ACCT 504 Final Exam (Keller)

(TCO A) A corporation has which of the following advantages? (Points : 5)

       Reduced taxes

       Simple to set up

       Limited liability for stockholders

       Owner maintains control

Question 2.2. (TCO A) Dividends flow through which one of the following statements? (Points : 5)

       The Balance Sheet

       The Statement of Retained Earnings

       The Income Statement

       None of the above

Question 3.3. (TCOs A and B) Below is a partial list of account balances for LBJ Company.

Cash

$12,000

Prepaid rent

1,300

Accounts receivable

7,000

Accounts payable

5,000

Notes payable

9,000

Common stock

22,000

Dividends

2,000

Revenues

45,000

Expenses

35,000

What did LBJ Company show as total debits? (Points : 5)

       $57,300

       $81,000

       $55,300

       $56,000

Question 4.4. (TCO B and E) Under cash-basis accounting, which of the following transactions would not be recorded? (Points : 5)

       Cash sales to customers

       Payments to vendors

       Sales on account

       Payroll payments to employees

Question 5.5. (TCO D) If ending inventory of the current year is understated (Points : 5)

       Cost of goods sold for the current year will be understated

       Gross profit for the current year will be unaffected

       Gross profit for the current year will be understated

       Net income for the current year will be overstated

Question 6.6. (TCO A and E) Equipment was purchased for $27,000. Freight charges amounted to $1,000 and there was a cost of $5,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $5,000 salvage value at the end of its 7-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)

       $4,714

       $4,000

       $3,857

       $3,285

Question 7.7. (TCOs D and G) When the market rate of interest exceeds the stated rate of interest on the bond, the bond will require _____. (Points : 5)

       a debit to Discount on Bonds Payable

       a credit to Premium on Bonds Payable

       a debit to Loss on Bonds Payable

       a credit to Gain on Bonds Payable

Question 8.8. (TCO C) Which inventory accounting system does not require a physical count of the inventory at the year end? (Points : 5)

       Periodic inventory system

       Perpetual inventory system

       Specific Identification

       None of the above

Question 9.9. (TCO F) Horizontal analysis is also known as _____. (Points : 5)

       ratio analysis

       vertical analysis

       common-size analysis

       trend analysis

Question 10.10. (TCO F) When performing a common-size balance sheet, the 100% figure is _____. (Points : 5)

       net sales

       total liabilities

       total assets

       total equity

Question 11.11. (TCO F) Ratios are most useful in expressing _____. (Points : 5)

       cause-and-effect relationships

       the relationships between numbers

       the delta between numbers

       the root cause of the problem

Question 12.12. (TCO F) Creditors are usually most concerned with analyzing _____. (Points : 5)

       the company stock price

       turnover

       liquidity

       profitability

Question 13.13. (TCO F) Shareholders are usually most interested in evaluating _____. (Points : 5)

       profitability

       leverage

       turnover

       the ability to pay debts as they come due

Question 14.14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

       multiply the stated rate times the bond’s face value

       calculate the present value of the principal only

       calculate the present value of both the principal and the interest

       calculate the present value of the interest only