THE 2005 SPRING ACCOUNTING TRIBE
The Second Scrimmage
Rules:
No cheating
______________________________________
Name
______________________________
PID
_________________
Campus
Version 1
The following data is for Bella Corporation:
Balance
12/31/05
Cash
20,000
Accounts Receivable
50,000
Inventory
50,000
Equipment
250,000
Accumulated Depreciation 25,000
Land
100,000
Accounts Payable
40,000
Wages Payable
15,000
Taxes Payable
10,000
Long-Term Note Payable
90,000
Common Stock ($1 each) 110,000
Retained Earnings
180,000
Balance
12/31/04
50,000
35,000
94,000
200,000
20,000
60,000
9,000
30,000
100,000
50,000
110,000
Sales
1,000,000
Cost of Goods Sold
600,000
Wage Expense
210,000
Rent Expense
48,000
Office Expenses
19,000
Depreciation Expense
18,000
Interest Expense
10,000
Income Tax Expense
20,000
Gain on Sale of Equipment
5,000
The land was acquired on April 1, 2005 by exchanging 50,000 shares of common stock worth $50,000
and cash for the balance of the purchase price. The additional common stock (other than that issued for the
purchase of the land) was sold on October 1st for $1 per share. The company sold a piece of equipment during
the year that cost $20,000 and had accumulated depreciation of $13,000 for a gain of $5,000. The retained
earnings balance for both years is after all closing entries have been made. During 2005, the 2004 taxes
payable were paid and ½ of the 2005 taxes were paid. The company’s tax rate is 20% The market price per
share at Dec 31, 2005 was $50. The Note Payable requires payments of $10,000 principal plus interest at 10%
on December 31st of each year of each year.
2
Prepare, in good form, a statement of cash flow for 2005 (100 points)
3
Prepare, in good form, an income statement for 2005 (50 points)
4
Multiple Choice ( 5 points each)
Using the data from Bella Corporation, answer questions 1-6 (Be careful to note which year the question is
asking about). Answers, to be correct, must be within 10%).
____1) What are the Total Current Liabilities at 12/31/04?
A.
B.
C.
D.
E.
$ 69,000
$ 99,000
$119,000
$109,000
None of the above
_____2) What was the debt to equity ratio at the end of 20x4?
A. 53.00%
B.
100%
C. 33.15%
D. 55.43%
E. None of these
_____3) What was the inventory turn for 20x5?
A.
6.94 Times
B.
8.33 Times
C. 13.89 Times
D. 10.64 Times
E. Some other number
____4) What was the book value per share at the end of 20x5?
A. $ 4.38
B. $ 3.42
C. $ 4.15
D. $ 2.64
E. Some other number
5) Assume the company earned $100,000 for the year ended 12/31/05, what was the ROE?
A. 22.53%
B. 29.06%
C. 44.44%
D. 45.68%
E. Some other number
5
____6) Assume the company earned $2.00 per share, what would the P/E ratio be at 12/31/x5?
A. 25
B. 12.50
C. 2.86
D. 40
E. Some other number
____7) Dana Corporation is buying all the assets and assuming all the liabilities of Blake. The
following information is available for Blake at the day of the purchase:
Accounts Receivable
200,000
Accounts payable
40,000
Inventory
60,000
Wages Payable
10,000
Equipment
200,000
Note Payable
300,000
Accumulated Depreciation 80,000
Common Stock
100,000
Land
300,000
Retained Earnings 230,000
Total
680,000
680,000
The accounts receivable are worth $180,000, the inventory is worth $80,000, the land is worth
$200,000 and the equipment is worth 140,000. Additionally, the Note Payable debt is payable interest only at
10% per year for the next 5 years and then the principal is due. Current interest rate for similar debt is 8%.
Dana will pay $500,000 for Blake. How much of the purchase price will Dana debit to goodwill?
A. $ 373,961
B. $ 273,961
C. $ 250,000
D. $ 350,000
E. Some other number
____8) Still on the Dana purchase of Blake, assuming prices are increasing, the reason that the worth of the
inventory is more than what Blake has on the books is probably because Blake uses:
A) A LIFO inventory system
B) A FIFO inventory system
C) An estimated inventory system
D) An estimate of the gross margin in calculating the inventory
E) None of these
____9) A balloon payment is
A.
B.
C.
D.
E.
A large lump sum payment of principal.
the total of the payments on a loan
the total principal payments on a loan.
the loan has been sold.
Something else.
6
____10) The Kylie Company prepares annual financial statements at December 31 of each year. On April 1,
20x5 they borrowed $500,000 from the bank. The Kylie Company must pay interest of 12% plus $50,000 on
April 1 each year starting in 20x6. The journal entry on December 31, 20x5 is:
A. Interest Expense
Cash
$ 45,000
B. Interest Expense
Cash
$60,000
C . Interest Expense
Note Payable
Cash
$60,000
$50,000
D. Interest Expense
Interest Payable
$ 45,000
E. Interest Payable
Interest Expense
$ 45,000
$ 45,000
$60,000
$110,000
$ 45,000
$ 45,000
____11) Still Kylie Company, The journal entry on April 1, 20x6 is:
A. Interest Expense
Interest Payable
Note Payable
Cash
$ 45,000
$ 15,000
$ 50,000
B. Interest Expense
Interest Payable
Note Payable
Cash
$ 15,000
$ 45,000
$ 50,000
C. Interest Expense
Note Payable
Cash
$60,000
$50,000
D. Interest Payable
Cash
$60,000
F. Interest Expense
Note Payable
Cash
$ 15,000
$ 50,000
$110,000
$110,000
$110,000
$60,000
$65,000
7
____12) Borton Co. had a fire. Ending inventory last year was $100,000. To the day of the fire, the company
had purchased $2,000,000 in goods. The sales to the date of the fire were $2,000,000. The company
marks up all merchandise 100% when determining the sales price. How much did Borton lose in the fire?
A. $ 1,000,000
B. $ 2,000,000
C. $ 1,100,000
D. $ 2,100,000
E. Some other number
13) Annabella Corp has a beginning balance (1/1/x1) )in Accounts Receivable of $200,000 and a
beginning credit balance in the Allowance for Doubtful Accounts of $10,000. During 20x1 the company sold
$1,000,000 of goods on credit and collected $900,000. Annabella wrote off $20,000 of customers who went
bankrupt. If Annabella estimates that 2% of its ending accounts receivable will eventually not be collected, its
adjusting journal entry for the bad debt expense will include a credit to allowance for doubtful accounts of:
A.
B.
C.
D.
E.
$ 4,000
$ 15,600
$ 5,600
$ 2,600
Some other number
____14) If Annabella had written off $20,000 of accounts receivable during 20x1 and a customer with a balance
of $1,000 which had previously been written off came back and paid during 20x1, the debit to bad debt
expense would have been:
A. $ 2,500
B. $ 3,290
C. $ 3,500
D. $ 14,600
E. Not enough information to calculate
8
____15) Winkler Co. had beginning Accounts Receivable of $300,000. At the end of the year, Accounts
Receivable was $400,000. Cost of Goods Sold for the year were $800,000 and sales for the year were
$2,000,000. The average collection period was (your answer should be within 10% of one of these)
A) 91 days
B) 64 days
C) 30 days
D) 5.71 times
E) some other number
____16) Slick J. Sheurman will sell you a Humbug for $100,000. The deal is you pay for the Humbug in six
equal annual payments that include interest at 3%. You called the bank and they said that they would charge you
10% for a similar loan. How much are the payments if you take
Slick Sheurman’s deal?
A.
B.
C.
D.
E.
____17)
$ 16,667 plus interest
$ 80,397.62
$ 18,459.72
$ 2,000
None of these
If you amortize the Sheurman deal properly, the interest for the first year would be
A. $ 10,000
B. $ 8,039.76
C. $ 3,000
D. $ 18,459.72
E. None of these
_____18) Intangible assets are
A. reported net of accumulated depreciation.
B. subtracted from current assets to get the quick or acid-test ratio.
C. assets which have no physical presence.
D Always included in current assets
E
None of these
9
_____19) DiDi wants to retire in 40 years at age 41 with $1,000,000. How much does she need to invest
today at a rate of 10% to meet her goal?
A.
B.
C.
D.
E.
$ 221,100.
$
22,100.
$ 9,779,100.
$ 977,910.
$
9,779.10
____20) How much does K. Bear need to invest today so that she can withdraw $1,000 per year for the next 10
years if she earns 8% on her money? She will make the first withdrawal one year from today.
A. $ 6,710.10
B. $ 671.01
C. $10,000.00
D. $ 4,632.00
E. $ 5,334.90
_____21) C. Delia purchased a new Whatsit on January 1 of 2004. It cost her $50,000, has an estimated
salvage value of $10,000 and is expected to last 10 years. What is the balance in the accumulated
depreciation account at the end of the third year?
A.
B.
C.
D.
E.
$ 50,000
$ 12,000
$ 38,000
$ 8,000 .
some other number
_____22) The matching concept is
A. Assets = Liabilities + Owners’ Equity
B. Debits = Credits
C. Having the same number of asset accounts on the balance sheet as were on the balance sheet the year
before
D. Recording all expenses incurred in generating the revenues of a period.
E. Revenues - Cost of Goods Sold
10
____23) John wants to buy a new Chevord. The cost is $600,000. John will pay for the Chevord by putting
10% down and the rest in 5 equal annual payments which include interest at 10%. The amount of the
payments would be:
A) $ 142,450.14
B) $ 108,000
C) $ 150,274.25
D) $ 135,246.83
E) Some other number
____24) Allowance for Doubtful Accounts is a (an)
A. expense account
B. liability account
C. contra account
D. revenue account
E. Huh?
For the next four questions, use the following data:
On January 1, 20x1 Peppel Company had 10 Huggies which cost it $10,000 each in their inventory. During
the year, the following transactions occurred:
Jan 1 Sold 4 Huggies for $20,000 each
Feb 1 bot 8 Huggies @ $11,000 each
Mar 1 sold 4 Huggies @ $22,000 each
Jun 1 sold 5 Huggies for $22,000 each
Sept 1 bought 3 @ $12,000 each
Dec 1 sold 2 @ $24,000 each
_____25) Cost of Goods Sold Under FIFO would be:
A.
B.
C.
D.
E.
$ 146,000
$ 155,000
$ 160,000
$ 111,000
None of these
____26) The ending Inventory under LIFO would be:
A)
B)
C)
D)
E)
$ 102,000
$ 146,000
$ 62,000
$ 69,000
None of these
11
_____27) Gross Margin under LIFO would be:
A)
B)
C)
D)
E)
_____28)
A.
B.
C.
D.
E.
$ 164,000
$ 146,000
$ 171,000
$ 111,000
None of these
Total Sales under FIFO
$ 155,000
$ 162,000
$ 326,000
10 @ $20
None of these
____29) On a statement of cash flows, depreciation is treated as an adjustment to net income because
depreciation:
A.
B.
C.
D.
E.
is a direct source of cash.
reduces reported income but does not involve an outflow of cash.
reduces reported income because it involves an inflow of cash.
is an inflow of cash to an account set up for the replacement of assets.
None of the above.
____30) Revenues are
A. Reported on the balance sheet
B. Increased with a debit
C. The costs of doing business
D. Always greater than the expenses
E. Reported on the income statement
____31) FIFO stands for:
A.
B.
C.
D.
E.
Financial information from operations
Financing interest for owners
Financial information for owners
Free interest for owners
First in first out