ACCT 201 Principles of Financial Accounting
Practice Final Exam
Combined Chapters 9 - 12
Dr. Fred Barbee
Part I: Multiple-Choice Questions
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1. Liabilities involve addressing issues of:
a.  When to pay.
b.  What to pay.
c.  How much to pay.
d.  All of the above.
e.  Both (a) and (b) only.
2. Contingent liabilities must be recorded if:
a.  The future event is probable and the amount owed can be reasonably estimated.
b.  The future event is remote.
c.  The future event is reasonably possible.
d.  The amount owed cannot be reasonably estimated.
e.  All of the above.
3. The face value of a note:
a.  Can represent the principal of a note.
b.  Can represent the principal and interest of a note.
c.  Can be the amount borrowed on a note.
d.  Is the value shown on the face of the note.
e.  All of the above.
4. A company must repay the bank $10,000 cash in 3 years for a loan it entered into. The loan is at 8% interest compounded annually. (The present value factor for 3 years at 8% is 0.7938). The present value of the loan is:
a.  $10,000
b.  $12,400
c.  $7,938
d.  $9,200
e.  $7,600
5. Bonds can be issued:
a.  At par.
b.  At a premium.
c.  At a discount.
d.  Between interest payment dates.
e.  All of the above.
6. A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The total amount of interest owed to the bondholders for each semiannual interest payment is:
a.  $0
b.  $33,750
c.  $67,500
d.  $750,000
e.  $1,550,000
7. A company has a market value per share of $73.00. Its net income is $1,750,000 and the weighted-average number of shares outstanding is 350,000. The company's price-earnings ratio equals.
a.  20.9
b.  4.2
c.  14.6
d.  20.0
e.  6.8
8. A corporation issued 6,000 shares of its $10 par value common stock in exchange for land that has a market value of $84,000. The entry to record this transaction would include:
a.  A debit to Common Stock for $60,000.
b.  A debit to Land for $60,000.
c.  A credit to Land for $60,000.
d.  A credit to Contributed Capital in Excess of Par value, CS for $24,000.
e.  A credit to Common Stock for $84,000.
9. Xtreme Sports has $10,000 of 12% noncumulative, nonparticipating; preferred stock outstanding. Xtreme Sports also has $90,000 of common stock outstanding. In the company's first year of operation, no dividends were paid. During the second year, Xtreme paid cash dividends of $14,000. This dividend should be distributed as follows:
a.  $1,200 preferred; $12,800 common.
b.  $2,400 preferred; $11,600 common.
c.  $2,480 preferred; $11,520 common.
d.  $1,400 preferred; $12,600 common.
e.  $7,000 preferred; $7,000 common.
10. The Statement of Cash Flows reports:
a.  Cash flows from operating activities.
b.  Cash flows from financing activities.
c.  Cash flows from investing activities.
d.  Significant noncash financing and investing activities.
e.  All of the above.
11. Which one of the following is representive of typical cash flows from operating activities?
a.  Proceeds from collecting the principal amoaunt of loans.
b.  Repayment of principal on loans.
c.  Proceeds from the issuance of bonds and notes payable.
d.  Payments by a merchandiser to acquire equity securities of other companies.
e.  Receipts of cash sales.
12. A company had total assets of $1,760,000, total cash flows of $1,320,000, and cash flows from operations of $205,000. This implies its cash flow on total assets ratio equals:
a.  1.33%
b.  8.58%
c.  11.65%
d.  15.5%
e.  75%

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Part II: Short Problems

Short Problem #1

A company sells computers with a 6-month warranty. In January, the company sold 100,000 computers at $1,750 each, and 1,500 computers were turned in for repairs during that same month. The total repairs amounted to $185,000 costs from the computer parts inventory. It is estimated that 2% of all units sold will need repairs under warranty at an estimated cost of $200 per unit. Prepare the journal entries to record (a) estimated warranty expense for January, and (b) warranty repair costs for January.

Short Problem #2

A company issued 10%, 10-year bonds with a par value of $1,000,000 on January 1, 2002, at a selling price of $885,295, to yield the buyers a 12% return. The company uses the effective interest amortization method. Interest is paid semiannually each June 30 and December 31.

  1. Prepare an amortization table for the first two payment periods using the format shown below:

    Semiannual
    Interest
    Period
    Cash
    Interest
    Paid
    Bond
    Interest
    Expense

    Discount
    Amortization

    Unamortized
    Discount

    Carrying
    Value

  2. Prepare the journal entry to record the first semiannual interest payment.

Short Problem #3

A corporation reports the following year-end stockholders' equity:

Contributed Capital
Preferred Stock, 8%, 100,000 shares authorized, 50,000 shares issued $2,500,000
Contributed capital in excess of par, Preferred 125,000
Common Stock, $10 par, 500,000 shares authorized, 400,000 shares issued 4,000,000
Contributed capital in excess of par, Common 1,200,000
Total Contributed Capital $7,825,000
Retained Earnings 10,125,000
Total Stockholders' Equity $17,950,000

Determine the following:

  1. Par value for the preferred stock
  2. Book value per share for both preferred stock and common stock assuming a call price per share of $55 for preferred and no dividends in arrears.

Part III: Problems

Based on the following income statement and balance sheet for Groden Corporation, determine the cash flows from operating activities using the indirect method:

Groden Corporation
Income Statement
For Year Ended December 31, 2002
Sales
 
$504,000
Cost of Goods Sold
$327,600
 
Depreciation
42,000
 
Other Operating Expenses
125,500
495,100
Other Gains (Losses:
Gain on Sale of Equipment
 

7,200
Incvome before taxes
 
$16,100
Income Tax Expense
 
4,800
Net Income
 
$11,300

Groden Corporation
Balance Sheets
At December 31, 2001 and 2002
Assets:
2002
2001
Cash
$64,650
$55,800
Accounts Receivable
21,000
29,000
Inventory
58,000
52,100
Equipment
240,000
222,000
Accumulated Depreciation
(106,000)
(96,000)
Total Assets
$277,650
$262,900
Liabilities:
 
 
Accounts Payable
$28,400
$23,700
Income Taxes Payable
1,050
1,200
Total Liabilities
$29,450
$24,900
Equity:
 
 
Common Stock
$106,000
$106,000
Contributed Capital in Excess of Par Value
18,000
18,000
Retained Earnings
124,200
114,000
Total Equity
$248,200
$238,000
Total Liabilities and Equity
$277,650
$262,900

         

Last Modified September 19, 2002