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Winter Accounting Quiz Prep
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1. 11) Which of the following combinations of ratios is preferable? A) A low current ratio and a high..11) Which of the following combinations of ratios is preferable?
A) A low current ratio and a high debt ratio
B) A high current ratio and a low debt ratio
C) A low current ratio and a low debt ratio
D) A high current ratio and a high debt ratio
12) To help keep debt ratios within normal limits, companies might adopt the following strategies:
A) decrease revenues.
B) sell stock.
C) choose to borrow more money.
D) increase costs.
13) A company has current assets of $80,000, long-term assets of $150,000, current liabilities of $40,000, and long-term liabilities of $40,000. The current ratio is:
A) .80.
B) 1.33.
C) 2.00.
D) 2.33.
14) Brankov Company has current assets of $105,000 and current liabilities of $40,000. The company decides to issue stock and receives cash of $70,000. After this transaction, the company's current ratio will be:
A) 0.68.
B) 1.88.
C) 3.62.
D) 4.38.
15) At the beginning of the year, Butters Company's balance sheet showed current assets of $36,000 and current liabilities of $10,000. During the current year, Butters issued common stock for $5,000 for cash and purchased $3,000 of inventory on account. After these transactions were recorded, Butter's current ratio was:
A) 1.17.
B) 1.60.
C) 3.38.
D) 3.60.
16) A company has current assets of $105,000 and current liabilities of $35,000. It made a $5,000 sale on account. After this transaction, its current ratio will be:
A) 0.33.
B) 1.14.
C) 3.00.
D) 3.14.
17) Rosewood Company had current assets of $582, current liabilities of $433, total assets of $732, and long-term liabilities of $200. What is Rosewood's debt ratio?
A) 0.59
B) 0.80
C) 0.86
D) 1.95
18) Dooley Company had current assets of $582, current liabilities of $433, total assets of $732, and long-term liabilities of $200. If Dooley executes a six-month note for $500, what is the new current ratio?
A) 0.76
B) 1.16
C) 1.34
D) 2.50
19) Flanders Company has total assets of $360,000 and total liabilities of $300,000. The company collects an account receivable of $20,000. After this transaction, the company's debt ratio will be:
A) 0.56.
B) 0.83.
C) 1.80.
D) 1.90.
20) A company's current ratio is decreasing every year and currently stands at 1.00. This indicates:
A) an improving financial position.
B) an improving liquidity position.
C) a declining ability to pay current liabilities.
D) an increase in profitability.
2. 98.An unacceptable way to make a correcting entry is to a.reverse the incorrect entry. b.erase the..
98.An unacceptable way to make a correcting entry is to
a.reverse the incorrect entry.
b.erase the incorrect entry.
c.compare the incorrect entry with the correct entry and make a correcting entry to correct the accounts.
d.correct it immediately upon discovery.
99.Cole Company paid the weekly payroll on January 2 by debiting Wages Expense for $40,000. The accountant preparing the payroll entry overlooked the fact that Wages Expense of $24,000 had been accrued at year end on December 31. The correcting entry is
a.Wages Payable ................................................................... 24,000
Cash ........................................................................ 24,000
b.Cash ................................................................................. 16,000
Wages Expense ...................................................... 16,000
c.Wages Payable ................................................................... 24,000
Wages Expense ...................................................... 24,000
d.Cash ................................................................................. 24,000
Wages Expense ...................................................... 24,000
100.Tyler Company paid $630 on account to a creditor. The transaction was erroneously recorded as a debit to Cash of $360 and a credit to Accounts Receivable, $360. The correcting entry is
a.Accounts Payable ............................................................... 630
Cash ........................................................................ 630
b. Accounts Receivable .......................................................... 360
Cash ........................................................................ 360
c. Accounts Receivable .......................................................... 360
Accounts Payable ................................................... 360
d. Accounts Receivable .......................................................... 360 Accounts Payable ............................................................... 630
Cash ........................................................................ 990
101.A lawyer collected $860 of legal fees in advance. He erroneously debited Cash for $680 and credited Accounts Receivable for $680. The correcting entry is
a.Cash .................................................................................. 680 Accounts Receivable .......................................................... 180
Unearned Revenue ................................................. 860
b.Cash .................................................................................. 860
Service Revenue ..................................................... 860
c.Cash ................................................................................... 180 Accounts Receivable .......................................................... 680
Unearned Revenue ................................................. 860
d.Cash .................................................................................. 180
Accounts Receivable .............................................. 180
102.All of the following are property, plant, and equipment except
a.supplies.
b.machinery.
c.land.
d.buildings.
103.The first item listed under current liabilities is usually
a.accounts payable.
b.notes payable.
c.salaries payable.
d.taxes payable.
104.Office Equipment is classified in the balance sheet as
a. a current asset.
b.property, plant, and equipment.
c.an intangible asset.
d.a long-term investment.
105.A current asset is
a.the last asset purchased by a business.
b.an asset which is currently being used to produce a product or service.
c.usually found as a separate classification in the income statement.
d.expected to be realized in cash, sold or consumed within one year of the balance sheet or the company's operating cycle, whichever is longer.
106.An intangible asset
a.derives its value from the rights and privileges it provides the owner.
b.is worthless because it has no physical substance.
c.is converted into a tangible asset during the operating cycle.
d.cannot be classified on the balance sheet because it lacks physical substance.
107.Liabilities are generally classified on a balance sheet as
a. small liabilities and large liabilities.
b.present liabilities and future liabilities.
c.tangible liabilities and intangible liabilities.
d.current liabilities and long-term liabilities.
3. Luang Company is considering the purchase of a new machine.
Luang Company is considering the purchase of a new machine. Its invoice price is $122,000, freight charges are estimated to be $3,000, and installation costs are expected to be $5,000. Salvage value of the new machine is expected to be zero after a useful life of 4 years. Existing equipment could be retained and used for an additional 4 years if the new machine is not purchased. At that time, the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would be scrapped. Luang’s accountant, Lisa Hsung, has accumulated the following data regarding annual sales and expenses with and without the new machine.
1. Without the new machine, Luang can sell 10,000 units of product annually at a per unit selling price of $100. If the new unit is purchased, the number of units produced and sold would increase by 25%, and the selling price would remain the same.
2. The new machine is faster than the old machine, and it is more efficient in its usage of materials.
With the old machine the gross profit rate will be 28.5% of sales, whereas the rate will be 30% of sales with the new machine.
3. Annual selling expenses are $160,000 with the current equipment. Because the new equipment would produce a greater number of units to be sold, annual selling expenses are expected to increase by 10% if it is purchased.
4. Annual administrative expenses are expected to be $100,000 with the old machine, and $112,000 with the new machine.
5. The current book value of the existing machine is $40,000. Luang uses straight-line depreciation.
6. Luang’s management has a required rate of return of 15% on its investment and a cash payback period of no more than 3 years.
Instructions
With the class divided into groups, answer the following. (Ignore income tax effects.)
(a) Calculate the annual rate of return for the new machine. (Round to two decimals.)
(b) Compute the cash payback period for the new machine. (Round to two decimals.)
(c) Compute the net present value of the new machine. (Round to the nearest dollar.)
(d) On the basis of the foregoing data, would you recommend that Luang buy the machine? Why?
4. Use the semi-annually compounded yield curve in the following table to price the some fixed...
Use the semi-annually compounded yield curve in the following table to price the some fixed income securities: Maturity T Yield r2 (0, T) 0.50 6.49% 1 6.71% 1.5 6.84% 2 6.88% (a) 1.5-year zero coupon bond (b) 2-year coupon bond paying 15% semiannually (c) 1.5-year coupon bond paying 9% annually (d) 2-year floating rate bond with zero spread and semiannual payments (e) 1.5-year floating rate bond with zero spread and annual payments. For this question, assume r1 (-0.5, 0.5) = 6%. (f) 1.5-year floating rate bond with 40 basis point spread with annual payments. For this question, assume r1 (-0.5, 0.5) = 6%.
5. Mr. Potts issued a 90-day, 7% note for $200,000, dated February 3rd to Valley Co. on account....
Mr. Potts issued a 90-day, 7% note for $200,000, dated February 3rd to Valley Co. on account. (Assume a 360-day year when calculating interest.)
a. Determine the due date of the note.
b. Determine the interest.
c. Determine the maturity value of the note.
d. Journalize the entry to record the issuance of the note by Potts on Feb. 3.
e. Journalize the entry to record the receipt of payment of the note at maturity by Valley Co.
6. 1. Which market targeting strategy is Dove following? Justify your answer. 2. Write a positioning...
1. Which market targeting strategy is Dove following? Justify your answer. 2. Write a positioning statement for Dove Men Care. 3. Can Dove and Dove Men Care continue to succeed as side-by-side brands? Why or why not?
7. Ex 10-6 Fixed asset purchases with note ObJ. 1 On June 30, Collins Management Company purchased...
Ex 10-6 Fixed asset purchases with note ObJ. 1
On June 30, Collins Management Company purchased land for $400,000 and a building for
$560,000, paying $360,000 cash and issuing a 5% note for the balance, secured by a mort- gage on the property. The terms of the note provide for 20 semiannual payments of $30,000 on the principal plus the interest accrued from the date of the preceding payment. Journal- ize the entry to record (a) the transaction on June 30, (b) the payment of the first installment on December 31, and (c) the payment of the second installment the following June 30.
8. Setting materials, labor, and overhead standards is challenging.
Setting materials, labor, and overhead standards is challenging. If standards are set too low, companies might purchase inferior products and employees might not work to their full potential. If standards are set too high, companies could be unable to offer a quality product at a profitable rate and employees could be overworked. The ethical challenge is to set a high but reasonable standard. Assume that as a manager, you are asked to set the standard materials price and quantity for the new 1,000 CKB Mega-Max chip, a technically advanced product. To properly set the price and quantity standards, you assemble a team of specialists to provide input.
Required
Identify four types of specialists that you would assemble to provide information to help set the materials price and quantity standards. Briefly explain why you chose each individual.
9. Lynn Shackelford is the owner and operator of Personality Shine LLC, a motivational consulting bu...
Lynn Shackelford is the owner and operator of Personality Shine LLC, a motivational consulting business. At the end of its accounting period, December 31, 2013, Personality Shine has assets of $834,000 and liabilities of $200,000. Using the accounting equation, determine the following amounts: a. Owner's equity as of December 31, 2013.
10. Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2015, for $504,45...
Pratt Company acquired all of Spider, Inc.'s outstanding shares on December 31, 2015, for $504,450 cash. Pratt will operate Spider as a wholly owned subsidiary with a separate legal and accounting identity. Although many of Spider's book values approximate fair values, several of its accounts have fair values that differ from book values. In addition, Spider has internally developed assets that remain unrecorded on its books. In deriving the acquisition price, Pratt assessed Spider's fair and book value differences as follows: Book Fair Values Values Computer software 57,000 97,250 Equipment 55,000 37,200 Client contracts 107,500 29,500 In-process research and development (78,000) (84,000) Notes payable At December 31, 2015, the following financial information is available for consolidation Pratt Spider Cash 31,700 32,400 74,500 147,500 Receivables Inventory 146,000 1,000 504,450 Investment in Spider Computer software 226,500 57,000 569,250 146,500 Buildings (net) 311,000 55,000 Equipment (net) Client contracts Goodwi Total assets 1,936,400 446,400 Accounts payable (94,900) (73,400) Notes payable (524,500) (78,000) Common stock (380,000) (100,000) Additional paid-in capital (170,000) (25,000) Retained earnings (767,000) (170,000) Total liabilities and equities $(1,936,400) $(446,400) Note: Parentheses indicate a credit balance.
11. 1. Can either man be excluded as the father? Explain. 2. Which man may be the father of the child?..
1. Can either man be excluded as the father? Explain.
2. Which man may be the father of the child? Explain.
3. How many radioactive probes were used in this activity?
4. Is this DNA profile sufficient to establish paternity? Why or why not?
12. Consider the following financial statements for BestCare HMO, a not profit managed
Consider the following financial statements for BestCare HMO, a not profit managed care plan. Perform a DU Pont analysis on BestCare. Assume that the industry average ratios are as follows: Total margin 3.8% Total Asset turnover 2.1 Equity multiplier 3.2 Return on equity (ROE) 25.5% B. calculate and interpret the following rations for BestCare: Return on assets (ROA) 8.0% Current ratio 1.3 Days cash on hand 41 days Average collection period 7 days Debt ratio 69% Debt 'to-equity ratio 2.2 Time interest earned (TIE) ratio 2.8 Fixed asset turnover ratio 5.2
13. Material and Labor Variance
During June, Danby Company's material purchases amounted to 6,600 pounds at a price of $7.9 per pound. Actual costs incurred in the production of 2,300 units were as follows:
Direct labor: $131,835 ($18.7 per hour)
Direct material: $37,920 ($7.9 per pound)
________________________________________
The standards for one unit of Danby Company's product are as follows:
Direct labor: Direct material:
Quantity, 3 hours per unit Quantity, 2 pounds per unit
Rate, $18.6 per hour Price, $7.6 per pound
________________________________________
Required:
Compute the direct-material price and quantity variances and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.
Direct-material price variance $ (Click to select)UnfavorableNoneFavorable
Direct-material quantity variance $ (Click to select)UnfavorableNoneFavorable
Direct-labor rate variance $ (Click to select)UnfavorableFavorableNone
Direct-labor efficiency variance $ (Click to select)FavorableUnfavorableNone
________________________________________
14. Instructions Hahn Flooring Company uses a perpetualinventory system A. Sales retums of $125,000 a...
Instructions Hahn Flooring Company uses a perpetualinventory system A. Sales retums of $125,000 and merchandise returns of $80,000 are estimated for the current years sales. B. The inventory account has a balance of $1,333,150, while physicalinventory indicates that $1,309,900 of merchandise is on hand Journalize the December 31 adjusting entries based on the above transactions. Assume that the inventory shrinkage is a normal amount. Refer to the Chart of Accounts for exact wording of account titles
15. Compute Equivalent Units: FIFO Method Materials are added at the beginning of the production pro...
Compute Equivalent Units: FIFO Method Materials are added at the beginning of the production process at Campo Company. Campo uses a FIFO process costing system. The following information on the physical flow of units is available for the month of November. Compute the equivalent units for the conversion cost calculation. Compute Equivalent Units and Cost per Equivalent Unit: Weighted- Average Method Refer to the data in Exercise 8-28. Cost data for November show the following: Compute the cost equivalent units for the conversion cost calculation assuming Campo uses the weighted-average method. Compute the cost per equivalent unit for materials and conversion costs for November.
16. Schramel Advertising Company’s trial balance at December 31 shows Supplies $6,700 and Supplies ...
Schramel Advertising Company’s trial balance at December 31 shows Supplies $6,700 and Supplies Expense $0. On December 31, there are $2,100 of supplies on hand.
Prepare the adjusting entry at December 31, and using T-accounts, enter the balances in the accounts, post the adjusting entry, and indicate the adjusted balance in each account.
17. Stockmaster Corporation has provided the following contribution format income that the following...
Stockmaster Corporation has provided the following contribution format income
that the following information is within the relevant range.
Sales (8,000 units) $ 320,000
Vasiable expenses 192,000
Contribution margin 128,000
Fixed expenses 121.600
a —_—
Net operating income Ss 6400
The margin of safety in dollars is closest to:
A) $6,400
B) $16,000
€) $121,600
D) $128,000
