Reference no: EM131265002

1. Operating cash flows affect

A. current assets and current liabilities.

B. equity accounts.

C. long-term asset accounts.

D. long-term liability accounts.

2. Which activities are computed differently using the two methods of formatting a statement of cash flows?

A. Operating activities

B. Both operating activities and investing activities

C. Financing activities

D. Investing activities

3. If Rick's net sales increased from $40,000 to $80,000 and its operating expenses increased from $30,000 to $50,000, then vertical analysis based on net sales would show which of the following for operating expenses for the two periods (to the nearest tenth of a percent)?

A. 133.3% and 160.0%

B. 62.5% and 75.0%

C. 75.0% and 62.5%

D. 160.0% and 133.3%

4. The Isaiah Corporation Stockholders' Equity section includes the following information:

Total par value of the preferred and common stock is

Preferred Stock $22,000

Paid-in Capital in Excess of Par-Preferred 2,980

Common Stock 48,000

Paid-in Capital in Excess of Par-Common 3,400

Retained Earnings 7,350

A. $83,730.

B. $70,000.

C. $76,380

5. If you own 500 shares (2% of a corporation's stock) and the corporation issues 15,000 new shares, how many of the new shares can you purchase under preemptive right?

A. 500

B. 300

C. 800

D. 0

6. Casey Company has an accounts receivable turnover of 36 days, an inventory turnover of 77 days, and an accounts payable turnover of 40 days. Casey's cash conversion cycle is _______ day(s).

A. 73

B. 81

C. 1

D. 153

7. What is the rate of return on equity if net income is $22,700; preferred dividends are $3,000; sales are $100,000; and average common stockholders' equity is $86,000?

A. 22.9%

B. 22.7%

C. 86.0%

D. 26.4%

8. What is Jane's rate of return on total assets if average total assets are $100,000; net income is $2,000; interest expense if $1,600; and income tax is $2,000?

A. 5.6%

B. 3.6%

C. 4.6%

D. 5.2%

9. Which section of the income statement does not report net of income taxes or net of income tax savings?

A. Cumulative effect of changes in accounting principles section

B. Extraordinary items section

C. Discontinued operations section

D. Continuing operations section

10. Isaiah Corporation's Accounts Receivable increased by $35,000, and its Accounts Payable decreased by $18,000. What is the net effect on cash from operations under the indirect method?

A. -$18,000

B. -$53,000

C. +$35,000

D. +$17,000

11. Earnings that a stockholder receives from a corporation are an example of which stockholder right?

A. Preemption

B. Liquidation

C. Dividends

D. Vote

12. The Amanda Corporation Stockholders' Equity section includes the following information:

What was the total selling price of the preferred stock?

Preferred Stock $12,000

Paid-in Capital in Excess of Par-Preferred 2,700

Common Stock 15,000

Paid-in Capital in Excess of Par-Common 4,100

Retained Earnings 8,200

A. $16,100

B. $12,000

C. $14,700

D. $20,200

13. Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is noncumulative. How much will be distributed to the preferred and common stockholders on the date of payment?

A. $34,000 preferred; $6,000 common

B. $0 preferred; $40,000 common

C. $40,000 preferred; $0 common

D. $6,000 preferred; $34,000 common

14. What is the rate of return on common stockholders' equity if sales are $100,000, net income is $22,700, and average common stockholders' equity is $86,000?

A. 86.0%

B. 26.4%

C. The rate of return can't be determined from the information given.

D. 22.7%

15. Casey Company has 5,000 shares of treasury cost that it purchased for $13 per share. It later resold 2,000 of those shares for $17 per share. The amount to be credited to Paid-in Capital-Treasury Stock is

A. $34,000.

B. $8,000.

C. $30,000.

D. $26,000.

16. For vertical analysis purposes, the base item on the income statement isEnd of exam

A. net income.

B. total expenses.

C. gross profit.

D. net sales.

17. Net sales at Kelly's Bakery increased from $40,000 to $60,000, and its cost of goods sold increased from $20,000 to $40,000. Vertical analysis based on net sales would show which percentages for cost of goods sold (rounded to the nearest %)?

A. 40% and 20%

B. 10% and 30%

C. 67% and 40%

D. 50% and 67%

18. Brandon Company had extraordinary losses of $150,000. If its corporate tax rate is 30%, at which amount will the losses be shown on the income statement?

A. Not enough information is given to answer the question.

B. $45,000

C. $105,000

D. $150,000

19. The records of Ashley Boutique showed a net loss of $30,000; depreciation expense of $25,000; and an increase in supplies on hand of $5,000. The amount of net cash flow from operating activities using the

indirect method is

A. $15,000.

B. $20,000.

C. ($10,000).

D. ($15,000).

20. In a common-size income statement, selling expenses are 55%. This means that they're 55% of

A. net income.

B. net sales.

C. gross profit.

D. net profit.

1. The following information was made available from the income statement and balance sheet of Meranda Company: Complete the cash flow from operating activities section for Meranda Company using the direct method for the year ended December 31, 2010.

2. Given the following balance sheet, complete a horizontal analysis. Compute the percentage to the nearest tenth of a percent.

Jessica's Jewelry Store
Comparative Balance Sheet
For Years Ended December 31, 2011 and 2010
(in thousands) 2011 2010 Difference

Assets
Current Assets
Cash and Equivalents $319 $288
Accounts Receivable, net 166 173
Inventory 437 400
Total Current Assets 922 861
Property, Plant and Equipment 377 412
Total Assets $1,299 $1,273
Liabilities
Current Liabilities
Accounts Payable 132 144
Accrued Liabilities 90 84
Total Current Liabilities 222 228
Long-Term Liabilities 84 96
Total Liabilities 306 324
Stockholders' Equity
Common Stock 288 255
Retained Earnings 705 694
Total Stockholders' Equity 993 949
Total Liabilities and
Stockholders' Equity
$1,299 $1,273

Part B: Answer each of the following 15 questions.

1. Given the following information, show the increase or decrease in the accounting equation:
A. Deanne invests $45,000 and $10,000 of office equipment into the business.
B. Furniture is purchased for $8,000 cash.
C. Supplies are purchased on credit for $2,300.
D. The month's electric bill of $775 was paid.
E. The month's cash sales were $5,000.

2. Journalize the following transactions and include the explanations.
A. Tammy invested $40,000 into her corporation on June 11.
B. Tammy purchased inventory for $95,000, of which $70,000 was on account on June 14.
C. Tammy paid one month's rent of $2,400 on June 16.
D. Tammy had sales of $15,000 on account on June 19.
E. Tammy had paid $2,500 on her payables account on June 21.

3. Prepare a trial balance from the following information for Computer Systems, Inc. for December 31, 2012:
Accounts payable $4,298
Common stock $4,073
Sales $8,302
Cash $1,902
Notes payable $888
Wages expense $777
Supplies expense $1,028
Equipment $5,183
Accounts receivable $1,733
Inventory $6,938

4. Compute the missing information from this post-closing trial balance:

Cash $38,502
Accounts Receivable 14,372
Prepaid Rent 18,229
Prepaid Insurance 4,583
Supplies (A)
Accounts Payable (B)
Wages Payable 29,428
Common Stock 30,049
Retained Earnings 18,423
Total $80,436 $80,436

5. Journalize the following transactions using the perpetual inventory method:
Nov. 1 Purchased $3,600 of merchandise from Hilltop, terms 2/10, n/30.
Nov. 5 Purchased $1,750 of merchandise for cash from Owen's Supply.
Nov. 7 Purchased $3,400 of merchandise from Seaside, terms 1/15, n/30.
Nov. 10 Returned $500 of merchandise to Seaside. Credit Memo #131
Nov. 11 Paid the invoice from Hilltop.

6. Given the following information, prepare a balance sheet for Brandon's Campstore for the year ending December 31, 2012:
Cash $38,745
Retained Earnings $171,309
Common Stock $43,500 Equipment $37,200
Accounts
Receivable
$14,109 Accounts Payable $26,351
Land $35,000 Inventory $81,311
Prepaid Supplies $9,003 Income Taxes
Payable
Office Computers $16,399 Other PPE $26,550
Accum. Depr. (all) $21,013 Prepaid Insurance $9,140
$5,284

7. Rick Company's beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows: (Note: The company uses a perpetual system of inventory.)

Units Unit Price Total Cost
January 1-Beginning
inventory
18 $24 $432
March 12-Sold 13
April 11-Purchase 45 $29 $1,305
June 20-Sold 33
Aug 16-Purchase 35 $27 $945
Sept 11-Sold 29
Total Cost of Inventory

8. Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If this is the only error in Years 1 and 2, fill in the items below, indicating which items will be understated, overstated, or correctly stated for Years 1 and 2.

Item Year 1 Year 2
Gross Profit _____________ ______________
Net Income _____________ ______________
Ending Retained Earnings _____________ ______________

9. Below is a list of treatments of accounting topics. Place GAAP on the line if the treatment is GAAP-based and place IFRS on the line if the treatment is  IFRS-based.
A. The use of LIFO is allowed. ___________________
B. Both research and development costs are expensed as incurred.
Market is defined as current replacement cost. ___________________

10. Record the necessary journal entries from the following bank reconciliation information for July 31, 2011:

Bank Balance, July 31, 2011 $ 28,542
Checkbook Balance, July 31, 2011 29,344
Bank collection of note receivable 1,545 + 210
Bank service charge 75
Deposits in transit 3,145
Outstanding checks 2,685
NSF check from customer 770
Correction of book error (check #456 written
for $280, recorded at $28)-maintenance
interest

11. Journalize the following transactions for Ryan Company:
July 1 Sold $5,300 of merchandise to Rick on account.
Nov. 1 Exchanged Rick's account receivable for an eight-month, 6% note for $5,300.
Dec. 31 Recorded accrued interest on Jim's note (round to nearest dollar).
July 1 Rick paid off his note with interest (round to nearest dollar).

12. A computer system was purchased on July 1 at a cost of $125,000. It's expected to be used for four years and to have a residual value of $5,000 after 8,000 hours of service. The system was used for 1,750 hours the first year and 2,100 hours the second year. Calculate the depreciation expense to the nearest dollar for the first and second years.

13. Prepare journal entries for the following transactions for Ryan Company in the general journal:

Feb. 28 Machinery that cost $57,000 and had accumulated depreciation of $46,000 was sold for $2,500.
April 10 A van that cost $23,700 and had accumulated depreciation of $21,000 was sold for $1,250.
July 16 Equipment that cost $120,000 and had accumulated depreciation of $112,000 was traded in for new equipment with a fair-market value of $140,000. The old equipment and $135,000 in cash were given for the new equipment.

14. Journalize the following treasury stock transactions:

May 1 Reacquired 800 shares of $15 par common stock for $13 per share.
May 7 Sold 400 shares at $11 per share.
May 9 Sold 250 shares at $17 per share.

15. The following information was taken from the financial statements of Brandon Company for 12/31/10 and12/31/09:

Net income for 2010: $313,000
Depreciation expense for 2010: $28,400
Loss on sale of equipment: $7,300
Balance Sheet 12/31/10 12/31/09
Accounts Receivable $46,000 $50,000
Merchandise Inventory 35,000 28,000
Accounts Payable 27,000 24,000
Interest Payable 6,000 8,000

Prepare the operating activities section of the statement of cash flows under the indirect method for the year ended December 31, 2010.