accounting

due in 13 hours 

 

Quiz –

PART I — MULTIPLE CHOICE

Instructions: Designate the best answer for each of the following questions.

_____ 1. Hinton Corporation desires to earn target net income of $90,000. If the selling price per unit is $30, unit variable cost is $24, and total fixed costs are $360,000, the number of units that the company must sell to earn its target net income is

a. 30,000.

b. 75,000.

c. 45,000.

d. 60,000.

_____ 2. The following data has been collected for use in analyzing the behavior of main-tenance costs of Steiner Corporation:

Month Maintenance Costs Machine Hours

January $121,000 20,000

February 125,000 23,000

March 128,000 24,000

April 159,000 34,000

May 168,000 36,000

June 178,000 38,000

July 181,000 40,000

Using the high-low method to separate the maintenance costs into their variable and fixed cost components, these components are

a. $5 per hour plus $20,000.

b. $5 per hour plus $30,000.

c. $4 per hour plus $41,000.

d. $3 per hour plus $61,000.

_____ 3. Given the following data for Farwell Company, compute (A) total manufacturing costs and (B) costs of goods manufactured:

Direct materials used $120,000 Beginning work in process $20,000

Direct labor 50,000 Ending work in process 10,000

Manufacturing overhead 150,000 Beginning finished goods 25,000

Operating expenses 175,000 Ending finished goods 15,000

(A) (B)

a. $310,000 $330,000

b. $320,000 $310,000

c. $320,000 $330,000

d. $330,000 $340,000

_____ 4. The cost classification scheme most relevant to responsibility accounting is

a. controllable vs. uncontrollable.

b. fixed vs. variable.

c. semivariable vs. mixed.

d. direct vs. indirect.

_____ 5. Which of the following would not be included in the operating activities section of a statement of cash flows?

a. Cash inflows from returns on loans (i.e., interest)

b. Cash inflows from returns on equity securities (i.e., dividends)

c. Cash outflows to governments for taxes

d. Cash outflows to reacquire treasury stock

_____ 6. Which of the following combinations presents correct examples of liquidity, profitability, and solvency ratios, respectively?

Liquidity Profitability Solvency

a. Inventory turnover Inventory turnover Times interest earned

b. Current ratio Inventory turnover Debt to total assets

c. Receivables turnover Return on assets Times interest earned

d. Quick ratio Payout ratio Return on assets

_____ 7. Which of the following pairs of terms in the area of financial statement analysis are synonymous?

a. Ratio — Trend

b. Horizontal — Trend

c. Vertical — Ratio

d. Horizontal — Ratio

_____ 8. Shinn Corporation has the following stock outstanding:

6% Preferred, $100 Par $1,000,000

Common Stock, $50 Par 2,000,000

No dividends were paid the previous 2 years. If Shinn declares $300,000 of dividends in the current year, how much will common stockholders receive if the preferred stock is cumulative?

a. $120,000

b. $180,000

c. $240,000

d. $80,000

_____ 9. The statement of cash flows is a(n)

a. required supplemental financial statement.

b. required basic financial statement.

c. optional basic financial statement.

d. optional supplementary statement.

_____ 10. The directors of Kennedy Corp. are trying to decide whether they should issue par or no par stock. They are considering three alternatives for their new stock, which they are assuming will be issued at $8 per share. The alternatives are: (A) $5 par value, (B) no par with a $1 stated value, and (C) no par, no stated value. If 60,000 shares are issued, what amount will be credited to the common stock account in each of these cases?

(A) (B) (C)

a. $60,000 $300,000 $480,000

b. $60,000 $480,000 $480,000

c. $480,000 $480,000 $480,000

d. $300,000 $60,000 $480,000

_____ 11. Taylor Corp. reacquired, but did not retire, 30,000 shares of its $2 par common stock at a cost of $13 per share on April 30, 2010. The stock was originally issued at $11 per share. On January 10, 2011, the 30,000 shares were sold at $16 per share. The sales entry should include a credit to Paid-in Capital from Treasury Stock for

a. $0.

b. $60,000.

c. $90,000.

d. $420,000.

_____ 12. What is the effect on total paid-in capital of a stock dividend and a stock split, respectively?

Stock Dividend Stock Split

a. Increase No effect

b. No effect No effect

c. Decrease No effect

d. Decrease Decrease

_____ 13. Which of the following is reported in the retained earnings statement as an adjustment to the beginning balance?

a. Extraordinary items

b. Prior period adjustments

c. Other revenues and expenses

d. Discontinued operations

_____ 14. Which of the following should be classified as an extraordinary item?

a. Effects of major casualties not infrequent in the area

b. Write-off of a significant amount of receivables

c. Loss from the expropriation of facilities by a foreign government

d. Losses due to a bitter, lengthy labor strike

_____ 15. Bonds that mature in installments are called

a. callable bonds.

b. registered bonds.

c. serial bonds.

d. term bonds.

_____ 16. A Discount on Bonds Payable account

a. is a contra account to Bonds Payable.

b. will cause interest expense to be less than cash interest payable.

c. is increased over the life of the bond until it equals the bond’s face value.

d. is an adjunct account to Bonds Payable.

_____ 17. Finney Corp. had 500,000 shares of common stock outstanding throughout the year. Finney reported net income of $1,400,000 and declared preferred stock dividends of $200,000 during the year. Finney should present earnings per share of

a. $2.00.

b. $2.40.

c. $2.80.

d. $3.20.

_____ 18. In order to be considered extraordinary, an item must be

a. infrequent and uninsured.

b. unusual and uninsured.

c. uninsured and infrequent.

d. infrequent and unusual.

_____ 19. If the market rate of interest is lower than the stated rate, bonds will sell at an amount

a. equal to face value.

b. not determinable from the given information.

c. lower than face value.

d. higher than face value.

_____ 20. A partner invests into a partnership a building with an original cost of $90,000 and accumulated depreciation of $40,000. This building has a $70,000 fair market value. As a result of the investment, the partner’s capital account will be credited for

a. $70,000.

b. $50,000.

c. $90,000.

d. $120,000.

PART II — STATEMENT OF CASH FLOWS

Presented below is information related to the operations of Tolbert Corporation.

December

2010 2009 2010

Cash $120,000 $ 80,000 Sales $760,000

Accounts receivable 110,000 96,000 Cost of goods sold 380,000

Inventory 60,000 44,000 Gross profit 380,000

Prepaid expenses 30,000 40,000 Depreciation expense 28,000

Land 78,000 40,000 Other operating expenses 266,000

Building 200,000 200,000 Income from operations 86,000

Accumulated depreciation— Loss on equipment sale 6,000

building (34,000) (16,000) Income before income taxes 80,000

Equipment 116,000 160,000 Income tax expense 24,000

Accumulated depreciation— Net income $ 56,000

equipment (30,000) (40,000)

Total $650,000 $604,000

Accounts payable $ 80,000 $ 58,000

Bonds payable 0 200,000

Common stock 400,000 200,000

Retained earnings 170,000 146,000

Total $650,000 $604,000

Additional information:

(a) In 2010, Tolbert declared and paid a cash dividend.

(b) The company converted $200,000 of bonds into common stock.

(c) Equipment with a cost of $44,000 and a book value of $24,000 was sold for $20,000. Land was acquired for cash.

Instructions:

Prepare a statement of cash flows in proper form for 2010, using the indirect method.

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PART III — RATIO ANALYSIS

The condensed financial statements of Jenner Corporation for 2010 are presented below.

Jenner Corporation Jenner Corporation

Balance Sheet Income Statement

December 31, 2010 For the Year Ended December 31, 2010

Assets Revenues $2,000,000

Current assets Expenses

Cash and short-term Cost of goods sold 960,000

investments $ 30,000 Selling and administrative

Accounts receivable 70,000 expenses 740,000

Inventories 140,000 Interest expense 50,000

Total current assets 240,000 Total expenses 1,750,000

Property, plant, and Income before income taxes 250,000

equipment (net) 760,000 Income tax expense 100,000

Total assets $1,000,000 Net income $ 150,000

Liabilities and Stockholders’ Equity

Current liabilities $ 100,000

Long-term liabilities 350,000

Stockholders’ equity 550,000

Total liabilities and

stockholders’ equity $1,000,000

Additional data as of December 31, 2009: Inventory = $100,000; Total assets = $800,000; Stockholders’ equity = $450,000.

Instructions: Compute the following listed ratios for 2010 showing supporting calculations.

(a) Current ratio = .

(b) Debt to total assets ratio = .

(c) Times interest earned = .

(d) Inventory turnover = .

(e) Profit margin = .

(f) Return on stockholders’ equity = .

(g) Return on assets = .

PART IV — MISCELLANEOUS MANAGERIAL MINI-PROBLEMS

Carson Corporation manufactures paper shredding equipment. You are requested to “audit” a sampling of computations made by Carson’s internal accountants via your independent recalculation of the information.

Instructions: Compute the requested information for each of the following independent situations (present supporting calculations).

(a) Each paper shredder has a standard materials cost of 20 pounds at $7.50 per pound or $150.00 in total. 40,000 pounds of materials were purchased for $320,000 during the period and 39,000 pounds were used in the production of 2,000 good units. Compute the direct materials price and quantity variances, and label them as favorable or unfavorable.

(b) Carson uses a process costing system. 2,000 units were in process at the beginning of the period, 60% complete. 20,000 units were started into production during the period; 1,000 were in process at the end of the period, 60% complete. Compute equivalent units for conversion costs.

(c) Carson sells each unit for $500. Variable costs per unit equal $300. Total fixed costs equal $800,000. Carson is currently selling 5,000 units per period and would like to earn net income of $400,000. Compute: (1) breakeven point in dollars; (2) sales units necessary to attain desired income; and (3) margin of safety ratio for current operations.

(1) Breakeven = $___________________________________________________.

(2) Desired sales = ___________________________________________ units.

(3) Margin of safety = _____________________________________________%.

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Professor Strohmenger
ACC 12 Spring 2013