ACC291 Final Exam Solutions 2014

Question 1

An aging  of  a company's accounts receivable indicates that $4,500 are estimated to be uncollectible.  If  Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will  require a

       debit to Bad Debt Expense for $3,300.       

       credit to Allowance for Doubtful Accounts for $4,500.

       debit to Bad Debt Expense for $4,500.

       debit to Allowance for Doubtful Accounts for $3,300.

Question 2

The financial statements of the Melton Manufacturing Company reports net sales of  $300,000 and accounts receivable of  $50,000 and $30,000 at the beginning of the year and end of  year, respectively. What is the average collection period for accounts receivable in days?

       36.5

       60.8

       96.1

       48.7      

Question 3

Stine Company purchased machinery with a list  price of  $64,000. They were given a 10% discount by the manufacturer. They paid $400 for shipping and sales tax of  $3,000. Stine  estimates that the machinery will  have a useful life  of  10 years and a residual value of  $20,000. If Stine uses straight-line depreciation, annual depreciation will  be

$4,100.      

$4,072.  

$6,100.  

$3,760.

Question 4

On  January  1, a machine with a useful life of  five years  and a residual value of  $40,000 was purchased for $120,000. What is the depreciation expense for year 2 under the double-declining-balance method of  depreciation?

$28,800.      

$23,040.  

$48,000.  

$38,400.

Question 5

As a recent graduate of  State University you're aware that IFRS requires component depreciation for plant assets. A friend has asked you to succinctly explain what component depreciation means.  Which of the following correctly describes component  depreciation?

       The method used to prorate annual depreciation on a time basis.

       The method of  depreciation recommended for an asset that is expected to be significantly more productive in the first  half of  its useful life.

       The method used to ensure that the depreciation rate remains constant from year to year.   

        The method that requires that significant parts of a plant asset with different useful lives be depreciated separately.

Question 6

Given the following account balances at year end, compute the total intangible assets on the balance sheet of Janssen Enterprises.

Cash                         $1,500,000

Accounts Receivable    4,000,000

Trademarks            1,000,000

Goodwill                   2,500,000

Research & Development Costs    2,000,000

$3,500,000.    

$5,500,000.  

$7,500,000.  

$9,500,000.

Question 7

Bonds with a face value of $300,000 and a quoted price of 97¼ have a selling price of

$291,006.  

$291,750.    

$291,075.  

$292,500.

Question 8

Sparks Company received proceeds of  $423,000 on 10-year, 8% bonds issued on January 1, 2013. The bonds had a face value of  $400,000, pay interest annually on December 31st,  and have a call price of 102. Sparks uses the straight-line method of amortization.  What is the carrying value of the bonds on January 1, 2015?

$418,400     

$400,000  

$381,600  

$420,700

Question 9

S. Lawyer performed legal services for E.  Corp. Due to a cash shortage, an agreement was reached whereby E. Corp. would pay S. Lawyer a legal fee of approximately $15,000 by issuing 8,000 shares of  its common stock (par $1). The stock trades on a daily basis and the market price  of  the stock on the day the debt was settled is $1.80 per share. Given this information,  the best journal entry for E.  Corp. to record for this transaction is

Legal Expense                                                   15,000

Common Stock                                                                         8,000

Paid-in Capital in  Excess of Par - Common                                 7,000

Legal Expense                                                        14,400

Common Stock                                                                           8,000

Paid-in Capital in  Excess of Par - Common                                   6,400

Legal Expense                                                 14,400

Common Stock                                                                    14,400

Legal Expense                                                 15,000

Common Stock                                                                     15,000

Question 10

Logan Corporation issues 50,000 shares of $50 par value preferred stock for cash at $60 per share. The entry to record the transaction will  consist of a debit to Cash for $3,000,000 and a credit or credits to

       Preferred Stock for $2,500,000 and Paid-in Capital in  Excess of  Par Value—Preferred Stock for $500,000.

       Preferred Stock for $2,500,000 and Retained Earnings for $500,000.

       Preferred Stock for $3,000,000.

       Paid-in Capital from Preferred Stock for $3,000,000.

Question 11

Jahnke Corporation issued 8,000 shares of  €2 par value ordinary shares for €11 per share. The journal  entry to record the sale will  include

       a debit to Retained Earnings for €72,000.

       a credit to Share Premium–Ordinary for €72,000.     

       a debit to Cash for €16,000.

       a credit to Share Capital–Ordinary for €88,000.

Question 12

Zoum Corporation had the following transactions during 2014:

1.     Issued $125,000 of  par value common stock for cash.

2.     Recorded and paid wages expense of  $60,000.

3.     Acquired land by issuing common stock of  par value $50,000.

4.     Declared and paid a cash dividend of  $10,000.

5.     Sold a long-term investment (cost $3,000) for cash of  $3,000.

6.     Recorded cash sales of $400,000.

7.     Bought inventory for cash of  $160,000.

8.     Acquired an investment in  Zynga stock for cash of $21,000.

9.     Converted bonds payable to common stock in  the amount of  $500,000.

10.     Repaid a 6 year note payable in  the amount of  $220,000. 

What is the net cash provided by financing activities?

       $395,000.

       $<115,000>.

       $<605,000>.

       $105,000.     

Question 13

Colie Company had an increase in  inventory of  $120,000. The cost of  goods sold was $490,000. There was a $30,000 decrease in  accounts payable from the prior period.  Using the direct method of  reporting cash flows from operating activities,  what were Colie's cash payments to suppliers?

$640,000.     

$310,000.

$580,000.

$370,000.

Question 14

Each of  the following items may be classified as operating or financing activities under IFRS except

       dividends paid.

       dividends received.

       interest paid.

       all of  these answer choices may be classified as such.

Question 15

The current assets of Orangatte Company are $227,500. The current liabilities are $130,000. The current ratio expressed as a proportion is

       175%.

       1.75:1.    

       .57:1.

       $210,000 ÷ $120,000.

Question 16

All of  the following requirements about internal controls were enacted under the Sarbanes Oxley Act  of 2002 except:

       companies must develop sound internal controls over financial reporting.

       independent  outside auditors must eliminate redundant internal control.

       independent  outside auditors must attest to the level of internal control.

       companies must continually assess the functionality of internal controls.

Question 17

Which of  the following is not an internal control activity for cash?

       The number of  persons who have access to cash should be limited

       The functions of  record keeping and maintaining custody of  cash should be combined.

       Surprise audits of  cash on hand should be made occasionally.

       All cash receipts should be recorded promptly.

Question 18

Before a check authorization is issued, the following documents must be in agreement, except for the

       remittance advice.

       invoice.

       receiving report.

       purchase order.

Question 19

Mitchell Corporation bought equipment on January 1, 2014 .The equipment cost 

$180,000     and had an expected salvage value of  $30,000. The life  of  the equipment was estimated to be 6 years. The book value of  the equipment at the beginning of  the third year would be

$130,000.      

$150,000.  

$50,000.  

$180,000.

Question 20

Brevard Corporation purchased a taxicab on January 1, 2013 for $25,500 to use for its shuttle business. The cab is expected to have a five-year useful life  and no salvage  value. During 2014, it retouched the cab's paint at a cost of  $1,200, replaced the transmission for $3,000 (which extended its life by an additional 2 years), and tuned-up the motor for $150. If  Brevard Corporation uses straight-line depreciation, what annual depreciation will  Brevard report for 2014?

$4,100.  

$3,900.     

$4,125.  

$5,100.

Question 21

On  July 1, 2014, Fleming Company sells machinery for $120,000.  The machinery originally cost $300,000, had an estimated 5-year life and an expected salvage value of  $50,000. The Accumulated Depreciation account had a balance of  $175,000 on January 1, 2014, using the straight-line method. The gain or loss on disposal is

       $10,000 loss.

       $5,000 gain.

       $20,000 gain.    

       $5,000 loss.

Question 22

On  July 1, 2014, Linden Company purchased the copyright to Norman Computer Tutorials for $140,000. It is estimated that the copyright will  have a useful life of 5 years. The amount of  Amortization Expense recognized for the year 2014 would be

$13,125.  

$25,900.  

$14,000.  

$28,000.

Question 23

The following totals for the month of  April were taken  from the payroll records of  Metz Company.

Salaries                         $30,000

FICA  taxes withheld          2,295

Income taxes withheld        6,600

Medical insurance deductions      1,200

Federal unemployment taxes    240

State unemployment taxes   1,500

The entry to record accrual of  employer’s payroll taxes would include a

       credit to Payroll Tax Expense for $4,035.

       credit to FICA  Taxes Payable for $1,740.

       credit to Payroll Tax Expense for $1,740.

       debit to Payroll Tax Expense for $4,035.        

Question 24

Thayer Company purchased a building on January 2 by signing a long-term $2,520,000 mortgage with monthly payments of  $23,100. The mortgage carries an interest  rate of  10 percent. The amount owed on the mortgage after the first payment will  be

$2,517,900.      

$2,499,000.  

$2,496,900.  

$2,520,000.

Question 25

The following data is available for BOX Corporation at December 31, 2014: 

Common stock, par $10 (authorized 30,000 shares)         $250,000

Treasury stock (at cost $15 per share)   $1,200

Based on the data, how many shares of  common stock are outstanding?

24,920.     

30,000.  

25,000.  

29,920.

Question 26

Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections:

Total Assets       Total Liabilities      Total Stockholders' Equity

Decrease             Increase                Decrease  

Decrease              No  change            Increase

Increase             Decrease                No  change  

No  change          Increase                   Decrease

Question 27

Assume the following cost of goods sold data for a company:

2015     $1,300,000

2014       1,200,000

2013       1,000,000

If 2013 is the base year, what is the percentage increase in  cost of  goods sold from 2013 to 2015?

       30%     

       130%

       70%

       20%

Question 28

A company has an average inventory on hand of  $75,000 and its average days in  inventory is  36.5 days. What is the cost of  goods sold?

$750,000      

$1,752,000  

$1,680,000  

$876,000

Question 29

The following information is available for Patterson Company:

                                   2014              2013

Accounts receivable$   360,000$   340,000

Inventory                     280,000     320,000

Net credit sales            3,000,000   2,600,000

Cost of  goods sold     1,500,000      840,000

Net income                 300,000       170,000

The accounts receivable turnover for 2014 is

       4.3 times.

       7.6 times.

       8.3 times.

       8.6 times.       

Question 30

All of  the following situtations below might indicate a company has a low quality of  earnings except

       Revenue is recognized when earned.

       Adoption of  a different inventory method for each of  the last three years.

       A lack of  disclosure about guaranteed payments that were mentioned in  the MD&A of the annual report.

       Maintenance costs are capitalized and then depreciated.

 Question 31

 IFRS

       implies that receivables with different characteristics should be reported separately.

       implies  that receivables with different characteristics should be reported as one unsegregated amount.

       requires that receivables with different characteristics should be reported as one unsegregated amount.

       requires that receivables with different characteristics should be reported separately.