practice exam 3 solutions

practice exam 3 solutions - Practice Exam 3 Name: PENN ID:...

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Practice Exam 3 Page 1 of 20 Name: PENN ID: __________________________ Recitation Section: __________________________ ACCOUNTING 101, PRACTICE EXAM #3 Instructions: 1. There are 20 numbered pages in this booklet (including a cover page and 2 blank pages at the end). Make sure you have all the pages before you begin. 2. Please print your name and student number at the top of this page AND on all subsequent pages. 3. This exam has 105 total points . Each question carries 3 points. No partial credit will be awarded. You have 120 minutes to complete the exam. So, please budget your time accordingly. 4. The Present Value Tables are provided at the end on page 18. 5. If any part of the statement is FALSE the entire statement is FALSE. 6. In the interest of fairness to all students, NO questions will be answered during the exam. If you think a question cannot be unambiguously answered with the information provided, you can choose “none of the above”. 7. The exam is closed book and the use of a laptop computer is prohibited. You are permitted to use ONE double-sided 8 ½ x 11 inch reference sheet. You are also permitted to use a calculator. 8. Exams written in pencil will not be considered for a regrade. Use a pen if you think you might submit your exam for a regrade request.
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Practice Exam 3 Page 2 of 20 Part I True/False ( 8 Questions – 3 Points Each. Please CIRCLE the right answer) 1. A very high current ratio and low quick ratio may indicate the company is not collecting its accounts receivables in a timely manner. TRUE / FALSE 2. When preferred stock is cumulative and the board of directors passes on a dividend, the dividends in arrears is not shown as a liability on the balance sheet. TRUE / FALSE 3. Suppose there would be no difference in a company’s net income in the current year if its operating leases were instead accounted for as capital leases (i.e., interest and amortization would be equal to the current year’s rental expense). Accounting for the operating leases as capital leases would increase the company’s Return on Equity (ROE). TRUE / FALSE Recall that ROE is defined as Net Income / Equity. Capitalizing the operating leases would increase Total Assets and Total Liabilities, but would have no effect on Equity. We are also told that there would be no difference in Net Income, so there would be no effect on ROE in this example. 4. A bond sold at a premium will pay cash interest in excess of the amount of interest expense recognized for accounting purposes. TRUE / FALSE 5. Earning tax-exempt interest on municipal bonds gives rise to a deferred tax liability. TRUE / FALSE Tax exempt interest is a permanent difference and will therefore affect the effective tax rate rather than giving rise to deferred taxes. 6.
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This note was uploaded on 03/02/2011 for the course ACCT 101 taught by Professor Armstrong during the Fall '09 term at UPenn.

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practice exam 3 solutions - Practice Exam 3 Name: PENN ID:...

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