Exam (elaborations) Liberty University ACCT 370 Exam 2 Complete solution
Liberty University ACCT 370 Exam 2 Complete solution
100% satisfied:
solutions
1. The Common Stock account is reported on the balance sheet at the:
2. The time that the performance obligation is satisfied for revenue recognition is
usually:
3. When reporting a change in an accounting principle, the general rule requires that
the current year’s income from continuing operations reflect:
4. Using the same accounting methods to record and report similar events from
period to period demonstrates:
5. If an inventory error is discovered during the reporting year,
6. Analysts must be aware that with the use of absorption costing, as inventory
absorbs more fixed costs, reported net income tends to:
7. IFRS accounting for inventory (IAS 2) does not permit which of the following cost
flow assumptions?
8. The use of the lower of cost or market (Old-LCM) method to value inventory
Liberty University ACCT 370 Exam 2
Complete Solution
indicates a probable loss has been sustained. This is an application of the
accounting principle of:
9. Which of the following statements regarding inventory accounting is false?
10. The following information pertains to the Fan Company’s inventory
item B1008:
20.M
a
r
c
h
21.
1
22.Inv
ent
ory
Bal
anc
e
23.4
0
0
24.u
n
i
t
s
25.
@
26.
$
27.3
.
1
0
28.
29.
30.
5
31.Pur
cha
se
32.1
,
4
0
0
33.u
n
i
t
s
34.
@
35.
$
36.3
.
2
0
37.
38.
39.
14
40.Pur
cha
se
41.2
8
0
42.u
n
i
t
s
43.
@
44.
$
45.3
.
2
5
46.
47. 48.
31
49.Inv
ent
ory
50.5
2
0
51.u
n
i
52. 53. 54.55.
Bal
anc
e
t
s
56.
57. In a periodic inventory system, the ending FIFO inventory is
58.Manufacturing costs not considered to be closely associated with production are
called:
59. A perpetual inventory system:
60. Goods available for sale needs to be allocated between:
61.When troubled debt is restructured via continuation with modification of debt
terms, the original loan is:
62. If a bank sells a mortgage portfolio at a price that yields the purchasers a return
that is lower than the average yield on the mortgages in the portfolio, the selling
price:
63. Frank Ritter, Inc. enters into an arrangement with Hisker
Enterprises whereby Hisker will assume $100,000 of Ritter’s
receivables for a 6% fee. These receivables have a related
allowance for doubtful accounts of $3,500.
64. Assuming the transaction was a factoring arrangement without
recourse, which one of the following entries will Ritter make?
65. If sales terms, customer creditworthiness, and accounting methods remain
constant, the percentage change in sales and the percentage change in accounts
receivable:
66. An analyst notes that ABC Inc.’s allowance for uncollectible accounts as a
percentage of year-end accounts receivable has changed. Which of the following
would not be a plausible explanation for the change?
67. Edsel Inc. has the following unadjusted year end trial balance
information available for 2018:
72.Credit sales 73.74.6
00
,0
00
75.
76.Ending accounts receivable balance 77.78.1
80
,0
00
79.
80.Ending allowance for uncollectibles 81.82.1
,5
00
83.
84.Estimated uncollectibles 85.86.2 87.
%
88.
89. If Edsel uses the gross accounts receivable approach for estimating
the bad debt provision, the allowance for uncollectibles account,
after the proper adjustments to the accounts are recorded, should
show a balance of:
90. In the utilities industry, image advertising and customer safety advertising are:
91. A typical rate formula for a public utility includes:
92. Contract terms:
93.With respect to executive pay, which of the following is not correct?
94. Financial statement forecasts are:
95. A bond that is considered unsecured is referred to as a:
96. Prior to the announcement of unexpected bad earnings (a negative earnings
surprise), a firm’s stock price will generally exhibit:
97.Which one of the following is an example of sustainable earnings?
98. In the process of determining fair value, the exit price refers to:
99. By using accruals and deferrals, accrual accounting:
100. The two ways to implement the discounted cash flow valuation approach
are:
101. Which of the following statements is false regarding the business
valuation process?
102. With respect to financial ratios:
103. Select one of the following statements that best reflects the relationship
between the operating cycle and the cash conversion cycle:
104. Which of the following is not correct with respect to computing ROCE?
105. Trend statements are better than common size statements at indicating
which of the following?
106. Strategies to gain a competitive advantage include product
differentiation and:
107. Manero Company included the following information in its
annual report:
108.
109.
2019 110.
111.
2018 112.
113.
2017
114. Sales
115.
116.
178,
40
0
1171.8.
119.
120.
162,
50
0
12112.2.
123.
124.
155,
50
0
125.
126. Cost of
goods sold
127.
128.
115,
00
0
.03.1.
132.
102,
50
0
13131.43.5.
136.
100,
00
0
137.
138. Operatin
g expenses
139.
140.
50,0
00
.24.3.
144.
50,0
00
.64.7.
148.
45,0
00
149.
150. Operatin
g income
151.
152.
13,4
00
.45.5.
156.
10,0
00
.85.9.
160.
10,5
00
161.
162. In a common-size income statement for 2017, the cost of
goods sold is expressed as:
163. Manero Company included the following information in its
annual report:
164.
165.
2019 166.
167.
2018 168.
169.
2017
170. Sales 171. 172.
178,
40
.47.51.76.
162,
50
17171.87.91.80.
155,
50
181.
0 0 0
182. Cost of
goods sold
183.
184.
115,
00
0
.68.7.
188.
102,
50
0
18191.09.1.
192.
100,
00
0
193.
194. Operati
ng expenses
195.
196.
50,0
00
.89.9.
200.
50,0
00
.20.3.
204.
45,0
00
205.
206. Operati
ng income
207.
208.
13,4
00
.01.1.
212.
10,0
00
.41.5.
216.
10,5
00
217.
218. In a common-size income statement for 2019, the cost of
goods sold is expressed as:
219. Condensed financial data are presented below for the
Phoenix Corporation:
220.
221. 2
019 222.
223.
2018
224. Accounts receivable 225.
226.
267,50
0
2272.8.
229.
230.
230,
00
0
231.
232. Inventory 233.
234.
312,50
0
.63.7.
238.
257,
50
0
239.
240. Total current assets 241. 242.
670,00
.44.52.46.
565,
247.
0
00
0
248. Intangible assets 249.
250.
50,000
.25.3.
254.
60,0
00
255.
256. Total assets 257.
258.
825,00
0
.06.1.
262.
695,
00
0
263.
264. Current liabilities 265.
266.
252,50
0
.86.9.
270.
200,
00
0
271.
272. Long-term liabilities 273.
274.
77,500
.67.7.
278.
75,0
00
279.
280. Sales 281.
282.
1,640,
000
.48.52.86. 287.
288. Cost of goods sold 289.
290.
982,50
0
.29.32.94. 295.
296. Interest expense 297.
298.
10,000
.00.13.02. 303.
304. Income tax expense 305.
306.
77,500
.80.93.10. 311.
312. Net income 313.
314.
127,50
0
.61.73.18. 319.
320. Cash flow from operations 3213.22. .42.53.26. 327.
71,000
328. Cash flow from investing
activities
329.
330.
(6,000
331.
)
33323.33.34. 335.
336. Cash flow from financing
activities
337.
338.
(62,50
0
339.
)
34304.13.42. 343.
344. Tax rate 345.
346.
30
347.
%
34384.93.50. 351.
352. The profit margin used to calculate return on assets for 2019
is (rounded):
353. Condensed financial data are presented below for the
Phoenix Corporation:
354.
355. 2
019 356.
357.
2018
358. Accounts receivable 359.
360.
267,50
0
36316.2.
363.
364.
230,
00
0
365.
366. Inventory 367.
368.
312,50
0
.07.1.
372.
257,
50
0
373.
374. Total current assets 375.
376.
670,00
0
37373.87.9.
380.
565,
00
0
381.
382. Intangible assets 383. 384.
50,000
.68.73.88.
60,0
389.
00
390. Total assets 391.
392.
825,00
0
.49.5.
396.
695,
00
0
397.
398. Current liabilities 399.
400.
252,50
0
.20.3.
404.
200,
00
0
405.
406. Long-term liabilities 407.
408.
77,500
.01.1.
412.
75,0
00
413.
414. Sales 415.
416.
1,640,
000
.81.94.20. 421.
422. Cost of goods sold 423.
424.
982,50
0
.62.74.28. 429.
430. Interest expense 431.
432.
10,000
43434.43.54.36. 437.
438. Income tax expense 439.
440.
77,500
44144.24.34.44. 445.
446. Net income 447.
448.
127,50
0
44954.05.14.52. 453.
454. Cash flow from operations 455.
456.
71,000
.85.94.60. 461.
462. Cash flow from investing
activities
463.
464.
(6,000
465.
)
46466.74.68. 469.
470. Cash flow from financing
activities
471. 472.
(62,50
473.
)
47447.54.76. 477.
0
478. Tax rate 479.
480.
30
481.
%
48428.34.84. 485.
486. The days inventory held for 2019 is (rounded):
487.
1
488.Accounting errors or irregularities can occur for which reasons?
A. simple oversight.
B. misapplication of GAAP.
C. management exploitation of the flexibility in GAAP.
D. all of these answer choices are correct.
48499.0.
491.
2
492.The accounts receivable turnover ratio:
A. is not useful in determining changes in customer payment patterns.
B. uses total sales and not just credit sales in the computation.
C. is computed using net credit sales and average accounts receivable.
D. is computed using net credit sales and ending accounts receivable.
49439.4.
495.
3
496.Accrual accounting decouples measured earnings from operating cash inflows
and outflows.
49479.8.
499.
4
500.Accrued liabilities represent:
A. income that has not yet been recognized on the income statement.
B. expenses that have not yet been recognized on the income statement.
C. expenses that have been recognized on the income statement but not yet
50510.2.
been paid.
D. income that has been recognized on the income statement but not yet
collected.
503.
5 504.Activity ratios describe the profitability of a company. 50550.6.
507.
6
508.The Additional Paid-In Capital account is reported on the balance sheet at the:
A. current market value of the stock minus par value.
B. original sales price of the stock minus the par value.
C. net realizable value of the stock minus par value.
D. discounted present value of the future dividends minus par value.
50591.0.
511.
7
512.Advanced technology and performance capabilities, consistent quality,
availability in multiple colors and sizes, prompt delivery, technical support
services, customer financing, distribution channels, or some other feature of
importance to customers are examples of:
A. competitive advantage.
B. differentiation.
C. product leadership.
D. low-cost leadership.
51531.4.
515.
8
516.All the following disclosures would appear in the Summary of Significant
Accounting Policies except:
A. inventory method.
B. depreciation method.
51571.8.
C. revenue recognition method.
D. financing method.
519.
9
520.Although a company’s earnings are important, an analysis of its cash flows is
central to credit evaluations and lending decisions.
52512.2.
523.
1
524.An analyst interested in learning the degree to which a company’s earnings
have fluctuated historically in relation to changes in economic growth would
employ cross-sectional analysis.
52552.6.
527.11.
528.A balance sheet prepared under U.S.
GAAP includes the following
elements except:
A. an asset section
B. a liabilities section
C. an equity section
D. a cash flow section
..
531.12.
532.Balance sheets developed under US
GAAP:
A. may, but are not required to, list
assets from most liquid to least liquid.
B. must list assets from most liquid to
least liquid.
C. must list assets from least liquid to
most liquid.
D. must list assets in alphabetical
order.
..
535.13. 536.The Barden Company provides the
following trial balance as of
December 31, 2018.
Debit Credit
Cash and cash equivalents 345,000
Accounts receivable 115,000
Inventory
120,000
Prepaid insurance 7,500
Prepaid rent 40,000
Equipment 265,000
Accumulated depreciation -
Equipment
65,000
Accounts payable
45,000
Accrued liabilities
10,000
Notes payable, due in 2020
135,000
Common stock
300,000
Additional paid-in capital
87,500
..
Retained earnings
250,000
Total
892,500 892,500
What would Barden report as current
assets on its balance sheet?
A. $460,000
B. $580,000
C. $892,500
D. $627,500
539.
1
540.The Barden Company provides the following trial balance as of December 31,
2018.
Debit Credit
Cash and cash equivalents 345,000
Accounts receivable 115,000
Inventory
120,000
Prepaid insurance 7,500
Prepaid rent 40,000
Equipment 265,000
Accumulated depreciation - Equipment
65,000
..
Accounts payable
45,000
Accrued liabilities
10,000
Notes payable, due in 2020
135,000
Common stock
300,000
Additional paid-in capital
87,500
Retained earnings
250,000
Total
892,500 892,500
What would Barden report as total stockholders’ equity on its balance sheet?
A. $300,000
B. $387,500
C. $637,500
D. $87,500
543.
1
544.The basic accounting equation may be expressed as assets = liabilities -
owners’ equity.
..
547.
1
548.The best measure of a firm’s sustainable income is: ..
A. income from continuing operations.
B. income before income tax.
C. income before unusual items and change in accounting principle.
D. net income.
551.
1
552.Both common and preferred stock dividends are subtracted in arriving at net
income available to common stockholders.
..
555.
1
556.The Canon Corporation sells ten copiers to the Title Company on October 15
for $40,000. Canon delivers the copiers to Title on October 20 and Title pays
$16,000, agreeing to pay the balance on November 10.
Under the accrual basis, how much revenue should Canon recognize in
November?
A. $0
B. $16,000
C. $24,000
D. $40,000
..
559.
1
560.The Canon Corporation sells ten copiers to the Title Company on October 15
for $40,000. Canon delivers the copiers to Title on October 20 and Title pays
$16,000, agreeing to pay the balance on November 10.
Under the cash basis, how much revenue should Canon recognize in October?
A. $0
B. $16,000
..
C. $24,000
D. $40,000
563.
2
564.Cash-basis accounting provides the most useful measure of future operating
performance.
..
567.
2
568.Cash collected from customers can be derived:
A. by analyzing changes in the Accounts Payable balance.
B. by appropriately adjusting revenue for changes in accounts receivable.
Correct
C. by appropriately adjusting revenue for changes in accounts payable.
D. by analyzing changes to the reserve for doubtful accounts.
..
571.
2
572.The change in equity of an entity during a period from transactions and other
events from non-owner sources is known as:
A. net income.
B. net operating income.
C. comprehensive income.
D. net change in assets.
..
575.
2
576.The change in equity of an entity during a period from transactions and other
events from non-owner sources is known as comprehensive income.
..
579.
2 580.A common-size balance sheet presents each item as a percentage of total assets. ..
583.
2
584.Common-size balance sheets may be used for all the following except: ..
A. gaining insights into the nature of a company’s operations.
B. analyzing a company’s asset and financial structure.
C. determining how management assesses the risks a company faces.
D. learning about the underlying economics of an industry.
587.
2
588.Condensed financial data are presented below for the Phoenix Corporation:
Accounts receivable 267,500 230,000
Inventory
312,500 257,500
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Total assets
825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Sales
1,640,000
Cost of goods sold 982,500
Interest expense 10,000
Income tax expense 77,500
Net income
127,500
Cash flow from operations 71,000
Cash flow from investing activities
. .
(6,000)
Cash flow from financing activities
(62,500)
Tax rate - 30%
If there is no preferred stock, the return on common equity for 2019 is
(rounded):
A. 25.8%
B. 27.9%
C. 41.4%
D. 43.4%
591.
2
592.Condensed financial data are presented below for the Phoenix Corporation:
Accounts receivable 267,500 230,000
Inventory
312,500 257,500
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Total assets
825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Sales
. .
1,640,000
Cost of goods sold 982,500
Interest expense 10,000
Income tax expense 77,500
Net income
127,500
Cash flow from operations 71,000
Cash flow from investing activities
(6,000)
Cash flow from financing activities
(62,500)
Tax rate - 30%
In a common size balance sheet for 2019, accounts receivable is expressed as:
A. 86%.
B. 116.3%.
C. 32.4%.
D. 16.3%.
595.
2
596.Condensed financial data are presented below for the Phoenix Corporation:
Accounts receivable 267,500 230,000
Inventory
312,500 257,500
..
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Total assets
825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Sales
1,640,000
Cost of goods sold 982,500
Interest expense 10,000
Income tax expense 77,500
Net income
127,500
Cash flow from operations 71,000
Cash flow from investing activities
(6,000)
Cash flow from financing activities
(62,500)
Tax rate - 30%
The accounts receivable turnover for 2019 is (rounded): (Assume all sales are
on account.)
A. 2.0 times.
B. 6.4 times.
C. 6.6 times.
D. 7.1 times.
599.
2
600.Condensed financial data are presented below for the Phoenix Corporation:
Accounts receivable 267,500 230,000
Inventory
312,500 257,500
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Total assets
825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Sales
1,640,000
Cost of goods sold 982,500
Interest expense 10,000
Income tax expense 77,500
Net income
127,500
Cash flow from operations 71,000
Cash flow from investing activities
(6,000)
Cash flow from financing activities
. .
(62,500)
Tax rate - 30%
The current ratio for 2019 is (rounded):
A. 1.4 to 1
B. 2.0 to 1
C. 2.7 to 1
D. 3.4 to 1
603.
3
604.Condensed financial data are presented below for the Phoenix Corporation:
Accounts receivable 267,500 230,000
Inventory
312,500 257,500
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Total assets
825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Sales
1,640,000
Cost of goods sold 982,500
Interest expense 10,000
. .
Income tax expense 77,500
Net income
127,500
Cash flow from operations 71,000
Cash flow from investing activities
(6,000)
Cash flow from financing activities
(62,500)
Tax rate - 30%
The days receivable outstanding for 2019 is (rounded):
A. 51 days.
B. 55 days.
C. 60 days.
D. 183 days.
607.
3
608.Condensed financial data are presented below for the Phoenix Corporation:
Accounts receivable 267,500 230,000
Inventory
312,500 257,500
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Total assets
. .
825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Sales
1,640,000
Cost of goods sold 982,500
Interest expense 10,000
Income tax expense 77,500
Net income
127,500
Cash flow from operations 71,000
Cash flow from investing activities
(6,000)
Cash flow from financing activities
(62,500)
Tax rate - 30%
The interest coverage for 2019 is:
A. 12.8 times.
B. 13.8 times.
C. 20.5 times.
D. 21.5 times.
611.
3
612.Condensed financial data are presented below for the Phoenix Corporation: . .
Accounts receivable 267,500 230,000
Inventory
312,500 257,500
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Total assets
825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Sales
1,640,000
Cost of goods sold 982,500
Interest expense 10,000
Income tax expense 77,500
Net income
127,500
Cash flow from operations 71,000
Cash flow from investing activities
(6,000)
Cash flow from financing activities
(62,500)
Tax rate - 30%
The inventory turnover for 2019 is (rounded):
A. 2.61 times.
B. 3.12 times.
C. 3.45 times.
D. 3.80 times.
615.
3
616.Condensed financial data are presented below for the Phoenix Corporation:
Accounts receivable 267,500 230,000
Inventory
312,500 257,500
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Total assets
825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Sales
1,640,000
Cost of goods sold 982,500
Interest expense 10,000
Income tax expense 77,500
Net income
127,500
Cash flow from operations 71,000
. .
Cash flow from investing activities
(6,000)
Cash flow from financing activities
(62,500)
Tax rate - 30%
The long-term debt to assets for 2019 is (rounded):
A. 9.4%
B. 10.2%
C. 40.0%
D. 43.4%
619.
3
620.Condensed financial data are presented below for the Phoenix Corporation:
Accounts receivable 267,500 230,000
Inventory
312,500 257,500
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Total assets
825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Sales
..
1,640,000
Cost of goods sold 982,500
Interest expense 10,000
Income tax expense 77,500
Net income
127,500
Cash flow from operations 71,000
Cash flow from investing activities
(6,000)
Cash flow from financing activities
(62,500)
Tax rate - 30%
The quick ratio for 2019 is (rounded): (Assume that total current assets include
cash, marketable securities, accounts receivable and inventory).
A. 1.1 to 1
B. 1.4 to 1
C. 1.6 to 1
D. 2.8 to 1
623.
3
624.Condensed financial data are presented below for the Phoenix Corporation:
Accounts receivable 267,500 230,000
Inventory
. .
312,500 257,500
Total current assets 670,000 565,000
Intangible assets 50,000 60,000
Total assets
825,000 695,000
Current liabilities 252,500 200,000
Long-term liabilities 77,500 75,000
Sales
1,640,000
Cost of goods sold 982,500
Interest expense 10,000
Income tax expense 77,500
Net income
127,500
Cash flow from operations 71,000
Cash flow from investing activities
(6,000)
Cash flow from financing activities
(62,500)
Tax rate - 30%
The return on assets ratio for 2019 is (rounded):
Multiple Choice
A. 16.3%
B. 16.9%
C. 17.7%
