ACC 421 Weily Plus Final Exam Solutions

ACC 421 Weily Plus Final Exam Solutions

Question 1
Transactions for Mehta Company for the month of May are presented below.
May    1         B.D. Mehta invests $3,186 cash in exchange for common stock of Mehta Company, a small welding corporation.
     3         Buys equipment on account for $1,157.
     13          Pays $509 to landlord for May rent.
     21         Bills Noble Corp. $531 for welding work done.
Prepare journal entries for each of these transactions.

Question 2
On July 1, 2012, Crowe Co. pays $19,628 to Zubin Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. For Crowe Co. journalize the entry on July 1 and the adjusting entry on December 31. (Round answers to zero decimal places, e.g. 2,555.)
Question 3
Dresser Company's weekly payroll, paid on Fridays, totals $6,600. Employees work a 5-day week. Prepare Dresser's adjusting entry on Wednesday, December 31, and the journal entry to record the $6,600 cash payment on Friday, January 2. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
Question 4
Side Kicks has year-end account balances of Sales $890,660; Interest Revenue $16,870; Cost of Goods Sold $557,320; Operating Expenses $207,440; Income Tax Expense $36,370; and Dividends $20,744. Prepare the year-end closing entries. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
Question 5

Question 6
   
What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?

Question 7
 
     Your answer is correct.
Starr Co. had sales revenue of $632,600 in 2012. Other items recorded during the year were
Question 7
 
     Your answer is correct.
Starr Co. had sales revenue of $632,600 in 2012. Other items recorded during the year were:
     Cost of goods sold    $328,900
     Wage expense    127,300
     Income tax expense    30,000
     Increase in value of company reputation    16,700
     Other operating expenses    10,900
     Unrealized gain on value of patents    22,300
Prepare a single-step income statement for Allen for 2012. Allen has 100,000 shares of stock outstanding. (List multiple entries from largest to smallest amount, e.g. 10, 5, 2. Round earnings per share to 2 decimal places, e.g. 0.20. Enter all amounts as positive amounts and subtract where necessary.)
Question 8
 
     Your answer is correct.
Portman Corporation has retained earnings of $752,650 at January 1, 2012. Net income during 2012 was $1,751,960, and cash dividends declared and paid during 2012 totaled $78,100. Prepare a retained earnings statement for the year ended December 31, 2012. Assume an error was discovered: land costing $87,490 (net of tax) was charged to repairs expense in 2009. (Enter all amounts as positive amounts and subtract where necessary.)
Question 9
 
     Your answer is correct.
On January 1, 2012, Richards Inc. had cash and common stock of $63,790. At that date the company had no other asset, liability or equity balances. On January 2, 2012, it purchased for cash $24,120 of equity securities that it classified as available-for-sale. It received cash dividends of $4,560 net of tax during the year on these securities. In addition, it has an unrealized holding gain on these securities of $5,380 net of tax. Determine the following amounts for 2012: (a) net income; (b) comprehensive income; (c) other comprehensive income; and (d) accumulated other comprehensive income (end of 2012).
Question 10
 
     Your answer is correct.
(Comprehensive Income)
Armstrong Corporation reported the following for 2012: net sales $1,227,100; cost of goods sold $762,000; selling and administrative expenses $324,800; and an unrealized holding gain on available-for-sale securities $23,800.
Prepare a statement of comprehensive income, using the two-income statement format. Ignore income taxes and earnings per share. (Enter all amounts as positive amounts and subtract where necessary.)
Question 11
Guillen, Inc. began work on a $7,160,800 contract in 2012 to construct an office building. Guillen uses the completed-contract method. At December 31, 2012, the balances in certain accounts were construction in process $1,751,500; accounts receivable $245,100; and billings on construction in process $1,077,500. Indicate how these accounts would be reported in Guillen's December 31, 2012, balance sheet.
Question 12
Lazaro, Inc. sells goods on the installment basis and uses the installment-sales method. Due to a customer default, Lazaro repossessed merchandise that was originally sold for $980, resulting in a gross profit rate of 40%. At the time of repossession, the uncollected balance is $680, and the fair value of the repossessed merchandise is $288. Prepare Lazaro's entry to record the repossession. (List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)
Question 13    
Harding Corporation has the following accounts included in its December 31, 2012, trial balance: Accounts Receivable $116,120; Inventories $295,100; Allowance for Doubtful Accounts $8,680; Patents $78,220; Prepaid Insurance $9,870; Accounts Payable $77,710; Cash $36,400. Prepare the current assets section of the balance sheet listing the accounts in proper
Question 14
Patrick Corporation's adjusted trial balance contained the following asset accounts at December 31, 2012: Prepaid Rent $20,000; Goodwill $58,610; Franchise Fees Receivable $4,340; Franchises $43,080; Patents $36,100; Trademarks $11,620. Prepare the intangible assets section of the balance sheet. (List amounts from largest to smallest, e.g. 10, 5, 3, 2.)
Question 15
 
     Your answer is correct.
Hawthorn Corporation's adjusted trial balance contained the following accounts at December 31, 2012: Retained Earnings $126,560; Common Stock $707,140; Bonds Payable $101,750; Additional Paid-in Capital $203,770; Goodwill $58,010; Accumulated Other Comprehensive Loss $153,850. Prepare the stockholders' equity section of the balance sheet. (List entries in order of stock preferred status. For negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)
Question 16
Keyser Beverage Company reported the following items in the most recent year.
     Net income    $40,850
     Dividends paid    7,000
     Increase in accounts receivable     13,590
     Increase in accounts payable    7,810
     Purchase of equipment (capital expenditure)    8,940
     Depreciation expense    6,810
     Issue of notes payable    22,810
Compute net cash flow provided by operating activities and the net change in cash during the year. (List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign preceding the number e.g. -45 or parenthesis e.g. (45).)

Question 17
Linden Corporation is preparing its December 31, 2012, financial statements. Two events that occurred between December 31, 2012, and March 10, 2013, when the statements were issued, are described below.
1.    A liability, estimated at $157,050 at December 31, 2012, was settled on February 26, 2013, at $175,160.
2.    A flood loss of $78,580 occurred on March 1, 2013.
What effect do these subsequent events have on 2012 net income? (If there is no impact select not change and 0 for the amount.)
Question 18
Roder Corporation has seven industry segments with total revenues as follows.
 
Penley    $441        Cheng     $147
Konami    504         Takuhi    126
KSC    168         Molina    525
Red Moon    189               
Based only on the total revenues test, which industry segments are reportable
Question 19
Operating profits and losses for the seven industry segments of Roder Corporation are:
 
Penley    $130        Cheng     $(30)
Konami    (60)         Takuhi    45
KSC    40         Molina    215
Red Moon    75               
Based only on the operating profit (loss) test, which industry segments are reportable?
Question 20
Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?
Question 21
Heartland Company's budgeted sales and budgeted cost of goods sold for the coming year are $143,870,000 and $31,464,000 respectively. Short-term interest rates are expected to average 10%. If Heartland can increase inventory turnover from its present level of 9 times a year to a level of 12 times per year, compute its expected cost savings for the coming year
Question 22
The financial statement which summarizes operating, investing, and financing activities of an entity for a period of time is the
Question 23
Ames Company reported 2012 net income of $153,850. During 2012, accounts receivable increased by $13,740 and accounts payable increased by $9,970. Depreciation expense was $40,990. Prepare the cash flows from operating activities section of the statement of cash flows.(List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign preceding the number e.g. -45 or parenthesis e.g. (45).)
Question 24
Martinez Corporation engaged in the following cash transactions during 2012.
     Sale of land and building    $200,840
     Purchase of treasury stock    47,390
     Purchase of land    43,570
     Payment of cash dividend    94,270
     Purchase of equipment    55,390
     Issuance of common stock    153,410
     Retirement of bonds    106,550
Compute the net cash provided (used) by investing activities. (List multiple entries from the largest positive to the smallest positive amount followed by the most negative to the least negative amount, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)
Question 25
Martinez Corporation engaged in the following cash transactions during 2012.
     Sale of land and building    $184,870
     Purchase of treasury stock    48,370
     Purchase of land    46,450
     Payment of cash dividend    94,930
     Purchase of equipment    54,920
     Issuance of common stock    155,790
     Retirement of bonds    108,190
Determine Martinez's free cash flow, assuming that it reported net cash provided by operating activities of $401,270.  (List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign preceding the number e.g. -45 or parenthesis e.g. (45).)
Question 26
(Preparation of a Statement of Cash Flows)   
A comparative balance sheet for Orozco Corporation is presented below.
          December 31
     Assets    2012    2011
     Cash    $62,779     $22,000
     Accounts receivable    83,328     67,549
     Inventories    181,328     190,549
     Land    72,328     111,549
     Equipment    268,672     198,451
     Accumulated depreciation-equipment    (70,328)    (43,549)
           Total    $598,107     $546,549
                
     Liabilities and Stockholders' Equity          
     Accounts payable    $35,328    $48,549
     Bonds payable    150,000    200,000
     Common stock ($1 par)    214,000    164,000
     Retained earnings    198,779    134,000
          Total    $598,107    $546,549
(a)    Prepare a statement of cash flows for 2012 for Orozco Corporation. (List multiple entries from the largest positive to the smallest positive amount followed by the most negative to the least negative amount, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)
(b)
    Determine Orozco Corporation's current cash debt coverage ratio, cash debt coverage ratio, and free cash flow. (Round ratios to 2 decimal places, e.g. 1.55. List multiple entries from the largest positive to the smallest positive amount followed by the most negative to the least negative amount, e.g. 15, 14, 10, -17, -5, -1. For negative numbers use either a negative sign preceding the number, e.g. -45 or parenthesis, e.g. (45).)
 
Current cash debt coverage ratio    0.39 : 1
 
Cash debt coverage ratio    0.53 : 1
Question 27    
Chris Spear invested $11,798 today in a fund that earns 12% compounded annually. To what amount will the investment grow in 3 years? To what amount would the investment grow in 3 years if the fund earns 12% annual interest compounded semiannually? (Round answers to 2 decimal places, e.g. 12,250.25. Hint: Use tables in text.)
Question 28
Amy Monroe wants to create a fund today that will enable her to withdraw $25,780 per year for 8 years, with the first withdrawal to take place 5 years from today. If the fund earns 10% interest, how much must Amy invest today? (Round the answer to zero decimal places, e.g. 120,250. Hint: Use tables in text.)
Question 29
Zach Taylor is settling a $25,000 loan due today by making 6 equal annual payments of $5,909.41.
What payments must Zach Taylor make to settle the loan at the interest rate of 11%, but with the 6 payments beginning on the day the loan is signed? (Round answer to 2 decimal places, e.g. 2,250.25. Hint: Use tables in text.)
Question 30
(Simple and Compound Interest Computations)
Lyle O 'Keefe invests $25,900 at 8% annual interest, leaving the money invested without withdrawing any of the interest for 8 years. At the end of the 8 years, Lyle withdrew the accumulated amount of money.