3. At the beginning of January 2013,Aeropostalehad a balance of $10,000 in its Retained Earnings account. During the month of January 2013, the company engaged in the following transactions? What was the balance of the companys Retained Earnings account at the end of January?

--Issued common stock for cash, $6,100.

--Provided services to customers on account, $5,500.

--Provided services to customers in exchange for cash, $3,900.

--Purchased equipment on January 31, paying cash of $5,100.

--Paid rent for January, $1,800.

--Sold equipment for $800 more than book value.

--Paid workers salaries for January, $2,500.

--Paid dividends to stockholders, $800.

a. $21,200 c. $14,300 e. $10,000

b. $15,100 d. $20,400

Note: Apply the accrual basis of accounting unless specifically instructed to do otherwise. 1. Consider the following cash flow items: Pay amount owed to bank for previous borrowing. Pay utility costs. Purchase equipment to be used in operations. Purchase office supplies to be used the next month. Purchase one year of rent in advance. Pay workers salaries. Pay for research and development costs. Pay taxes to the IRS. Sell common stock to investors. How many of these cash flow items involve investing activities? a. b. c. d. e. 2. None One Two Three Four Listed next are several transactions for Parton & Owens Productions. --Issued common stock in exchange for cash. --Purchased equipment by signing a note payable. --Paid rent for the current month. --Purchased equipment for cash. --Sold treasury stock. --Purchased office supplies on credit. --Paid insurance for the current month. --Collected cash from customers on account. How many of these transactions increased the company's total assets? a. b. c. One Two Three d. e. Four Five 2 3. At the beginning of January 2013, Aeropostale had a balance of $10,000 in its Retained Earnings account. During the month of January 2013, the company engaged in the following transactions? What was the balance of the company's Retained Earnings account at the end of January? --Issued common stock for cash, $6,100. --Provided services to customers on account, $5,500. --Provided services to customers in exchange for cash, $3,900. --Purchased equipment on January 31, paying cash of $5,100. --Paid rent for January, $1,800. --Sold equipment for $800 more than book value. --Paid workers' salaries for January, $2,500. --Paid dividends to stockholders, $800. a. b. 4. $21,200 $15,100 c. d. e. $10,000 Of the following accounts, how many have a normal debit balance. Cash Service Revenue Accounts Payable Treasury Stock Retained Earnings a. Two b. Three 5. $14,300 $20,400 c. d. Salaries Expense Utilities Expense Warranty Expense Dividends Common Stock Five Six e. Four Consider the following transactions of Berling Inc.: January January January January January January 2: 4: 6: 8: 9: 10: Paid a cash dividend Provided services to customers on account Issued common stock in exchange for cash Borrowed cash from the bank and signed a note Wrote off an account receivable Purchased office supplies on account 3 How many of these transactions resulted in a debit to an expense account? a. One c. Four b. Two d. None Facts for Questions 6-8: e. Three Goss & Caine, Inc., prepares monthly financial statements for its bank. The company's November 30 and December 31 (2013) adjusted trial balances included the following amounts. Supplies Prepaid Insurance Salaries Payable Unearned Revenue November 30 Debit Credit 2,600 4,800 3,000 4,400 December 31 Debit Credit 3,100 4,400 5,000 4,000 Other information: --Purchases of supplies in December totaled $1,700. --No insurance payments were made in December. --During December, $3,000 of salaries for November were paid by Goss & Caine. --On November 1, a tenant paid Goss & Caine $4,800 in advance rent for the period November 1, 2013, through October 31, 2014. 6. Goss & Caine's adjusting entry for supplies used during the month of December included a a. b. c. d. e. 7. debit of $1,200 to Supplies Expense. credit of $500 to Supplies. credit of $2,200 to Supplies. credit to Supplies Expense of $1,100. None of the above. Goss & Caine's December 31 adjusting entry for salaries included a a. b. c. d. e. debit of $5,000 to Salaries Expense. credit of $5,000 to Salaries Payable. credit of $3,000 to Salaries Payable. debit of $5,000 to Salaries Payable. both a & b 4 8. Goss & Caine's December 31 adjusting entry related to unearned revenue included a a. b. c. d. e. 9. On November 28, 2013, Witcher & Mitchell received a $3,000 payment from a customer for services that were to be provided over the following three months (December, January, and February). The company credited the $3,000 receipt to Unearned Revenue. If an equal amount of service was provided each month, Witcher & Mitchell's December 31 adjusting entry included a a. b. c. d. e. 10. debit to Rent Revenue of $800. credit to Unearned Revenue of $400. debit to Unearned Revenue of $800. credit to Rent Revenue of $800. debit to Unearned Revenue of $400. $1,000 $2,000 $1,000 $2,000 $1,000 debit to Service Revenue. credit to Service Revenue. debit to Unearned Revenue. credit to Unearned Revenue. credit to Unearned Revenue. \"Purchased supplies on account during April. The supplies were paid for and used in May.\" What was the impact of this transaction during April on the following three items: Cash Balance a. b. c. d. e. No effect Decrease Decrease No effect No effect Cash-basis Net Income No effect Decrease Decrease No effect Decrease Accrual-basis Net Income Decrease No Effect Decrease No effect Decrease 5 11. Ellison & Evans' general ledger showed a checking account balance of $22,870 on June 30, 2013. The June cash receipts of $1,585, included in the general ledger balance, were placed in the night depository at the bank on June 30 and processed by the bank on July 1. The bank statement dated June 30 showed bank service fees of $95. The bank processed all checks written by the company by June 30 and listed them on the bank statement, except for one check totaling $1,210. The bank statement showed a balance of $22,400 on June 30. What was the adjusted balance of Ellison & Evans' cash balance on June 30, 2010? a. $22,825 b. $24,185 12. c. d. $22,870 $22,775 e. Some other amount At the beginning of 2013, Gonzales Acosta & Ngo (GAN) had accounts receivable of $84,000. At the end of 2013, the company had accounts receivable of $72,000. During 2013, GAN had total sales of $1,100,000, all of which were credit sales. What was this company's average collection period for 2013? a. b. c. 15.49 times 14.10 times 17.19 times d. e. 23.6 days 25.9 days 6 13. On March 17, Fitzpatrick Lumber sold building materials to Krumme Limited for $15,000 with terms of 3/10, net 20. What amount did Fitzpatrick record as revenue on March 25 when Krumme paid for the building materials? a. b. 14. $15,000 $14,550 c. d. $10,500 Zero $15,450 On April 19, Bennett & Bohn installed plumbing in a new home for $3,500 on account. However, on April 24, the plumbing work did not pass inspection and Bennett & Bohn granted the customer an allowance of $700 because of the problem. The customer made full payment of the balance owed, excluding the allowance, on April 30. The entry recorded on April 24 by Bennett & Bohn included a. a debit to Sales Allowances. b. a credit to Sales Allowances. 15. e. c. a debit to Service Revenue d. a credit to Accounts Payable Coe Wang Bakeries had the following balances on December 31, 2013, before any adjusting entries: Accounts Receivable = $93,800; Allowance for Uncollectible Accounts = $6,100 (debit). Coe Wang estimates uncollectible account expense based on an aging of accounts receivable as shown below: Age Group Not yet due 0-30 days past due 31-60 days past due More than 60 days past due Accts. Rec'ble Estimated Percent Uncollectible $50,000 20,000 18,000 4% 8% 10% 5,800 50% 7 What amount of bad debt expense did Coe Wang Bakeries record in its December 31, 2013, adjusting entry? a. b. c. $10,200 $13,800 $14,400 d. e. $4,100 some other amount Facts for Questions 16-19: During 2013, Shi & Li sold 800 buckets. The selling price per bucket was $80. Shi & Li had the following beginning inventory and purchase transactions during 2013. The company uses a periodic inventory system. Inventory, Purchase: Purchase: Purchase: 16. $16,000 $4,000 $8,500 d. e. $21,750 Some other amount What was this company's cost of goods sold for 2013 assuming that it uses the LIFO method? a. b. c. 18. January 1, 2013 April 24, 2013 July 31, 2013 December 7, 2013 Unit Cost $20 30 35 50 What was this company's ending inventory for 2013 assuming that it uses the FIFO method? a. b. c. 17. Units 300 350 250 100 $27,000 $24,800 $26,250 d. e. $21,750 Some other amount What was this company's cost of goods sold for 2013 assuming it uses the average cost method? a. b. c. $27,000 $24,200 $26,250 d. e. $21,750 Some other amount 8 19. Under which inventory cost flow assumption would Shi & Li have the highest cost of goods available for sale during 2013? a. b. c. d. e. 20. LIFO FIFO Average cost Either LIFO or FIFO That figure would have been the same under all three methods. Sorrels & Sutter reported the following amounts in its 2013 income statement. Net sales $440,000 Advertising expense 20,000 Interest expense 10,000 Salaries expense 60,000 Utilities expense 15,000 Income tax expense 20,000 Cost of goods sold 260,000 What was this company's operating income for 2013? a. b. c. d. e. $120,000 $85,000 $110,000 $95,000 Some other amount 9 21. Patel & Price had the following inventory data at the end of 2013, prior to any adjusting entries. Inventory Item Neds Nicks Lohrs Quantity 300 700 200 Cost $10 $11 $12 Market $15 $10 $10 After applying the lower-of-cost-or-market method, the accountant for Patel & Price prepared an adjusting entry. entry . . . a. b. c. d. e. 22. decreased the company's increased the company's increased the company's increased the company's none of the above That cost of goods sold. inventory. cost of goods sold. stockholders' equity. On April 30, 2014, Valles Company acquired all of the outstanding common stock of Brumley Inc. for $150. The book values and fair values of Brumley's assets and liabilities are shown next: Book Value Fair Value Current assets Property & equipment $42 66 $90 99 10 Current liabilities Long-term liabilities 10 42 10 40 Calculate the amount paid for goodwill. a. b. $92 $51 c. d. $94 $11 e. some other amount Facts for Questions 23-25: Petrocchi Corp. purchased a new hydraulic press to use in the production of elrods. The hydraulic press was purchased on January 1, 2009, and cost $600,000. The company estimated that the machine would have a residual value of $100,000 at the end of its useful life of five years. The following schedule indicates the number of elrods expected to be produced each year of the life of the hydraulic press (assume that actual production in each year was equal to the estimated production). 2009 2010 2011 23. 2012 2013 8,000 elrods 9,000 elrods Assuming that the company applied the double-declining balance method, how much depreciation expense was recorded on the hydraulic press in 2010? a. b. c. 24. 10,000 elrods 6,000 elrods 7,000 elrods $200,000 $144,000 $120,000 d. e. $240,000 None of these Assuming that the company applied the activity-based method, what was the balance of the machine's accumulated depreciation account at the end of 2011 (after adjusting entries)? 11 a. b. c. 25. $200,000 $ 87,500 $287,500 d. e. $92,500 None of these If the hydraulic press was sold at the end of 2010 (after the 2010 depreciation expense was recorded), what was the gain or loss on disposal if the selling price was $425,000 and the company used the straight-line depreciation method? a. b. c. $25,000 Gain $125,000 Gain $25,000 Loss Facts for Questions 26-27: for two companies. d. e. $50,000 None of these Listed next are selected financial data Davis, Inc. Current Assets: Cash and cash equivalents Current investments Net account receivables Inventory Other current assets Total Current Assets $ 3,400 4,100 3,600 5,200 1,100 $17,400 Douglas, Inc. $ 2,600 3,200 1,900 4,700 1,600 $14,000 12 Current Liabilities: Accounts payable Short-term debt Other current liabilities Total Current Liabilities $ 1,700 3,500 4,100 $ 9,300 $ 3,000 2,400 1,400 $ 6,800 26. Which company has the more impressive acid-test ratio? a. b. c. 27. Choose the correct answer: a. b. c. d. 28. Davis Douglas The two companies have identical acid-test ratios. Davis ratio Davis ratio Davis ratio Davis ratio has more working than Douglas has less working than Douglas has more working than Douglas has less working than Douglas capital but a lower current capital and a lower current capital and a higher current capital but a higher current On October 1, 2013, Carlson's Closets borrowed $50,000 from Quinones National Bank. Carlson's signed a nine-month, 6% note payable. Interest was payable at maturity. Carlson's year-end is December 31. Carlson's journal entry to record the payment of this note will include a a. debit to Interest Receivable of $750. b. debit to Interest Expense of $1,500. 13 c. credit to Interest Expense of $750. d. credit to Interest Payable of $1,500. e. debit to Interest Expense of $2,250. 29. How many of the following items are current liabilities? Accounts payable Sales allowances Customer advances Purchase Returns Unused line of credit Commercial paper a. One b. Two c. Three 30. Four Five On January 1, 2014, Parker Company issued $500,000 of 8% bonds due in 10 years. The bonds sold for $467,480 when the market interest rate was 9%. What will be the \"debit\" to Interest Expense on June 30, 2014, the first semi-annual interest payment date? a. $20,000 b. $18,744 31. d. e. c. d. $21,037 $19,201 e. $22,500 On January 1, 2014, Esparza Company issued $600,000 of 8% bonds due in 15 years. The market interest rate on the issue date was 7%. What will be the \"credit\" to Cash on June 30, 2014, the first semi-annual interest payment date? a. $24,000 b. $21,000 c. d. $48,000 $19,201 e. Some other amount 14 32. On January 1, 2013, Cochran & Collier issued $50 million of 8% bonds, due in 10 years, with interest payable semi-annually on June 30 and December 31 each year. What was the issue price of these bonds if the market rate was 7% on the date they were issued? a. $51,244,600 b. $53,553,300 c. d. $48,128,500 $46,602,578 e. $55,101,900 FACTS FOR QUESTIONS 33-35: Presented below are selected financial data for three competing companies for a recent year. Total assets Total liabilities Total stockholders' equity Sales Interest expense Income tax expense Net income 33. Ashcraft $17,000 9,500 7,500 18,000 900 1,000 1,900 Bowers $15,300 9,700 5,600 17,400 800 1,200 2,200 Which company has the highest debt-to-equity ratio? a. Ashcraft Cooper $13,200 6,700 6,500 13,900 900 1,400 2,100 15 b. Bowers c. Cooper d. Cannot be determined given information provided. 34. Which company has the poorest or least impressive times interest earned ratio? a. b. c. d. 35. Which company has the highest profit margin ratio? a. b. c. d. 36. Ashcraft Bowers Cooper Cannot be determined given information provided. \"Re-issued 1,000 shares of treasury stock. The stock had been originally issued for $70 per share and reacquired for $60 per share. The stock was re-issued at $55 per share.\" The journal entry for this transaction included a a. b. c. d. e. 37. Ashcraft Bowers Cooper Cannot be determined given information provided. debit to Treasury Stock. credit to Retained Earnings. debit to Loss on Sale of Treasury Stock. debit to Additional Paid-in Capital. None of the above Daly Avondet & D'Amato (DAD) reported net sales of $900,000 in 2013 and a net income of $150,000. The company's average 16 common shares outstanding during 2013 was 100,000. The par value of the company's common stock was $10 per share and was sold for an average price of $20 per share. At the end of 2013, the company's stock price was $22.50. What was DAD's P/E ratio at the end of 2013? a. 10.1 b. 14.0 c. 20.2 38. d. 15.0 e. cannot be determined given information provided How many of the following transactions have no impact on a company's total assets? Issued common stock Purchase of treasury stock Declare cash dividend a. one b. two c. three 39. d. e. Payment of a cash dividend Sale of treasury stock Payment of employee salaries four five \"Issued 800 shares of $20 par value common stock for $20 per share.\" The journal entry for this transaction included a a. b. c. d. e. debit to Treasury Stock. credit to Retained Earnings. credit to Additional Paid-in Capital. debit to Common Stock. None of the above 17 40. Which of the following is reported in the statement of cash flows if the direct method is being used? a. Depreciation expense b. Loss on sale of an asset c. Gain on sale of an asset 41. 42. How many of the following items would be reported in the operating activities section of a statement of cash flows that was prepared using the indirect method? Purchase of a patent Depreciation expense Decrease in accounts receivable Increase in inventory Exchange of long-term assets Payment of dividends a. Two b. Three e. c. d. Four Five Six Isaac Inc., reported net income of $122,000 for 2013. That net income figure included a loss on the sale of land of $20,000. A comparison of Isaac's 2013 and 2012 balance sheets revealed that the company's receivables decreased by $30,000 in 2013, while its inventory increased $20,000, and its accounts payable decreased by $16,000. What was Isaac's net cash flows from operating activities during 2013? a. $136,000 b. $108,000 43. d. Cash paid to suppliers e. Amortization expense c. d. $128,000 $96,000 e. some other amount Pitt Bell, Inc. reported net income of $161,000 for 2013. That net income figure included a gain on the sale of a building of $40,000. A comparison of the company's 2013 and 2012 balance sheets revealed that the company's receivables decreased by $34,000 in 2013, while its inventory decreased $18,000, and its accounts payable increased by $18,000. During 2013, the 18 company recorded $20,000 of depreciation expense. What was Pitt Bell's net cash flows from operating activities in 2013? a. $175,000 b. $171,000 44. c. $251,000 d. $211,000 Treasury stock a. has a normal debit balance. b. can be considered a current asset. c. decreases stockholders' equity. 45. 47. d. is recorded as an investment. e. both a and c Which of the following is a positive sign that a company can quickly turn its receivables into cash? a. b. c. d. 46. e. Some other amount A low receivables turnover ratio. A high receivables turnover ratio. A low average collection period. Both a high receivables turnover ratio and a low average collection period. Assume that Porter Company has a current ratio of 1.13. If Porter purchases inventory on account, the company's current ratio will go down. a. True b. False c. Cannot be determined given information provided When using \"vertical analysis,\" every item in the balance sheet is expressed as a percentage of total stockholders' equity. 19 a. True b. False FACTS FOR QUESTIONS 48-49: Forsyth Amil & McCormick (FAM), Inc. reported total sales of $20 million in 2013 and $18 million in 2012 (all sales on credit). In 2013, the company had total cost of goods sold of $12.4 million compared to $13.4 million the previous year. The company's net income for 2013 was $4.2 million compared to $3.0 million the previous year. The following table presents balance sheet data for FAM for both years. All amounts are expressed in thousands of dollarsso, for example, the company had $500,000 of cash in 2012. 2013 Current assets: Cash Accounts receivable Inventory Long-term assets Total Assets Current liabilities Long-term liabilities Common stock Retained earnings Total liabilities and equity 48. $ 900 2,100 4,700 18,800 $26,500 $ 500 3,800 4,300 15,200 $23,800 $ 7,200 5,800 3,000 10,500 $26,500 $ 6,100 7,000 3,000 7,700 $23,800 What was FAM's gross profit ratio for 2013? a. 38% b. 40% 49. 2012 c. 29.5% d. 33% e. Cannot be determined given information provided What was FAM's receivables turnover ratio in 2013? a. 53.7 days b. 6.8 times c. 38.4 days d. 9.5 times e. 55.6 days 20 50. Consider the following 2012 and 2013 inventory data for Bartok Motors: 2013 2012 Beginning inventory $ 80,000 $ 50,000 Ending inventory 120,000 80,000 Purchases 235,000 315,000 Purchases returns 25,000 15,000 What was Bartok's average days in inventory for 2013? a. b. 214.7 days 237.2 days c. d. 187.2 days 171.7 days e. 155.4 days 21 Name:______________________ Seat #:______________________ ACCOUNTING 2113 SPRING 2014 FINAL EXAM 22 NOTE: Choose the BEST answer for each item