Reference no: EM1347943

Before year-end adjusting entries, Dunn Company's account balances at December 31, 2010, for accounts receivable and the related allowance for uncollectible accounts were $600,000 and $45,000, respectively. An aging of accounts receivable indicated that $62,500 of the December 31 receivables are expected to be uncollectible. The net realizable value of accounts receivable after adjustment is

$582,500.

$555,000.

$492,500.

$537,500.

Question 2

One of the benefits of the statement of cash flows is that it helps users evaluate financial flexibility. Which of the following explanations is a description of financial flexibility?

The firm's ability to pay its debts as they mature.

The firm's ability to invest in a number of projects with different objectives and costs.

The nearness to cash of assets and liabilities.

The firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities

Question 3

Items 65 through 68 apply to the appropriate use of interest tables. Given below are the future value factors for 1 at 8% for one to five periods. Each of the items 65 to 68 is based on 8% interest compounded annually.
Periods Future Value of 1 at 8%
1 1.080
2 1.166
3 1.260
4 1.360
5 1.469
What amount will be in a bank account three years from now if $6,000 is invested each year for four years with the first investment to be made today?

($6,000 × 1.260) + ($6,000 × 1.166) + ($6,000 × 1.080) + $6,000

$6,000 × 1.360 × 4

($6,000 × 1.080) + ($6,000 × 1.166) + ($6,000 × 1.260) + ($6,000 × 1.360)

$6,000 × 1.080 × 4

Question 4

Consider the following: Cash in Bank - checking account of $13,500, Cash on hand of $500, Post-dated checks received totaling $3,500, and Certificates of deposit totaling $124,000. How much should be reported as cash in the balance sheet?

$13,500.

$131,500.

$14,000.

$17,500.

Question 5

Which of the following facts concerning fixed assets should be included in the summary of significant accounting policies?
Depreciation Method Composition

Yes Yes

No Yes

Yes No

No No

Question 6

Which of the following is a method to generate cash from accounts receivable?
Assignment Factoring

No No

No Yes

Yes No

Yes Yes

Question 7

Barkley Company will receive $100,000 in a future year. If the future receipt is discounted at an interest rate of 8%, its present value is $63,017. In how many years is the $100,000 received?

6 years

8 years

7 years

5 years

Question 8

On January 4, 2010, Kiley Co. leased a building to Dodd Corp. for a ten-year term at an annual rental of $75,000. At inception of the lease, Kiley received $300,000 covering the first two years' rent of $150,000 and a security deposit of $150,000. This deposit will not be returned to Dodd upon expiration of the lease but will be applied to payment of rent for the last two years of the lease. What portion of the $300,000 should be shown as a current and long-term liability in Kiley's December 31, 2010 balance sheet?
Current Liability Long-term Liability

$150,000 $150,000

$75,000 $150,000

$150,000 $75,000

$0 $300,000

Question 9

Bella requires $80,000 in four years to purchase a new home. What amount must be invested today in an investment that earns 6% interest, compounded annually?

$63,367.

$100,998.

$65,816.

96,891.

Question 10

For which of the following transactions would the use of the present value of an ordinary annuity concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence?

A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement.

A capital lease is entered into with the initial lease payment due one month subsequent to the signing of the lease agreement.

A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 9%.

A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 7%.

Question 11

A trial balance before adjustments included the following:
Debit Credit
Sales $425,000
Sales returns and allowance $14,000
Accounts receivable 43,000
Allowance for doubtful accounts 760
If the estimate of uncollectibles is made by taking 2% of net sales, the amount of the adjustment is

$8,220.

$6,700.

$8,500.

$9,740.

Question 12

On January 15, 2010, Dolan Corp. adopted a plan to accumulate funds for environmental improvements beginning July 1, 2014, at an estimated cost of $4,000,000. Dolan plans to make four equal annual deposits in a fund that will earn interest at 10% compounded annually. The first deposit was made on July 1, 2010. Future value factors are as follows:
Future value of 1 at 10% for 5 periods 1.61
Future value of ordinary annuity of 1 at 10% for 4 periods 4.64
Future value of annuity due of 1 at 10% for 4 periods 5.11
Dolan should make four annual deposits of

$782,779.

$862,069.

$1,000,000.

$711,618.

Question 13

AG Inc. made a $10,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale?

Debit Accounts Receivable for $9,900 and Sales Discounts for $100.

Debit Accounts Receivable for $10,000 and Sales Discounts for $100.

Debit Accounts Receivable for $10,000.

Debit Accounts Receivable for $9,900.

Question 14

Kohler Company owns the following investments:
Trading securities (fair value) $60,000
Available-for-sale securities (fair value) 35,000
Held-to-maturity securities (amortized cost) 47,000
Kohler will report securities in its long-term investments section of

exactly $142,000.

exactly $107,000.

$82,000 or an amount less than $82,000, depending on the circumstances.

exactly $95,000.

Question 15

Which of the following is not considered cash for financial reporting purposes?

Postdated checks and I.O.U.'s

Coin, currency, and available funds

Petty cash funds and change funds

Money orders, certified checks, and personal checks

Question 16

On December 30, 2010, AGH, Inc. purchased a machine from Grant Corp. in exchange for a zero-interest-bearing note requiring eight payments of $50,000. The first payment was made on December 30, 2010, and the others are due annually on December 30. At date of issuance, the prevailing rate of interest for this type of note was 11%. Present value factors are as follows:
Present Value of Ordinary Present Value of
Period Annuity of 1 at 11% Annuity Due of 1 at 11%
7 4.712 5.231
8 5.146 5.712
On AGH's December 31, 2010 balance sheet, the net note payable to Grant is

$261,775.

$235,600.

$285,600.

$257,300.

Question 17

During 2010 the DLD Company had a net income of $50,000. In addition, selected accounts showed the following changes:
Accounts Receivable $3,000 increase
Accounts Payable 1,000 increase
Building 4,000 decrease
Depreciation Expense 1,500 increase
Bonds Payable 8,000 increase
What was the amount of cash provided by operating activities?

$49,500.

$50,000.

$51,500.

$59,500.

Question 18

On January 1, 2010, Haley Co. issued ten-year bonds with a face amount of $2,000,000 and a stated interest rate of 8% payable annually on January 1. The bonds were priced to yield 10%. Present value factors are as follows:
At 8% At 10%
Present value of 1 for 10 periods 0.463 0.386
Present value of an ordinary annuity of 1 for 10 periods 6.710 6.145
The total issue price of the bonds was

$1,840,000.

$1,960,000.

$1,755,200.

$2,000,000.

Question 19

Why is the allowance method preferred over the direct write-off method of accounting for bad debts?

Improved matching of bad debt expense with revenue.

Estimates are used.

Allowance method is used for tax purposes.

Determining worthless accounts under direct write-off method is difficult to do.

Question 20

The following trial balance of Reese Corp. at December 31, 2010 has been properly adjusted except for the income tax expense adjustment.
Reese Corp.
Trial Balance
December 31, 2010
Dr. Cr.
Cash $ 775,000
Accounts receivable (net) 2,695,000
Inventory 2,085,000
Property, plant, and equipment (net) 7,366,000
Accounts payable and accrued liabilities $ 1,701,000
Income taxes payable 654,000
Deferred income tax liability 85,000
Common stock 2,350,000
Additional paid-in capital 3,680,000
Retained earnings, 1/1/10 3,450,000
Net sales and other revenues 13,360,000
Costs and expenses 11,180,000
Income tax expenses 1,179,000
$25,280,000 $25,280,000

Other financial data for the year ended December 31, 2010:
? Included in accounts receivable is $1,200,000 due from a customer and payable in quarterly installments of $150,000. The last payment is due December 29, 2012.
? The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose in a prior year, of which $20,000 is classified as a current liability.
? During the year, estimated tax payments of $525,000 were charged to income tax expense. The current and future tax rate on all types of income is 30%.
In Reese's December 31, 2010 balance sheet, the final retained earnings balance is

$4,536,000.

$4,905,000.

$4,451,000.

$4,976,000.

Question 21

What is the normal journal entry when writing-off an account as uncollectible under the allowance method?

Debit Allowance for Doubtful Accounts, credit Accounts Receivable.

Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.

Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.

Question 22

On January 1, 2010, Ball Co. exchanged equipment for a $160,000 zero-interest-bearing note due on January 1, 2013. The prevailing rate of interest for a note of this type at January 1, 2010 was 10%. The present value of $1 at 10% for three periods is 0.75. What amount of interest revenue should be included in Abel's 2011 income statement?

$16,000

$0

$13,200

$12,000

Question 23

Keisler Corporation reports:
Cash provided by operating activities $200,000
Cash used by investing activities 110,000
Cash provided by financing activities 140,000
Beginning cash balance 70,000
What is Keisler's ending cash balance?

$520,000.

$450,000.

$230,000.

$300,000.

Question 24

At the beginning of 2009, Gannon Company received a three-year zero-interest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note as a $1,000 trade note receivable on its 2009 year-end statement of financial position and $1,000 as sales revenue for 2009. What effect did this accounting for the note have on Gannon's net earnings for 2009, 2010, 2011, and its retained earnings at the end of 2011, respectively?

Overstate, overstate, understate, zero

Overstate, understate, understate, understate

Overstate, overstate, overstate, overstate

None of these

Question 25

Presented below are data for Bandkok Corp.
2010 2011 2012
Assets, January 1 $5,400 $6,480 ?
Liabilities, January 1 3,240 ? $3,888
Stockholders' Equity, Jan. 1 ? ? 4,050
Dividends 1,080 810 918
Common Stock 972 864 920
Stockholders' Equity, Dec. 31 ? ? 3,078
Net Income 1,080 864 ?
Stockholders' Equity at January 1, 2011 is

$3,186.

$3,132.

$1,890.

$1,998.

Question 26

What will be the balance on September 1, 2016 in a fund which is accumulated by making $8,000 annual deposits each September 1 beginning in 2009, with the last deposit being made on September 1, 2016? The fund pays interest at 8% compounded annually.
Present Value of Future Value of
Ordinary Annuity Ordinary Annuity
7 periods 5.2064 8.92280
8 periods 5.7466 10.63663
9 periods 6.2469 12.48756

$71,383

$85,093

$60,480

$45,973

Question 27

Packard Corporation reports the following information:
Net cash provided by operating activities $215,000
Average current liabilities 150,000
Average long-term liabilities 100,000
Dividends paid 60,000
Capital expenditures 110,000
Payments of debt 35,000
Packard's free cash flow is

$155,000.

$10,000.

$45,000.

$105,000.