ACC2301 - Exam 3 Review

Haake Corp. reported gross sales of $200,000, sales returns and allowances of $10,000, and sales discounts of $4,000. The company has $50,000 in tangible assets and $240,000 in average total assets. What is the company's asset turnover ratio (round to two decimal places)?

.78

Justin and his brother Tom decide that, despite the ongoing pandemic, they should totally open up a taco food truck in Austin. They opt to follow the accrual method of accounting. Their company, JT Inc., borrowed $100,000 from the bank on May 1, 2020. The note had a 12 percent annual rate of interest and matures on April 30, 2021. The note is considered short term debt (since it's only for one year). Assume Interest and principal will be paid in cash on the maturity date How much CASH was paid for interest in Year 1 on December 31st?

0

Caterpillar Corporation makes and sells heavy equipment. In 2019, Caterpillar purchases a machine that can produce 30,000 bolts for the heavy equipment it makes. The cost of the machine is $18,000,000 and has a useful life of 15 years. In year one, Caterpillar produces 3,000 bolts and in year two it produces 6,000 bolts. What's the depreciation expense using Units of Production for Year 1?

1,800,000

A company with $98,000 in current assets and $60,000 in current liabilities bought 14,000 worth of inventory on credit. After this transaction, the current ratio will be:

1.51

ABC Company issued common stock at the following times: On Feb. 4th: 3,000 shares of common stock for $23.00 per share. On June 1st: 2,000 shares of common stock for $30.00 per share The Par Value of ABC's common stock is $2.00. What is the total increase to Common Stock as result of these two events?

10,000

A company purchased land for $94,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1,200. Under the historical cost principle, the cost of land would be recorded at

104,800

Justin and his brother Tom decide that, despite the ongoing pandemic, they should totally open up a taco food truck in Austin. They opt to follow the accrual method of accounting. Their company, JT Inc., borrowed $100,000 from the bank on May 1, 2020. The note had a 12 percent annual rate of interest and matures on April 30, 2021. The note is considered short term debt (since it's only for one year). Assume Interest and principal will be paid in cash on the maturity date. What total amount of cash will be paid to the bank on April 30, 2021, for principal and interest?

112,000

ABC Company issued common stock at the following times: On Feb. 4th: 3,000 shares of common stock for $23.00 per share. On June 1st: 2,000 shares of common stock for $30.00 per share The Par Value of ABC's common stock is $2.00. What is the total increase to PIC in Excess as result of these two events?

119,000

During 2020 Apple declared a 4 for 1 stock split on its common shares. Assume they have 3 million shares subject to this split. What is the number of shares outstanding following the split?

12,000,000

BobCat Inc. has cash of $39,000, accounts receivable of $51,000, inventory of $76,000, prepaid insurance 1,000 and land of $138,000. The company has only one current liability account- salary payable of $44,000, what is working capital?

123,000

ABC Company issued common stock at the following times: On Feb. 4th: 3,000 shares of common stock for $23.00 per share. On June 1st: 2,000 shares of common stock for $30.00 per share The Par Value of ABC's common stock is $2.00. What is the total increase to equity as result of these two events?

129,000

The Hyperion Corp. built a new headquarters to support its surging sales growth. To raise capital they issued $200,000 in 10 year bonds at Face Value with a stated rate of interest at 8% on January 1st, 2019. Payments are due annually. How much would the interest cash payments be for the first year?

16,000

Haake Corp. reported gross sales of $200,000, sales returns and allowances of $10,000, and sales discounts of $4,000. The company has $50,000 in tangible assets and $240,000 in average total assets. What is the company's net sales?

186,000

Hoot Corp has a delivery van it uses for business purposes. The van was purchased on Jan 1, 2017, had a cost of 32,000, and a salvage value of 4,000. It's estimated life is 4 years. If Hoot sells this van at the beginning of 2020 (Jan 1) for 13,000, what is the gain or loss recognized on this disposal?

2,000 Gain

Sales for Wilco were 770,000 and 940,000 in 2018 and 2019 respectively. If 2018 is the base year, what is the percentage increase in sales from 2018 to 2019?

22%

The Fine Dining Cafe purchased a large freezer to hold its frozen meat and desserts that it sells to diners. The cost of the equipment was $60,000 and is expected to be useful for 10 years. At the end of the 10 year period, the company should be able to salvage $5,000. They paid $1,000 to have the item shipped to their San Marcos location. They paid an additional $2,500 to modify the equipment to fit in the store. They also paid $1,500 to ensure the equipment would work with the electrical system. All costs related to the equipment were purchased on account. They use the straight-line depreciation method. What is the balance in the accumulated depreciation account at the end of year 4?

24,000

Utilizing the following income statement information for BobCat Inc. and vertical analysis, what is the gross profit margin? Put another way, what percentage of net sales is comprised by gross profit? BobCat Inc. Income Statement For the Year Ended December 31, 2019 Net Sales $1,500 Cost of Goods Sold $1,080 Gross Profit $420 Operating Expenses $320 Net Income $100

28%

Wilco reflects the following information for 2019: Beginning of Year A/R: 168,000 Beginning of Year Inv: 126,000 End of Year A/R: 134,000 End of Year Inv: 112,000 Net Sales: 520,000 COGS: 475,000 What's the inventory turnover?

3.99

Justin and his brother Tom decide that, despite the ongoing pandemic, they should totally open up a taco food truck in Austin. They opt to follow the accrual method of accounting. Their company, JT Inc., borrowed $100,000 from the bank on May 1, 2020. The note had a 12 percent annual rate of interest and matures on April 30, 2021. The note is considered short term debt (since it's only for one year). Assume Interest and principal will be paid in cash on the maturity date. What is the interest accrued on the Income Statement in (Year 2) with respect to this note?

4,000

The Fine Dining Cafe purchased a large freezer to hold its frozen meat and desserts that it sells to diners. The cost of the equipment was $60,000 and is expected to be useful for 10 years. At the end of the 10 year period, the company should be able to salvage $5,000. They paid $1,000 to have the item shipped to their San Marcos location. They paid an additional $2,500 to modify the equipment to fit in the store. They also paid $1,500 to ensure the equipment would work with the electrical system. All costs related to the equipment were purchased on account. They use the straight-line depreciation method. What is the book value of the equipment at the end of year 4?

41,000

A Company has the following LONG-TERM assets. These can further be divided into tangible and intangible assets. Which of the following are intangibles? 1. 18-wheel truck 2. Timber 3. Log loader 4. Dental chair 5. Goodwill 6. Computer software 7. Retail store building 8. Shelving for inventory 9. Trademark 10. Gas well 11. Drilling rig 12. FCC license for TV station

5, 6, 9, 12

The Fine Dining Cafe purchased a large freezer to hold its frozen meat and desserts that it sells to diners. The cost of the equipment was $60,000 and is expected to be useful for 10 years. At the end of the 10 year period, the company should be able to salvage $5,000. They paid $1,000 to have the item shipped to their San Marcos location. They paid an additional $2,500 to modify the equipment to fit in the store. They also paid $1,500 to ensure the equipment would work with the electrical system. All costs related to the equipment were purchased on account. They use the straight-line depreciation method. What's the depreciation on this asset for year 1? (Assume a full year's depreciation)

6,000

The Fine Dining Cafe purchased a large freezer to hold its frozen meat and desserts that it sells to diners. The cost of the equipment was $60,000 and is expected to be useful for 10 years. At the end of the 10 year period, the company should be able to salvage $5,000. They paid $1,000 to have the item shipped to their San Marcos location. They paid an additional $2,500 to modify the equipment to fit in the store. They also paid $1,500 to ensure the equipment would work with the electrical system. All costs related to the equipment were purchased on account. They use the straight-line depreciation method. What's the depreciation on this asset for year 7? (Assume a full year's depreciation)

6,000

Caterpillar Corporation makes and sells heavy equipment. In 2019, Caterpillar purchases a machine that can produce 30,000 bolts for the heavy equipment it makes. The cost of the machine is $18,000,000 and has a useful life of 15 years. In year one, Caterpillar produces 3,000 bolts and in year two it produces 6,000 bolts What is the per unit depreciation expense using the units-of-production method? Assume no salvage value.

600

The Fine Dining Cafe purchased a large freezer to hold its frozen meat and desserts that it sells to diners. The cost of the equipment was $60,000 and is expected to be useful for 10 years. At the end of the 10 year period, the company should be able to salvage $5,000. They paid $1,000 to have the item shipped to their San Marcos location. They paid an additional $2,500 to modify the equipment to fit in the store. They also paid $1,500 to ensure the equipment would work with the electrical system. All costs related to the equipment were purchased on account. They use the straight-line depreciation method. What is Fine Dining's total cost of this asset?

65,000

Utilizing the following income statement information for BobCat Inc. and vertical analysis, what is the net income margin? Put another way, what percentage of net sales is comprised by net income? BobCat Inc. Income Statement For the Year Ended December 31, 2019 Net Sales $1,500 Cost of Goods Sold $1,080 Gross Profit $420 Operating Expenses $320 Net Income $100

7%

TechNoir paid cash to acquire the assets of an existing company. Among the assets acquired were the following items: A Patent with 5 remaining years of legal life: Current value 36,600Goodwill valued at 44,100 Compute the annual amortization expense for the intangible assets

7,320

Justin and his brother Tom decide that, despite the ongoing pandemic, they should totally open up a taco food truck in Austin. They opt to follow the accrual method of accounting. Their company, JT Inc., borrowed $100,000 from the bank on May 1, 2020. The note had a 12 percent annual rate of interest and matures on April 30, 2021. The note is considered short term debt (since it's only for one year). Assume Interest and principal will be paid in cash on the maturity date What is the interest accrued on the Income Statement in (Year 1) on December 31st, 2020?

8,000

What is the total stockholders' equity based on the following account balances? Common Stock 100,000 Paid-In Capital in Excess of Par, CS 600,000 Retained Earnings 180,000 Long-term debt 110,000 Treasury Stock 40,000

840,000

You go to Best Buy and buy a swanky new television with a price tag of $800. Sales tax is 8.25%. The total amount of cash collected by Best Buy from you was:

866

Wilco reflects the following information for 2019: Beginning of Year A/R: 168,000 Beginning of Year Inv: 126,000 End of Year A/R: 134,000 End of Year Inv: 112,000 Net Sales: 520,000 COGS: 475,000 What's the "Days in Inventory" ratio? Round to the nearest whole number.

91 Days

If a problem doesn't give you the average account balance (i.e. A/R, Inventory, Total Assets, etc.) but instead gives you Beginning and End of year balances (BOY and EOY, respectively), what can you do to solve the problem?

Add the BOY and EOY balances and divide by 2. This will give you the average.

The Fine Dining Cafe purchased a large freezer to hold its frozen meat and desserts that it sells to diners. The cost of the equipment was $60,000 and is expected to be useful for 10 years. At the end of the 10 year period, the company should be able to salvage $5,000. They paid $1,000 to have the item shipped to their San Marcos location. They paid an additional $2,500 to modify the equipment to fit in the store. They also paid $1,500 to ensure the equipment would work with the electrical system. All costs related to the equipment were purchased on account. They use the straight-line depreciation method. What financial statements are impacted by the purchase of the equipment?

Balance Sheet

The Fine Dining Cafe purchased a large freezer to hold its frozen meat and desserts that it sells to diners. The cost of the equipment was $60,000 and is expected to be useful for 10 years. At the end of the 10 year period, the company should be able to salvage $5,000. They paid $1,000 to have the item shipped to their San Marcos location. They paid an additional $2,500 to modify the equipment to fit in the store. They also paid $1,500 to ensure the equipment would work with the electrical system. All costs related to the equipment were purchased on account. They use the straight-line depreciation method. What financial statements are impacted by the recording of depreciation? (Check all that apply).

Balance Sheet, Income Statement, Statement of Retained Earnings (Equity)

Justin and his brother Tom decide that, despite the ongoing pandemic, they should totally open up a taco food truck in Austin. They opt to follow the accrual method of accounting. Their company, JT Inc., borrowed $100,000 from the bank on May 1, 2020. The note had a 12 percent annual rate of interest and matures on April 30, 2021. The note is considered short term debt (since it's only for one year). Assume Interest and principal will be paid in cash on the maturity date. On May 1st, how should the receipt of the loan be recorded?

Cash (Assets) Increase & Liabilities Increase

Current Assets divided by Current Liabilities is which ratio?

Current Ratio

So in light of the previous question: If a creditor were concerned with a company's short term debt paying ability, which of the following ratios would they most likely utilize for such a measurement?

Current Ratio

When a company decides to pay a dividend, on which date do they accrue the associated liability?

Date of Declaration

Which of the following ratios is used to evaluate the company's long-term paying ability?

Debt to Assets Ratio

Jamison, Inc. is a regional air cargo carrier. Jamison made a $4,500 improvement to one of its airplanes that would increase the productive life of the asset. How should this entry be reflected on their Balance Sheet?

Decrease Cash, Increase Airplane Asset

The process of allocating to expense the cost of a plant asset (long term resource) over its useful (service) life is called:

Depreciation

High inventory turnover compared with the industry average might suggest which of the following?

Effective Purchasing Procedures

Wilhelm spends $50 on an oil change for a vehicle used in his business. How should this expenditure be treated?

Expensed

On Jan 31, 2019 the current ratio of Walmart was 0.86, while the same ratio at the same day for Target was 0.94. If we draw a conclusion about the liquidity of each company solely based on the current ratio analysis, Walmart has the better short-term liquidity.

False

Chapter 8 focuses primarily on what type of cash flow activity?

Financing

Which of the following intangible assets are NOT amortized?

Goodwill

Another good critical thinking question here: On June 30, 2019, Swell Time Fun Unlimited Co.'s total current assets were $390,000 and its total current liabilities were $175,000. On July 1, 2017, STFU Co. paid a short-term note to a bank with $80,000 cash. As a result of this transaction, the current ratio will...

Increase

For the sake of argument, let's say the Fine Dining Cafe purchased that freezer in the previous problem with cash. What kind of Cash Flow activity (and direction) would this be?

Investing Outflow

Pick the (most likely) True(ish) statement:

Investors (Stockholders) and potential investors are mianly interested in a company's profitability ratios

Which of the following is never depreciated?

Land

Bonds Payable will always be classified as what on the balance sheet?

Long Term Liability

Trick Question: What kind of cash flow activity is the cash payment of interest on a note?

Operating

Quick recap: Liquidity Ratios measure what?

Short Term Debt Paying Ability

The most commonly used depreciation method utilized by businesses today is:

Straight Line

The Hyperion Corp. built a new headquarters to support its surging sales growth. To raise capital they issued $200,000 in 10 year bonds with a stated rate of interest at 8% on January 1st, 2019. Payments are due annually. Instead of issuing the bonds at Face Value (100), they were issue at 97. What does this mean?

The bonds were issued at a discount

Which of the following is a reason a company would buy back its stock (Treasury Stock)?

To raise the price of the stock To have stock to pay its officers and/or employees Prevent a hostile takeover

A stock split has ZERO impact, value wise, on the equity section of a company's balance sheet.

True

BobCat Inc. has cash of $39,000, accounts receivable of $51,000, inventory of $76,000, prepaid insurance 1,000 and land of $138,000. The company has only one current liability account- salary payable of $44,000. The Company's current ratio is 3.8.

True

Sustainable income is the most likely level of income to be obtained in the future by a company.

True

Which of the following is NOT a possible perk to the ownership of Preferred Stock?

Voting for members of the board of directors