Spring 2016 Midterm Exam

12 2 presented below is a partial trial balance for

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2. Presented below is a partial trial balance for the Messenger Corporation at December 31, 2016. Account Title Debits Credits Cash and cash equivalents 30,000 Accounts receivable 195,000 Raw materials inventory 36,000 Note receivable 120,000 Interest receivable 4,000 Interest payable 7,000 Marketable securities 48,000 Land 100,000 Buildings 1,500,000 Accumulated depreciation–buildings 740,000 Work in process inventory 38,000 Finished goods inventory 98,000 Equipment 400,000 Accumulated depreciation–equipment 230,000 Franchise (net of amortization) 120,000 Prepaid insurance (for the next year) 60,000 Deferred revenue 48,000 Accounts payable 240,000 Note payable 500,000 Salaries payable 6,000 Cash restricted for payment of note Payable 100,000 Allowance for uncollectible accounts 24,000 13
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Additional information: 1. The note receivable, along with any accrued interest, is due on November 1, 2017. 2. The note payable is due in 2021. Interest is payable annually. 3. The marketable securities consist of equity securities of other corporations. Management does not intend to sell any of the securities in the next year. 4. Deferred revenue will be earned equally over the next 18 months. Required: Determine the company's working capital (current assets minus current liabilities) at December 31, 2016. (6 points) 3. Listed below are 10 terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the correct term. (10 points) 14
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TERM PHRASE NUMBER 1. Earnings per share Required disclosure for publicly traded corporations. ____ 2. Comprehensive income Component of the entity has been sold or will be sold. ____ 3. Restructuring costs Costs generally associated with downsizing. ____ 4. Multiple-step income statement Reports a series of intermediate subtotals. ____ 5. Foreign currency translation gain Accounted for prospectively. ____ 6. Change in estimate Tangentially related to normal operations. ____ 7. Nonoperating income Accounted for retrospectively by revising prior years' statements. ____ 8. Change in accounting principle Other comprehensive income item. ____ 9. Discontinued operations Total nonowner change in equity. ____ 10. Earnings quality Ability of reported income to predict future earnings. ____ 15
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