ACC 400 Final Exam 100% Correct Answers
BesttutorACC 400 Final Exam 100% Correct Answers
1. A measure of a company’s solvency is the a. acid-test ratio. b. current ratio
3. The financial statements of the Colter Manufacturing Company reports net sales
of $400,000 and accounts receivable of $80,000 and $40,000 at the beginning of the
year and end of year, respectively. What is the receivables turnover ratio for Colter?
4 . Lexter Company has a balance of $65,000 in Accounts Receivable and a $5,000
credit balance in Allowance for Doubtful Accounts. If a specific customer’s account
with a balance of $500 is written off as uncollectible, the cash (or net) realizable
value of the accounts receivable will be
5. Martin Textile purchased machinery for $50,000 eight years ago. It was expected
to have a useful life of ten years, no salvage value, and was depreciated using the
straight-line method. At the end of its eighth year of use it was retired from service
and given to a junk dealer. The entry to record the retirement includes
6. The cost of a patent should be amortized over a. 40 years
7. On July 1, 2007, Low Enterprises sold equipment with an original cost of $85,000
for $40,000. The equipment was purchased January 1, 2006, and was depreciated
using the straight-line method assuming a five year useful life and $5,000 salvage
value. The necessary entries for 2007 include
8. On the Balance Sheet the current portion of long-term debt should
9. Bonds that are subject to retirement at a stated dollar amount prior to maturity at
the option of the issuer are called a. options. b. early retirement bonds
10. The Muffin Company issued a five-year interest-bearing note payable for
$50,000 on January 1, 2005. Each January the company is required to pay $10,000
on the note. How will this note be reported on the December 31, 2006, balance sheet?
11. Toran Manufacturing declared an 10% stock dividend when it had 150,000
shares of $5 par value common stock outstanding. The market price per common
share was $12 per share when the dividend was declared. The entry to record this
dividend declaration includes a credit to
12. Richer Company paid $21,000 to buy 4,000 shares of its $6 par value common
stock for the treasury. The stock was originally sold for $25,000. The entry to record
the purchase includes
13. The purchase of treasury stock
14. Ross Paints reported sales of $350,000, total assets of $150,000, total stock-
holders’ equity of $60,000, current assets of $50,000, current liabilities of $30,000,
and cash of $15,000. In a vertical analysis of the balance sheet, cash would be shown
as
15. Common size analysis is one technique of
16. Swanson Company had inventory of $220,000 and $180,000 on December 31,
2007, and December 31, 2006, respectively. Cost of goods sold for 2007 was
$1,520,000. Average days in inventory is approximately
17. If common stock is issued for an amount greater than par value, the excess
should be credited to
18. Paid-in Capital in Excess of Par Value
19. The financial statements of the Bolton Manufacturing Company reports net sales
of $500,000 and accounts receivable of $50,000 and $30,000 at the beginning of the
year and end of year, respectively. What is the receivables turnover ratio for Bolton?
20. The following credit sales are budgeted by Rodriguez Company: February
50,000 March 70,000 April 60,000 The company’s past experience indicates that
80% of the accounts receivable are collected in the month of sale, 20% in the month
following the sale. The anticipated cash inflow for the month of April is
PART II — TRUE/FALSE 3 points each (39 points)
1. Under an operating lease, both the leased asset and the liability are shown on the
balance sheet.
2. Certain types of leases, called capital leases, allow the lessee to account for the
transaction as a rental.
3. The issuance of common stock affects both paid-in capital and retained earnings.
4. The acquisition of treasury stock by a corporation increases total assets and total
stockholders’ equity.
5. Treasury stock is reported as an asset on the balance sheet because treasury stock
may later be resold.
6. Horizontal analysis is a technique for evaluating a financial statement item in the
current year with other items in the current year.
7. Another name for horizontal analysis is trend analysis.
8. If a company has sales of $110 in 2007 and $154 in 2006, the percentage decrease
in sales from 2006 to 2007 is 140%.
9. Allowance for Doubtful Accounts is debited under the direct write-off method
when an account is determined to be uncollectible.
10. When the allowance method is used, the write-off of an account receivable
results in an expense at the time of write-off.
11. Allowance for Doubtful Accounts is a contra account that is deducted from
Accounts Receivable on the balance sheet.
12. The Allowance for Doubtful Accounts is a liability account.
13. When a monthly mortgage payment is made and recorded, the debit to Mortgage
Payable represents the reduction in the principal balance
PART III — MATCHING 3 points each (42 points) Match the items below by entering
the appropriate code letter in the space provided. A. Prenumbered documents G.
Cash budget B. Custody of an asset should be kept H. Restricted cash separate from
the record-keeping I. Invest idle cash for that asset J. Canceled checks C. Television
monitors, garment sensors K. NSF checks and burglar alarms are examples L.
Outstanding checks D. Bonding employees M. Petty cash receipt E. Collusion N. Cash
equivalents F. Cash 1. Segregation of duties. 2. Cash that is not available for general
use, but instead is restricted for a particular purpose. 3. Two or more employees
circumventing prescribed procedures. 4. Prevent a transaction from being recorded
more than once. 5. Checks which have been returned by the maker’s bank for lack of
funds. 6. Checks which have been paid by the depositor’s bank. 7. A projection of
anticipated cash flows. 8. Anything that a bank will accept for deposit. 9. Mechanical
and electronic control devices. 10. A basic principle of cash management. 11.
Insurance protection against misappropriation of assets. 12. Document indicating
the purpose of a petty cash expenditure. 13. Issued checks that have not been paid
by the bank. 14. Highly liquid investments.
PART IV — MATCHING 3 points each (30 points) Match the items below by entering
the appropriate code letter in the space provided. A. Serial bonds F. Current ratio B.
Debenture bonds G. Straight-line method of amortization C. Bond indenture H.
Times interest earned ratio D. Market interest rate I. Callable bonds E. Discount on
bonds payable J. Maturity date ____ 1. Bonds subject to retirement at a stated dollar
amount prior to maturity. ____ 2. A legal document that sets forth the terms of a bond
issue. ____ 3. Bonds that mature in installments. ____ 4. A measure of a company’s
short-term liquidity. ____ 5. The time that the final payment on a bond is due from
the bond issuer. ____ 6. A measure of a company’s solvency. ____ 7. The rate investors
demand for loaning funds to a corporation. ____ 8. Unsecured bonds issued against
the general credit of the borrower. ____ 9. Occurs when the contractual rate of
interest is less than the market rate of interest. ____ 10. Produces a periodic interest
expense that is the same amount each interest period.
10 years ago
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