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DeVry NY ACCT 504 Week 8, Final Exam 5




Question;1. The ACE Company has five plants nationwide that cost $100 million. The current market value of the plants is $500 million. The plants will be recorded and reported as assets ata. $100 million.b. $600 million.c. $400 million.d. $500 million. _____ 2. A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as thea. stand alone concept.b. monetary unit assumption.c. corporate form of ownership.d. economic entity assumption. _____3. A net loss will result during a time period whena. liabilities exceed assets.b. dividends exceed revenues.c. expenses exceed revenues.d. revenues exceed expenses. _____4. As of December 31, 2008, Anders Company has assets of $35,000 and stockholders' equity of $20,000. What are the liabilities for Anders Company as of December 31, 2008?a. $15,000b. $10,000c. $25,000d. $20,000 _____5. A credit is not the normal balance for which account listed below?a. Common stock accountb. Revenue accountc. Liability accountd. Dividend account _____6. An accountant has debited an asset account for $1,000 and credited a liability account for $500. What can be done to complete the recording of the transaction?a. Nothing further must be done.b. Debit an stockholders' equity account for $500.c. Debit another asset account for $500.d. Credit a different asset account for $500. _____7. Which of the following is not true of the terms debit and credit?a. They can be abbreviated as Dr. and Cr.b. They can be interpreted to mean increase and decrease.c. They can be used to describe the balance of an account.d. They can be interpreted to mean left and right. _____8. In the first month of operations, the total of the debit entries to the cash account amounted to $900 and the total of the credit entries to the cash account amounted to $500. The cash account has a(n)a. $500 credit balance.b. $800 debit balance.c. $400 debit balance.d. $400 credit balance. _____9. On January 14, Franco Industries purchased supplies of $500 on account. The entry to record the purchase will includea. a debit to Supplies and a credit to Accounts Payable.b. a debit to Supplies Expense and a credit to Accounts Receivable.c. a debit to Supplies and a credit to Cash.d. a debit to Accounts Receivable and a credit to Supplies. _____10. Management could determine the amounts due from customers by examining which ledger account?a. Service Revenueb. Accounts Payablec. Accounts Receivabled. Supplies _____11. A list of accounts and their balances at a given time is called a(n)a. journal.b. posting.c. trial balance.d. income statement. _____12. Management usually desires ________ financial statements and the IRS requires all businesses to file _________ tax returns.a. annual, annualb. monthly, annualc. quarterly, monthlyd. monthly, monthly _____13. In a service-type business, revenue is considered earneda. at the end of the month.b. at the end of the year.c. when the service is performed.d. when cash is received. _____14. Ken's Tune-up Shop follows the revenue recognition principle. Ken services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Ken on August 5. Ken receives the check in the mail on August 6. When should Ken show that the revenue was earned?a. July 31b. August 1c. August 5d. August 6 _____15. A furniture factory's employees work overtime to finish an order that is sold on February 28. The office sends a statement to the customer in early March and payment is received by mid-March. The overtime wages should be expensed ina. February.b. March.c. the period when the workers receive their checks.d. either in February or March depending on when the pay period ends. _____16. A small company may be able to justify using a cash basis of accounting if they havea. sales under $1,000,000.b. no accountants on staff.c. few receivables and payables.d. all sales and purchases on account. _____17. Which one of the following is not a justification for adjusting entries?a. Adjusting entries are necessary to ensure that revenue recognition principles are followed.b. Adjusting entries are necessary to ensure that the matching principle is followed.c. Adjusting entries are necessary to enable financial statements to be in conformity with GAAP.d. Adjusting entries are necessary to bring the general ledger accounts in line with the budget. _____18. If a resource has been consumed but a bill has not been received at the end of the accounting period, thena. an expense should be recorded when the bill is received.b. an expense should be recorded when the cash is paid out.c. an adjusting entry should be made recognizing the expense.d. it is optional whether to record the expense before the bill is received. _____19. Quirk Company purchased office supplies costing $6,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,400 still on hand. The appropriate adjusting journal entry to be made at the end of the period would bea. Debit Office Supplies Expense, $2,400, Credit Office Supplies, $2,400.b. Debit Office Supplies, $3,600, Credit Office Supplies Expense, $3,600.c. Debit Office Supplies Expense, $3,600, Credit Office Supplies, $3,600.d. Debit Office Supplies, $2,400, Credit Office Supplies Expense, $2,400. _____20. Closing entries are madea. in order to terminate the business as an operating entity.b. so that all assets, liabilities, and Stockholders' equity accounts will have zero balances when the next accounting period starts.c. in order to transfer net income (or loss) and dividends to the retained earnings account.d. so that financial statements can be prepared. _____21. The relationship between current assets and current liabilities is important in evaluating a company'sa. profitability.b. liquidity.c. market value.d. accounting cycle. _____22. An objective of financial reporting is to provide information that is mainly useful toa. governmental taxing bodies.b. employees and labor unions.c. investors and creditors.d. internal and external auditors. _____ 23. Which of the following statements is not true?a. Comparability means using the same accounting principles from year to year within a company.b. Reliability is the quality of information that gives assurance that it is free of error or bias.c. Relevant accounting information must be capable of making a difference in the decision.d. The FASB concluded that the overriding criterion by which accounting choices can be judged is decision usefulness. _____24. The going concern assumption assumes that the businessa. will be liquidated in the near future.b. will be purchased by another business.c. is in a growth industry.d. will continue in operation long enough to carry out its existing commitments. _____25. The revenue recognition principlea. states that revenue should be recognized in the period when received.b. states that expense recognition is tied to revenue recognition.c. requires that revenue be recognized in the accounting period when it is earned.d. requires that events making a difference to financial statement users be clearly disclosed. _____26. Which of the following is not a characteristic of the cost principle?a. Reliabilityb. Subjectivityc. Objectivityd. Verifiability _____1. (TCO A) Which of the following is an advantage of the sole proprietorship relative to the corporate form of business organization? (Points: 5) Limited liability of investor Transferability of ownership Simple to establish Unlimited life2. (TCO A) Dividends _____. (Points: 5) represent an expense and are an operating activity represent an obligation and are an operating activity represent a distribution of earnings and are a financing activity represent an asset and are an investing activity3. (TCOs A, B) Below is a partial list of account balances for LBJ Company:Cash $15,000Prepaid insurance 5,000Accounts receivable 2,500Accounts payable 3,000Notes payable 6,000Common stock 10,000Dividends 500Revenues 15,000Expenses 13,000What did LBJ Company show as total debits? (Points: 5) $34,000 $36,000 $70,000 $31,0004. (TCOs B, E) Why is the accrual basis of accounting preferred by GAAP? (Points: 5) The Accrual basis is easier to use. The Accrual basis is also preferred by the Internal Revenue Service. The Accrual basis complies with the revenue recognition and matching principles. The Accrual basis requires fewer accounting resources.5. (TCO D) In a period of increasing prices, which inventory cost flow assumption will result in the highest amount of net income?(Points: 5) LIFO The average cost method FIFO Income tax expense for the period will be the same under all assumptions.6. (TCOs A, E) Equipment was purchased for $75,000 on January 1, 2011. Freight charges of $3,200 were incurred and there was a cost of $6,000 for installation. It is estimated the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense for 2011 using the straight-line method will be _____. (Points: 5) $13,800 $14,440 $12,600 $13,2407. (TCO D,G) Payne Corporation issues 100 twenty-year, 6%, $1,000 bonds dated July 1, 2010, at 94. The journal entry to record the issuance will show a _____. (Points: 5) debit to Cash of $100,000 credit to Bonds Payable of $94,000 credit to Premium on Bonds Payable of $4,000 debit to Discount on Bonds Payable of $6,0008. (TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $100,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $1,000,000. 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) $20,000 $1,020,000 $1,000,000 $980,0009. (TCO F) If you are making comparisons within a company to detect changes in financial relationships and significant trends, you are performing what type of analysis? (Points: 5) Industry averages analysis Intercompany analysis Common-size analysis Intracompany analysis10. (TCO F) The formula for performing horizontal analysis is _____. (Points: 5) (Current Year Amount minus Base Year Amount) divided by Current Year Amount Base Year Amount divided by Current Year Amount Current Year Amount minus Base Year Amount (Current Year Amount minus Base Year Amount) divided by Base Year Amount11. (TCO F) Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time _____.(Points: 5) that has been arranged from the highest number to the lowest number that has been arranged from the lowest number to the highest number to determine which numbers are in error to determine the amount and/or percentage increase or decrease that has taken place12. (TCO F) A common measure of liquidity is _____. (Points: 5) debt-to-total-assets ratio cash debt coverage free cash flow working capital13. (TCO F) Short-term creditors would be most interested in which of the following ratios? (Points: 5) Average collection period Times interest earned Cash debt coverage Free cash flow14. (TCO G) To calculate the market value of a bond, we need to _____. (Points: 5) multiply the bond price times the interest rate calculate the present value of the principal only calculate the present value of the interest only calculate the present value of both the principal and1. (TCO A) Use the following partial financial statement information below to calculate the liquidity and profitability ratios. This information can be used to correctly solve each of the ratios below.Average common shares outstanding 35,000 Current liabilities $25,000Capital expenditures $20,000 Net income $50,000Cash provided by operations $77,000 Net sales $100,000Preferred stock dividends paid $30,000 Total liabilities $50,000Current assets $20,000 Total assets $80,000Instructions: Compute the following.a) Current ratio b) Working capital c) Earnings per shared) Debt-to-total-assets ratioe) Free cash flow2. (TCOs D, E) Please prepare the following journal entries. Indicate which account should be debited with the abbreviation DR in front of the account name and which account should be credited with the abbreviation CR in front of the account name along with the dollar amount of the debit and credit. a) Investors invested $150,000 in exchange for 10,000 shares of common stock. b) Company made payment on account for $10,000 c) Company received $15,000 for services not yet performed d) Company purchased $7,500 worth of equipment e) Company billed $5,000 for services performed(Points: 30)


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