Student Name Student ID Number
Date of Exam Wednesday, November 30, 2016
Time Period Start time: 2:05 End time: 2:45
Number of Exam Pages (including this cover sheet)
Additional Materials Allowed Cordless calculators may be used. The calculator
must be standalone with no communication or data
storage features.
Both the examination paper and multiple choice scantron must be submitted.
Course Abbreviation and Number ACC 231
Course Title Uses of Accounting Information
Class # 81718
Professor Mindy Wolfe
All questions are worth 2.5 points
1. Lionworks, Inc. issues 5,000 shares of $40 par common stock for $43 per share. The amount
credited to paid-in capital in excess of par is:
A) $200,000.
B) $215,000.
C) $15,000.
D) $0.
Answer: C
2. Mike's Motors has 240,000 shares of $5-par common stock outstanding. They have declared
a 10% stock dividend. The current market price of the common stock is $11/share. The
amount that will be debited to Retained Earnings on the date of declaration is:
A) $120,000.
B) $384,000.
C) $264,000.
D) $132,000.
Answer: C
3. Cypress Corporation's outstanding stock is 75 shares of $55-par, 7% non-cumulative
preferred stock and 2,100 shares of $12-par common stock. Cypress paid $2,500 in dividends
during the year. Common stockholders received:
A) $2,500.
B) $2,211.
C) $289.
D) $0.
Answer: B
4. HiTech Industries reacquired 10,000 shares of its $26-par common stock for $70/share. The
debit to Treasury Stock will be:
A) based on the last treasury stock transaction.
B) $440,000.
C) $260,000.
D) $700,000.
Answer: D
5. Which of the following would cause a decrease of the par value of a company's stock?
A) Cash dividend
B) Stock split
C) Stock dividend
D) Sale of additional stock
Answer: B
6. Preferred stockholders generally have the same basic rights as common stockholders
EXCEPT for:
A) voting.
B) dividends.
C) liquidation.
D) preemption.
Answer: A
7. The formula needed to compute "additional paid-in capital in excess of par" is:
A) number of shares of stock times par value per share of stock.
B) number of shares of stock times selling price per share of stock.
C) number of shares of stock times (selling price per share - par value per share).
D) number of shares of stock times (selling price per share + par value per share).
Answer: C
Diff: 1
8. A company issues 55,000 shares of its $5 par common stock for $20 per share. The amount to
be debited to Cash is:
A) $275,000.
B) $825,000.
C) $1,375,000.
D) $1,100,000.
Answer: D
9. The entry to record S&C, Inc. selling 1,500 shares of $9 par common stock for $22 per share
would be to:
A) debit Cash $33,000; credit Common Stock $33,000.
B) debit Cash $33,000; credit Common Stock $13,500; credit Paid-In Capital in Excess of Par-
Common Stock $19,500.
C) debit Cash $13,500; credit Common Stock $13,500.
D) debit Cash $13,500; debit Paid-In Capital in Excess of Par–Common $19,500; credit
Common Stock $33,000.
Answer: B
10. You have exam A. Please fill in the A bubble on your scantron.
Answer A
11. Which of the following dates do NOT require a journal entry?
A) Date of payment
B) Date of record
C) Date of declaration
D) All dividend dates require a journal entry.
Answer: B
12. In which section of the Statement of Cash Flows would you add or subtract a change in
Accounts Payable, and why?
A) The financing section, in order to recognize amounts paid through third party financing.
B) The operating section, in order to make things balance and provide up-to-date information for
investors.
C) The operating section, in order to recognize that not all expenses are cash expenses.
D) The financing section, in order to correctly compute the amount that the company has re-
invested through purchases.
Answer: C
13. Kringle Co. issued bonds during the year. This would be considered a(n)_______ in cash, and
would be reported in the _______ section of the Statement of Cash Flows.
A) increase, financing
B) decrease, investing
C) increase, investing
D) decrease, financing
Answer: A
14. Cash receipts from the sale of long-term assets, such as equipment and vehicles, are:
A) added to operating activities.
B) subtracted from operating activities.
C) added to investing activities.
D) subtracted from investing activities.
Answer: C
15. The cost of purchasing long-term assets, such as buildings and land, are:
A) added to operating activities.
B) subtracted from operating activities.
C) added to investing activities.
D) subtracted from investing activities.
Answer: D
16. An example of a cash outflow from financing activities is:
A) paying off note payable.
B) paying for 6 months rent in advance.
C) purchasing land.
D) making payment on accounts payable.
Answer: A
17. Under the indirect method of cash flow, which of the following adjustments would NOT be
made to net income when computing cash from operating activities?
A) Add an increase in Accounts Payable
B) Add Depreciation Expense
C) Add a decrease in Accounts Payable
D) Subtract the gain on sale of land
Answer: C
18. There was a gain on the sale of investment property. How would this affect the Statement of
Cash Flows operations section under the indirect method?
A) It is already included in the net income.
B) It would be added back to net income.
C) It would be subtracted from net income.
D) It does not affect the cash flow from operations.
Answer: C
19. Activities that increase and decrease as a result of selling a company's stock are:
A) marketing activities.
B) operating activities.
C) investing activities.
D) financing activities.
Answer: D
Diff: 1
Question Type: Application
20. Caesario Company's Accounts Receivable increased by $39,000 and their Accounts Payable
decreased by $19,000. What is the net effect on cash from operations under the indirect
method?
A) +$58,000
B) -$20,000
C) -$58,000
D) +$20,000
Answer: C
21. TLR Productions' Accounts Receivable increased by $44,000 and its Accounts Payable
increased by $29,000. What is the net effect on cash from operations under the indirect
method?
A) +$73,000
B) +$15,000
C) -$15,000
D) -$73,000
Answer: C
22. Sterling Sails reported net income of $30,000; depreciation expenses of $19,000; an increase
in Accounts Payable of $2,000; and an increase in current notes receivable of $3,000. Net
Cash Flows from operating activities under the indirect method is:
A) $50,000.
B) $49,000.
C) $48,000.
D) $44,000.
Answer: C
23. If $9,000 was generated from operations (indirect method); $3,000 was used for investing
activities; and $8,000 was generated from financing activities, the cash balance:
A) increased by $8,000.
B) increased by $4,000.
C) increased by $14,000.
D) decreased by $20,000.
Answer: C
24. Mockingjay, Inc. reported the following for 2016:
Net sales: $335,000
Net income: $34,600
Market price per share of common stock: $37.50
Dividends: $18,500
Average number of shares of common stock
outstanding: 121,000
What are the earnings per share for Mockinjay, Inc.?: (Round your final answer to the nearest
cent.)
A) $0.15/share
B) $0.29/share
C) $0.13/share
D) $0.07/share
Answer: B
25. A comparison of the amounts for the same item in the financial statements of two or more
periods is called:
A) vertical analysis.
B) comparative analysis.
C) horizontal analysis.
D) trend analysis.
Answer: C or D
26. Which analysis deals with the percentage of changes in certain items over a period of years?
A) Horizontal analysis
B) Vertical analysis
C) Incremental analysis
D) Trend analysis
Answer: A or D
27. TNT Guitar's sales were $13,100 in 2016 and $11,600 in 2015. The percentage change in
TNT's sales from 2015 to 2016 was: (Round your final answer to two decimal places, X.XX
%.)
A) +11.45%.
B) -12.93%.
C) +12.93%.
D) -11.45%.
Answer: C
28. The sales of Sassycat, Inc. for the years 2014, 2015, and 2016 are $36,000, $59,000 and
$76,000, respectively. If 2014 is the base year, the trend percentage for 2015 is: (Round your
final answer to two decimal places, X.XX%.)
A) 61.02%.
B) 163.89%.
C) 211.11%.
D) 128.81%.
Answer: B
Diff: 1
Question Type: Application
29. Crowne Cottages, Inc. has current assets of $44,000, long-term assets of $250,900, current
liabilities of $42,600, and long-term debt of $156,700. Crowne's debt ratio is: (Round your
final answer to two decimal places, X.XX%.)
A) 62.46%.
B) 67.58%.
C) 53.14%.
D) 79.43%.
Answer: B
30. Mozart, Inc. has net sales of $1,000,000, net income of $68,000, average current assets of
$39,000, average fixed assets of $167,000, and average total assets of $207,000. Mozart,
Inc.'s return on assets is: (Round your final answer to the nearest percentage.)
A) 41%.
B) 174%.
C) 7%.
D) 33%.
Answer: D
31. Statements that are often used to compare different size businesses are called:
A) comparative analysis.
B) cash flow analysis.
C) common-size statements.
D) horizontal analysis.
Answer: C
32. The following is a common-sized Income Statement for Sydney and Caesar Companies.
(in thousands) Sydney % Caesar %
Net Sales 100.0% 100.0%
Cost of Goods Sold 64.6% 60.8%
Gross Profit 35.4% 39.2%
Operating Expenses
Selling, General and Adm. 15.4% 15.3%
Other 1.4% 1.5%
Income Before Income Tax 18.7% 22.4%
Income Tax Expense 2.7% 3.1%
Net Income 16.0% 19.3%
Which company has better control of their overall operating expenses?
A) Not enough information is given to assess the question.
B) Sydney Company
C) Caesar Company
D) Too close to make a solid determination.
Answer: A or D
33. What is the return on equity if sales are $130,000, net income is $25,700, beginning
Stockholders' Equity is $93,000, and ending common Stockholders' Equity is $87,000?
(Round your final answer to two decimal places, X.XX%)
A) 72.22%
B) 27.63%
C) 29.54%
D) 28.56%
Answer: C or D
34. Sugar's Candy Company reported the following for 2016:
Earnings/share: $16.68
Market price per share of common stock: $64
Number of shares of common stock outstanding: 79,000
Net income: $57,000
Dividends/share: $6.73
What is the price earnings ratio for Sugar's Candy Company? (Round your final answer to two
decimal places.)
A) 9.51
B) 0.16
C) 2.48
D) 3.84
Answer: D
35. Why would a high debt ratio be a red flag in a financial statement analysis?
A) The company is borrowing more than it is earning.
B) The company may be unable to pay its debts.
C) The company is paying too much interest.
D) Both A and B are reasons why it would be a red flag.
Answer: B
Attached to the back of the exam are 5 ratios and the financial statements for Apple, Inc. to
answer Questions 36 - 40:
36. What is Apple Inc.’s Debt Ratio for the period ending September 24, 2016?
A) 0.41
B) 0.55
C) 0.60
D) 1.66
Answer C
37. What is Apple Inc.’s Return on Assets for the period ending September 24, 2016?
A) 0.17
B) 0.50
C) 0.33
D) 0.14
Answer B
38. What is Apple Inc.’s Price Earnings ratio if the stock price per share is $112 for the period
ending September 24, 2016?
A) 0.17
B) 0.50
C) 0.33
D) 0.14
Answer B
39. What is Apple Inc.’s Return on Equity for the period ending September 24, 2016?
A) 0.17
B) 0.33
C) 0.42
D) 2.40
Answer C
40. What is Apple Inc.’s Working Capital for the period ending September 24, 2016?
A) 27,863
B) 79,006
C) 93,626
D) 106,869
Answer A
Extra Credit
As you approach graduation, you are evaluating your job offers from the following companies.
Assuming that all other factors are equal (pay, benefits, location, job duties, industry, company
size, company age etc.), for which of the following companies would you choose to work and
why?
A B C
Cash Flows from operations
+$115,000 $100,000 $0
Cash Flows from investing activities
($20,000) $0
Cash Flows from financing activities
+$5,000 +$100,000
Net increase in cash for the most current year +$100,000 +$100,000 +$100,000
A) Company A, the company is generating cash from its daily operations, investing in long-term
assets and generating cash from its owners or borrowing a relatively small amount.
B) Company B, the company only generates cash from its daily operations and is not spending
the cash for any other reason.
C) Company C, the company only generates cash from the owners.
D) All three companies offer the same opportunity for the future.
Answer: A
Ratios
Net Working Capital = Current Assets - Current Liabilities
Return on Assets = Net Income
Average Total Assets
Debt Ratio = Total Liabilities
Total Assets
Earning
s per
Share
(EPS)
=
Net Income
Average Number of Common Shares
Outstanding
Return on Equity (ROE) = Net Income
Average Stockholders’ Equity
Price Earnings Ratio (PE) = Current Price per Share
Current EPS
