Accounting 350, Fall 2009, Day
Quiz #2, Chpts. 5 & 6
1.
Houghton Company has the following items: common stock, $720,000; treasury stock,
$85,000; deferred taxes, $100,000 and retained earnings, $313,000. What total amount
should Houghton Company report as stockholders' equity?
A) $848,000.
B) $948,000. (720-85+313)
C) $1,048,000.
D) $1,118,000.
2. Presented below are data for Antwerp Corp.
2010
2011
2012
Assets, January 1
$2,800
$3,360
?
Liabilities, January 1
1,680
?
$2,016
Stockholders' Equity, Jan. 1
?
?
2,100
Dividends
560
420
476
Common Stock
504
448
500
Stockholders' Equity, Dec. 31
?
?
1,596
Net Income
560
448
?
Stockholders' Equity at January 1, 2010 is
A) $ 504.
B) $ 560.
C) $1,120. (2,800-1,680)
D) $1,624.
3. Keisler Corporation reports:
Cash provided by operating activities
Cash used by investing activities
Cash provided by financing activities
Beginning cash balance
4.
$200,000
(110,000)
140,000
70,000
What is Keisler's ending cash balance?
A) $230,000.
B) $300,000. (200-110+140+70)
C) $450,000.
D) $520,000.
During 2010 the DLD Company had a net income of $50,000. In addition, selected
accounts showed the following changes:
Accounts Receivable
Accounts Payable
Building
Depreciation Expense
Bonds Payable
($3,000) increase
1,000 increase
4,000 decrease
1,500 increase
8,000 increase
What was the amount of cash provided by operating activities?
A) $49,500 (50-3+1+1.5)
B) $50,000
C) $51,500
D) $59,500
Use the following to answer questions 5-7:
The following trial balance of Reese Corp. at December 31, 2010 has been properly adjusted except for the
income tax expense adjustment.
Reese Corp.
Trial Balance
December 31, 2010
Dr.
Cr.
Cash
$ 775,000
Accounts receivable (net)
2,695,000
Inventory
2,085,000
Property, plant, and equipment (net)
7,366,000
Accounts payable and accrued liabilities
$ 1,701,000
Income taxes payable
654,000
Deferred income tax liability
85,000
Common stock
2,350,000
Additional paid-in capital
3,680,000
Retained earnings, 1/1/10
3,450,000
Net sales and other revenues
13,360,000
Costs and expenses
11,180,000
Income tax expenses
1,179,000
25,280,00
25,280,00
Other financial data for the year ended December 31, 2010:
• Included in accounts receivable is $1,200,000 due from a customer and payable in
quarterly installments of $150,000. The last payment is due December 29, 2012.
• The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose
in a prior year, of which $20,000 is classified as a current liability.
• During the year, estimated tax payments of $525,000 were charged to income tax expense. The current and
future tax rate on all types of income is 30%.
In Reese's December 31, 2010 balance sheet,
5. The current assets total is
A) $6,080,000.
B) $5,555,000.
C) $5,405,000.
D) $4,955,000.
775+2,085+(2,695-600)
6. The current liabilities total is
A) $1,850,000.
B) $1,915,000.
C) $2,375,000.
D) $2,440,000.
1701+(654-525)+20
7. The final retained earnings balance is
A) $4,451,000.
B) $4,536,000.
C) $4,976,000.
D) $4,905,000.
3450 +([13360-11180]*.7)
8. Mordica Company will receive $100,000 in 7 years. If the appropriate interest rate is
10%, the present value of the $100,000 receipt is
A) $51,000.
B) $51,316. PV Factor of .51316
C) $151,000.
D) $194,872.
9. Jenks Company financed the purchase of a machine by making payments of $18,000 at
the end of each of five years. The appropriate rate of interest was 8%. The future value
of one for five periods at 8% is 1.46933. The future value of an ordinary annuity for five
periods at 8% is 5.8666. The present value of an ordinary annuity for five periods at 8%
is 3.99271. What was the cost of the machine to Jenks?
A) $26,448
B) $71,869 3.99271*18,000
C) $90,000
D) $105,600
10. Lane Co. has a machine that cost $200,000. It is to be leased for 20 years with rent
received at the beginning of each year. Lane wants a return of 10%. Calculate the
amount of the annual rent.
Present Value of
Period Ordinary Annuity
19
8.36492
20
8.51356
21
8.64869
A) $21,356 200,000 / (8.36942+1)
B) $23,909
C) $29,728
D) $23,492
11. Ziggy is considering purchasing a new car. The cash purchase price for the car is
$28,000. What is the annual interest rate if Ziggy is required to make annual payments
of $6,500 at the end of the next five years?
A) 4%.
B) 5%. 28,000/6,500 Table 6-4
C) 6%.
D) 7%.
12. Stech Co. is issuing $2.6 million 12% bonds in a private placement on July 1, 2010.
Each $1,000 bond pays interest semi-annually on December 31 and June 30 of each
year. The bonds mature in ten years. At the time of issuance, the market interest rate for
similar types of bonds was 8%. What is the expected selling price of the bonds?
A) $3,306,705. (13.59033*156,000) +(.45639*2.6 mil)
B) $5,426,797.
C) $3,297,839.
D) $3,324,385.
13. On January 1, 2010, Gore Co. sold to Cey Corp. $400,000 of its 10% bonds for
$354,118 to yield 12%. Interest is payable semiannually on January 1 and July 1. What
amount should Gore report as interest expense for the six months ended June 30, 2010?
A) $17,706
B) $20,000
C) $21,247 (354,118*.12)/2
D) $24,000
14. On July 1, 2010, Ed Wynne signed an agreement to operate as a franchisee of Kwik
Foods, Inc., for an initial franchise fee of $180,000. Of this amount, $60,000 was paid
when the agreement was signed and the balance is payable in four equal annual
payments of $30,000 beginning July 1, 2011. The agreement provides that the down
payment is not refundable and no future services are required of the franchisor. Wynne's
credit rating indicates that he can borrow money at 14% for a loan of this type.
Information on present and future value factors is as follows:
Present value of 1 at 14% for 4 periods
Future value of 1 at 14% for 4 periods
Present value of an ordinary annuity of 1 at 14% for 4 periods
0.59
1.69
2.91
Wynne should record the acquisition cost of the franchise on July 1, 2010 at
A) $130,800.
B) $147,300. (2.91*30,000) + 60,000
C) $180,000.
D) $202,800.
Answer Key
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
B
C
B
A
D
A
C
B
B
A
B
A
C
B