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ACC 400 Week 1 DQ 1 What is a current asset? What is a non-current asset? What is the difference between the two types of assets? In which financial statement would you find these assets? ACC 400 Week 1 DQ 2 What is an example of a significant accounting estimate? What is the importance of these estimates? How do ethics play into the decision-making process? Which financial statements include significant accounting estimates? Why? ACC 400 Week 1 DQ 3 What are internal controls? Why do companies need them? What are some examples of internal controls? Who is responsible for developing internal controls? What are some limitations of internal controls? ACC 400 Week 1 DQ 4 What are intangible assets? How does a business obtain intangible assets? What is goodwill? Why would a business have an account for goodwill? ACC 400 Week 1 E-text Individual Assignments – Problem Set P7-3B & Exercise E9.4 & Exercise 9.8 ACC 400 Week 1 Summary ACC 400 Week 2 Description ACC 400 Week 2 DQ 1 Explain what a current liability is and identify the major types of current liabilities. Explain what a long term liability is and provide examples. In which financial statement would you find these liabilities? ACC 400 Week 2 DQ 2 What are the types of equity accounts? What is the role of equity accounts in raising capital? Under what circumstances would you not pay a dividend? Under what circumstances would you pay a dividend?
ACC 400 Week 2 DQ 3 Identify and discuss the major characteristics of a corporation, including the advantages and disadvantages of being a corporation. ACC 400 Week 2 E-text Individual Assignments – Chapter 8 Questions 3 and 4, Exercise E8-5 & Exercise E9.9 ACC 400 Week 2 Summary ACC 400 Week 2 Team Assignment-Text Assignments Exercise E7-2 & Problem Set B P72B ACC 400 Week 3 Description ACC 400 Week 3 DQ 1 What is horizontal analysis? What is the value in using horizontal analysis? Why would a company use this analysis? What does this analysis tell you? ACC 400 Week 3 DQ 2 What are examples of irregular items? How does a change in accounting principles affect the financial statements? Who in the organization is responsible for the application of a change in an accounting principle? Why? ACC 400 Week 3 DQ 3 What are the three most common types of ratios? Why are they important? Which ratios would you use to determine the long-term viability of an organization? Why? ACC 400 Week 3 E-text Individual Assignments – Chapter 10 Questions 1, 7, 8, and 19, BE 10-1, BYP10-1, BYP11-10 & Internet Assignment 11-1 ACC 400 Week 3 Summary ACC 400 Week 3 Team Assignment-Text Assignments – Chapter 13 13-4A ACC 400 Week 4 Description ACC 400 Week 4 DQ 1 What are some of the various lease options? When would you use one option over the others? What could be the financial impact of this decision? ACC 400 Week 4 DQ 2
Under which circumstances would you lease versus purchase? What are the criteria that you would use to make this decision? What is the financial impact of this decision? ACC 400 Week 4 DQ 3 What are the components of the capital structure? What are the differences of these components? How do you determine the optimal mix of the components of the capital structure? ACC 400 Week 4 Individual Assignment Debt Vs. Equity Financing Paper ACC 400 Week 4 Summary ACC 400 Week 4 Team Assignment – Interpreting Financial Statements & BYP13-4 Coca Cola-Pepsi ACC 400 Week 4 Team Assignment – Interpreting Financial Statements Report ACC 400 Week 4 Team Assignment BYP13-4 Coca Cola-Pepsi ACC 400 Week 4 Team Assignment BYP13-4 Coca Cola-Pepsi ( Excel ) ACC 400 Week 5 Descrption ACC 400 Week 5 E-text Individual Assignments – 13-4 Application of SFAC No. 13, Case 23.1 & Case 23.2 ACC 400 Week 5 Final Answer Sheet ACC 400 Week 5 Team Assignment-Text Assignments – BYP 13-7, Exercises 23.10 and 23.12 ACC 400 Week 5 Final 1. Zelma Company’s last financial statements provided the following ratios: Current ratio 3:2 Quick ratio 1:2 Accounts receivable turnover 9.0 times Inventory turnover 8.0 times Net income percentage 12.5% Return on equity 22.6% Return on assets 9.8% To the nearest day, what is the operating cycle for Zelma? a) 80 days b) 86 days c) 172 days d) 129 days
2. The following events have been projected:
A. Cash sales and collections from customers totaling $980,000 B. Cash payments for operating expenses of $560,000 C. Cash payments for income taxes and interest expense of $45,000 D. Cash payments of prior period accruals of $80,000 E. Borrowed $50,000 cash by issuing a note payable F. Cash dividends of $20,000 The beginning balance of cash is $45,000. What is the budgeted ending balance of cash? a. $325,000 b. $370,000 c. $275,000 d. $245,000 3. On January 1, a business exchanged a plant asset with a cost of $18,000 and accumulated depreciation of $16,500 for a similar asset that had a list price of $23,000. The business received a trade-in allowance of $2,100 on the old plant asset. What was the result of the exchange? a. A $600 gain on the disposal of a plant asset. b. A $1,000 unrecognized gain on the exchange of a plant asset. c. A cost basis of $22,400 for the new plant asset d. A cost basis of $23,600 for the new plant asset 4. Which one of the following is not an objective of a system of internal controls? a. b. c. d.
Safeguard company assets Overstate liabilities in order to be conservative Enhance the accuracy and reliability of accounting records Reduce the risks of errors
5. A company’s past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5 % in the second month after the sale; the remainder is never collected. Budgeted credit sales were: July August September
$120,000 72,000 180,000
The cash inflow in the month of September is expected to be a. $135,600 b. $102,600 c. $108,000 d. $129,600
6. A check for $275 is incorrectly recorded by a company as $257. On the bank reconciliation, the $18 error should be a. Added to the balance per books. b. Deducted from the balance per book. c. Added to the balance per bank. d. Deducted from the balance per bank. 7. The Allowance for Doubtful Accounts is necessary because a. when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay. b. uncollectible accounts that are written off must be accumulated in a separate account. c. a liability results when a credit sale is made. d. management needs to accumulate all the credit losses over the years. 8. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited a. when a credit sale is past due. b. at the end of each accounting period. c. whenever a pre-determined amount of credit sales have been made. d. when an account is determined to be uncollectible 9. Manning Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Manning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? a. Bad Debts Expense ……………………………………………….. 10,000 Allowance for Doubtful Accounts …………………….. 10,000 b. Bad Debts Expense ……………………………………………….. 8,000 Allowance for Doubtful Accounts …………………….. 8,000 c. Bad Debts Expense ……………………………………………….. 8,000 Accounts Receivable ……………………………………… 8,000 d. Bad Debts Expense ……………………………………………….. 10,000 Accounts Receivable ……………………………………… 10,000
10. The receivables turnover ratio a. Is computed by dividing net credit sales for the accounting period by the cash realizable value of accounts receivable on the last day of the accounting period. b. Can be used to compute the average collection period. c. Is a method of evaluating the solvency of net accounts receivable. d. Is only important to internal users of accounting information.
11. A measure of a company’s solvency is the a. acid-test ratio. b. current ratio. c. times interest earned ratio. d. asset turnover ratio. 12. The times interest earned ratio is computed by dividing a. net income by interest expense. b. income before income taxes by interest expense. c. income before interest expense by interest expense. d. income before interest expense and income taxes by interest expense. 13. The 2007 financial statements of Shadow Co. contain the following selected data (in millions). Current Assets $ 75 Total Assets 120 Current Liabilities 40 Total Liabilities 85 Cash 8 Interest Expense 5 Income Taxes 10 Net Income 16 The debt to total assets ratio is a. 70.8% b. 53.3% c. 1.41% d. 6.2 times 14. The statement “Bond prices vary inversely with changes in the market rate of interest” means that if the a. market rate of interest increases, the contractual interest rate will decrease. b. contractual interest rate increases, then bond prices will go down. c. market rate of interest decreases, then bond prices will go up. d. contractual interest rate increases, the market rate of interest will decrease. 15. A company would not acquire treasury stock a. b. c. d.
in order to reissue shares to officers. as an asset investment. in order to increase trading of the company’s stock. to have additional shares available to use in acquisitions of other companies.
16. Which of the following is the appropriate general journal entry to record the declaration of cash dividends? a. Retained Earnings Cash b. Dividends Payable Cash c. Paid-in Capital Dividends Payable d. Retained Earnings Dividends Payable 17. Allstate, Inc., has 10,000 shares of 6%, $100 par value, cumulative preferred stock and 100,000 shares of $1 par value common stock outstanding at December 31, 2007. If the board of directors declares a $50,000 dividend, the a. preferred stockholders will receive 1/10th of what the common stockholders will receive. b. preferred stockholders will receive the entire $50,000. c. $50,000 will be held as restricted retained earnings and paid out at some future date. d. preferred stockholders will receive $25,000 and the common stockholders will receive $25,000. 18. When a change in accounting principle occurs a. prior years’ financial statements should not be changed to reflect the newly adopted principle. b. the new principle should be used in reporting the results of operations of the current year. c. the cumulative effect of the change in principle should be reflected on the income statement as of the beginning of the next year. d. the cumulative effect of the change in accounting principle should be classified as an extraordinary item on the income statement. 19. Which of the following is not an irregular item on the income statement? a. Discontinued operations b. Extraordinary items c. Other revenues and expenses 20. Vertical analysis is a technique that expresses each item in a financial statement a. in dollars and cents. b. as a percent of the item in the previous year. c. as a percent of a base amount. d. starting with the highest value down to the lowest value.
ACC 400 Final Exam Practice
1. A measure of a company’s solvency is the a. acid-test ratio. b. current ratio 2. Allowance for Doubtful Accounts is presented as a(n) 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 stockholders’ 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.