Paper , Order, or Assignment Requirements

1. Operating cash flows affect

   A. current assets and current liabilities.

   B. equity accounts.

   C. long-term asset accounts.

   D. long-term liability accounts.

   2. Which activities are computed differently using the two methods of formatting a statement of cash

   flows?

   A. Operating activities

   B. Both operating activities and investing activities

   C. Financing activities

   D. Investing activities

   3. If Rick’s net sales increased from $40,000 to $80,000 and its operating expenses increased from $30,000

   to $50,000, then vertical analysis based on net sales would show which of the following for operating

   expenses for the two periods (to the nearest tenth of a percent)?

   A. 133.3% and 160.0%

   B. 62.5% and 75.0%

   C. 75.0% and 62.5%

   D. 160.0% and 133.3%

   4. The Isaiah Corporation Stockholders’ Equity section includes the following information:

   Total par value of the preferred and common stock is

   Preferred Stock $22,000

   Paid-in Capital in Excess of Par-Preferred 2,980

   Common Stock 48,000

   Paid-in Capital in Excess of Par-Common 3,400

   Retained Earnings 7,350

   A. $83,730.

   B. $70,000.

   C. $76,380

2. If you own 500 shares (2% of a corporation’s stock) and the corporation issues 15,000 new shares, how many of the new shares can you purchase under preemptive right?

   A. 500

   B. 300

   C. 800

   D. 0

   6. Casey Company has an accounts receivable turnover of 36 days, an inventory turnover of 77 days, and an accounts payable turnover of 40 days. Casey’s cash conversion cycle is _______ day(s).

   A. 73

   B. 81

   C. 1

   D. 153

   7. What is the rate of return on equity if net income is $22,700; preferred dividends are $3,000; sales are $100,000; and average common stockholders’ equity is $86,000?

   A. 22.9%

   B. 22.7%

   C. 86.0%

   D. 26.4%

   8. What is Jane’s rate of return on total assets if average total assets are $100,000; net income is $2,000; interest expense if $1,600; and income tax is $2,000?

   A. 5.6%

   B. 3.6%

   C. 4.6%

   D. 5.2%

   9. Which section of the income statement does not report net of income taxes or net of income tax savings?

   A. Cumulative effect of changes in accounting principles section

   B. Extraordinary items section

   C. Discontinued operations section

   D. Continuing operations section

   10. Isaiah Corporation’s Accounts Receivable increased by $35,000, and its Accounts Payable decreased

   by $18,000. What is the net effect on cash from operations under the indirect method?

   A. −$18,000

   B. −$53,000

   C. +$35,000

   D. +$17,000

3. Earnings that a stockholder receives from a corporation are an example of which stockholder right?

   A. Preemption

   B. Liquidation

   C. Dividends

   D. Vote

   12. The Amanda Corporation Stockholders’ Equity section includes the following information:

   What was the total selling price of the preferred stock?

   Preferred Stock $12,000

   Paid-in Capital in Excess of Par—Preferred 2,700

   Common Stock 15,000

   Paid-in Capital in Excess of Par—Common 4,100

   Retained Earnings 8,200

   A. $16,100

   B. $12,000

   C. $14,700

   D. $20,200

   13. Rick Company has declared a $40,000 cash dividend to shareholders. The company has 5,000 shares of $20 par, 6% preferred stock, and 10,000 shares of $15 par common stock. The preferred stock is

   noncumulative. How much will be distributed to the preferred and common stockholders on the date of

   payment?

   A. $34,000 preferred; $6,000 common

   B. $0 preferred; $40,000 common

   C. $40,000 preferred; $0 common

   D. $6,000 preferred; $34,000 common

   14. What is the rate of return on common stockholders’ equity if sales are $100,000, net income is $22,700, and average common stockholders’ equity is $86,000?

   A. 86.0%

   B. 26.4%

   C. The rate of return can’t be determined from the information given.

   D. 22.7%

   15. Casey Company has 5,000 shares of treasury cost that it purchased for $13 per share. It later resold 2,000 of those shares for $17 per share. The amount to be credited to Paid-in Capital—Treasury Stock is

   A. $34,000.

   B. $8,000.

   C. $30,000.

   D. $26,000.

   16. For vertical analysis purposes, the base item on the income statement isEnd of exam

   A. net income.

   B. total expenses.

   C. gross profit.

   D. net sales.

   17. Net sales at Kelly’s Bakery increased from $40,000 to $60,000, and its cost of goods sold increased from $20,000 to $40,000. Vertical analysis based on net sales would show which percentages for cost of goods sold (rounded to the nearest %)?

   A. 40% and 20%

   B. 10% and 30%

   C. 67% and 40%

   D. 50% and 67%

   18. Brandon Company had extraordinary losses of $150,000. If its corporate tax rate is 30%, at which amount will the losses be shown on the income statement?

   A. Not enough information is given to answer the question.

   B. $45,000

   C. $105,000

   D. $150,000

   19. The records of Ashley Boutique showed a net loss of $30,000; depreciation expense of $25,000; and an increase in supplies on hand of $5,000. The amount of net cash flow from operating activities using the

   indirect method is

   A. $15,000.

   B. $20,000.

   C. ($10,000).

   D. ($15,000).

   20. In a common-size income statement, selling expenses are 55%. This means that they’re 55% of

   A. net income.

   B. net sales.

   C. gross profit.

   D. net profit.

1. The following information was made available from the income statement

and balance sheet of Meranda Company:

Complete the cash flow from operating activities section for Meranda Company

using the direct method for the year ended December 31, 2010.

2. Given the following balance sheet, complete a horizontal analysis.

Compute the percentage to the nearest tenth of a percent.

Jessica’s Jewelry Store

Comparative Balance Sheet

For Years Ended December 31, 2011 and 2010

(in thousands) 2011 2010 Difference

Assets

Current Assets

Cash and Equivalents $319 $288

Accounts Receivable, net 166 173

Inventory 437 400

Total Current Assets 922 861

Property, Plant and Equipment 377 412

Total Assets $1,299 $1,273

Liabilities

Current Liabilities

Accounts Payable 132 144

Accrued Liabilities 90 84

Total Current Liabilities 222 228

Long-Term Liabilities 84 96

Total Liabilities 306 324

Stockholders’ Equity

Common Stock 288 255

Retained Earnings 705 694

Total Stockholders’ Equity 993 949

Total Liabilities and

Stockholders’ Equity

$1,299 $1,273

Part B: Answer each of the following 15 questions. Each answer is worth

4 points.

1. Given the following information, show the increase or decrease in the

accounting equation:

1. Deanne invests $45,000 and $10,000 of office equipment into the business.
2. Furniture is purchased for $8,000 cash.
3. Supplies are purchased on credit for $2,300.
4. The month’s electric bill of $775 was paid.
5. The month’s cash sales were $5,000.

2. Journalize the following transactions and include the explanations.
3. Tammy invested $40,000 into her corporation on June 11.
4. Tammy purchased inventory for $95,000, of which $70,000 was on account on June 14.
5. Tammy paid one month’s rent of $2,400 on June 16.
6. Tammy had sales of $15,000 on account on June 19.
7. Tammy had paid $2,500 on her payables account on June 21.

3. Prepare a trial balance from the following information for Computer Systems, Inc. for December 31, 2012:

Accounts payable  $4,298

Common stock  $4,073

Sales    $8,302

Cash    $1,902

Notes payable  $888

Wages expense  $777

Supplies expense  $1,028

Equipment   $5,183

Accounts receivable  $1,733

Inventory    $6,938

4. Compute the missing information from this post-closing trial balance:

4. Compute the missing information from this post-closing trial balance:

Cash $38,502

Accounts Receivable   14,372

Prepaid Rent   18,229

Prepaid Insurance     4,583

Supplies     (A)

Accounts Payable  (B)

Wages Payable   29,428

Common Stock   30,049

Retained Earnings   18,423

_______ _______

Total $80,436  $80,436

5. Journalize the following transactions using the perpetual inventory method:

Nov. 1 Purchased $3,600 of merchandise from Hilltop, terms 2/10, n/30.

Nov. 5 Purchased $1,750 of merchandise for cash from Owen’s Supply.

Nov. 7 Purchased $3,400 of merchandise from Seaside, terms 1/15, n/30.

Nov. 10 Returned $500 of merchandise to Seaside. Credit Memo #131

Nov. 11 Paid the invoice from Hilltop.

6. Given the following information, prepare a balance sheet for Brandon’s Campstore for the year ending December 31, 2012:

Cash  $38,745

Retained Earnings $171,309

Common Stock $43,500 Equipment $37,200

Accounts

Receivable

$14,109 Accounts Payable            $26,351

Land $35,000  Inventory $81,311

Prepaid Supplies   $9,003  Income Taxes

Payable

Office Computers $16,399  Other PPE $26,550

Accum. Depr. (all) $21,013 Prepaid Insurance             $9,140

$5,284

7. Rick Company’s beginning inventory and purchases during the fiscal year ended December 31, 2012, were as follows: (Note: The company uses a perpetual system of inventory.)

Units Unit Price Total Cost

January 1—Beginning

inventory

18 $24 $432

March 12—Sold 13

April 11—Purchase 45 $29 $1,305

June 20—Sold 33

Aug 16—Purchase 35 $27 $945

Sept 11—Sold 29

Total Cost of Inventory

8. Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If this is the only error in Years 1 and 2, fill in the items below,

indicating which items will be understated, overstated, or correctly stated for Years 1 and 2.

Item     Year 1   Year 2

Gross Profit    _____________ ______________

Net Income    _____________ ______________

Ending Retained Earnings  _____________ ______________

9. Below is a list of treatments of accounting topics. Place GAAP on the line

if the treatment is GAAP-based and place IFRS on the line if the treatment is

IFRS-based.

1. The use of LIFO is allowed. ___________________
2. Both research and development costs are expensed as incurred.

___________________

Market is defined as current replacement cost. ___________________

10. Record the necessary journal entries from the following bank

reconciliation information for July 31, 2011:

Bank Balance, July 31, 2011  $ 28,542

Checkbook Balance, July 31, 2011 29,344

Bank collection of note receivable 1,545 + 210

Bank service charge 75

Deposits in transit 3,145

Outstanding checks 2,685

NSF check from customer 770

Correction of book error (check #456 written

for $280, recorded at $28)—maintenance

interest

11. Journalize the following transactions for Ryan Company:

July 1 Sold $5,300 of merchandise to Rick on account.

Nov. 1 Exchanged Rick’s account receivable for an eight-month, 6% note for $5,300.

Dec. 31 Recorded accrued interest on Jim’s note (round to nearest dollar).

July 1 Rick paid off his note with interest (round to nearest dollar).

12. A computer system was purchased on July 1 at a cost of $125,000. It’s

expected to be used for four years and to have a residual value of $5,000 after

8,000 hours of service. The system was used for 1,750 hours the first year and

2,100 hours the second year. Calculate the depreciation expense to the nearest

dollar for the first and second years.

13. Prepare journal entries for the following transactions for Ryan Company in the general journal:

Feb. 28 Machinery that cost $57,000 and had accumulated depreciation of $46,000 was sold for $2,500.

April 10 A van that cost $23,700 and had accumulated depreciation of $21,000 was sold for $1,250.

July 16 Equipment that cost $120,000 and had accumulated depreciation

of $112,000 was traded in for new equipment with a fair-market value of $140,000. The old equipment and $135,000 in cash were given for the new equipment.

14. Journalize the following treasury stock transactions:

May 1 Reacquired 800 shares of $15 par common stock for $13 per share.

May 7 Sold 400 shares at $11 per share.

May 9 Sold 250 shares at $17 per share.

15. The following information was taken from the financial statements of

Brandon Company for 12/31/10 and12/31/09:

Net income for 2010: $313,000

Depreciation expense for 2010: $28,400

Loss on sale of equipment: $7,300

Balance Sheet    12/31/10  12/31/09

Accounts Receivable   $46,000  $50,000

Merchandise Inventory     35,000    28,000

Accounts Payable      27,000    24,000

Interest Payable       6,000     8,000

Prepare the operating activities section of the statement of cash flows under the

indirect method for the year ended December 31, 2010.