FA SolutionsFall.docx
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FA SolutionsFall.docx
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FASolutionsFall
LingnanMBA,2011FallMidtermExamPaper(Solutions)
FinancialAccounting
NAME:
ID:
Question1:
(18points)Choice
1.Aninvestorwantstofindtheamountofcashandlandthatacompanyhas.Wherewilltheinvestorlook?
a.Statementofshareholders’equity
b.Incomestatement
c.Balancesheet
d.Statementofcashflows
Ans:
C
2.Acompany’sprofitsduringitsmostrecentyeararefoundinits
a.balancesheetandincomestatement.
b.statementofcashflowsonly.
c.statementofshareholders’equityonly.
d.incomestatementandstatementofshareholders’equity.
Ans:
D
3.Asapotentialcreditor,youareinterestedinacompany’sabilitytopayloaninterestandprincipalastheycomedue.Whichofthefollowingwouldbeofthegreatestinteresttoyouinyouranalysis?
a.statementofshareholders’equity.
b.incomestatement.
c.statementofcashflows.
d.StatementofFinancialAccountingStandards.
Ans:
C
4.Whichoneofthefollowinggroupsofaccountscontainsonlycurrentassets?
a.Inventory,accountsreceivable,equipment.
b.Cash,equipment,copyrights.
c.Cash,accountsreceivable,merchandiseinventory.
d.Patents,copyrights,andtrademarks.
Ans:
C
5.GivenbelowareseveralaccountsfromCaterpillarCompany’saccountingrecords.
Cash$14,000
Accumulateddepreciation7,000
Retainedearnings,beginningofyear22,000
Contributedcapital25,000
Patents2,000
Dividends5,000
Netincomefortheyearwas$37,000.Howmuchistotalshareholders’equityattheendoftheyear?
a.$86,000.
b.$82,000.
c.$87,000.
d.$79,000.
Ans:
D
6.Theinformationbelowwastakenfromthe2010annualreportofJenaCorp.
2010
2009
2008
Beginningcashbalance
$11,596
?
$6,925
Netcashflowfromoperatingactivities
7,987
?
9,000
Netcashflowfrominvestingactivities
2,450
4,330
?
Netcashflowfromfinancingactivities
?
(9,612)
(7,500)
Endingcashbalance
$12,983
?
$12,478
Whichofthefollowingisthemissingamountforthebeginningcashbalancefor2009?
a.$5,925
b.$8,741
c.$12,478
d.$5,282
Ans:
C
7.GarrisonCorporationhasthefollowingtransactions:
1.Dividendsarepaidtotheshareholders.
2.AutilitybillforJulyispaidinAugust.
3.Anewwarehousefacilityispurchased
4.Principalpaymentsonoutstandingdebtarepaid.
5.Employeeswagesarepaid.
6.Forty-fiveunitsofinventoryaresoldfor$100each
7.Commonstockisissuedfor$230,000incash.
8.Adeliveryvanusedfor5-yearsissoldfor$12,000,whichisitsbookvalue.
Whichoftheabovetransaction(s)areexamplesofinvestingactivities?
a.3,4,7,8
b.1,4,7
c.4,7
d.3,8
Ans:
D
8.Thevaluationbasisusedtomeasurelong-termliabilitiesis:
a.presentvalue.
b.replacementcost.
c.fairmarketvalue.
d.historicalcost.
Ans:
A
9.Whichoneofthefollowingisviolatedwhenafirmhasapolicyofacceleratingtherecognitionofdepreciationexpenseduringgoodyearsanddecreasingdepreciationexpenseduringleanyears?
a.Relevance
b.Matching
c.Consistency
d.Conservatism
Ans:
C
10.Whichoneofthefollowingismostlikelyviolatediffirmincreasesthedollaramountreportedforunsoldinventoryonthebalancesheettoacostitanticipatesitwillhavetopayforfutureinventoryitems?
a.Consistency
b.Conservatism
c.Goingconcern
d.Economicentity
Ans:
B
11.JeterCompanyordered400toywagonsfromLamar,Inc.onMay1,2010.JeterCompanypaidforthemonMay20atacostof$2each.Jetersold50ofthemonJune2,2010,for$4eachtoGillozCompany.GillozCompanypaidJeteronJune10.
OnwhichdateshouldJeterCompanyrecognizerevenue?
a.May1
b.May20
c.June10
d.June2
Ans:
D
12.Providing$4,000ofservicestocustomersonaccountcauses
a.assetsandshareholders’equitytodecreaseby$4,000.
b.assetsandshareholders’equitytoincreaseby$4,000.
c.assetsandliabilitiestoincreaseby$4,000.
d.assetsandliabilitiestodecreaseby$4,000.
Ans:
B
13.LakeshaCorp.purchased$2,000ofsuppliesonaccount.Thesupplieswillbeusedoverthenextfewmonths.Thiseventcauses
a.assetsandshareholders’equitytoincreaseby$2,000.
b.assetsandshareholders’equitytodecreaseby$2,000.
c.assetsandexpensestodecreaseby$2,000.
d.assetsandliabilitiestoincreaseby$2,000.
Ans:
D
14.OnDecember13,2009,MichaelCompanyreceived$8,000incashasapaymentinadvancefromacustomerandcreditedUnearnedServiceRevenue.ThebalanceintheUnearnedServiceRevenueaccountwas$2,000atthebeginningofDecember.AttheendofDecember,allbut$500hadbeenearned.WhatadjustingentryisnecessaryattheendofDecember?
a.
Cash
8,000
UnearnedServiceRevenue
1,500
ServiceRevenue
9,500
b.
UnearnedServiceRevenue
6,500
ServiceRevenue
6,500
c.
UnearnedServiceRevenue
9,500
ServiceRevenue
9,500
d.
ServiceRevenue
8,000
UnearnedServiceRevenue
8,000
Ans:
C
15.Undertheallowancemethodofaccountingforbaddebts,therecognitionofbaddebtsexpense
a.increasescurrentassetsanddecreasesnetincome.
b.decreasescurrentassetsandincreasesnetincome.
c.increasescurrentassetsandnetincome.
d.decreasescurrentassetsandnetincome.
Ans:
D
16.Thejournalentrytorecordtherecoveryofapreviouslywritten-off$2,000accountreceivable(forcustomerLenoCompany)undertheallowancemethodwouldinclude:
a.acredittoBadDebtExpense.
b.acredittoCash.
c.adebittoAccountsPayable–LenoCompany.
d.acredittoAllowanceforDoubtfulAccounts.
Ans:
D
17.DoleProduceLtd.counted$700ofinventorytwiceinitsDecember31,2010inventory.OnDecember31,2011,itmistakenlyomitted$200ofmerchandisefromitsinventory.Asaresultoftheseerrors:
a.netincomeisoverstatedby$700in2010andunderstatedby$200in2011.
b.netincomeinunderstatedby$700in2010andoverstatedby$200in2011.
c.netincomeisoverstatedby$700in2010andunderstatedby$900in2011.
d.totalnetincomefor2010and2011iscorrect.
Ans:
C
18.MarsHardwaresold20drillsfor$8each.Eachdrillcost$4.Whichjournalentryisrequiredatthetimeofsaleunderaperpetualinventorysystem?
a.
Cash
160
Sales
160
b.
Cash
160
Inventory
160
c.
Cash
160
Sales
160
CostofGoodsSold
80
Inventory
80
d.
Cash
160
Inventory
80
GainfromSale
80
Ans:
C
19.Thecurrentratiohelpsassessacompany’s
a.profitability.
b.assetturnover.
c.capitalstructureleverage.
d.solvency.
Ans:
D
20.Usingborrowedfundstogeneratereturnsfortheshareholdersiscalled
a.leverage.
b.profitability.
c.takingabath.
d.solvency.
Ans:
A
Question2:
(18points)Matching
1.Foreachitemlistedin1through7,placetheletter(athroughe)oftheaccountingeffectinthespaceprovided.Youmayuseeachlettermorethanonceornotatall.
AccountingEffects
a.Assetsandnetincomeincrease
b.Assetsandnetincomedecrease
c.Assetsdecreaseandnetincomeincreases
d.Assetsincreaseandnetincomedecreases
e.Assetsandnetincomearenotaffected
____1.Duringaperiodofincreasinginventoryandrisingprices,acompanydecidestouseFIFOinsteadofLIFO.
____2.Duringaperiodofincreasinginventoryandrisingprices,acompanydecidestouseaveraginginsteadofFIFO.
____3.Duringaperiodofincreasinginventoryandincreasingprices,acompanyusestheLIFOmethod,whichcreatesthelargestcostofgoodssold.
____4.Acompanyapplieslower-of-cost-or-marketforvaluingendinginventorywhenmarketpriceislessthancost.
____5.Acompanyapplieslower-of-cost-or-marketforvaluingendinginventorywhencostislessthanmarketprice.
____6.Duringanextendedperiodofconstantprices,acompanyadoptsLIFOinsteadofFIFO.
Solution:
1.a2.b3.b4.b5.e6.e
2.TheaccountsforJalisaCompanyarelistedbelow,identifiedbynumber.Followingthelistofaccountsisaseriesofadjustingentries(athroughf)preparedbyJalisaCompany.Foreachentry,identifythenumber(s)oftheaccountstobedebitedandcreditedandplacetheminthespaceprovidedadjacenttoeachadjustingentry.
Accounts
1.Cash
11.NotesPayable
2.AccountsReceivable
12.CommonStock
3.PrepaidRent
13.RetainedEarnings
4.OfficeSupplies
14.ServiceRevenue
5.Automobiles
15.OfficeSuppliesExpense
6.AccumulatedDepreciation
16.UtilitiesExpense
7.AccountsPayable
17.SalariesandWagesExpense
8.InterestPayable
18.DepreciationExpense
9.SalariesandWagesPayable
19.InterestExpense
10.IncomeTaxPayable
20.IncomeTaxExpense
AdjustingEntries
Debit
Credit
a.Providedlegalservicestoclientsthatwillpaynextmonth
b.Accruedwagesearnedbyemployeesthatwillbepaidnextmonth
c.Recognizedofficesuppliesusedduringthemonth
d.Recordedthecurrentmonthofdepreciationexpense
e.Recordedmonthlyutilitiesexpenseswhicharenotyetpaid
f.Recognizedtheamountofinterestduetothebankonanote
Solution:
a.2,14
b.17,9
c.15,4
d.18,6
e.16,7
f.19,8
3.Foreachcharacteristicwhichappearsnumberedfrom1through5below,selectthecorrectfactorwhichshouldbeconsideredineachassessmentaslistedinitemsathroughe.
FactorstoConsider
a.Managementbias
b.Financialflexibility
c.Liquidity
d.Operatingperformance
e.Off-balance-sheetfinancing
____1.Abilitytogetcashfromsaleofassetsandissuanceofdebtorstock
____2.Avoidingreportingfinancialresponsibilitiesonthebalancesheet
____3.
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