The Fall 2008 Accounting Tribe
The Second Encounter
Version A
Rules:
No Cheating
Instructor:
Circle
Mrs. Kirch
Mrs. Freeland
__________________________________
Name
__________________________________
PID
__________________________________
Days &Time of Your Class
Pledge:
1)
2)
3)
4)
By signing my name below, I am promising that:
The work I complete is my own,
I did not and will not give aid to others,
I will not share any information about the examination with those
who are taking it later, and
I will report any others that I observe violating these rules.
Signature ________________________________________________
The following data is for Darby and JD’s Truck Sales, Inc.:
Cash
Accounts Receivable
Allowance for Doubtful Accounts
Inventory
Prepaid Insurance
Equipment
Accumulated Depreciation
Land
Goodwill
Accounts Payable
Wages Payable
Rent Payable
Interest Payable
Taxes Payable
Note Payable
Common Stock ($1 each)
Retained Earnings
Sales
Cost of Goods Sold
Wage Expense
Rent Expense
Office Expenses
Depreciation Expense
Bad Debt Expense
Insurance Expense
Interest Expense
Income Tax Expense
Balance
12/31/07
Balance
12/31/08
30,000
50,000
10,000
70,000
2,400
200,000
20,000
78,100
90,000
15,000
50,000
3,600
350,000
80,000
100,000
10,000
35,800
8,000
6,000
3,250
10,000
130,000
200,000
193,650
1,400,000
719,500
264,000
48,000
41,000
60,000
30,000
3,000
14,500
66,000
30,000
10,000
4,000
3,750
5,000
150,000
60,000
59,650
The land was acquired on June 30, 2008 by exchanging 60,000 shares of common stock worth $60,000 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 September 30, 2008 for $1 per share. The company did not sell any equipment during
the year. All equipment purchased during the year was purchased for cash. The retained earnings balance for
both years is after all closing entries have been made. The Note Payable requires payments of $20,000
principal plus interest at 10% on September 30th of each year.
The only item that will be graded is the scantron or bubble sheet. Therefore,
you do not need to worry about the format of your financial statements since
they will not be graded. It is highly recommended that you do the income
statement, balance sheet and cash flow statement to be sure they balance and
tie together before you answer the questions about them.
Multiple Choice Circle answer on exam AND bubble in on scan sheet. (6 points each)
The next 18 questions refer to Darby and JD=s financial statements.
1) The Total Assets at December 31, 2008 was:
A.
B.
C.
D.
E.
$ 586,700
$ 216,700
$ 270,000
$ 578,600
None of the above
2) The Total Current Liabilities at December 31, 2008 was (be careful!)
A.
B.
C.
D.
E.
$ 103,050
$ 83,050
$ 63,050
$ 193,050
None of the above
3) The Income from Operations was
A.
B.
C.
D.
E.
$ 240,500
$ 234,500
$ 220,000
$ 154,000
None of the above
4) The EPS was
A.
B.
C.
D.
E.
$ 6.36
$ 2.09
$ 0.77
$ 1.40
None of the above
5) The “Supplemental Information” section of the Cash Flow Statement for Darby and JD’s
would include
A.
B.
C.
D.
E.
Cash paid for Interest, Cash Paid for Taxes and Cash Paid for Land
Cash Paid for Working Capital, Cash Paid for Land, and Interest Expense
Cash Paid for Interest, Cash Paid for Taxes and 60,000 shares of Common Stock
Exchanged for Land
Cash paid for Interest, Cash paid for Taxes, and 60,000 shares of Common Stock and
Cash Exchanged for Land
None of the above describes
6) The cash paid for wages in 2008 was:
A.
B.
C.
D.
E.
$ 264,000
$ 260,000
$ 266,000
$ 268,000
None of the above
7) On the Cash Flow Statement, the Cash Flow from Operations was
A.
B.
C.
D.
E.
$ 208,100
$ 148,100
$ 54,100
$ 198,100
None of the above
8) On the Cash Flow Statement, the Cash Flow from (Used by) Investing Activities was
A.
B.
C.
D.
E.
($ 160,000)
($ 260,000)
($ 190,000)
($ 200,000)
None of the above
9) On the Cash Flow Statement, the Cash Flow from (Used by) Financing Activities was
A.
B.
C.
D.
E.
$ 60,000
$ 40,000
$ 100,000
$ 120,000
None of the above
10) In the “Supplemental Information” section, the Cash Paid for Interest was
A.
B.
C.
D.
E.
11)
$ 3,750
$ 3,250
$ 15,000
$ 14,500
None of the above
In the “Supplemental Information” section, The Cash Paid for Taxes was
A.
B.
C.
D.
E.
$ 5,000
$ 71,000
$ 66,000
$ 61,000
None of the above
12)
For Darby & JD’s, Taxable Income for 2008 was
A.
B.
C.
D.
E.
13)
Which of the following will NOT appear in the Operating Activities section of the Statement
of Cash Flows?
A.
B.
C.
D.
E.
14)
$ 234,500
$ 1,400,000
$ 154,000
$ 220,000
None of the above
Decrease in Inventory
Add: Accumulated Depreciation
Increase in Accounts Payable
Net Income
None of the above
Total Current Assets at December 31, 2008 for Darby & JD’s Truck Sales, Inc. was
A.
B.
C.
D.
E.
$ 206,700
$ 236,700
$ 216,700
$ 246,700
None of the above
15) The Net Fixed Assets at December 31, 2008 for Darby & JD’s was
A.
B.
C.
D.
E.
16)
For Darby & JD’s, Financing Activities will include
A.
B.
C.
D.
E.
17)
$ 180,000
$ 430,000
$ 220,000
$ 370,000
None of the above
Payment on Note Payable ($ 35,000)
Issuance of Common Stock $ 80,000
Issuance of Common Stock $ 140,000
Payment of Interest ($ 15,000)
None of the above
For Darby & JD’s, the total amount of Accounts Receivable written off during 2008 was
A.
B.
C.
D.
E.
$ 30,000
$ 15,000
$ 10,000
$ 55,000
None of the above
18)
For Darby’s & JD’s, Investing Activities will include
A.
B.
C.
D.
E.
19)
The major difference on the income statement between a retail operation and a service
company is
A.
B.
C.
D.
E.
20)
increases total assets.
decreases total assets.
decreases the current ratio.
increases the current ratio.
both B and C are correct.
The matching concept is
A.
B.
C.
D.
E.
22)
The owners= equity is shown differently
A service company=s income statement is as of a certain date, not for a period ending
A service company has no Cost of Goods Sold
A retail company includes interest in the operating expense section
There is no difference
An increase in accumulated depreciation
A.
B.
C.
D.
E.
21)
Purchase of land ($100,000)
Sale of equipment $ 10,000
Payment for land ($ 40,000)
Increase in Accumulated Depreciation $60,000
None of the above
Debits = Credits
Assets = Liabilities + Owners= Equity
Revenues - Cost of Goods Sold = Gross Margin
Recording all expenses incurred in generating the revenues of the period
The same as the book value
Which of the following would not be an adjustment in arriving at net cash flow from
operations?
A.
B.
C.
D.
E.
Changes in wages payable
Depreciation expense for the year
Changes in prepaid expenses
Decrease in inventory
Net increase in long-term debt
Use the following information for the next 7 questions
Anna’s Bellas, Inc
Statement of Income
For the Year Ended December 31, 2008
Anna’s Bellas, Inc
Balance Sheet
Dec. 31,
2007
2008
$ 170,000
80,000
80,000
330,000
$ 140,000
70,000
90,000
300,000
Assets
Sales
Cost Of Goods Sold
Gross Margin
Operating Expenses
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Total Operating Expenses
Income Before Taxes
Tax Expense
Net Income
EPS
$ 600,000
300,000
300,000
60,000
24,000
10,000
6,000
100,000
200,000
60,000
$ 140,000
$ 2.55
Current Assets
Cash
Accounts Receivable
Inventory
Total Current Assets
Property and Equipment
Equipment
320,000
Less: Accumulated
Depreciation
50,000
Net Property & Equipment 270,000
Total Assets
$ 600,000
Liabilities
Current Liabilities
Wages payable
Taxes Payable
Total Current Liabilities
Long-Term Debt
Note Payable
Total Liabilities
Owners’ Equity
Common Stock
($1 per share)
Retained Earnings
Total Owners’ Equity
Total Liabilities and
Owners’ Equity
Stock Price at 12/31/08 $ 15.00
23)
At December 31, 2008 the book value per share was approximately
A.
B.
C.
D.
E.
$ 1.00
$ 10.67
$ 7.75
$ 8.45
some other number
$ 10,000
60,000
70,000
400,000
60,000
340,000
$ 640,000
$
5,000
40,000
45,000
180,000
250,000
130,000
175,000
50,000
300,000
350,000
60,000
405,000
465,000
$ 600,000
$ 640,000
24) For 2008, the return on assets was approximately
A.
B.
C.
D.
E.
25)
For 2008, return on equity was approximately
A.
B.
C.
D.
E.
26)
6.67
6.00
4.71
1.71
some other number
At December 31, 2008, the Debt to Equity Ratio was approximately
A.
B.
C.
D.
E.
29)
43 days
49 days
46 days
91 days
some other number
At December 31, 2008, the current ratio was approximately
A.
B.
C.
D.
E.
28)
17.18%
34.36%
40.00%
30.11%
some other number
For 2008, the average collection period was approximately
A.
B.
C.
D.
E.
27)
22.58%
21.88%
24.33%
11.29%
some other number
34.27%
27.34%
41.67%
37.63 %
None of the above
At December 31, 2008, the Price Earnings Ratio was approximately
A.
B.
C.
D.
E.
1.00
15.00
5.88
9.33
None of the above
30)
Wills Co. had a beginning balance (12/31/x7) in Accounts Receivable of $600,000 and a
beginning credit balance in the Allowance for Doubtful Accounts of $30,000. During 20x8 he
sold $800,000 of goods on credit and collected $600,000. If Wills estimates that 5% of his
ending accounts receivable will eventually not be collected, his adjusting journal entry for the
bad debt expense will include a credit to allowance for doubtful accounts of
A.
B.
C.
D.
E.
31)
Still Wills Co. - If Wills had written off $5,000 of accounts receivable during 20x8, the debit to
bad debt expense would have been:
A.
B.
C.
D.
E.
32)
$ 39,750
$ 14,750
$ 15,000
$ 4,750
None of the above
Still Wills Co. - After the $5,000 write off of accounts receivable and the recording of the bad
debt expense, the ending balance in the Allowance for Doubtful Accounts at December 31,
20x8 would be:
A.
B.
C.
D.
E.
33)
$ 4,000
$ 1,000
$ 40,000
$ 10,000
None of the above
$ 39,750
$ 64,750
$ 25,000
$ 40,000
None of the above
You are preparing a bid for a note that has exactly five years to go. It was originally for
$100,000 payable in 12 equal annual payments which included interest at 10%. Current
interest rates are 6%. How much do you offer for the note so that you will earn 6%?
A.
B.
C.
D.
E.
$ 116,849.46
$ 81,271.69
$ 73,381.65
$ 61,822.04
None of these is close to the correct number
34)
The Dariko Company prepares annual financial statements at December 31 of each year. On
April 1, 20x6 the Company borrowed $100,000 from the bank. The Dariko Company must pay
interest of 10% on the unpaid balance plus $10,000 on the principal on April 1 of each year.
The journal entry on December 31, 20x6 is:
A.
B.
C.
D.
E.
35)
Interest Payable
Interest Expense
$ 7,500
Interest Expense
Cash
$ 7,500
Interest Expense
Note Payable
Cash
$ 7,500
$ 10,000
Interest Expense
Interest Payable
$ 2,500
Interest Expense
Interest Payable
$ 7,500
$ 7,500
$ 7,500
$ 17,500
$ 2,500
$ 7,500
Still Dariko - The journal entry on April 1, 20x7 is:
A.
B.
C.
D.
E.
Interest Expense
Interest Payable
Note Payable
Cash
$ 7,500
Interest Expense
Note Payable
Cash
$ 7,500
$ 10,000
$ 7,500
$ 10,000
$ 10,000
$ 17,500
Interest Payable
Interest Expense
Note Payable
Cash
$ 7,500
$ 2,500
$ 10,000
Interest Payable
Cash
$ 7,500
Interest Payable
Interest Expense
Note Payable
Cash
$ 2,500
$ 7,500
$ 10,000
$ 20,000
$ 7,500
$ 20,000
36)
Megan will sell you a Doodlebop for $30,000. The deal is you pay for the Doodlebop in three
equal annual payments that include interest at 4%. You put no money down and the first
payment is not due until one year from today!! 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 Megan=s deal?
A.
B.
C.
D.
E.
37)
$ 11,200.00
$ 10,810.46
$ 12,063.44
$ 8,264.69
None of the above
How much are you really paying for the Doodlebop under Megan=s deal?
A. $ 33,600.00
B. $ 26,884.01
C. $ 30,000.00
D. $ 36,190.32
E. None of the above
38)
If you amortize the Megan deal properly, the interest for the first year would be
A.
B.
C.
D.
E.
39)
$ 3,619.03
$ 3,000.00
$ 2,688.40
$ 1,200.00
None of the above
Meghann=s Corporation is buying all the assets and assuming all the liabilities of Dylan=s, Inc.
The following information is available for Dylan=s at the date of the purchase:
Accounts Receivable
Inventory
Equipment
Accumulated Depreciation
Land
300,000
100,000
200,000
80,000
300,000
Accounts payable
Wages Payable
Note Payable
Common Stock
Retained Earnings
40,000
10,000
100,000
300,000
270,000
The inventory is worth $60,000, the land is worth $400,000 and the equipment is worth
$300,000. Everything else is worth its book value. Meghann=s Corporation will pay $1,000,000
for Dylan=s, Inc. How much of the purchase price will Meghann=s Corporation debit to
goodwill?
A.
B.
C.
D.
E.
$ 90,000
$ 240,000
$ 330,000
$ 390,000
Some other number which is not here
40)
On a statement of cash flows, depreciation expense is treated as an adjustment to net income
because depreciation expense
A.
B.
C.
D.
E.
41)
is a direct source of cash.
reduces reported income because it involves an inflow of cash.
reduces reported income but does not involve an outflow of cash
is an inflow of cash to an account set up for the replacement of assets.
None of the above
Kevin, Inc. is buying all the assets and assuming all the liabilities of Makenna, Inc. for $500,000.
The following information is available for Makenna, Inc. at the date of purchase:
Accounts Receivable
Inventory
Equipment
Accumulated Depreciation
70,000
80,000
90,000
10,000
Accounts Payable
Note Payable
Common Stock
Retained Earnings
20,000
100,000
50,000
60,000
The accounts receivable are worth $60,000, the inventory is worth $70,000 and the equipment
is worth $70,000. Additionally, the Note Payable debt is payable interest only at 12% per year
for the next 5 years and then the principal is due. The current interest rate for similar debt is
9%. How much of the purchase price will Kevin, Inc. debit to goodwill?
A.
B.
C.
D.
E.
42)
$ 390,000.00
$ 431,668.95
$ 427,902.78
$ 409,183.20
None of the above
Patrick, Inc. issued 7-year, $100,000 face, 8% coupon bonds to yield 5%. The journal
entry to record the issuance of the bonds would include
A.
B.
C.
D.
E.
A debit to bond discount of $ 17,359.12
A debit to cash of $ 100,000.00
A credit to bonds payable of $ 117,359.12
A credit to bond premium of $ 17,359.12
None of the above
43)
Jason Industries is issuing a 5-year, $50,000 zero coupon bond priced to yield 8% on
December 31, 20x0. How much will Jason Industries receive when it is issued?
A.
B.
C.
D.
E.
44)
Still on Jason Industries – If the first year’s interest was paid on December 31, 20x1, the
entry to record that interest would include
A.
B.
C.
D.
E.
45)
A credit to cash for $ 4,000.00
A debit to interest expense of $ 4,000.00
A debit to interest expense of $ 2,722.33
A debit to bond premium of $ 2,722.33
None of the above
Eric Company issued 10-year, $100,000 face, 5% coupon bonds to yield 9% on
December 31, 20x0. The journal entry on Eric Company’s books on December 31, 20x2
(the date of the second interest payment) would include
A.
B.
C.
D.
E.
46)
$ 50,000.00
$ 70,000.00
$ 33,841.97
$ 34,029.16
None of the above
A debit to interest expense of $ 6,841.71
A debit to bond discount of $ 1,841.71
A credit to cash of $9,000.00
A debit to interest expense of $ 5,000.00
None of the above
Still on Eric Company – At December 31, 20x2
A.
B.
C.
D.
E.
The Balance Sheet would show Net Bonds Payable of $ 76,019.01 under Current
Liabilities
The Balance Sheet would show Add: Bond Discount of $ 1,689.64
The balance in the bond premium account would be credit of $3,531.35
The balance in the bond discount account would be a debit of $ 22,139.28
None of the above