Accounting 557 Week 10 Final Exam part 2

Question 1

Blaney Clothing Store had a balance in the Accounts Receivable account of $437,500 at the beginning of the year and a balance of $500,000 at the end of the year. Net credit sales during the year amounted to $3,000,000. The average collection period of the receivables in terms of days was

                       

53.2 days.

                       

365 days.

                       

60.1 days.

                       

57 days.

 

Question 2

Which one of the following is primarily interested in the liquidity of a company?

                       

Federal government

                       

Stockholders

                       

Long-term creditors

                       

Short-term creditors

 

Quedtion 3

The order of presentation of nontypical items that may appear on the income statement is

                       

Extraordinary items, Discontinued operations, Other revenues and expenses.

                       

Discontinued operations, Extraordinary items, Other revenues and expenses.

                       

Other revenues and expenses, Discontinued operations, Extraordinary items.

                       

Other revenues and expenses, Extraordinary items, Discontinued operations

Question 4

Vertical analysis is a technique which expresses each item within a financial statement

                       

in dollars and cents.

                       

in terms of a percentage of the item in the previous year.

                       

in terms of a percent of a base amount.

                       

starting with the highest value down to the lowest value.

 

Question 5

Saira, Inc. has the following income statement (in millions):

                                   SAIRA, INC.

                              Income Statement

             For the Year Ended December 31, 2014

Net Sales                                                                  $300

Cost of Goods Sold                                                    180

Gross Profit                                                                 120

Operating Expenses                                                     45

Net Income                                                                  $75

 

Using vertical analysis, what percentage is assigned to Cost of Goods Sold?

                       

40%

                       

60%

                       

100%

                       

None of these answer choices are correct

 

Question 6

Lake Company reported the following on its income statement:

Income before income taxes                                        $600,000

Income tax expense                                                          150,000

Net income                                                                       $450,000

An analysis of the income statement revealed that interest expense was $60,000. Lake Company's times interest earned was

                       

11 times.

                       

10 times.

                       

8.5 times.

                       

7.5 times

 

Question 7

 

        The following information is available for Oakland Company:

 

                                                           2015                     2014    

Accounts receivable                $   430,000           $   460,000

Inventory                                      280,000                320,000

Net credit sales                         2,670,000             1,600,000

Cost of goods sold                    1,860,000             1,060,000

Net income                                   300,000                170,000

 

The accounts receivable turnover ratio for 2015 is

                       

1.4 times.

                       

6.2 times.

                       

6.0 times.

                       

5.8 times

 

Question 8

Which one of the following is not a tool in financial statement analysis?

                       

Horizontal analysis

                       

Circular analysis

                       

Vertical analysis

                       

Ratio analysis

 

Question 9

 

Short-term creditors are usually most interested in evaluating

                       

solvency.

                       

liquidity.

                       

marketability.

                       

profitability.

 

Question 10

Blaine Company had these transactions pertaining to stock investments:

Feb. 1  Purchased 2,000 shares of Norton Company (10%) for $51,000.

June 1  Received cash dividends of $2 per share on Horton stock.

Oct. 1  Sold 1,200 shares of Horton stock for $32,400.

The entry to record the sale of the stock would include a

                       

debit to Cash for $30,600.

                       

credit to Gain on Sale of Stock Investments for $1,200.

                       

debit to Stock Investments for $30,600.

                       

credit to Gain on Sale of Stock Investments for $1,800

 

Quedtion 11

On January 1, 2014, Brenner Company purchased at face value, a $1,000, 10% bond that pays interest on January 1 and July 1. Brenner Company has a calendar year end.

The entry for the receipt of interest on January 1, 2015 is

                       

Cash........................................................................................ 110

                   Interest Revenue.............................................................                 110

                       

Cash........................................................................................ 100

                   Interest Receivable..........................................................                 100

                       

Cash........................................................................................ 40

                   Interest Revenue.............................................................                   40

                       

Cash........................................................................................ 50

                   Interest Receivable..........................................................                   50

 

Question 12

Ban Co. purchased 50, 5% Waylan Company bonds for $50,000 cash plus brokerage fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to record the December 31 interest accrual would include a

                       

debit to Interest Receivable for $1,250.

                       

debit to Interest Revenue for $1,250.

                       

credit to Interest Revenue for $1,262.50.

                       

debit to Debt Investments for $1,262.50.

 

Question 13

At the time of acquisition of a debt investment,

                       

no journal entry is required.

                       

the historical cost principle applies.

                       

the Stock Investments account is debited when bonds are purchased.

                       

the Investment account is credited for its cost plus brokerage fees.

 

Question 14

For accounting purposes, the method used to account for long-term investments in common stock is determined by

                       

the amount paid for the stock by the investor.

                       

the extent of an investor’s influence on the operating and financial affairs of the investee.

                       

whether the stock has paid dividends in past years.

                       

whether the acquisition of the stock by the investor was “friendly” or “hostile.”

 

Question 15

Pension funds and mutual funds regularly invest in debt and stock securities to

                       

generate earnings.

                       

house excess cash until needed.

                       

meet strategic goals.

                       

control the company in which they invest

 

Question 16

On January 1, 2014, Lark Corporation purchased 35% of the common stock outstanding of Dinc Corporation for $700,000. During 2014, Dinc Corporation reported net income of $200,000 and paid cash dividends of $100,000. The balance of the Stock Investments—Dinc account on the books of Lark Corporation at December 31, 2014 is

                       

$700,000.

                       

$735,000.

                       

$770,000.

                       

$665,000

 

Question 17

The cost method of accounting for long-term investments in stock should be employed when the

                       

investor owns more than 50% of the investee’s stock.

                       

investor has significant influence on the investee and the stock held by the investor are marketable equity securities.

                       

market value of the shares held is greater than their historical cost.

                       

investor’s influence on the investee is insignificant

 

Question 18

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)

                       

subtraction from net income.

                       

addition to net income.

                       

addition to cash flow from investing activities.

                       

subtraction from cash flow from investing activities

 

Question 19

Under IFRS, the cash flow statement can be prepared using

                       

the direct method only.

                       

the indirect method only.

                       

either the direct or indirect method.

                       

the T-account method only

 

Question 20

 

The statement of cash flows should help investors and creditors assess each of the following except the

                       

entity's ability to generate future income.

                       

entity's ability to pay dividends.

                       

reasons for the difference between net income and net cash provided by operating activities.

                       

cash investing and financing transactions during the period

 

Question 21

Lending money and collecting the loans are

                       

operating activities.

                       

investing activities.

                       

financing activities.

                       

Non-cash investing and financing activities.

 

Question 22

 

If $250,000 of bonds are issued during the year but $130,000 of old bonds are retired during the year, the statement of cash flows will show a(n)

                       

net increase in cash of $120,000.

                       

net decrease in cash of $120,000.

                       

increase in cash of $250,000 and a decrease in cash of $130,000.

                       

net gain on retirement of bonds of $120,000.

 

Question 23

A company had net income of $210,000. Depreciation expense is $27,000. During the year, Accounts Receivable and Inventory increased $17,000 and $42,000, respectively. Prepaid Expenses and Accounts Payable decreased $5,000 and $6,000, respectively. There was also a loss on the sale of equipment of $2,000. How much cash was provided by operating activities?

                       

$175,000

                       

$179,000

                       

$241,000

                       

$271,000

 

Question 24

Generally, the most important category on the statement of cash flows is cash flows from

                       

operating activities.

                       

investing activities.

                       

financing activities.

                       

significant noncash activities

 

Question 25

Jean’s Vegetable Market had the following transactions during 2014:

1.         Issued $50,000 of par value common stock for cash.

2.         Repaid a 6 year note payable in the amount of $22,000.

3.         Acquired land by issuing common stock of par value $100,000.

4.         Declared and paid a cash dividend of $2,000.

5.         Sold a long-term investment (cost $3,000) for cash of $8,000.

6.         Acquired an investment in IBM stock for cash of $15,000.

What is the net cash provided (used) by investing activities?

                       

$15,000

                       

$33,000

                       

($7,000)

                       

$8,000


Answer

ACC 557 Final Exam Part 2

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