Exam 3 - Spring 2011

Exam 3 - Spring 2011 - ACCT 2103 Spring 2011 Exam 3 guru!...

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Unformatted text preview: ACCT 2103 Spring 2011 Exam 3 guru! Monday/Wednesday seat: M/W Section (Left, Center, or Right) thhfi M/W Row 4:) M/W Seat Friday Instructor (circle one): Jimmy Downes / Abbie Field / Brad King / Aria Ghajar Class Time (circle one): 8:30 / 2:30 You must turn in both your exam pages and your green scantron. Do no_t complete your green scantron until completely finished with the exam. Record your name, class time (8:30 or 2:3 0), and test version number on the scantron. The test version number is provided on the last page of the exam. Do n_ot open or turn over your exam until your instructor tells you to begin. It is a Violation of the ethical code of conduct to (1) provide any information regarding this exam to a student in a later exam section or receive information from a student in an earlier exam section and (2) use a programmable calculator With memory. A Violation of this code of conduct may result in an F! for the course. Multiple Choice Questions Identifi/ the letter of the choice that best completes the statement or answers the question. 1. Which f the following stages of equity financing comes last in the traditional order of progression? gOutside investment by ‘laagl" investors and venture capital firms. S lfllnvestmentbfifriends and 'min of the founders. 1 @,Initial public offering (IPO). H Mlnvestment by the founders of the business.\ 2. The concept that interest causes the value of money received today to be greater than the value of that same amount of money r ived in the future is referred to as the: grime value of money. B. Monetary unit assumption. C. Matching principle. D. Historical cost principle. 3. A feature common to both stock splits and stock dividends is @ That there is no effect on total stockholders” equity. . A reduction in the contributed capital of a corporation. C. A transfer to earned capital of a corporation. D. An increase in total liabilities of a corporation. 4. The mixture of liabilities and stockholders' equity a business uses is called its: A. Accounting equation. B. Indenture agreement. . Bond contract. apital structure. 5. The entry to record a monthly payment on an installment note such as a car loan: A. Increases expense, decreases liabilities, and increases assets. ncreases expense, decreases liabilities, and decreases assets. Increases expense, increases liabilities, and increases assets. fllncreases expense, increases liabilities, and decreases assets. 6. South Beach Apparel issued 10,000 shares of $1 par value stock for $5 per share. What is true about the journal entry to record the issuance? 3, fiDebit Common Stock $10,000. Cask 90,000 ‘Opog x g _. 90/009 )B’xCredit Cash $50,000. cs 10,000 ~40/000 C. Credit Common Stock $50,000. AV“; 40,000 W @Iredit Additional Paid-In Capital $40,000. 7. The issuance of notes payable for borrowing is classified in the statement of cash flows as a(n): KIOperating activity. KNoncash activity. Investing activity. @Financing activity. 8. Which of the following is added to net income as an adjustment under the in cash flow ? éGain on the sale of land. Accounts receivable increase. * Inventory increase. Salaries payable increase. direct method of preparing the statement of 9. A contingent liability should be disclosed in a note to the financial statements rather than being recorded if: The likelihood of a loss is eighty percent. The incurrence of a loss is reasonably possible. _ The incurrence of a loss is probable. . Sc\\ bisc\0$~*‘°’ \ D. The likelihood ofa loss is remote. - “o temé as A 10. Which of the following is an example of a noncash activity? AiPurchase of land using cash proceeds from issuance of common stock. Purchase of land by issuing debt. /K. Sale of land for less than its cost. “ELSale of land for more than its cost. 11. A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 8%. These bonds will sell at a price that is: A. Equal to $500,000. @ess than $500,000. . The answer cannot be determined from the information provided. D. More than $500,000. ‘ 12. The times interest earned ratio is calculated as A. Net income/Interest expense. B. Interest expense/Net income. ,7 . Interest expense/(Net income + interest expense + tax expense). (Net income + interest expense + tax expense)/Interest expense. 13. A company's liquidity refers to its: A. Ability to collect accounts receivable. B. Ability to sell inventory efficiently. . Ability to generate profits from operations. Ability to pay currently maturing debts. 14. On December 1, 2012, Old World Deli signed a $300,000, 5%, six-month note payable with the amount borrowed plus t accrued interest due six months later on June 1, 2013. Old World Deli should record which of the following adjusting entries at December 31, 2012? a Debit Interest Expense and credit Interest Payable, $7,500. ‘ Debit Interest Expense and credit Cash, $1,250. ‘TDebit Interest Expense and credit Cash, $7,500. Debit Interest Expense and credit Interest Payable, $ 1,250. . .7 006% ’3 f 15. The balance sheet of Tech Track reports total assets of $400,000 and $500,000 at the beginning and end of the year, respectively. Sales revenues are $1.1 million ($0.8 million in the previous year), net income is $40,000, and net cash flows from operating activities are $50,000. How does Tech Track’s cash return on assets compare to the industry average of 10%? etter. orse. W C. Same as. D. Cannot be determined with the data provided. Ago/GO O 16. Which of the following is not withheld from an employee's salary? Federal and state unemployment taxes. I B Employee portion of health insurance. ederal and state income taxes. D. FICA taxes. 17. Roberto Corporation was organized on January 1, 2012. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2012, Roberto had the following transactions relating to stockholders' equity: ' Issued 10,000 shares of common stock at $7 per share Issued 20,000 shares of common stock at $8 per share Reported a net income of $100,000 Paid dividends of $50,000 Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8) What is total stockholders' equity at the end of 2012? 70 O A. $270,000. \ngiéJv’r $250,000. “some C. $200,000. ' D. $300,000. )3 I19 1.. l8. Assume net income was $100,000, depreciation expense was $8,000,3aceidt‘ints receivable decreased by $7,500, and accounts payable decreased by $2,500. The amount of cash flows from operating activities is: A. $103,000. Hm B. $100,000. I ,0. $108,000. gripe @35113000. 7.4—? ~ 2,390 19. Brian Inc. borrowed $8,000 from First Bank and signed 'a promissory noggqfhat entry should Brian lnc. record? I A. Debit Cash, $8,000; Credit Notes Receivable, $8,000. B. Debit Notes Receivable, $8000; Credit Cash, $8,000. @Debit Cash, $8,000; Credit Notes Payable, $8,000. D. Debit Notes Payable, $8,000; Credit Cash, $8,000. 20. Treasury Stock: @decreases stockholders‘ equity. B. increases stockholders‘ equity. C. has a normal credit balance. D. is recorded as an investment. 21. Discount—Mart issues $10 million in bonds on January 1, 2012. The bonds have a ten—year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds: Cash Interest Decrease in Carrying Date Paid Expense (:larrying Value \7 alue 151-12 $8,640.967 6730.512 $300,000 $345,639 $45,639 8.686.606 13:31:12 300000 347.464 47.464 8.734.070 6-30.13 300,000 349.363 49,363 8.783, 33 12 '31-'13 300.(,)0(} 351.33 51.33 8.834.770 What is the market annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six month rate.) 22. The collection of cash from customers would be classified as which type of cash flow on the Statement of Cash Flows? A. Financing. B. investing. Operating. ot reported on the statement of cash flows. 23. Arrow Printers paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and $6,000 in dividends n its common stock. Arrow would report cash outflows from activities, as follows: perating, $2,000; Financing $16,000. B. Operating, $18,000; Financing $0. 91221736“ \ 7‘72- Operating, $0; Financing $18,000. @Operating, $12,000; Financing $6,000. 24. Which of the following is true for bonds issued at a discount? The market interest rate is greater than the stated interest rate. B. The stated interest rate is greater than the market interest rate. C. The stated interest rate and the market interest rate are equal. D. The stated interest rate and the market interest rate are unrelated. 25. Raiders Company issues a bond with a stated interest rate of 10%, face value of $50,000, and due in 5 years. Interest payments are made semi—annually. The market rate for this type of bond is 8%. What is the issue price of the bond? (Present value tables are attached to back of exam.) A. $83,920 9500? 19335. $46,320 » $54,055 323550900 26. Advantages of the corporate form that have led to the growth of this form of business ownership include all of the following except: A. Lack of mutual agency. B. Ease of raising capital. Low government regulation. D. Limited liability. 27. If a company issues 1,000 shares of $1 par value common stock for $30 per share, what would be the effect on the accountin equation? ncrease assets and increase liabilities. . ncrease assets and increase revenue. Increase assets and increase stockholders’ equity. D. Increase assets and decrease stockholders’ equity. 28. The Titan Co. retires a $20 million bond issue when the carrying value of the bonds is $18 million, but the market value of the bonds is $23 million. The entry to record the retirement will include: A. No gain or loss on retirement. B. A credit of $5 million to a gain account. @A debit of $5 million to a loss account. D. A debit to cash for $18 million. 29. The sale of gift cards by a company is a direct example of: A. Current portion of long—term debt. B. Sales tax payable. @Unearned revenues. D. Deferred taxes. 30. The current portion of long—term debt should be A. Reported as a long—term liability on the balance sheet. ombined with the rest of the long—term debt on the balance sheet. eported as a current liability on the balance sheet. D. Paid immediately. 3 1. Which of the following is not a current liability? A. Current portion of long—term debt. B. A note payable due in 2 years. . Accounts payable. D. Sales tax payable. 32. Earnings per share (EPS) @is useful in comparing earnings performance for the same company over time. B. is useful in comparing earnings performance across companies. is useful in both comparing earnings performance across companies and in comparing earnings performance for the same company over time. D. is not useful in comparing earnings performance across companies or in comparing earnings performance for the same company over time. 33. Bad Brad's BBQ had cash flows for the year as follows (33 in millions): CASH RECEIVED FROhI: Customers $ 1.800 Interest on inrestments 300 Sale of land 100 —/ Sale of common stock 600 Issuance of debt securities 2.000 CASH PAID FOR: Interest on debt 55‘ 300 Income tax 80 Debt principal reduction ‘1 . 5 00 Purchase ofequipment 4.000 Purchase of inrentory 1.000 Dividends on common stock 200 (1:)perating expenses 0 500 Bad Brad's would report net cash inflows (outflows) from investing activities in the amount of: A. $0,900). (3,900). C. $01,000). D. $100. 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Exam 3 - Spring 2011 - ACCT 2103 Spring 2011 Exam 3 guru!...

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