[FINAL EXAM] ACC 400 Final Exam Guide
University of Phoenix
ACC/400 Accounting for Decision Making
1. 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.
2. Allowance for Doubtful Accounts is presented as a(n)
a. addition to Accounts Receivable on the balance sheet.
b. operating expense on the income statement.
c. deduction from Sales on the income statement.
d. contra asset on the balance sheet.
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?
a. 6.7 times
b. 10 times
c. 5 times
d. 8 times
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 a
a. debit to Loss on Disposal for $10,000.
b. debit to Machinery for $50,000.
c. debit to Depreciation Expense for $10,000.
d. credit to Accumulated Depreciation—Machinery for $40,000.
6. The cost of a patent should be amortized over
a. 40 years.
b. the shorter of its legal life or its useful life.
c. the longer of its legal life or its useful life.
d. its useful life.
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 a
a. debit to Accumulated Depreciation—Equipment for $16,000.
b. credit to Gain on Sale of Equipment for $21,000.
c. credit to Cash for $40,000.
d. debit to Depreciation Expense for $8,000.
8. On the Balance Sheet the current portion of long-term debt should
a. be paid immediately.
b. be reclassified as a current liability.
c. be classified as a long-term liability.
d. not be separated from the long-term portion of debt.
9. Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called
b. early retirement bonds.
c. callable 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?
a. Long-term Debt, $50,000
b. Long-term Debt, $40,000
c. Long-term Debt, $30,000; Long-term Debt due within one year, $10,000
d. Long-term Debt of $40,000; Long-term Debt due within one year, $10,000
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
a. Retained Earnings of $180,000.
b. Paid-in Capital in Excess of Par for $105,000.
c. Common Stock for $180,000.
d. Retained Earnings for $75,000.
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 a
a. debit to Treasury Stock for $21,000.
b. credit to Treasury Stock for $25,000.
c. debit to Treasury Stock for $25,000.
d. credit to Common Stock for $21,000.
13. The purchase of treasury stock
a. increases total assets and decreases total stockholders’ equity.
b. decreases total assets and increases total stockholders’ equity.
c. increases total assets and increases total stockholders’ equity.
d. decreases total assets and decreases total stockholders’ equity.
14. Ross Paints reported sales of $350,000, total assets of $150,000, total stock-holders’ 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
a. ratio analysis.
b. horizontal analysis.
c. liquidity analysis.
d. vertical analysis.
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
b. Retained Earnings.
c. Paid-in Capital in Excess of Par Value.
d. Legal Capital.
18. Paid-in Capital in Excess of Par Value
a. is credited when no-par stock does not have a stated value.
b. is reported as part of paid-in capital on the balance sheet.
c. represents the amount of legal capital.
d. normally has a debit balance.
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?
a. 7 times
b. 10 times
c. 16.7 times
d. 12.5 times
20. The following credit sales are budgeted by Rodriguez Company:
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
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.
Match the items below by entering the appropriate code letter in the space provided.
A. Prenumbered documents
B. Custody of an asset should be kept separate from the record-keeping for that asset
C. Television monitors, garment sensors
and burglar alarms are examples
D. Bonding employees
G. Cash budget
H. Restricted cash
I. Invest idle cash
J. Canceled checks
K. NSF checks
L. Outstanding checks
M. Petty cash receipt
N. Cash equivalents
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.
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.
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