Accounting Final

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017. ​ Refer to the information about Norwood, Inc. ​ If Norwood uses the double-declining-balance depreciation method, what amount is the depreciation expense for 2017?

$15,000

If a company purchases $3,200 worth of inventory with terms of 3/10, n/30 on March 3 and pays March 12, then the amount paid to the seller would be

$3,104

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet?

Depreciation Expense—Buildings

Which of the following statements is true concerning intangible assets?

Intangible assets lack physical existence.

Assets classified as property, plant, and equipment are reported at

each asset's original cost less depreciation since acquisition.

The outflow of assets resulting from the sale of products and services is called a(n)

expense

Cash flows from issuing and repurchasing stock or issuing and repaying (retiring) debt are classified as

financing activities

Cash flows from acquiring and disposing of long-term assets are classified as

investing activities

When selecting between the best alternatives regarding an ethical dilemma in accounting all of the following should be considered except:

which alternative provides the most profitable information.

Which of the following is a total dollar measure of liquidity?

working capital

What is the distinguishing characteristic between accounts receivable and notes receivable?

Notes receivable result from a written promise to pay within a specified amount of time.

Which of the following is considered a liquidity analysis tool?

acid-test ratio

A liability for dividends is created

at the date of declaration

Harbor City Corporation's end-of-year balance sheet consisted of the following amounts: ​ Cash $ 15,000 Accounts receivable $50,000 Property, plant, and equipment 70,000 Long-term debt 40,000 Capital stock 100,000 Accounts payable 20,000 Retained earnings ? Inventory 35,000 ​ What amount should Harbor City report on its balance sheet for total assets?

$170,000

Harbor City Corporation's end-of-year balance sheet consisted of the following amounts: ​ Cash $ 15,000 Accounts receivable $50,000 Property, plant, and equipment 70,000 Long-term debt 40,000 Capital stock 100,000 Accounts payable 20,000 Retained earnings ? Inventory 35,000 ​ What amount should Harbor City report on its balance sheet for total assets?

$170,000 $15,000 + $50,000 + $70,000 + $35,000 = $170,000

Use the information presented below for Chambersburg Corp. for 2017 and 2016 to answer the questions that follow. Chambersburg uses the straight-line depreciation method. 2017 2016 Property, plant, and equipment $ 250,000 $190,000 Accumulated depreciation 100,000 85,000 Depreciation expense 62,500 47,500 Net sales 1,000,000 900,000 Average Total assets 625,000 475,000 ​ Refer to the information for Chambersburg Corp. ​ What is the asset turnover ratio for Chambersburg for 2017?

1.60 times

Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below. Assets Current assets - $ 38,000,000 Net plant, property, and equipment - 101,000,000 Total assets - $139,000,000 Liabilities and Equity Accounts payable - $ 10,000,000 Accruals - 9,000,000 Current liabilities - $ 19,000,000 Long-term debt (40,000 bonds, $1,000 par value) - 40,000,000 Total liabilities - $ 59,000,000 Common stock (10,000,000 shares) - 30,000,000 Retained earnings - 50,000,000 Total shareholders' equity - 80,000,000 Total liabilities and shareholders' equity - $139,000,000 ​ The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 40%. Refer to Exhibit 10.1. What is the best estimate of the firm's WACC?

11.53%

Below is financial data for Fawnsworth Industries' current year. Net sales on account during year - $500,000 Cost of merchandise sold during year - 300,000 Accounts receivable, beginning of year - 45,000 Accounts receivable, end of year - 35,000 Inventory, beginning of year - 90,000 Inventory, end of year - 110,000 Refer to the data for Fawnsworth Industries. Based on this information, what is the accounts receivable turnover for the current period?

12.5 times

Below is financial data for Fawnsworth Industries' current year. Net sales on account during year - $500,000 Cost of merchandise sold during year - 300,000 Accounts receivable, beginning of year - 45,000 Accounts receivable, end of year - 35,000 Inventory, beginning of year - 90,000 Inventory, end of year - 110,000 Refer to the data for Fawnsworth Industries. Based on this information, what is Fawnsworth's number of days' sales in inventory (assuming a 360 day year)?

120 days

Assume that you have been hired as a consultant by CGT, a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below. Assets Current assets - $ 38,000,000 Net plant, property, and equipment - 101,000,000 Total assets - $139,000,000 Liabilities and Equity Accounts payable - $ 10,000,000 Accruals - 9,000,000 Current liabilities - $ 19,000,000 Long-term debt (40,000 bonds, $1,000 par value) - 40,000,000 Total liabilities - $ 59,000,000 Common stock (10,000,000 shares) - 30,000,000 Retained earnings - 50,000,000 Total shareholders' equity - 80,000,000 Total liabilities and shareholders' equity - $139,000,000 ​ The stock is currently selling for $15.25 per share, and its noncallable $1,000 par value, 20-year, 7.25% bonds with semiannual payments are selling for $875.00. The beta is 1.25, the yield on a 6-month Treasury bill is 3.50%, and the yield on a 20-year Treasury bond is 5.50%. The required return on the stock market is 11.50%, but the market has had an average annual return of 14.50% during the past 5 years. The firm's tax rate is 40%. Refer to Exhibit 10.1. Based on the CAPM, what is the firm's cost of equity?

13.00%

Below is financial data for Fawnsworth Industries' current year. Net sales on account during year - $500,000 Cost of merchandise sold during year - 300,000 Accounts receivable, beginning of year - 45,000 Accounts receivable, end of year - 35,000 Inventory, beginning of year - 90,000 Inventory, end of year - 110,000 Refer to the data for Fawnsworth Industries. Based on this information, what is Fawnsworth's inventory turnover ratio for the current period?

3.00 times

Deposits made by a company but not yet reflected in a bank statement are called

Deposits in transit

Under the cost principle, assets are always carried at their original cost or historical cost.

True

Marcos Inc. had net income for 2016 of $40,000. It declared and paid a $3,500 cash dividend in 2016. If the company's retained earnings for the end of the year was $38,200, what was the company's retained earnings balance at the beginning of 2016?

$1,700

Harbor City Corporation's end-of-year balance sheet consisted of the following amounts: ​ Cash $ 15,000 Accounts receivable $ 50,000 Property, plant, and equipment 70,000 Long-term debt 40,000 Capital stock 100,000 Accounts payable 20,000 Retained earnings ? Inventory 35,000 ​ What is Harbor City's retained earnings balance at the end of the current year?

$10,000

Pace Co. borrowed $20,000 at a rate of 7.25%, simple interest, with interest paid at the end of each month. The bank uses a 360-day year. How much interest would Pace have to pay in a 30-day month?

$120.83

George's Department Store is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales $200,000 Purchases 90,000 Inventory (beginning) 23,000 Inventory (ending) 17,000 Purchase returns and allowances 3,000 Purchase discounts 7,000 Transportation-in 4,000 Sales discounts 8,000 Sales returns and allowances 5,000 Refer to the account information for George's Department Store. ​ Calculate George's net sales.

$187,000

Router Inc. lends $70,000 on a 120-day, 9% promissory note. The total interest that Router will receive at maturity is

$2,100

Takenson Corp. is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales $500,000 Purchases 225,000 Inventory (beginning) 16,000 Inventory (ending) 30,000 Operating Expenses 148,000 Income Tax Expense 10,000 Retained Earnings (beginning) 53,000 Dividends 15,000 Refer to information for Takenson Corp.Calculate the cost of goods sold for Takenson Corp.

$211,000

The data presented below is for Falconi, Inc. for 2016. Credit sales during the year - $2,100,000 Accounts receivable—December 31, 2016 - 395,000 Allowance for doubtful accounts—December 31, 2016 - 20,000 Bad debt expense for the year - 17,000 ​ What amount will Falconi show on its year-end balance sheet for the net realizable value of its accounts receivable?

$375,000

At December 31, 2016, the accounting records of Tasty Foods Corporation contain the following: Accounts payable $16,000 Accounts receivable $40,000 Land $240,000 Cash ? Capital stock ? Equipment $120,000 Building $180,000 Notes payable $190,000 Retained earnings $160,000 ​ If capital stock is $260,000, what is the December 31, 2016 cash balance?

$46,000

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017. ​ Refer to the information about Norwood, Inc. ​ If Norwood uses the straight-line method, what is the book value at December 31, 2018?

$51,875

Norwood, Inc. ​ Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017. ​ Refer to the information about Norwood, Inc.If Norwood uses the units-of-production method, what is the depreciation rate per hour for the equipment?

$6.00

Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of operation. The crane was purchased on January 1, 2016 and was used 2,700 hours in 2016 and 2,600 hours in 2017. ​ Refer to the information about Norwood, Inc.If Norwood uses the units-of-production method, what is the depreciation rate per hour for the equipment?

$6.00

Gyro's Shop reported a net loss of $15,000 and total expenses of $80,000. How much are total revenues?

$65,000

The data presented below for Lynx Corp. is for the year ended December 31, 2016: Sales (100% on credit) - $1,000,000 Sales returns - 30,000 Accounts Receivable (December 31, 2016) - 170,000 Allowance for Doubtful Accounts [Cr. Balance] (Before adjustment at December 31, 2016) - 1,300 Estimated amount of uncollectible accounts based on aging analysis - 14,000 ​ If Lynx Corp. estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debt expense for 2016?

$9,700

Which one of the following is not a cash equivalent?

180-day note issued by a local or state government

Below is financial data for Fawnsworth Industries' current year. Net sales on account during year - $500,000 Cost of merchandise sold during year - 300,000 Accounts receivable, beginning of year - 45,000 Accounts receivable, end of year - 35,000 Inventory, beginning of year - 90,000 Inventory, end of year - 110,000 Refer to the data for Fawnsworth Industries. Based on this information, what is Fawnsworth's number of days' sales in receivables (assuming a 360 day year)?

28.8 days

Which one of the following statements is true concerning assets?

Accountants use the term historical cost to refer to the original cost of an asset.

Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC) for use in capital budgeting?

Accounts payable

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called

Accumulated Depreciation

The payment of employee salaries has what effect on the accounting equation?

Assets decrease and stockholders' equity decreases.

Blake and Ryan each invest $30,000 in a business and are given shares of stock in Jones Industries as evidence of their ownership interests. For this transaction, identify the effect on the accounting equation.

Assets increase and stockholders' equity increases.

In order for accounting information to be useful in making informed decisions, it must be

Both relevant and reliable

Which of the following items would not be a reconciling item?

Canceled checks

A list of all asset, liability, stockholders' equity, revenue, and expense accounts, along with their assigned account numbers, which are used by a company is a(an)

Chart of Accounts

The Securities and Exchange Commission (SEC) is concerned with

Companies that issue securities to the general public.

Which one of the following is an accurate description of Allowance for Doubtful Accounts?

Contra Account

A disadvantage of the corporate form of organization is that corporate stockholders are more exposed to personal liabilities in the event of bankruptcy than are investors in a typical partnership.

False

All financial statements are prepared using the accrual basis of accounting.

False

GAAP stands for Generally Accepted Accounting Procedures.

False

The Chairman of the Board must also be the CEO.

False

The initial step in the recording process is posting.

False

When are consolidated financial statements prepared?

If one company owns more than 50% of another company

Venture Enterprises' accountant determined the following: Common stock, $0.01 par value $50,000 Where would this item be reported on Venture's financial statements?

In the Stockholders' Equity section of the balance sheet

Which one of the following is not an accurate description of Allowance for Doubtful Accounts?

Income statement account

Which of the following is a noncurrent asset?

Land

"Claims to economic resources" are known as

Liabilities and stockholders' equity

Which of the following adjusting entries involves the cash account?

None of the Above (Deferred Revenue, Accrued Asset, Deferred Liability)

Which concept is the reason the dollar is used in the preparation of financial statements?

None of the above

Which concept is the reason the dollar is used in the preparation of financial statements?

None of these choices (consistency, legal entity, going concern)

Which of the following accounts is not classified as a current liability?

Note payable, due in three (3) years

When is revenue from the sale of merchandise normally recognized?

On the date the sale is made.

Which of the following organizations is responsible for setting auditing standards followed by public accounting firms in conducting independent audits of financial statements?

Public Company Accounting Oversight Board (PCAOB)

Which of the following statements best describes the term "revenues"?

Revenues represent assets received from the sale of products or services.

Which of the following best describes the term "equity"?

The amount of interest or claim that the owners have in the business

When a company purchases treasury stock, which of the following statements is true?

The cost of the treasury stock reduces stockholders' equity.

Which of the following would be classified as external users of financial statements?

The creditors and stockholders of the company

Which of the following best describes the term "expenses"?

The outflow of assets resulting from the sale of goods and services.

All of the following are important provisions of the Sarbanes-Oxley Act except:

The requirement to prepare both FASB and IASB financial statements.

What is the primary objective of financial reporting?

To provide useful information for decision making.

The preparation of financial statements requires that the information be understandable

To those willing to spend the time to understand it.

A partnership is a business owned by two or more individuals.

True

Adjusting entries are recorded at the end of each accounting period so that net income is accurately reflected in the financial statements for the period.

True

Assets can be tangible or intangible in nature.

True

Balance sheet accounts are called real accounts.

True

Capital stock indicates the owners' ownership to a corporation.

True

In most corporations, the CFO ranks under the CEO.

True

Partnerships and proprietorships generally have a tax advantage over corporations.

True

Starting to invest early for retirement increases the benefits of compound interest.

True

The income statement is a statement that summarizes revenues and expenses for a period.

True

The primary operating goal of a publicly-owned firm trying to best serve its stockholders should be to

Use a well-structured managerial compensation package to reduce conflicts that may exist between stockholders and managers.

Sales Discounts is classified as what type of account?

a contra-revenue

How is treasury stock shown on the balance sheet?

a decrease in stockholders' equity

When an inventory system updates the Inventory account at the time of each sale, this is known as:

a perpetual system.

A company would repurchase its own stock for all of the following reasons except

d. it wishes to make an investment in its own stock.

The payment of accounts payable results in a(n)

decrease in liabilities and a decrease in assets.

Operating assets with no physical properties are called

intangible assets

With regard to preferred stock,

its stockholders may have the right to participate, along with common stockholders, if an extra dividend is declared.

Bonds are sold at a premium if the

market rate of interest was less than the face rate at the time of issue.

Authorized stock represents the

maximum number of shares that can be issued.

Horizontal analysis is analysis

of dollar changes and percentage changes over two or more years.

Segregation and rotation of duties is most effective in

preventing collusion.

What type of interest is calculated on the balance of the principal only ?

simple interest

The primary purpose of the statement of cash flows is to provide information about

the cash inflows and outflows of the company.

Depreciation is a process by which

the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset.

A convertible bond is one where

the holder can convert the bond into common stock at a future time.