,947 on July 31, 2005. Based on the accounts receivable aging report, bad debt expense will be:
Johnstone Supplies, Inc.
Accounts Receivable Aging Report, July 31, 2005
Accounts receivable by due date / Account Total / Estimated % uncollectibleNote yet due / $126,500 / 2%
1-30 days past due / $89,200 / 12%
31-60 pays past due / $53,600 / 18%
Over 60 days past due / $31,800 / 35%
A)$34,012.
B)$5,065.
C)$62,959.
D)$50,434.
17.A high accounts receivable turnover ratio indicates: (Hint: Accounts receivable turnover = Net Sales / Average net accounts receivable)
A)the company's sales are increasing.
B)a large proportion of the company's sales are on credit.
C)customers are making payments very quickly.
D)the company is taking longer to sell inventory.
18.When the amount of a contingent liability can be estimated and its likelihood is possible but not probable, the company should:
A)include a description in the footnotes to the financial statements.
B)record the amount of the liability times the probability of its occurrence.
C)record the amount of the liability as a long-term liability.
D)omit the information about the contingent liability from its financial statements and footnotes.
19.A company expects to use equipment that cost $48,000 for 10 years and then sell it for $6,000. Using the straight-line method, the company would report depreciation for the equipment of:
A)$4,200 per year.
B)$8,400 per year.
C)$4,800 per year.
D)$9,600 per year.
20.The fixed asset turnover ratio measures the: (Hint: Fixed asset turnover ratio = Net sales / Average net fixed assets)
A)useful life of long-lived assets.
B)the average difference between book value and disposal value of fixed assets.
C)useful life of intangible assets.
D)efficiency with which the investment in fixed assets produces revenue.