ACC 557 Final Exam Part 2

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ACC 557 Final Exam Part 2

Question 1

3 out of 3 points

   
  The cost method of accounting for long-term investments in stock should be employed when the      
  Selected Answer: investor’s influence on the investee is insignificant.Correct Answer: investor’s influence on the investee is insignificant.      

Question 2

0 out of 3 points

   
  The cost of debt investments includes each of the following except      
  Selected Answer: commissions.Correct Answer: accrued interest.      

Question 3

3 out of 3 points

   
  Comanic Corp. has common stock of $5,400,000, retained earnings of $2,000,000, unrealized gains on trading securities of $100,000 and unrealized losses on available-for-sale securities of $200,000.  What is the total amount of its stockholders’ equity?      
  Selected Answer: $7,200,000Correct Answer: $7,200,000      

Question 4

3 out of 3 points

   
  Corporations invest excess cash for short periods of time in each of the following except      
  Selected Answer: equity securities.Correct Answer: equity securities.      

Question 5

3 out of 3 points

   
  Revenue is recognized when cash dividends are received under      
  Selected Answer: the cost method.Correct Answer: the cost method.      

Question 6

3 out of 3 points

   
  Pension funds and mutual funds regularly invest in debt and stock securities to      
  Selected Answer: generate earnings.Correct Answer: generate earnings.      

Question 7

3 out of 3 points

   
  Unrealized gains and losses related to available-for-sale/non-trading equity investments are reported in other comprehensive income under      
  Selected Answer: Both GAAP and IFRS.Correct Answer: Both GAAP and IFRS.      

Question 8

3 out of 3 points

   
  If a parent company has two wholly owned subsidiaries, how many legal and economic entities are there from the viewpoint of the shareholders of the parent company?        Legal             Economic      
  Selected Answer: 3                        1Correct Answer: 3                        1      

Question 9

3 out of 3 points

   
  Comparisons of financial data made within a company are called      
  Selected Answer: intracompany comparisons.Correct Answer: intracompany comparisons.      

Question 10

3 out of 3 points

   
  Under IFRS, comprehensive income may be displayed (reported) in      
  Selected Answer: the one-statement or the two-statement approach.Correct Answer: the one-statement or the two-statement approach.      

Question 11

3 out of 3 points

   
  Each of the following is a factor affecting quality of earnings except      
  Selected Answer: extraordinary items.Correct Answer: extraordinary items.      

Question 12

3 out of 3 points

   
          Wrapp Company has income before taxes of $350,000 and an extraordinary loss of $70,000. If the income tax rate is 30% on all items, the income statement should show income before irregular items and an extraordinary loss, respectively, of:      
  Selected Answer: $245,000 and ($49,000)Correct Answer: $245,000 and ($49,000)      

Question 13

3 out of 3 points

   
  Vertical analysis is a technique which expresses each item within a financial statement      
  Selected Answer: in terms of a percent of a base amount.Correct Answer: in terms of a percent of a base amount.      

Question 14

3 out of 3 points

   
  Swiss Clothing Store had a balance in the Accounts Receivable account of $920,000 at the beginning of the year and a balance of $980,000 at the end of the year. Net credit sales during the year amounted to $6,650,000. The average collection period of the receivables in terms of days was      
  Selected Answer: 52.1 days.Correct Answer: 52.1 days.      

Question 15

3 out of 3 points

   
  Under which of the following cases may a percentage change be computed?      
  Selected Answer: The trend of the balances is decreasing but all balances are positive.Correct Answer: The trend of the balances is decreasing but all balances are positive.      

Question 16

3 out of 3 points

   
  Which one of the following is not a tool in financial statement analysis?      
  Selected Answer: Circular analysisCorrect Answer: Circular analysis      

Question 17

3 out of 3 points

   
  The following information pertains to Rural Company. Assume that all balance sheet amounts represent both average and ending balance figures.  Assume that all sales were on credit.AssetsCash and short-term investments                                                                                   $  40,500Accounts receivable (net)                                                                                                     30,000Inventory                                                                                                                                  27,000Property, plant and equipment                                                                                         215,000               Total Assets                                                                                                          $312,500Liabilities and Stockholders’ EquityCurrent liabilities                                                                                                                $  60,000Long-term liabilities                                                                                                               75,000Stockholders’ equity—common                                                                                        177,500               Total Liabilities and Stockholders’ Equity                                                              $312,500Income StatementSales                                                                                                                                      $  90,000Cost of goods sold                                                                                                                 40,000Gross profit                                                                                                                              50,000Operating expenses                                                                                                               25,000               Net income                                                                                                                  $  25,000Number of shares of common stock                                                                                    5,000Market price of common stock                                                                                                 $22Dividends per share                                                                                                                    1.00 What is the return on assets for Rural?      
  Selected Answer: 8%Correct Answer: 8%      

Question 18

0 out of 3 points

   
  Which of the following transactions does notaffect cash during a period?      
  Selected Answer: Exercise of the call option on bonds payableCorrect Answer: Write-off of an uncollectible account      

Question 19

3 out of 3 points

   
  Jean’s Vegetable Market had the following transactions during 2014:1. Issued $50,000 of par value common stock for cash.2. Repaid a 6 year note payable in the amount of $22,000. 3. Acquired land by issuing common stock of par value $100,000.4. Declared and paid a cash dividend of $2,000. 5. Sold a long-term investment (cost $3,000) for cash of $8,000. 6. Acquired an investment in IBM stock for cash of $15,000. What is the net cash provided (used) by investing activities?      
  Selected Answer: ($7,000)Correct Answer: ($7,000)      

Question 20

3 out of 3 points

   
  Which of the following would be added to net income using the indirect method?      
  Selected Answer: Depreciation expenseCorrect Answer: Depreciation expense      

Question 21

3 out of 3 points

   
  The order of presentation of activities on the statement of cash flows is      
  Selected Answer: operating, investing, and financing.Correct Answer: operating, investing, and financing.      

Question 22

3 out of 3 points

   
  In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)      
  Selected Answer: addition to net income.Correct Answer: addition to net income.      

Question 23

3 out of 3 points

   
  A company had net income of $210,000. Depreciation expense is $27,000. During the year, Accounts Receivable and Inventory increased $17,000 and $42,000, respectively. Prepaid Expenses and Accounts Payable decreased $5,000 and $6,000, respectively. There was also a loss on the sale of equipment of $2,000. How much cash was provided by operating activities?      
  Selected Answer: $179,000Correct Answer: $179,000      

Question 24

3 out of 3 points

   
  Which of the following activities is excluded from the statement of cash flows under IFRS?      
  Selected Answer: Noncash investing and financing activitiesCorrect Answer: Noncash investing and financing activities      

Question 25

3 out of 3 points

   
  Which one of the following affects cash during a period?      
  Selected Answer: Payment of an accounts payableCorrect Answer: Payment of an accounts payable      



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