ACC 291 Final Test Answers Required

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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

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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.

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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?

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36.5

60.8

96.1

48.7

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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

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$4,100.

$4,072.

$6,100.

$3,760.

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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?

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$28,800.

$23,040.

$48,000.

$38,400.

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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?

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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.

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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

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$3,500,000.

$5,500,000.

$7,500,000.

$9,500,000.

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Question 7

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

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$291,006.

$291,750.

$291,075.

$292,500.

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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?

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$418,400

$400,000

$381,600

$420,700

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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

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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

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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

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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.

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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

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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.

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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?

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$395,000.

$<115,000>.

$<605,000>.

$105,000.

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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?

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$640,000.

$310,000.

$580,000.

$370,000.

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Question 14

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

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dividends paid.

dividends received.

interest paid.

all of these answer choices may be classified as such.

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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

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175%.

1.75:1.

.57:1.

$210,000 ÷ $120,000.

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Question 16 All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act of 2002 except:

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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.

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Question 17 Which of the following is not an internal control activity for cash?

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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.

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Question 18 Before a check authorization is issued, the following documents must be in agreement, except for the

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remittance advice.

invoice.

receiving report.

purchase order.

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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

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$130,000.

$150,000.

$50,000.

$180,000.

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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?

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$4,100.

$3,900.

$4,125.

$5,100.

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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

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$10,000 loss.

$5,000 gain.

$20,000 gain.

$5,000 loss.

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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

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$13,125.

$25,900.

$14,000.

$28,000.

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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

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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.

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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

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$2,517,900.

$2,499,000.

$2,496,900.

$2,520,000.

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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?

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24,920.

30,000.

25,000.

29,920.

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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

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Decrease Increase Decrease

Decrease No change Increase

Increase Decrease No change

No change Increase Decrease

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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?

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30%

130%

70%

20%

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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?

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$750,000

$1,752,000

$1,680,000

$876,000

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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

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4.3 times.

7.6 times.

8.3 times.

8.6 times.

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Question 30

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

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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.

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Question 31

IFRS

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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.

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