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(Solved) Exam Name TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 1) The cost of razing a building on a parcel of land to...


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Exam
Name TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
1) The cost of razing a building on a parcel of land to build a new building is added to the cost of the
land. 1) 2) Treating a cost which should be an expense as a capital expenditure will make a company's net
income higher. 2) 3) Accelerated depreciation differs from straight-line depreciation in that depreciation expense is
greater in the first year and less in the later years. 3) 4) Tangible assets must be tested for impairment at least once a year. 4) 5) If assets are junked before being fully depreciated, there is a loss equal to the book value of the
asset.
6) A loss on disposal of an asset is recorded when cash received is less than book value. 6) 7) Accumulated depletion is a contra asset account. 7) 5) 8) One of the key concepts surrounding the definition of an asset is that it must provide future benefit.
8) 9) Amounts owed for products or services purchased on account are contingent liabilities. 9) 10)Gross pay is the total amount of salary, wages, commissions, and bonuses earned by 10)
an employee
during a pay period.
11)Ensuring efficiency of the payroll process is one of the two key controls for payroll. 11) 12)The current portion of notes payable is the principal amount that will be paid within 12)
one year of
the balance sheet date.
13)The bond carrying amount is the balance in the bond payable account subtracted
from or added to the balance in either the discount or premium account.
14)If a company issues a bond in-between interest payments, the company can pay a
prorated portion of the interest payment on the regular payment date.
15)If the difference between the effective-interest method of amortizing bond
discount and the straight-line method is immaterial, then GAAP permits use of
the straight-line method.
1 13) 14) 15) 2 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
16)On May 1, 2013, Metro Company has bonds with balances as shown below. 16) If Metro retires the bonds for $52,000, what will be the effect on the income statement?
A) There
B) There
C) There
D) There will
will
will
will be
be
be
be sales revenue of $3,140.
a gain on retirement of $3,140.
no effect on net income.
a loss on retirement of $3,140. TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
17)A corporation is a separate legal entity formed under the laws of a particular state. 17) 18)Corporations must issue common stock, but may or may not decide to issue preferred stock.
18) 19)Stock sold for amounts in excess of par value results in a gain reported on the income statement.
19) 20)The stock of publicly owned corporations is bought and sold on stock exchanges,
such as the New
York Stock Exchange. 20) 21)When a company records the year-end closing entries, the Income summary
balance, before it is closed to Retained earnings, should be equal to the Net income
or Net loss for the year. 21) 22)If preferred stock is non-cumulative, then the company does NOT need to pay
dividends that were passed in previous years. 22) 23)The book value of common stock is equal to the total equity less the book value of
preferred stock, divided by the number or common shares outstanding. 23) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question.
24)Which of the following measures a company's success in using assets to earn income? 24)
A) The rate of return on total assets
B) Inventory turnover
C) Days sales in receivables
D) The rate of return on stockholders' equity
25)A company's income tax expense is calculated on the basis of book income, but the
income tax
payable amount is based on the:
A) amount of taxable income, as calculated on the income tax return.
B) sales tax rate applied to sales revenues. 25) C) amount of dividends paid to shareholders.
D) amount of payroll tax that has not been paid yet.
26)Origami Company is considering a new project and needs to raise $800,000 of
capital. Their
after-tax net income would be $75,000 if they do not implement the new project. If
the new project is implemented, it will add an additional $50,000 of profits before tax
and interest. Origami's income tax rate is 40%. If they use debt financing, the
interest will be at 5%. Origami has 25,000 shares of common stock outstanding and
no preferred stock. 26) If Origami decides to implement the project using debt financing, what will be the
earnings per share amount? (Please round to the nearest cent.)
A) $3.40 B) $4.20 C) $3.24 D) $4.14 TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 27) 27)On June 30, 2014, Stephans Company showed the following data on the equity
section of their balance sheet:
Stockholders' equity
Common stock, $1 par
Paid-in capital in excess of par
Retained earnings
Total stockholder's equity 100,000 shares
authorized
40,000 shares
issued $40,00
0
260,00
0
940,00
0
$1,240,0
00 On July 1, 2014, Stephans distributed a 5% stock dividend. The market value of the
stock at that time was $13 per share. Following this transaction, the total
shareholders' equity would go down by $26,000.
28)A stock split is an increase in the number of issued and outstanding shares of stock, 28)
coupled with a
proportionate reduction in the par value of the stock.
29)A corporation must record a gain on sale for the sale of treasury stock at an amount
greater than its purchase price.
30)Please refer to the following information for Petra Sales Company:
•
•
•
• 29) 30) Common stock, $1.00 par, 200,000 issued, 180,000 outstanding
Paid-in capital in excess of par: $1,600,000
Retained earnings: $2,440,000
Treasury stock: 20,000 shares purchased at $12 per share If Petra Sales sells 10,000 shares of treasury stock at $14 per share, the company will
record a gain on the sale of treasury stock of $20,000.
31)Public companies are required to publish financial statements, but privately held
companies are generally not required to do so. 31) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
32)Which of the following BEST describes operating income?
32)
A) The income or loss generated from the normal operations of the business
B) The income or loss from segments of the business that have been sold or terminated
C) The gains and losses from transactions that are not part of the normal
operations of the business
D) The income or loss generated from unusual or infrequent events
33)Which of the following best describes extraordinary items on the income statement?
33)
A) The income or loss generated from the normal operations of the business
B) The income or loss generated from unusual and infrequent events
C) The income or loss from segments of the business that have been sold or terminated
D) The gains and losses from transactions that are not part of the normal
operations of the business
34)A statement of cash flows is generated to show:
A) the inflow and outflow of cash during the time period.
B) the expenses the company incurred during the time period.
C) how profits were generated.
D) the revenues the company has earned. 34) 35)Which one of the following is a principal function of the statement of cash flows?
A) To evaluate the company's earnings per share
B) To predict future net income
C) To evaluate management decisions
D) To predict the growth of company assets 35) 36)Which of the following describes the operating activities as shown in the statement of cash
flows?
36)
A) Includes transactions that primarily impact current assets and current liabilities
B) Includes increases and decreases in long-term assets
C) Includes transactions affecting the capitalization of the business
D) Shows the beginning and ending balance of cash
37)Which of the following describes the investing activities as shown in the statement of cash flows?
37)
A) Includes increases and decreases in long-term assets
B) Includes transactions affecting the capitalization of the business
C) Shows the beginning and ending balance of cash
D) Includes transactions that primarily impact current assets and current liabilities
38)Transnational Company just started in business and was looking for additional
capital in order to
purchase a property to build their headquarters. They found an investor who was
willing to sell them land worth $500,000 in exchange for stock in the company. How
would this transaction be shown on the statement of cash flows?
A) In the noncash investing and financing activities section
B) In the investing activities section
C) In the operating activities section
D) In the financing activities section 38) TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
39)Companies sometimes obtain financing other than cash. Although such transactions
do not directly involve cash, they still must be reported in the financing section of the
cash flow statement.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question. 39) 40) 40)Which of the following sections from the statement of cash flows would include the
acquisition of a building by issuing common stock?
A) The financing section
B) The noncash investing and financing section
C) The investing section
D) The operating section
41)Which of the following sections from the statement of cash flows would include the
payment of a note payable by issuing common stock?
A) The payment of a note payable by issuing common stock would not be
included in the noncash investing and financing section.
B) The payment of a note payable by issuing common stock would be included in
the investing section.
C) The payment of a note payable by issuing common stock would be included in
the operating section.
D) The payment of a note payable by issuing common stock would be included in
the financing section. 41) 42)
42)If an investor wants to know how much cash a company can free up for new
opportunities, such as expanding into a new sales region, they would most likely look
at:
A) acid ratio.
B) cash flow from investing activities.
C) earnings per share.
D) free cash flow.
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 43) 43)Qtopia Company uses the direct method to prepare its statement of cash flows. It has
reported sales revenues of $100,000 on its income statement for the year 2012. If the
balance in accounts receivable has gone up by $4,000 during the year, then $4,000
will have to be added to $100,000 to calculate collections from customers.
44)Qtopia Company uses the direct method to prepare its statement of cash flows. It
has reported operating expenses of $21,000 on its income statement for the year
2012. If the balance in accrued liabilities has gone up by $1,000 during the year,
then $1,000 will have to be added to $21,000 as part of the process to calculate
payments to suppliers for operating expenses.
45)Investors and creditors generally evaluate a company by using one year's data. 44) 45) 46)Horizontal analysis compares each item in the income statement to the net sales amount.
46) 47)Benchmarking is the comparison of a company's current year results with an earlier
year's
performance. 48)I
f an analyst wishes to see how operating expenses of a company have changed from
one year to the next, using a horizontal analysis would be the best approach. 47) 48) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
49)Which of the following is the definition of vertical analysis?
49)
A) Vertical analysis is the practice of comparing a company with other
companies that are leaders.
B) Vertical analysis is the analysis of a financial statement that reveals the
relationship of each statement item to a specified base, which is the 100%
figure.
C) Vertical analysis is the study of percentage changes in comparative financial statements.
D) Vertical analysis is the analysis in which percentages are computed by selecting a
base year as 100% and expressing amounts for following years as a percentage
of the base amount.
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
50)In a vertical analysis of the income statement, each line item is shown as a
percentage of gross profit.
51)The Arlington Company prepared a common-size income statement to compare its
results with its key competitor, Bardo Company. Please refer to the following data: Revenues
Cost of goods sold
Gross Profit
Operating expenses:
Sales and marketing expense
General and administrative
expense and development
Research
expense
Total operating expenses Arlington
Co.
100.0
%42.1
%
57.9
%
26.3
%
12.0
%
4.1%
42.4
% 50) 51) Bardo Co.
100.0
%47.8
%
52.2
%
8.6%
10.8
%
10.2
%
29.6
% Income before income tax
Income tax expense
Net income (loss) 15.5
22.6
%
%
3.3%
5.8%
12.3
16.8
%
%
Based on this data, an analyst could conclude that Arlington's total gross profit is
higher than Bardo's.
52)The inventory turnover ratio is a measure of the company's ability to pay all of its
current liabilities
if they come due immediately. 52) 53)Days' sales in receivables is a measure of a company's ability to collect receivables. 53) 54)The current ratio is a key indicator of a company's ability to pay current liabilities. 55)Management accounting often requires forward-looking data because of the
futuristic nature of
many business decisions. 54) 55) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
56)Which of the following is NOT an objective of management accounting?
56)
A) To provide information to shareholders to assist them with their investment decisions
B) To assist business managers with respect to providing a return to the owners of the business
C) To provide information to business managers to assist them in planning for their business
D) To provide information to business managers to assist them in controlling their business
57)Management is accountable to its employees in which of the following ways?
57)
A) Providing a return on the owner's shareholders' investment
B) Providing a safe workplace
C) Providing products that are safe and free of defects
D) Ensuring the business is environmentally responsible for impacts on the community
58)Which of the following describes a system in which suppliers deliver materials at the 58)
time they are
needed and finished units are completed when customer orders need to be filled?
A) Total quality management
B) Just-in-time (JIT)
C) Enterprise resource planning
D) Supply chain management
59)What is the name given to software systems that can integrate all of a
company's worldwide functions, departments and data into a single system?
A) Just-in-time inventory management
B) Enterprise resource planning
C) Total quality management
D) E-Commerce 59) 60)Which of the following is NOT an advantage of just-in-time inventory management?60)
A) Reduce the amount of insurance needed for lower levels of inventory
B) Surplus inventory is maintained to prevent production shut-down in case
of supply interruption
C) Lower inventory levels reduce storage cost
D) Inventory kept for shorter periods of time reduces the amount of goods that become obsolete
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
61)Baker products shipped an order to a customer on the second day of January. Later
that day, the sales manager told the accountant to record the sale as if it had taken
place on the last day of December. This would allow the company to book the sales
revenue in the year just ended and boost year-end profit. Because the transaction
was a legitimate sale, the alteration of the date of sale alone would not be
considered unethical. 61) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question.
62)Which of the following is NOT one of the key standards of ethical practice published by the IMA?
62)
A) Environmental sensitivity
B) Integrity
C) Confidentiality
D) Competence
63)Which of the following could be found on the income statement of a service company? 63)
A) Cost of goods sold
B) Rent expense
C) Cost of goods manufactured
D) Manufacturing overhead
64)Bainbridge Services reported the following information for the year
2012: 64) Service revenue
Operating expenses
Net income
Number of service calls for the year
How much was the unit cost per service
call?
A) $2.20
B) $0.20 $20,000
$15,750
$4,250
21,000
C) $0.95 D)
$0.75 65)Which of the following applies to the raw materials used by a manufacturing company?
A) Finished goods inventory
B) Merchandise inventory
C) Work in process inventory
D) Materials inventory 65) 66)The following information pertains to Bright Toy Company's operating activities for 2012. The 66)
company sells light box toys and sold 10,000 units in 2012.
Purchases
Selling and Administrative Expenses
Merchandise inventory, 1/1/2012
Merchandise inventory, 12/31/2012
Sales Revenue $126,00
090,000
14,000
10,000
250,00
0 What is the cost of goods available for sale for 2012?
A) $104,000
B) $130,000
C) $140,000 D) $126,000 67)The following information pertains to Bright Toy Company's operating activities for 2012. The 67)
company sells light box toys and sold 10,000 units in 2012.
Purchases
Selling and Administrative Expenses
Merchandise inventory, 1/1/2012
Merchandise inventory, 12/31/2012
Sales Revenue
What is the gross profit percentage?
A) 56%
B) 36% $126,00
090,000
14,000
10,000
250,00
0
C) 100% D) 48% 68)All of the following are examples of manufacturing overhead EXCEPT for:
A) indirect materials.
B) insurance on factory equipment.
C) wages of assembly line workers.
D) utilities incurred in the factory.
69)Given the following information, determine the cost
of goods sold. Direct labor incurred
Manufacturing overhead incurred
Direct materials used
Finished goods inventory, 1/1/2012
Finished goods inventory, 12/31/2012
Work in process inventory, 1/1/2012
Work in process inventory, 12/31/2012 $126,00
0359,00
0 1,000
395,00
0
442,00
0
193,00
0
218,00
0 68) 69
) A) $731,000 B) $461,000 C) $414,000 D) $781,000 TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
70)The wages and benefits of the factory janitors are included in manufacturing overhead.70) 71)Premium on bonds payable is spread over the term of the bonds and reduces total interest
expense.
71) 72)The balance in the Bonds payable account is a credit of $50,000. The balance in the 72)
Discount on
bonds payable account is a debit of $1,500. The bond carrying amount is $51,500.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question. 73) 73)The following information has been provided by LeMaire Company:
• Direct labor: $50,000
• Direct materials used: $20,000
• Materials purchased: $27,000
• Cost of goods manufactured: $100,000
• Ending work in process: $16,000
• Corporate headquarters' property taxes: $6,000
• Manufacturing overhead: $39,000
The beginning work in process was:
A) $7,000.
B) $9,000. C) $1,000. D) $23,000.
74) 74)The following information was obtained from Sizzler Company:
• Advertising costs: $7,900
• Indirect labor: $9,000
• Direct Labor: $31,000
• Indirect materials: $7,200
• Direct materials: $47,000
• Factory utilities: $3,000
• Factory repair and maintenance: $700
• Factory janitorial costs: $1,900
• Manufacturing equipment depreciation: $1,600
• Delivery vehicle depreciation: $790
• Administrative wages and salaries: $19,000
How much were Sizzler's product costs?
A) $102,190
B) $99,500 C) $101,400 D) $129,090 75)Pearland Company has 2,000 shares of preferred stock outstanding. The preferred
stock has a $100 par value, a 5% dividend rate, and is non-cumulative. If Pearland
has sufficient funds to pay dividends, what is the total amount of dividends that will
be paid out to preferred shareholders?
A) $10,000 B) $1,000 C) $2,000 75) D) $5,000 76)Orleans Company was incorporated on January 1, 2012. Orleans issued 4,000 shares
of common stock and 500 shares of preferred stock on that date. The preferred
shares are cumulative, $100 par, with an 8% dividend rate. Orleans has not paid any
dividends yet. In 2015, Orleans had its first profitable year, and on November 1, 2015,
Orleans declared a total dividend of $28,000. What is the total amount that will be
paid out to preferred shareholders?
A) $3,200
B) $16,000
C) $4,000
D) $28,000
77)A corporation has 15,000 shares of 10%, $50 par cumulative preferred stock
outstanding and 25,000 shares of no-par common stock outstanding. Dividends of
$37,500 are in arrears. At the end of the current year, the corporation declares a
dividend of $120,000. 76) 77) What is the dividend per share for preferred shares and for common shares?
A) The dividend per share is $.50 to preferred shares and $4.60 to common shares.
B) The dividend per share is $7.50 to preferred shares and $.30 to common shares.
C) The dividend per share is $8.00 to preferred shares and $0 to common shares.
D) None of the above are correct.
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 78) 78)When a company sells stock for more than the par value, it will record a gain on
sale for the amount in excess of par.
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or
answers the question.
79)Which of the following would be included in the entry to record the issuance of 5,000
shares of $10 par value common stock at $13 per share cash?
A) Cash would be debited for $65,000.
B) Common stock would be debited for $50,000.
C) Paid-in capital in excess of par—common would be debited for $5,000.
D) Common stock would be credited for $65,000. 79) 80) 80)The rate of return on total assets and the rate of return on common stockholders'
equity are used to evaluate the:
A) cash flow of the business.
B) ability to pay current liabilities with current assets.
C) liquidity of the business.
D) profitability of the business.
81)Reed Company reports the following information for
the year 2013: Net income
Preferred dividends
Common equity, Jan 1 $46,00
012,00
0
800,00
0
1
2 81
) Common equity, Dec 31 900,00
0
Please calculate the rate of return on common stockholders' equity. Please round to 3
decimal places.
A) 0.043
B) 0.054
C) 0.040
D) 0.014
82)Which of the following factors may cause a difference between book income and taxable income?
82)
A) The company uses straight-line depreciation for books and accelerated depreciation for tax.
B) The company pays its federal income taxes quarterly as opposed to annually.
C) The company has a deposit in transit at year-end.
D) The company sells stock right before the end of the year.
83)Onyx Company's income statement shows net income before income tax of $38,000. 83)
The
company's tax return shows taxable income of $34,000. Company's tax rate is 40%.
Which of the following entries would be used to record tax expense and tax
payable?
A) Debit Income tax expense $15,200, credit Deferred tax liability $1,600 and
credit Income tax payable $13,600.
B) Debit Income tax expense $15,200 and credit Cash $15,200.
C) Debit Deferred tax liability $13,600 and credit Income tax payable $13,600.
D) Debit Deferred tax liability $1,600, debit Income tax expense $13,600 and
credit Income tax payable $15,200.
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
84)Normally, a company's book income and tax income should be the same. 84) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
85)Please refer to the following information for Peartree Company:
•
•
•
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
Paid-in capital in excess of par: $2,150,000
Retained earnings: $910,000
Treasury stock: 5,000 shares purchased at $20 per share If Peartree resold 1,000 shares of treasury stock for $24 per share, what journal
entry would be required?
A) Debit Cash $24,000 and credit Treasury stock $24,000.
B) Debit Treasury stock $24,000 and credit Cash $24,000.
C) Debit Treasury stock $20,000, debit Paid-in capital $2,000 and credit Cash
$24,000.
D) Debit Cash $24,000, credit Treasury stock $20,000 and credit Paid-in capital
$4,000. 1
3 85
) 86)Which of the following is a common reason for companies to retire preferred stock? 86)
A) To stop paying out dividends to preferred shareholders
B) To increase stockholders' equity
C) To reward the preferred shareholders
D) To make a profit on the retirement of preferred stock
87)Which of the following statements is TRUE?
A) No journal entries are needed to either appropriate or restrict retained earnings.
B) Appropriations of retained earnings require journal entries, but restrictions
on retained earnings do not.
C) Restrictions on retained earnings must be journalized, but appropriations do
not need to be journalized.
D) Both appropriations and rest...

 


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