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ACC 556 Week 1 Discussion

"Financial Statements" Please respond to the following:

From the e-Activity, analyze Apple’s most recent financial statements. Based on your

analysis, predict whether Apple’s financial health will likely improve or deteriorate over

the next five (5) years. Provide a rationale for your response.

From the e-Activity, examine Apple’s statement of cash flows. Recommend at least two

(2) actions that Apple could take in order to maximize the use of its cash flows. Provide a

rationale for your response.

ACC 556 Week 1 Homework Chapter 1

Question 1

A business organized as a separate legal entity owned by stockholders is a partnership.

Answer

True

False

Question 2

Accounting communicates financial information about a business to both internal and external

users.

Answer



True

False

Question 3

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

receipts and cash payments of a company for a specific period of time.

Answer

True

False

Question 4

One way of stating the accounting equation is: Assets + Liabilities = Stockholders’ Equity.

Answer

True

False

Question 5

Claims of creditors and owners on the assets of a business are called liabilities.

Answer

True

False

Question 6

A business organized as a corporation

Answer

is not a separate legal entity in most states.

requires that stockholders be personally liable for the debts of the business.

is owned by its stockholders.

has tax advantages over a proprietorship or partnership.

Question 7

The accounting equation may be expressed as

Answer

Assets = Stockholders’ Equity – Liabilities.

Assets = Liabilities + Stockholders’ Equity.

Assets + Liabilities = Stockholders’ Equity.

Assets + Stockholders’ Equity = Liabilities.

Question 8

Which of the following activities involves collecting the necessary funds to support the business?

Answer

Operating

Investing

Financing

Delivering

Question 9

Which of the following is an asset?

Answer

Mortgage payable

Investments

Common stock

Retained earnings

Question 10

Which of the following would not be considered an external user of accounting data for the

Julian Company?

Answer

Internal Revenue Service agent

Management

Creditors

Customers

Question 11

Ashley’s Accessory Shop started the year with total assets of $140,000 and total liabilities of

$80,000. During the year the business recorded $220,000 in revenues, $110,000 in expenses, and

dividends of $40,000. The net income reported by Ashley’s Accessory Shop for the year was

Answer

$80,000.

$100,000.

$130,000.

$110,000.

Question 12

Stockholders’ equity is comprised of

Answer

common stock and dividends.

common stock and retained earnings.

dividends and retained earnings.

net income and retained earnings.

Question 13

Marvin Services Corporation had the following accounts and balances:

Accounts payable $18,000 Equipment $21,000

Accounts receivable 3,000 Land 21,000

Buildings ? Unearned service revenue 6,000

Cash 9,000 Total stockholders' equity ?

If the balance of the Buildings account was $42,000 and $3,000 of Accounts Payable were paid

in cash, what would be the balance of the total stockholders' equity?

Answer

$81,000

$72,000

$102,000

$78,000

Question 14

All of the following are interrelationships that are important to understand when preparing

financial statements except

Answer

the net income from the income statement is used in the retained earnings statement.

the ending retained earnings from the retained earnings statement is used in the

stockholder's equity section of the balance sheet.

the cash on the balance sheet should be equal to the cash at the end of the period on the

statement of cash flows.

all of the payments on the balance sheet should be equal to the cash payments for operating

activities on the statement of cash flows.

Question 15

External users want answers to all of the following questions except

Answer

Is the company earning satisfactory income?

Will the company be able to pay its debts as they come due?

Will the company be able to afford employee pay raises this year?

How does the company compare in profitability with competitors?

Question 16

Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX)?

Answer

The Act calls for increased oversight responsibilities for boards of directors.

The Act has resulted in increased penalties for financial fraud by top management.

The Act calls for decreased independence of outside auditors reviewing corporate financial

statements.

The Act is meant to decrease the likelihood of unethical corporate behavior.

Question 17

When expenses exceed revenues, which of the following is true?

Answer

a net loss results

a net income results

assets equal liabilities

assets are increased

Question 18

The financial statement that summarizes the changes in retained earnings for a specific period of

time is the

Answer

balance sheet.

income statement.

statement of cash flows.

retained earnings statement.

Question 19

Which of the following is not a common way that managers use the balance sheet?

Answer

To analyze the balances of assets, liabilities, and stockholders’ equity throughout the

accounting period

To determine if the cash balance is sufficient for future needs

To analyze the balance between debt and common stock financing

To analyze the balance of accounts receivable on the last day of the accounting period

MT

Question 20

Match the items below by entering the appropriate code letter in the space provided.

Answer

Distribution

s of cash

Answer

A Corporatio

from a

corporation

to its stock

holders.

Read

Answer

Items for

Question 20

Consumed

assets or

services.

Read

Answer

Items for

Question 20

Ownership

is limited to

one person.

Read

Answer

Items for

Question 20

Officers

and others

who

manage the

business.

Read

Answer

. n

B

.

Dividends

C

.

Manageme

nt

discussion

and

analysis

D

.

Assets

E

.

Sole

proprietors

hip

F. Internal

users

G

.

Expenses

H

.

Annual

report

I. Investing

activities

J. Liabilities

Items for

Question 20

Creditor

claims

against the

assets of the

business.

Read

Answer

Items for

Question 20

A separate

legal entity

under state

laws.

Read

Answer

Items for

Question 20

A report

prepared by

managemen

t that

presents

financial

information

.

Read

Answer

Items for

Question 20

A section of

the annual

report that

presents

managemen

t’s views.

Read

Answer

Items for

Question 20

Future

economic

benefits.

Read

Answer

Items for

Question 20

Involves

acquiring

the

resources

necessary

to run the

business.

Read

Answer

Items for

Question 20


Question 1

Cash and supplies are both classified as current assets.

Answer

True

False

Question 2

Earnings per share measures the net income earned on each share of common stock.

Answer

True

False

Question 3

Net cash provided by operating activities takes into account that a company must invest in

capital expenditures just to maintain its current level of operations.

Answer

True

False

Question 4

In order for information to be relevant, it must be reported on a monthly basis.

Answer

True

False

Question 5

For accounting purposes, business transactions should be kept separate from the personal

transactions of the stockholders of the business.

Answer

True

False

Question 6

In a classified balance sheet, assets are usually classified as

Question 7

Equipment is classified on the balance sheet as

Question 8

Use the following data to determine the total dollar amount of assets to be classified as

current assets.

Koonce Office Supplies

Balance Sheet

December 31, 2014

Cash $ 130,000 Accounts payable $ 140,000

Accounts receivable 100,000 Salaries and wages payable 20,000

Inventory 110,000 Mortgage payable 160,000

Prepaid insurance 60,000 Total liabilities $320,000

Stock investments 170,000

Land 180,000

Buildings $210,000 Common stock $240,000

Less: Accumulated Retained earnings 500,000

depreciation (40,000) 170,000 Total stockholders’ equity $740,000

Trademarks 140,000 Total liabilities and

Total assets $1,060,000 stockholders’ equity $1,060,000

Question 9

N3 Corporation has assets of $3,000,000, common stock of $780,000, and retained earnings

of $475,000. What are the creditors’ claims on their assets?

Question 10

The following information is available for Bradshaw Corporation and Newell Corporation:

(in millions)

Bradshaw Corporation Newell Corporation

2014 2013 2014 2013

Preferred dividends 25 10 0 30

Net income 500 480 490 520

Shares outstanding at the

end of the year

200 180 150 200

Shares outstanding at the

beginning of the year

180 150 200 220

Based on this information, the earnings per share calculations (rounded to two decimals)

suggest

Question 11

Reporting a net income of $95,000 will

Question 12

Based on the following data, what is the amount of current assets?

Accounts payable……………………………………………………….. $62,000

Accounts receivable…………………………………………………….. 100,000

Cash………………………………………………………………………. 50,000

Intangible assets………………………………………………………… 100,000

Inventory…………………………………………………………………. 138,000

Long-term investments…………………………………………………. 160,000

Long-term liabilities……………………………………………………… 200,000

Short-term investments…………………………………………………. 80,000

Notes payable……………………………………………………………. 56,000

Property, plant, and equipment…………………………………………… 1,340,000

Prepaid insurance……………………………………………………….. 2,000

Question 13

Using the following balance sheet and income statement data, what is the debt to assets ratio?

Current assets $ 14,000 Net income $ 21,000

Current liabilities 8,000 Stockholders’ equity 39,000

Average assets 80,000 Total liabilities 21,000

Total assets 60,000

Average common shares outstanding was 10,000.

Question 14

Which of the following is not considered a measure of liquidity?

Question 15

Free cash flow provides an indication of a company’s ability to

Question 16

If Morris Corporation has a negative $131 million free cash flow, which of the following

statements is most likely true?

Question 17

Accounting information should be neutral in order to enhance

Question 18

The principle that indicates that assets should be reported at the price received to sell an asset

is the

Question 19

Garrison Company prepares quarterly reports, which it distributes to all stockholders and

other entities that rely on its accounting information. Which of the following is the best term

for the key assumption in financial reporting that Garrison is following?

Question 20

Each of the following statements is justified by a fundamental quality or an enhancing of

quality accounting. Write the letter in the blank next to each statement corresponding to the

quality involved.

Question Selected Match

Consistency E.

A company uses the same accounting principles from year to year.

Verifiable B.

Information that is free from error.

Understandability A.

Information presented in a clear and concise fashion.

Relevance C.

Information that makes a difference in a decision.

Faithful

representation

D.

Information accurately depicts what really happened.


"Accounting Systems and Accruals" Please respond to the following:

From the e-Activity, examine the greatest threats to a computerized accounting system.

Suggest two (2) preventive measures or remedies to protect the system and / or mitigate

negative impact to the system. Provide a rationale for your response.

Pretend that you are a criminal and want to commit fraud by altering your company’s

accruals. Create a brief (one [1] paragraph) plan for committing the fraud. Predict the

major potential resulting damage to the company’s financial statements from the fraud.


Question 1

Economic events that require recording in the financial statements are called accounting

transactions.

True

False

Question 2

An account is often referred to as a T-account because of the way it is constructed.

True

False

Question 3

Revenues are a subdivision of stockholders’ equity.

True

False

Question 4

Salaries and wages payable is a type of expense.

True

False

Question 5

Operating activities are the types of activities the company performs to generate profits.

True

False

Question 6

If total liabilities decreased by $4,000, then

Question 7

An expense

Question 8

Are advanced receipts from customers treated as revenue at the time of receipt? Why or why

not?

Question 9

Which statement about an account is true?

Question 10

Which one of the following represents the expanded basic accounting equation?

Question 11

Which of the following is not an example of a source document that provides evidence of a

transaction?

Question 12

The primary purpose of the trial balance is to

Question 13

Which of the following statements is not true?

Question 14

All of the following are characteristics of every accounting information system except it is a

system

Question 15

On June 1, 2014, England Inc. reported a cash balance of $21,000. During June, England

made deposits of $8,000 and made disbursements totaling $24,000. What is the cash balance

at the end of June?

Question 16

All of the following statements regarding the double-entry system are true except

Question 17

Borrowing money and issuing shares of stock are

Question 18

The purpose of the ledger is to

Question 19

Which statement is incorrect?

Question 20



Account E.

An accounting record of increases and decreases in specific assets,

liabilities, and stockholders’ equity items.

Normal account

balance

C.

The side which increases an account.

Debit D.

Left side of an account.

Revenue account A.

Has a credit normal balance

Ledger J.

The entire group of accounts maintained by a company.

Journal F.

Shows the debit and credit effects of specific transactions.

Posting G.

Transferring journal entries to ledger accounts.

Chart of accounts B.

A list of all the accounts used by a company.

Trial balance H.

A list of accounts and their balances at a given time.

Source document I.

Evidence that a transaction has taken place.


Question 1

The revenue recognition principle dictates that revenue be recognized in the accounting

period in which the performance obligation is satisfied.

True

False

Question 2

An adjusting entry to a prepaid expense is required to recognize expired expenses.

True

False

Question 3

Unearned revenue is a prepayment that requires an adjusting entry when services are

performed.

True

False

Question 4

When closing entries are prepared, each income statement account is closed directly to

retained earnings.

True

False

Question 5

The accounting cycle begins with the journalizing of the transactions.

True

False

Question 6

Management usually wants ________ financial statements and the IRS requires all

businesses to file _________ tax returns.

Question 7

A flower shop makes a large sale for $1,000 on November 30. The customer is sent a

statement on December 5 and a check is received on December 10. The flower shop follows

GAAP and applies the revenue recognition principle. When is the $1,000 considered to be

recognized?

Question 8

Which statement is correct?

Question 9

Given the data below for a firm in its first year of operation, determine net income under the

cash basis of accounting.

Cash received from customers $48,000

Accounts receivable 12,000

Cash paid for expenses 26,000

Accounts payable (related to expenses) 3,000

Prepaid rent for next period 7,000

Question 10

Accrued expenses are:

Question 11

If a resource has been consumed but a bill has not been received at the end of the accounting

period, then:

Question 12

Depreciation is the process of:

Question 13

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will

this have on that month's financial statements?

Question 14

Why do generally accepted accounting principles require the application of the revenue

recognition principle?

Question 15

Which of the following would not result in unearned revenue?

Question 16

Failure to prepare an adjusting entry at the end of the period to record an accrued expense

would cause:

Question 17

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees

was omitted. Which of the following statements is true?

Question 18

Can financial statements be prepared directly from the adjusted trial balance?

Question 19

Which statement is correct concerning the adjusted trial balance?

Question 20


Answer


Periodicity assumption H.

The economic life of a business can be divided into artificial

time periods

Cash basis B.

Events recorded only in periods the company receives or pays

cash

Revenue recognition

principle

D.

Revenue is recognized when the performance obligation is

satisfied.

Prepaid expenses E.

Expenses paid before they are incurred

Expense recognition

principle

C.

Efforts are related to accomplishments

Accrued revenues A.

Revenues earned but not yet received

Depreciation F.

A cost allocation process

Post-closing trial balance G.

Includes only permanent—balance sheet—accounts

Accrued expenses I.

Expenses incurred but not yet paid


"Accounting for Inventories" Please respond to the following:

Suggest which type of income statement a retailer should use. Defend your suggestion.

Analyze inventory valuation methods discussed in the textbook. Based on your analysis,

recommend the most accurate valuation method that reflects current economic

conditions. Provide a rationale for your recommendation.


Question 1

An advantage of using the periodic inventory system is that it requires less record keeping

than the perpetual inventory system.

True

False

Question 2

The terms 2/10, net/30 mean that a 2 percent discount is allowed on payments made within

the 10 days discount period.

True

False

Question 3

Sales allowances and Sales discounts are both designed to encourage customers to pay their

accounts promptly.

True

False

Question 4

Freight-out appears as an operating expense in the income statement.

True

False

Question 5

With the periodic inventory system, goods available for sale must be calculated before cost

of goods sold.

True

False

Question 6

Merchandising companies that sell to retailers are known as

Question 7

The primary source of revenue for a wholesaler is

Question 8

Which of the following is a true statement about inventory systems?

Question 9

Which of the following items does not result in an adjustment in the merchandise inventory

account under a perpetual system?

Question 10

Farwell Company purchased merchandise with an invoice price of $2,000 and credit terms of

1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the

credit terms?

Question 11

As the president of Harter Company, you notice that no discounts have been taken when

settling accounts payables. What would be an acceptable explanation?

Question 12

A sales invoice is prepared when goods

Question 13

The Sales Returns and Allowances account does not provide information to management

about

Question 14

The collection of a $700 account beyond the 2 percent discount period will result in a

Question 15


Answer

Selected Answer:

Sales discounts are recorded as debits to the sales revenue account.

Question 16

Multiple-step income statements show

Question 17

Financial information is presented below:

Operating expenses $ 28,000

Sales returns and allowances 7,000

Sales discounts 3,000

Sales revenue 150,000

Cost of goods sold 91,000

The gross profit rate would be

Question 18

What is an advantage of using the multiple-step income statement?

Question 19

Which of the following provides the best rationale regarding analysts' views about the

information value of the gross profit rate versus the gross profit amount?

Question 20


Answer


Net sales I.

Sales less sales returns and allowances and sales discounts.

Sales discount E.

A reduction given by the seller for prompt payment of a credit sale.

Credit terms H.

Specifies the amount of cash discount and time period during

which it is offered.

Periodic inventory

system

D.

Requires a physical count of goods on hand to compute cost of

goods sold.

Gross profit rate G.

Gross profit divided by net sales.

Contra revenue A.

An account that is offset against a revenue account on the income

statement.

Freight-out C.

Freight cost to deliver goods to customers reported as an operating

expense.

Gross profit J.

Net sales less cost of goods sold.

Sales invoice B.

Provides support for a credit sale.

Purchase discount F.

A cash discount claimed by a buyer for prompt payment of a

balance due.


Question 1

Raw materials inventories are the goods that a manufacturing company has completed and

are ready to be sold to customers.

True

False

Question 2

Goods held on consignment should be included in the consignor’s ending inventory.

True

False

Question 3

If a company has no beginning inventory and the unit cost of inventory items does not

change during the year, the value assigned to the ending inventory will be the same under

LIFO and average cost flow assumptions.

True

False

Question 4

The LIFO method is rarely used because most companies do not sell the last goods they

purchase first.

True

False

Question 5

The FIFO reserve is a required disclosure for companies that use FIFO.

True

False

Question 6

Manufactured inventory that has begun the production process but is not yet completed is

Question 7

Which of the following should not be included in the physical inventory of a company?

Question 8

At December 31, 2014 Howell Company’s inventory records indicated a balance of

$858,000. Upon further investigation it was determined that this amount included the

following:

• $168,000 in inventory purchases made by Howell shipped from the seller 12/27/14 terms

FOB destination, but not due to be received until January 2nd

• $111,000 in goods sold by Howell with terms FOB destination on December 27th. The

goods are not expected to reach their destination until January 6th.

• $9,000 of goods received on consignment from Westwood Company

What is Howell’s correct ending inventory balance at December 31, 2014?

Question 9

Noise Makers Inc has the following inventory data:

July 1 Beginning inventory 20 units at $19 $ 380

7 Purchases 70 units at $20 1,400

22 Purchases 10 units at $22 220

$2,000

A physical count of merchandise inventory on July 30 reveals that there are 32 units on hand.

Using the average cost method, the value of ending inventory is

Question 10

Inventory costing methods place primary reliance on assumptions about the flow of

Question 11

Many companies use just-in-time inventory methods. Which of the following is not an

advantage of this method?

Question 12

Which of the following statements is correct with respect to inventories?

Question 13

In periods of rising prices, which is an advantage of using the LIFO inventory costing

method?

Question 14

Jenks Company developed the following information about its inventories in applying the

lower of cost or market (LCM) basis in valuing inventories:

Product Cost Market

A $57,000 $60,000

B 40,000 38,000

C 80,000 81,000

If Jenks applies the LCM basis, the value of the inventory reported on the balance sheet

would be

Question 15

Selection of an inventory costing method by management does not usually depend on

Answer

Selected Answer:

the fiscal year end.

Question 16

Which statement concerning lower of cost or market (LCM) is incorrect?

Question 17

Use the following information regarding Black Company and Red Company to answer the

question “Which of the following is Red Company's "cost of goods sold" for 2014 (to the

closest dollar)?”

Year

Inventory

Turnover Ratio Ending Inventory

Black Company 2012 $26,340

2013 10.7 $29,890

2014 10.2 $30,100

Red Company 2012 $25,860

2013 9.0 $24,750

2014 9.5 $22,530

Question 18

A low number of days in inventory may indicate all of the following except

Question 19

The LIFO reserve is

Question 20


Answer


Merchandise Inventory F.

Goods ready for sale to customers by retailers and wholesalers.

Work in process B.

Goods that are only partially completed in a manufacturing

company.

FOB shipping point A.

Title to the goods transfers when the public carrier accepts the

goods from the seller.

FOB destination C.

Title to goods transfers when the goods are delivered to the

buyer.

Specific identification

method

D.

Tracks the actual physical flow for each inventory item

available for sale.

First-in, first-out (FIFO)

method

G.

Ending inventory valuation consists of the most recent

inventory purchases.

Last-in, first-out (LIFO)

method

I.

Cost of goods sold consists of the most recent inventory

purchases.

Average cost method J.

The same unit cost is used to value ending inventory and cost

of goods sold.

LIFO reserve E.

The difference between inventory reported using LIFO and

inventory using FIFO.

Inventory turnover ratio H.

Measures the number of times the inventory sold during the

period.


"Internal Controls" Please respond to the following:

Imagine that a coworker wants to circumvent an internal control to steal money from

your company. Speculate on two (2) internal controls that your coworker might attempt

to circumvent in order to steal the money. Recommend two (2) actions that the company

could take in order to prevent the theft.

Outline an anti-fraud program that you would implement at your company (current or

previous). Suggest the approach you would take to sell this program to your senior

executives. Provide a rationale for your response.


Question 1

The most important element of the fraud triangle is rationalization.

True

False

Question 2

Requiring employees to take vacations is a weakness in the system of internal controls

because it does not promote operational efficiency.

True

False

Question 3

Under an effective system of internal control, errors occur only as a result of fraud or

dishonesty.

True

False

Question 4

Control over cash disbursements is improved if major expenditures are paid by check.

True

False

Question 5

Cash equivalents are highly liquid investments that can be converted into a specific amount

of cash.

True

False

Question 6

Which of the following is not one of the main factors that contribute to fraudulent activity?

Question 7

Under the concept of establishment of responsibility, how many people should have the

ultimate responsibility?

Question 8

A consequence of separation of duties is that

Question 9

In large companies, the independent internal verification procedure is often assigned to

Question 10

Sam’s Grocery Store has the following policy. ‘Only one cashier can have access to a cash

drawer.’ Which internal control principle supports this policy?

Question 11

Supervisors counting cash receipts daily is an example of

Question 12

Blank checks

Question 13

All of the following are true regarding bank statements except

Question 14

Which of the following would be added to the balance per bank on a bank reconciliation?

Question 15

Notification by the bank that a deposited customer check was returned NSF requires that the

company make the following adjusting entry:

Question 16

Clark Company developed the following reconciling information in preparing its September

bank reconciliation:

Cash balance per bank, 9/30 $30,800

Note receivable collected by bank 16,800

Outstanding checks 25,200

Deposits in transit 12,600

Bank service charge 210

NSF check 3,360

Using the above information, determine the cash balance per books (before adjustments) for

the Clark Company.

Question 17

Of the following employees, who should prepare the bank reconciliation?

Question 18

In the month of May, Lopat Company Inc. wrote checks in the amount of $55,500. In June,

checks in the amount of $75,948 were written. In May, $50,808 of these checks were

presented to the bank for payment, and $65,298 in June. What is the amount of outstanding

checks at the end of May?

Question 19

All of the following are true regarding the management and monitoring of cash except

Question 20


Answer


Prenumbered documents F.

Prevent a transaction from being recorded more

than once.

Custody of an asset should be kept

separate from the record-keeping for that

asset

J.

Segregation of duties.

Television monitors, garment sensors and

burglar alarms are examples

L.

Physical control devices.

Bonding employees H.

Insurance protection against misappropriation

of assets.

Collusion M.

Two or more employees circumventing

prescribed procedures.

Cash N.

Anything that a bank will accept for deposit.

Cash budget G.

A projection of anticipated cash flows.

Restricted cash I.

Cash that is not available for general use, but

instead is restricted for a particular purpose.

Invest idle cash D.

A basic principle of cash management.

Canceled checks K.

Checks which have been paid by the depositor's

bank.

NSF checks E.

Checks which have been returned by the

maker's bank for lack of funds.

Outstanding checks B.

Issued checks that have not been paid by the

bank.

Petty cash receipt C.

Document indicating the purpose of a petty

cash expenditure.

Cash equivalents A.

Highly liquid investments.


"Accounts Receivable Management" Please respond to the following:

Examine the five (5) steps to managing accounts receivable. Speculate on the step that is

most vulnerable to fraud. Suggest at least two (2) actions that a company can take in

order to protect this step from fraud.

Imagine that your company has tasked you with developing a plan for factoring accounts

receivables. Create one (1) scenario that demonstrates the key benefits and / or detriments

to your company from factoring accounts receivable.


Question 1

An aging of accounts receivable schedule is based on the premise that the longer the period

an account remains unpaid, the greater the probability that it will eventually be collected.

True

False

Question 2

Allowance for Doubtful Accounts is a contra account that is deducted from Accounts

Receivable on the balance sheet.

True

False

Question 3

Under the allowance method, Bad Debt Expense is debited when an account is deemed

uncollectible and must be written off.

True

False

Question 4

Interest on a 6-month, 10 percent, $10,000 note is calculated by multiplying $10,000 0.10

6/12.

True

False

Question 5

If a company has significant concentrations of credit risk, it must discuss this risk in the

notes to its financial statements.

True

False

Question 6

Interest is usually associated with

Question 7

On January 15, Nifty Company sells merchandise on account to Martinez Associates for

$3,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $600 to

Nifty. On January 24, payment is received from Martinez for the balance due. What is the

amount of cash received?

Question 8

The expense recognition

Question 9

Which one of the following is not a principle of sound accounts receivable management?

Question 10

Bad Debt Expense is considered

Question 11

When an account is written off using the allowance method, the

Question 12

All of the following statements regarding the financial statement presentation of receivables

are true except:

Question 13

Which of the following is not true regarding a promissory note?

Question 14

The bookkeeper recorded the following journal entry

Allowance for Doubtful Accounts 1,000

Accounts Receivable – Richard James 1,000

Which one of the following statements is false?

Question 15

The direct write-off method is acceptable for financial reporting purposes only if the bad debt

losses are insignificant.

Question 16

When calculating interest on a promissory note with the maturity date stated in terms of days,

the

Question 17

The interest on a $4,000, 9%, 90-day note receivable is

Question 18

Which of the following is a way of disposing of a note receivable?

Question 19

The accounts receivable turnover

Question 20


Answer


Aging the accounts

receivable

H.

Analysis of customer account balances by length of time they

have been unpaid.

Direct write-off method A.

Bad debt losses are not estimated and no allowance account is

used.

Trade receivables B.

Notes and accounts receivable that result from sales

transactions.

Accounts receivable

turnover

G.

A measure of the liquidity of receivables.

Percentage of receivables

basis

C.

Emphasizes expected cash realizable value of accounts

receivable.

Promissory note F.

A written promise to pay a specified amount on demand or at a

definite time.

Dishonored note E.

A note which is not paid in full at maturity.

Cash net realizable value D.

The net amount expected to be received in cash.

Credit card sales I.

Sales that involve the customer, the retailer, and the credit card

issuer.

ACC 556 Week 5 Midterm Exam Part 1

Question 1

A concentration of credit risk is a threat of nonpayment from a single customer or class of

customers that could adversely affect the financial health of the company.

Question 2

The partnership form of business organization

Question 3

Goods that have been purchased FOB destination but are in transit, should be excluded from a

physical count of goods by the buyer.

Question 4

The revenue recognition principle dictates that revenue be recognized in the accounting period in

which the performance obligation is satisfied.

Question 5

An aging of accounts receivable schedule is based on the premise that the longer the period an

account remains unpaid, the greater the probability that it will eventually be collected.

Question 6

To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by

the employee authorized to sign checks.

Question 7

The economic resources that are owned by a business are called stockholders’ equity.

Question 8

Consistent use of the same accounting principles and methods is necessary for meaningful

analysis of trends within a company.

Question 9

Use the following data to calculate the current ratio.

Carne Auto Supplies

Balance Sheet

December 31, 2014

Cash $ 35,000 Accounts payable $ 65,000

Accounts receivable 50,000 Salaries and wages payable 10,000

Inventory 70,000 Mortgage payable 90,000

Prepaid insurance 40,000 Total liabilities $165,000

Stock investments 80,000

Land 95,000

Buildings $100,000 Common stock $120,000

Less: Accumulated Retained earnings 250,000

depreciation (30,000) 85,000 Total stockholders’ equity $370,000

Trademarks 70,000 Total liabilities and

Total assets $535,000 stockholders’ equity $535

Question 10

Requiring employees to take vacations is a weakness in the system of internal controls because it

does not promote operational efficiency.

Question 11

Which of the following would not be classified as a long-term liability?

Question 12

Management may choose any inventory costing method it desires as long as the cost flow

assumption chosen is consistent with the physical movement of goods in the company.

Question 13

Which of the following is not a common way that managers use the balance sheet?

Question 14

Solvency ratios measure the short-term ability of the company to pay its maturing obligations.

Question 15

Lankston Company began the year by issuing $90,000 of common stock for cash. The company

recorded revenues of $825,000, expenses of $720,000, and paid dividends of $45,000. What was

Lankston’s net income for the year?

Question 16

Marvin Services Corporation had the following accounts and balances:

Accounts payable $18,000 Equipment $21,000

Accounts receivable 3,000 Land 21,000

Buildings ? Unearned service revenue 6,000

Cash 9,000 Total stockholders' equity ?

If the balance of the Buildings account was $45,000 and the equipment was sold for $21,000,

what would be the total of stockholders' equity?

Question 17

The best definition of assets is the

Question 18

Owners of business firms are the only people who need accounting information.

Question 19

An advantage of using the periodic inventory system is that it requires less record keeping than

the perpetual inventory system.

Question 20

Expense recognition is tied to revenue recognition.

Question 21

Source documents can provide evidence that a transaction has occurred.

Question 22

The multiple-step income statement is considered more useful than the single-step income

statement because it highlights the components of net income.

Question 23

Bathlinks Corporation has a debt to assets ratio of 73%. This tells the user of Bathlinks’s

financial statements that

Question 24

Which of the following is the least likely consideration that management uses when deciding

whether to pay a dividend?

Question 25

Financing activities include the purchase or sale of long-lived assets or the purchase or sale of

investment securities.

ACC 556 Week 5 Midterm Exam Part 2

Question 1

A company usually determines the amount of supplies used during a period by:

Question 2


Question 3

If Morris Corporation has a negative $131 million free cash flow, which of the following

statements is most likely true?

Question 4

Which one of the following is not an objective of a system of internal controls?

Question 5

Regions Inc. pays its rent of $48,000 annually on January 1 and makes monthly adjusting entries.

If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following are

true?

Question 6

Management usually wants ________ financial statements and the IRS requires all businesses to

file _________ tax returns.

Question 7

If a company is given credit terms of 2/10, n/30, it should

Question 8

Smithson Corporation’s unadjusted trial balance includes the following balances (assume normal

balances):

• Accounts Receivable $3,357,000

• Allowances for Doubtful Accounts $ 63,900

Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense

will the company record?

Question 9

All of the following are characteristics of every accounting information system except it is a

system

Question 10

A revenue generally

Question 11

Receivables are

Question 12

All of the following are true regarding the management and monitoring of cash except

Question 13

Olympus Climbers Company has the following inventory data:

July 1 Beginning inventory 20 units at $19 $ 380

7 Purchases 70 units at $20 1,400

22 Purchases 10 units at $22 220

$2,000

A physical count of merchandise inventory on July 30 reveals that there are 32 units on hand.

Using the FIFO inventory method, the amount allocated to cost of goods sold for July is

Question 14

The primary difference between accrued revenues and unearned revenues is that accrued

revenues have:

Question 15

Bad Debt Expense is considered

Question 16

Dobler Company gathered the following reconciling information in preparing its June bank

reconciliation:

Cash balance per books, 6/30 $8,400

Deposits in transit 600

Notes receivable and interest collected by bank 1,480

Bank charge for check printing 50

Outstanding checks 3,000

NSF check 280

The adjusted cash balance per books on June 30 is

Question 17

At Emerson Company, one bookkeeper prepares the cash deposits while the other bookkeeper

enters the collections in the journal and ledger. Which of the following is the best explanation of

this type of internal control principle over cash receipts?

Question 18

Fehr Company sells merchandise on account for $5,000 to Kelly Company with credit terms of

2/10, n/30. Kelly Company returns $1,000 of merchandise that was damaged, along with a check

to settle the account within the discount period. What is the amount of the check?

Question 19

Independent internal verification of the physical inventory process occurs when

Question 20

A trial balance proves

Question 21

A merchandiser will earn an operating income of exactly $0 when

Question 22

Which of these would cause the inventory turnover ratio to increase the most?

Question 23

Which of the following is least likely to help a company minimize losses as credit standards are

relaxed?

Question 24

What is an advantage of using the multiple-step income statement?

Question 25

Two companies report the same cost of goods available for sale but each employs a different

inventory costing method. If the price of goods has increased during the period, then the

company using


"Plant Assets" Please respond to the following:

Imagine that you are the Chief Financial Officer (CFO) of a startup airline company. The

executive management team has tasked you with making a recommendation about

whether the company should buy or lease airplanes. Analyze the major pros and cons for

leasing and buying assets. Based on your analysis, provide a recommendation to the

executive team.

Compare and contrast the three (3) methods for depreciating plant assets. Recommend

the method that maximizes profits for both a shorter period of time and a longer period of

time.


Question 1

All plant assets (fixed assets) must be depreciated for accounting purposes.

True

False

Question 2

Recording depreciation on plant assets affects the balance sheet and the income statement.

True

False

Question 3

Additions and improvements to a plant asset that increase the asset's operating efficiency,

productive capacity, or expected useful life are generally expensed in the period incurred.

True

False

Question 4

If a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold

section of the income statement.

True

False

Question 5

Research and development costs that result in a successful product that is patentable are

charged to the Patent account.

True

False

Question 6

A company purchased land for $350,000 cash. Real estate brokers' commission was $25,000

and $35,000 was spent for demolishing an old building on the land before construction of a

new building could start. Under the historical cost principle, the cost of land would be

recorded at

True

False

Question 7

The four subdivisions for plant assets are

Question 8

Which of the following is included in the cost of constructing a building?

Question 9

Accountants do not attempt to measure the change in a plant asset's market value during

ownership because

Question 10

Equipment was purchased for $68,000 on January 1, 2013. Freight charges amounted to

$2,800 and there was a cost of $8,000 for building a foundation and installing the equipment.

It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year

useful life. What is the amount of accumulated depreciation at December 31, 2014, if the

straight-line method of depreciation is used?

Question 11

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that

Question 12

A plant asset was purchased on January 1 for $45,000 with an estimated salvage value of

$5,000 at the end of its useful life. The current year's Depreciation Expense is $5,000

calculated on the straight-line basis and the balance of the Accumulated Depreciation

account at the end of the year is $25,000. The remaining useful life of the plant asset is

Question 13

Grant Company has decided to change the estimate of the useful life of an asset that has been

in service for 2 years. Which of the following statements describes the proper way to revise a

useful life estimate?

Question 14

A company sells a plant asset that originally cost $240,000 for $80,000 on December 31,

2014. The accumulated depreciation account had a balance of $120,000 after the current

year's depreciation of $20,000 had been recorded. The company should recognize a

Question 15

The book value of an asset will equal its fair value at the date of sale if

Question 16

The following information is provided for Nguyen Company and Northwest Corporation.

(in $ millions) Nguyen Company Northwest

Corporation

Net income 2014 $275 $390

Net sales 2014 1,500 4,100

Total assets 12/31/12 1,000 2,400

Total assets 12/31/13 1,050 3,000

Total assets 12/31/14 1,150 4,000

What is Northwest's asset turnover ratio for 2014?

Question 17

Intangible assets are the rights and privileges that result from ownership of long-lived assets

that

Question 18

Intangible assets

Question 19

Which of the following statements concerning financial statement presentation is false?

Question 20

Indicate whether each of the following expenditures should be classified as land (L), land

improvements (LI), buildings (B), equipment (E), or none of these (X).

Answer


Parking lots B.

Land Improvements

(LI)

Electricity used by a machine E.

None of these (X)

Excavation costs C.

Buildings (B)

Interest on building construction loan C.

Buildings (B)

Cost of trial runs for machinery D.

Equipment (E)

Drainage costs A.

Land (L)

Cost to install a machine D.

Equipment (E)

Fences B.

Land Improvements

(LI)

Unpaid (past) property taxes assumed A.

Land (L)

Cost of tearing down a building when land and a building on it are

purchased

A.

Land (L)

ACC 556 Week 6 Assignment 1

Assignment 1: Financial Analysis

Due Week 6 and worth 160 points

Use the Internet or Strayer databases to research one (1) publicly traded company and review its

last annual report. Use an investor’s view to perform financial analysis and discuss various non-

financial factors impacting investment decision.

Write a two to three (2-3) page paper in which you:

1. From an investor’s view, review the last annual report for chosen company. Use financial

analysis tools of liquidity, profitability, and solvency to evaluate the company’s

performance and reasons for investing or not investing. Include the company’s ranking in

the industry, and its major competitors.

2. From an investor’s views, discuss at least three (3) non-financial factors that suggest

investing in this company. These may include environmental responsibility

(sustainability), corporate governance, etc. Explain the main reasons why these are

important to an investor.

3. Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and

other Websites do not quality as academic resources.

Your assignment must follow these formatting requirements:

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins

on all sides; citations and references must follow APA or school-specific format. Check

with your professor for any additional instructions.

Include a cover page containing the title of the assignment, the student’s name, the

professor’s name, the course title, and the date. The cover page and the reference page are

not included in the required assignment page length.

The specific course learning outcomes associated with this assignment are:

Analyze and interpret financial statements.

Evaluate management control systems and examine their relationship with accounting

and planning, including feedback and non-financial performance measurements.

Use technology and information resources to research issues in financial accounting for

managers.

Write clearly and concisely about financial accounting using proper writing mechanics.


"Liabilities" Please respond to the following:

Hypothesize a scenario in which one could intentionally misstate liabilities for his or her

personal financial gain. Recommend two (2) actions that companies can take to prevent

or detect intentional misstatements of liabilities for personal financial gain. Justify your

response.

From the e-Activity, imagine that you are advising an investor who is considering

purchasing bonds from the selected company. Analyze the types of bonds the chosen

company issues and make a recommendation to the investor as to which type of bond

would provide the most value. Justify your response.


Question 1

A current liability must be paid out of current earnings.

True

False

Question 2

Most notes are not interest bearing.

True

False

Question 3

Unearned revenues are received before goods are delivered or services are rendered.

True

False

Question 4

The carrying value of bonds is calculated by adding the balance of the Discount on Bonds

Payable account to the balance in the Bonds Payable account.

True

False

Question 5

Material gains or losses on bond redemption are reported as an extraordinary item on the

income statement.

True

False

Question 6

Liabilities are classified on the balance sheet as current or

True

False

Question 7

With an interest-bearing note, the amount of assets received upon issuance of the note is

generally

Question 8

The interest charged on a $70,000 note payable, at the rate of 6%, on a 90-day note would be

Question 9

On January 1, 2014, Keisler Company, a calendar-year company, issued $700,000 of notes

payable, of which $175,000 is due on January 1 for each of the next four years. The proper

balance sheet presentation on December 31, 2014, is

Question 10

Norlan Company does not ring up sales taxes separately on the cash register. Total receipts

for October amounted to $29,400. If the sales tax rate is 5%, what amount must be remitted

to the state for October's sales taxes?

Question 11

Stockholders of a company may be reluctant to finance expansion through issuing more

equity because

Question 12

Which of the following is not an advantage of issuing bonds instead of common stock?

Question 13

When authorizing bonds to be issued, the board of directors does not specify the

Question 14

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest

annually would sell at an amount

Question 15

If bonds are issued at a discount, it means that the

Question 16

In the balance sheet, the account Discount on Bonds Payable is

Question 17

If bonds have been issued at a discount, then over the life of the bonds the

Question 18

Ervay Company has $875,000 of bonds outstanding. The unamortized premium is $12,600.

If the company redeemed the bonds at 101, what would be the gain or loss on the

redemption?

Question 19

The relationship between current assets and current liabilities is

Question 20


Answer


Bonds that mature in installments. J.

Serial bonds

Unsecured bonds issued against the general credit of the

borrower.

G.

Debenture bonds

A legal document that sets forth the terms of a bond issue. F.

Bond indenture

The rate investors demand for loaning funds to a

corporation.

D.

Market interest rate

Occurs when the contractual rate of interest is less than the

market rate of interest.

I.

Discount on bonds payable

A measure of a company’s short-term liquidity. H.

Current ratio

Produces a periodic interest expense that is the same amount

each interest period.

E.

Straight-line method of

amortization

A measure of a company’s solvency. B.

Times interest earned

Bonds subject to retirement at a stated dollar amount prior to

maturity.

C.

Callable bonds

The time that the final payment on a bond is due from the

bond issuer.

A.

Maturity date


Question 1

A corporation is not an entity that is separate and distinct from its owners.

True

False

Question 2

A stockholder has the right to vote in the election of the board of directors.

True

False

Question 3

The acquisition of treasury stock by a corporation increases total assets and total

stockholders’ equity.

True

False

Question 4

Cash dividends are not a liability of the corporation until they are declared by the board of

directors.

True

False

Question 5

A detailed stockholders’ equity section in the balance sheet will list the names of individuals

who are eligible to receive dividends on the date of record.

True

False

Question 6

Under the corporate form of business organization

Question 7

Which of the following statements reflects the transferability of ownership rights in a

corporation?

Question 8

If a stockholder cannot attend a stockholders’ meeting, he may delegate his voting rights by

means of a(n)

Question 9

If Norben Company issues 4,000 shares of $5 par value common stock for $140,000, the

account

Question 10

Holden Packaging Corporation began business in 2014 by issuing 80,000 shares of $5 par

common stock for $8 per share and 20,000 shares of 6%, $10 par preferred stock for par. At

year end, the common stock had a market value of $10. On its December 31, 2014 balance

sheet, Holden Packaging would report

Question 11

The following data is available for BOX Corporation at December 31, 2014:

Common stock, par $10 (authorized 30,000 shares) $250,000

Treasury stock (at cost $15 per share) $ 1,200

Based on the data, how many shares of common stock are issued?

Question 12

Which of the following is not a right or preference associated with preferred stock?

Question 13

All of the following statements about preferred stock are true except

Question 14

The board of directors of Benson Company declared a cash dividend of $1.50 per share on

42,000 shares of common stock on July 15, 2014. The dividend is to be paid on August 15,

2014, to stockholders of record on July 31, 2014. The effects of the journal entry to record

the payment of the dividend on August 15, 2014, are to

Question 15

Which of the following statements is not true about a 2-for-1 split?

Question 16

The following selected amounts are available for Thomas Company.

Retained earnings (beginning) $2,500

Net loss 200

Cash dividends declared 200

Stock dividends declared 200

What is its ending Retained Earnings balance?

Question 17

In the stockholders’ equity section of the balance sheet

Question 18

Herman Corporation had net income of $120,000 and paid dividends of $24,000 to common

stockholders and $20,000 to preferred stockholders in 2014. Herman Corporation’s common

stockholders’ equity at the beginning and end of 2014 was $450,000 and $550,000,

respectively. Herman Corporation’s payout ratio for 2014 is

Question 19

Which of the following statements is true regarding corporate performance ratios?

Question 20


Answer

QuestionSelected

Match

The chief accounting officer. F.

Controller

A debit balance in retained earnings. A.

Deficit

Measures the percentage of earnings distributed in the form of dividends to

common stockholders.

C.

Payout ratio

A pro rata distribution of the corporation’s own stock to stockholders. E.

Stock dividend

The date the board of directors formally declares a dividend. G.

Declaration

date

Enables stockholders to maintain their same percentage ownership when

new shares are issued.

D.

Preemptive

right

The amount assigned to each share of stock in the corporate charter. H.

Par value

The amount that must be retained in the business for the protection of

creditors.

J.

Legal capital

Corporation’s own stock that has been reacquired by the corporation but

not retired.

I.

Treasury stock

Preferred stockholders have a right to receive current and unpaid prior-

year dividends before common stockholders receive any dividends.

B.

Cumulative

feature


"Budgeting" Please respond to the following:

Analyze the major pros and cons of preparing company budgets. Determine at least two

(2) critical budget items that you believe are essential in managing a company. Provide a

rationale for your response.

Analyze the most common responsibility reporting systems. From your analysis, argue at

least one (1) pro and one (1) con of using responsibility reporting systems.


Question 1

A benefit of budgeting is that it provides definite objectives for evaluating performance.

True

False

Question 2

Effective budgeting requires clearly defined lines of authority and responsibility.

True

False

Question 3

Financial budgets must be completed before the operating budgets can be prepared.

True

False

Question 4

The budgeted income statement indicates the expected profitability of operations for the next

year.

True

False

Question 5

The budget itself and the administration of the budget are entirely accounting

responsibilities.

True

False

Question 6

Why are budgets useful in the planning process?

True

False

Question 7

Which of the following statements about budget acceptance in an organization is true?

True

False

Question 8

The budget committee would not normally include the

True

False

Question 9

Which of the following is not an operating budget?

True

False

Question 10

The production budget shows expected unit sales are 100,000. The required production units

are 104,000. What are the beginning and desired ending finished goods units, respectively?

Beginning Units Ending Units

True

False

Question 11

A company budgeted unit sales of 204,000 units for January, 2013 and 240,000 units for

February 2013. The company has a policy of having an inventory of units on hand at the end

of each month equal to 30% of next month's budgeted unit sales. If there were 61,200 units

of inventory on hand on December 31, 2012, how many units should be produced in January,

2013 in order for the company to meet its goals?

True

False

Question 12

The following information is taken from the production budget for the first quarter:

Beginning inventory in units 1,200

Sales budgeted for the quarter 456,000

Production capacity in units 472,000

How many finished goods units should be produced during the quarter if the company

desires 3,200 units available to start the next quarter?

Question 13

A company determined that the budgeted cost of producing a product is $30 per unit. On

June 1, there were 80,000 units on hand, the sales department budgeted sales of 300,000

units in June, and the company desires to have 120,000 units on hand on June 30. The

budgeted cost of goods manufactured for June would be

Question 14

The single most important output in preparing financial budgets is the

Question 15

What is the proper preparation sequencing of the following budgets?

1 - Budgeted Balance Sheet

2 - Sales Budget

3 - Selling and Administrative Budget

4 - Budgeted Income Statement

Question 16

The formula for determining budgeted merchandise purchases is budgeted

Question 17

Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the

difference in the budgets the two entities will prepare?

Question 18

The primary benefits of budgeting include all of the following except it

Question 19

The budget that is often considered to be the most important financial budget is the

Question 20


Answer


Management's plans expressed in financial terms for a specified future

time period.

I.

Budget

Budgets that indicate the cash resources needed for expected operations

and planned capital expenditures.

J.

Financial budgets

A group responsible for coordinating the preparation of the budget. A.

Budget committee

A set of interrelated budgets that constitute a plan of action for a

specified time period.

D.

Master budget

The projection of potential sales for the industry and the company's

expected share of such sales.

H.

Sales forecast

A projection of production requirements to meet expected sales. G.

Production budget

A projection of anticipated cash flows. B.

Cash budget

A selection of strategies to achieve long-term goals. F.

Long-range

planning

An estimate of the quantity and cost of direct materials to be purchased. E.

Direct materials

budget

An estimate of expected sales for the budget period. C.

Sales budget


Question 1

Budget reports comparing actual results with planned objectives should be prepared only

once a year.

True

False

Question 2

A static budget is changed only when actual activity is different from the level of activity

expected.

True

False

Question 3

Management by exception means that management will investigate areas where actual results

differ from planned results if the items are material and controllable.

True

False

Question 4

Budget reports provide the feedback needed by management to see whether actual operations

are on course.

True

False

Question 5

The manager of an investment center can improve ROI by reducing average operating assets.

True

False

Question 6

What is budgetary control?

Question 7

A static budget is appropriate in evaluating a manager's performance if

Question 8

What is the primary difference between a static budget and a flexible budget?

Question 9

If a company plans to sell 48,000 units of product but sells 60,000, the most appropriate

comparison of the cost data associated with the sales will be by a budget based on

Question 10

Nikoto Steel Co. budgeted manufacturing costs for 50,000 tons of steel are:

Fixed manufacturing costs $50,000 per month

Variable manufacturing costs $12.00 per ton of steel

Nikoto produced 40,000 tons of steel during March. How much is the flexible budget for

total manufacturing costs for March?

Question 11

At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400

are incurred at 18,400 direct labor hours, the flexible budget report should show the

following difference for indirect materials:

Question 12

Top management can control

Question 13

A manager of a cost center is evaluated mainly on

Question 14

Given below is an excerpt from a management performance report:

Budget Actual Difference

Contribution margin $600,000 $580,000 $20,000 U

Controllable fixed costs $200,000 $220,000 $20,000 U

The manager's overall performance

Question 15

Bogey Co. recorded operating data for its Cheap division for the year. Bogey requires its

return to be 10%.

Sales $ 1,400,000

Controllable margin 160,000

Total average assets 4,000,000

Fixed costs 100,000

What is the ROI for the year?

Question 16

A measure frequently used to evaluate the performance of the manager of an investment

center is

Question 17

What is the goal of residual income?

Question 18

Which of the following would not be considered an aspect of budgetary control?

Question 19

All of the following statements are correct about management by exception except it

Question 20


Answer


The use of budgets to control operations. H.

Budgetary control

A projection of budget data at one level of activity. A.

Static budget

A projection of budget data for various levels of activity. E.

Flexible budget

A part of management accounting that involves accumulating and

reporting revenues and costs on the basis of the individual manager

who has the authority to make the day-to-day decisions about the

items.

F.

Responsibility

accounting

Costs that a manager has the authority to incur within a given period

of time.

G.

Controllable costs

The review of budget reports by top management directed entirely or K.

primarily to differences between actual results and planned objectives. Management by

exception

The preparation of reports for each level of responsibility shown in the

company's organization chart.

C.

Responsibility

reporting system

A measure of the profitability of an investment center computed by

dividing controllable margin (in dollars) by average operating assets.

J.

Return on

Investment

A responsibility center that incurs costs and also generates revenues. I.

Profit center

A responsibility center that incurs costs, generates revenues, and has

control over the investment funds available for use.

B.

Investment center

Costs which are incurred for the benefit of more than one profit center. D.

Indirect fixed costs

Costs that relate specifically to a responsibility center and are incurred

for the sole benefit of the center.

L.

Direct fixed costs


"Cash Flows" Please respond to the following:

Outline a strategy for companies to spend excess cash and maximize the value of that

spend. Provide a rationale for your response.

From the e-Activity, compare and contrast the selected company’s statement of cash

flows to its income statement. Suggest at least two (2) items from each statement that

investors should analyze when deciding whether or not to purchase the company’s stock.

Justify your response.


Question 1

The statement of cash flows is a required statement that must be prepared along with an

income statement, balance sheet, and retained earnings statement.

True

False

Question 2

The activity from the balance sheet to be presented in the financing activities section of the

statement of cash flows is based on an analysis of stockholders’ equity only.

True

False

Question 3

The acquisition of a building by issuing bonds would be considered an investing and

financing activity that did not affect cash.

True

False

Question 4

The cash debt coverage ratio indicates a company’s ability to repay its liabilities from cash

generated from operations.

True

False

Question 5

The current cash debt coverage ratio is considered a better representative of liquidity than the

current ratio because it involves the entire year rather than a balance at one point in time.

True

False

Question 6

The statement of cash flows

Question 7

Generally, the most important category on the statement of cash flows is cash flows from

Question 8

Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate

where, if at all, interest paid on note would be classified on the statement of cash flows.

Question 9

Which of the following transactions does not affect cash during a period?

Question 10

Zoum Corporation had the following transactions during 2014:

1 - Issued $125,000 of par value common stock for cash.

2 - Recorded and paid wages expense of $60,000.

3 - Acquired land by issuing common stock of par value $50,000.

4 - Declared and paid a cash dividend of $10,000.

5 - Sold a long-term investment (cost $3,000) for cash of $3,000.

6 - Recorded cash sales of $400,000.

7 - Bought inventory for cash of $160,000.

8 - Acquired an investment in Zynga stock for cash of $21,000.

9 - Converted bonds payable to common stock in the amount of $500,000.

10 - Repaid a 6 year note payable in the amount of $220,000.

What is the net cash provided by financing activities?

Question 11

In order to determine net cash provided by operating activities, a company must convert net

income from an accrual basis to a cash basis under

Question 12

The information to prepare the statement of cash flows comes from all of the following

sources except

Question 13

Peninsula Company reported net income of $260,000 for the year. During the year, accounts

receivable increased by $21,000, accounts payable decreased by $9,000 and depreciation

expense of $45,000 was recorded. Net cash provided by operating activities for the year is

Question 14

In calculating cash flows from operating activities using the indirect method, a loss on the

sale of equipment will appear as a(n)

Question 15

The net income reported on the income statement for the current year was $440,000.

Depreciation was $62,000. Accounts receivable and inventories decreased by $20,000 and

$32,000, respectively. Prepaid expenses and accounts payable increased, respectively, by

$2,000 and $16,000. How much cash was provided by operating activities?

Question 16

The statement of cash flows will not provide insight into

Question 17

Laser Performance Inc. has the following information available (amount in thousands).

Net Income $30,000

Average Total Liabilities 80,000

Average Current Liabilities 36,000

Cash Provided by Operations 48,000

Cash Sales 130,000

Capital Expenditures 22,000

Dividends Paid 6,000

What is the current cash debt coverage?

Question 18

Authentic Exposure Company had the following transactions that took place during the year:

I. Paid amount owing to suppliers $2,750.

II. Purchased new equipment for $5,000 by signing a long-term note payable.

III. Purchased a patent and paid $15,000 cash for the asset.

How what is the total effect of these transactions on Free Cash Flow, Current Cash Debt

Coverage, and Cash Debt Coverage respectively?

Free Current Cash Debt Cash Debt

Cash Flow Coverage Coverage

Question 19

All of the following statements are true regarding cash flow presentations except

Question 20

For each of the following items, indicate by using the appropriate code letter, how the item

should be reported in the statement of cash flows, using the indirect method.

Answer


Decrease in accounts payable during a

period

C.

Deducted from net income

Declaration and payment of a cash dividend. F.

Cash outflow—investing activity

Loss on disposal of land. D.

Added to net income

Decrease in accounts receivable during a

period.

D.

Added to net income

Redemption of bonds for cash. F.

Cash outflow—investing activity

Proceeds from sale of equipment at book

value.

B.

Cash inflow—investing activity

Issuance of common stock for cash. E.

Cash inflow—financing activity

Purchase of a building for cash. A.

Cash outflow—financing activity

Acquisition of land in exchange for common

stock.

G.

Significant noncash investing and financing

activity

Increase in inventory during a period. C.

Deducted from net income


"Extraordinary Items and Ratio Analysis" Please respond to the following:

Choose at least two (2) items or events that you would consider to be extraordinary to a

company. Propose the manner in which you would disclose these items or events to

investors. Justify your response.

Determine the two (2) financial ratios that you believe to be the most important indicators

of financial health for a company. Predict two (2) positive or two (2) negative financial

outcomes should the chosen ratios change dramatically from one year to another. Provide

a rationale for your response.


Question 1

Comprehensive income includes all revenues, expenses, gains, losses, and dividends.

True

False

Question 2

A primary purpose of vertical analysis is to observe trends over a three-year period.

True

False

Question 3

In the vertical analysis of an income statement, each item is generally stated as a percentage

of net income.

True

False

Question 4

Leverage and return on equity are closely related.

True

False

Question 5

Because pro forma earnings are based on specific rules, these amounts are highly reliable.

True

False

Question 6

Which of the following income statement figures would probably be the best indicator of a

company’s future performance?

Question 7

The discontinued operations section of the income statement refers to

Question 8

Patchett Company reported income before taxes of $800,000 and an extraordinary loss of

$200,000. Assume that the company’s tax rate is 25%. What amounts will be reported on the

income statement for income before irregular items and extraordinary items, respectively?

Question 9

Comprehensive income would not include

Question 10

All of the following statements are true regarding comprehensive income except

Question 11

Horizontal analysis of comparative financial statements includes the

Question 12

Assume the following cost of goods sold data for a company:

2015 $1,300,000

2014 1,200,000

2013 1,000,000

If 2013 is the base year, what is the percentage increase in cost of goods sold from 2013 to

2015?

Question 13

The best way to study the relationship of the components within a financial statement is to

prepare

Question 14

The following schedule is a display of what type of analysis?

Amount Percent

Current assets $100,000 25%

Property, plant, and equipment 300,000 75%

Total assets $400,000 100%

Question 15

Stockholders are most interested in evaluating

Question 16

Somen to Park Corporation had net credit sales of $4,060,000 and cost of goods sold of

$3,000,000 for the year. The Accounts Receivable balances at the beginning and end of the

year were $650,000 and $750,000, respectively. The accounts receivable turnover was

Question 17

BVI Corporation had net income of $1,600,000 and paid dividends to common stockholders

of $400,000 in 2014. The weighted average number of shares outstanding in 2014 was

500,000 shares. BVI Corporation's common stock is selling for $50 per share on the

NASDAQ. BVI Corporation's payout ratio for 2014 is

Question 18

A successful grocery store would probably have

Question 19

The following information pertains to Blue Flower Company. Assume that all balance sheet

amounts represent both average and ending balance figures. Assume that all sales were on

credit.

Assets

Cash and short-term investments $ 45,000

Accounts receivable (net) 30,000

Inventory 15,000

Property, plant and equipment 210,000

Total Assets $300,000

Liabilities and Stockholders’ Equity

Current liabilities $ 60,000

Long-term liabilities 90,000

Stockholders’ equity—common 15,000

Total Liabilities and Stockholders’ Equity $300,000

Income Statement

Sales revenue $ 121,000

Cost of goods sold 66,000

Gross margin 55,000

Operating expenses 30,000

Net income $ 25,000

Number of shares of common stock 6,000

Market price of common stock $20

Dividends per share on common stock .50

Cash provided by operations $40,000

What is the current ratio for this company?

Question 20

For each of the ratios listed below, indicate by the appropriate code letter, whether it is a

liquidity ratio, a profitability ratio, or a solvency ratio.

Answer


Price-earnings ratio A.

Profitability ratio

Return on assets A.

Profitability ratio

Accounts receivable turnover ratio B.

Liquidity ratio

Earnings per share A.

Profitability ratio

Payout ratio A.

Profitability ratio

Current cash debt coverage B.

Liquidity ratio

Current ratio B.

Liquidity ratio

Debt to assets ratio C.

Solvency ratio

Free cash flow C.

Solvency ratio

Inventory turnover B.

Liquidity ratio

ACC 556 Week 10 Assignment 2 Budget Planning and Control

Due Week 10 and worth 160 points

Use the Internet and / or Strayer databases to research budget planning and control. Imagine that

the company that you currently work for, have previously worked for, or would like to work for

in the future has tasked you with preparing a budget plan.

Write a three to four (3-4) page paper in which you:

1. Describe the company that you currently work for, have previously worked for, or would

like to work for in the future. Determine at least two (2) compelling reasons that this

company should prepare and manage a budget. Predict the two (2) most likely positive

and negative financial outcomes for this company if it properly or improperly performs

effective budgeting.

2. Outline a high-level budget plan for the company. In your high-level budget plan,

recommend the most appropriate budgeting phases for the company.

3. Propose two (2) methods and techniques that the company should use to manage its

budget over time in preparation for the fact that budgets are ever changing. Justify your

response.

4. Imagine that the company is facing a financial challenge that is causing the actual

amounts of money that it spends to become significantly off target from its budgeted

amounts. Prepare an action plan to resolve the budget misalignment. In your action plan,

recommend at least one (1) budgeting technique to resolve the budget and actual

discrepancies. Provide a rationale for your response.

5. Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and

other Websites do not quality as academic resources.

Your assignment must follow these formatting requirements:

Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins

on all sides; references must follow APA or school-specific format. Check with your

professor for any additional instructions.

Include a cover page containing the title of the assignment, the student’s name, the

professor’s name, the course title, and the date. The cover page and the reference page are

not included in the required page length.

The specific course learning outcomes associated with this assignment are:

Evaluate management control systems and examine their relationship with accounting

and planning, including feedback and non-financial performance measurements.

Evaluate decision making tools for capital investments, budgeting, and budgeting

controls.

Analyze financial accounting tools and techniques that convert financial accounting data

into information for decision making.

Use technology and information resources to research issues in financial accounting for

managers.

Write clearly and concisely about financial accounting using proper writing mechanics.


"Sum It Up" Please respond to the following:

Provide two (2) examples that demonstrate a change in your theories of financial

accounting for managers since the beginning of this course.

Rate the three (3) most important concepts that you have learned in this course in order of

importance (one [1] being the most important; three [3], the least). Provide a rationale for

your rating scheme.

ACC 556 Week 11 Final Exam Part 1

Question 1

The debt to assets ratio measures the percentage of the total assets provided by creditors.

Question 2

Vertical analysis is a technique for evaluating a series of financial statement data over a period of

time to determine the increase (decrease) that has taken place.

Question 3

Cash dividends are not a liability of the corporation until they are declared by the board of

directors.

Question 4

The current cash debt coverage ratio is considered a better representative of liquidity than the

current ratio because it involves the entire year rather than a balance at one point in time.

Question 5

All of the following are true regarding financial statement analysis ratios associated with

liabilities except

Question 6

The master budget reflects management's long-term plans encompassing five years or more.

Question 7

One objective of the income statement is to separate the results of continuing operations from

those of discontinued operations.

Question 8

On January 1, a machine with a useful life of five years and a residual value of $15,000 was

purchased for $75,000. What is the depreciation expense for year 2 under straight-line

depreciation?

Question 9

Budget reports provide the feedback needed by management to see whether actual operations are

on course.

Question 10

A company whose current liabilities exceed its current assets may have a liquidity problem.

Question 11

During 2014, Phelps Corporation reported net sales of $3,000,000, net income of $1,320,000,

and depreciation expense of $80,000. Phelps also reported beginning total assets of $1,000,000,

ending total assets of $1,500,000, plant assets of $800,000, and accumulated depreciation of

$500,000. Phelps’s asset turnover ratio is

Question 12

On January 1, 2014, Ermler Company, a calendar-year company, issued $1,000,000 of notes

payable, of which $250,000 is due on January 1 for each of the next four years. The proper

balance sheet presentation on December 31, 2014, is

Question 13

A master budget is most useful in evaluating a manager's performance in controlling costs.

Question 14

Under the corporate form of business organization

Question 15

Once cost is established for a plant asset, it becomes the basis of accounting for the asset unless

the asset appreciates in value, in which case, market value becomes the basis for accountability.

Question 16

Bonds with a face value of $400,000 and a quoted price of 104¼ have a selling price of

Question 17

A current liability is a debt that can reasonably be expected to be paid

Question 18

The book value of a plant asset is the difference between the

Question 19

A budget can be used as a basis for evaluating performance.

Question 20

Which of the following is not properly classified as property, plant, and equipment?

Question 21

Intangible assets are rights, privileges, and competitive advantages that result from ownership of

long-lived assets without physical substance.

Question 22

The market rate of interest is often called the

Question 23

A corporation is not an entity that is separate and distinct from its owners.

Question 24

Accountants do not attempt to measure the change in a plant asset's market value during

ownership because

Question 25

A primary objective of the statement of cash flows is to show the income or loss on investing and

financing transactions.

ACC 556 Week 11 Final Exam Part 2

Question 1

Ratios are used as tools in financial analysis

Question 2

A critical factor in budgeting for a service firm is to

Question 3

Holden Packaging Corporation began business in 2014 by issuing 80,000 shares of $5 par

common stock for $8 per share and 20,000 shares of 6%, $10 par preferred stock for par. At year

end, the common stock had a market value of $10. On its December 31, 2014 balance sheet,

Holden Packaging would report

Question 4

A master budget consists of

Question 5

The date on which a cash dividend becomes a binding legal obligation is on the

Question 6

Which one of the following is not a benefit of budgeting?

Question 7

The single most important output in preparing financial budgets is the

Question 8

Assume the following sales data for a company:

2015 $910,000

2014 $770,000

2013 700,000

If 2013 is the base year, what is the percentage increase in sales from 2013 to 2014?

Question 9

Which of the following income statement figures would probably be the best indicator of a

company’s future performance?

Question 10

Which of the following is not typically a characteristic experienced by a company during the

growth phase of the corporate life cycle?

Question 11

A manager of a cost center is evaluated mainly on

Question 12

A comparison with other companies that provides insight into a company's competitive position

is most commonly known as which of the following types of comparisons?

Question 13

Which one of the following items is not necessary in preparing a statement of cash flows?

Question 14

Quincy Corp. earned controllable margin of $500,000 on sales of $6,400,000. The division had

average operating assets of $5,200,000. The company requires a return on investment of at least

8%. How much is residual income?

Question 15

Cochran Corporation, Inc. has the following income statement (in millions):

COCHRAN CORPORATION, INC.

Income Statement

For the Year Ended December 31, 2014

Net Sales $240

Cost of Goods Sold 80

Gross Profit 160

Operating Expenses 65

Net Income $ 95

Using vertical analysis, what percentage is assigned to net income?

Question 16

Bogey Co. recorded operating data for its Cheap division for the year. Bogey requires its return

to be 10%.

Sales $ 1,400,000

Controllable margin 160,000

Total average assets 4,000,000

Fixed costs 100,000

What is the ROI for the year?

Question 17

Zoum Corporation had the following transactions during 2014:

1 - Issued $125,000 of par value common stock for cash.

2 - Recorded and paid wages expense of $60,000.

3 - Acquired land by issuing common stock of par value $50,000.

4 - Declared and paid a cash dividend of $10,000.

5 - Sold a long-term investment (cost $3,000) for cash of $3,000.

6 - Recorded cash sales of $400,000.

7 - Bought inventory for cash of $160,000.

8 - Acquired an investment in Zynga stock for cash of $21,000.

9 - Converted bonds payable to common stock in the amount of $500,000.

10 - Repaid a 6 year note payable in the amount of $220,000.

What is the net cash provided by operating activities?

Question 18

The primary purpose of the statement of cash flows is to

Question 19

All of the following statements regarding changes in accounting principles are true except which

of the following?

Question 20

Laser Performance Inc. has the following information available (amount in thousands).

Net Income $30,000

Average Total Liabilities 80,000

Average Current Liabilities 36,000

Cash Provided by Operations 48,000

Cash Sales 130,000

Capital Expenditures 22,000

Dividends Paid 6,000

What is the current cash debt coverage?

Question 21

If there were 60,000 pounds of raw materials on hand on January 1, 120,000 pounds are desired

for inventory at January 31, and 410,000 pounds are required for January production, how many

pounds of raw materials should be purchased in January?

Question 22

A flexible budget

Question 23

On the basis of the budget reports,

Question 24

If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant

expansion, the effect of this action is to

Question 25

The following information pertains to Marsh Company. Assume that all balance sheet amounts

represent average balance figures.

Total asset $400,000

Stockholders’ equity—common 200,000

Total stockholders’ equity 280,000

Sales revenue 120,000

Net income 25,000

Number of shares of common stock 8,000

Common dividends 9,000

Preferred dividends 6,000

What is Marsh’s payout ratio?

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