Intermediate Accounting Exam #1 (ch.1-4)
*Use the following information for the next 3 questions*
The income statement of Dolan Corporation for 2017 included the following items:
Interest Revenue $141,000
Salaries and Wages Expense 210,000
Insurance Expense 21,000
The following balance have been excerpted from Dolan Corporation's balance sheets:
Dec 31, 2017 Dec 31, 2016
Interest Receivable $18,200 $15,000
Salaries and Wages payable 17,800 8,400
Prepaid Insurance 2,200 3,000
1) The cash received for interest durning 2017 was?
a. $122,800
b. $137,800
c. $141,000
d. $144,200
2) The cash paid for salaries and wages during 2017 was?
a. $219,400
b. $200,600
c. $201,600
d. $227,800
3) The cash paid for insurance premiums during 2017 was?
a. $19,000
b. $18,200
c. $22,000
d. $20,400 - ANS-1) b. $137,800
2) b. $200,600
3) d. $20,400
\According to Statement of Financial Accounting Concepts No. 2, predictive value is an
ingredient of the fundamental quality of:
Relevance: Faithful Representation:
a. yes no
b. yes yes
c. no no
d. no yes - ANS-a: yes; no
, \Application of the full disclosure principle:
a. is theoretically desirable but not practical because the costs of complete disclosure exceed
the benefits
b. is violated when important financial information is buried in the notes to the financial
statements
c. is demonstrated by the use of supplementary information presenting the effects of changing
prices
d. requires that the financial statements be consistent and comparable - ANS-c. is demonstrated
by the use of supplementary information presenting the effects of changing prices
\At Ruth Company, events and transactions during 2017 included the following. The tax rate for
all items is 30%.
(1) Depreciable for 2015 was found to be understated by
$120,000
(2) A strike by the employees of a supplier resulted in a loss
of $100,000
(3) The inventory at December 31, 2015 was overstated by
$160,000
(4) A disposal of a component of the business resulted in a
$2,000,000 loss
The effect of these events and transactions on 2017 net income would be:
a. ($70,500)
b. ($1,470,000)
c. ($1,554,000)
d. ($1,666,000) - ANS-b. ($1,470,000)
\Benedict Corporation reports the following information:
Net Income $750,000
Dividends on Common Stock $210,000
Dividends on Preferred Stock $90,000
Weighted Average Common Shares Outstanding 250,000
Benedict should report earnings per share of:
a. $1.80
b. $2.16
c. $2.64
d. $3.00 - ANS-c. $2.64
\Financial information exhibits the characteristic of consistency when:
a. expenses are reposted as charges against revenue in the period in which they are paid
b. companies apply the same accounting treatment to similar events, from period to period
c. extraordinary gains and losses are not included on the income statement
*Use the following information for the next 3 questions*
The income statement of Dolan Corporation for 2017 included the following items:
Interest Revenue $141,000
Salaries and Wages Expense 210,000
Insurance Expense 21,000
The following balance have been excerpted from Dolan Corporation's balance sheets:
Dec 31, 2017 Dec 31, 2016
Interest Receivable $18,200 $15,000
Salaries and Wages payable 17,800 8,400
Prepaid Insurance 2,200 3,000
1) The cash received for interest durning 2017 was?
a. $122,800
b. $137,800
c. $141,000
d. $144,200
2) The cash paid for salaries and wages during 2017 was?
a. $219,400
b. $200,600
c. $201,600
d. $227,800
3) The cash paid for insurance premiums during 2017 was?
a. $19,000
b. $18,200
c. $22,000
d. $20,400 - ANS-1) b. $137,800
2) b. $200,600
3) d. $20,400
\According to Statement of Financial Accounting Concepts No. 2, predictive value is an
ingredient of the fundamental quality of:
Relevance: Faithful Representation:
a. yes no
b. yes yes
c. no no
d. no yes - ANS-a: yes; no
, \Application of the full disclosure principle:
a. is theoretically desirable but not practical because the costs of complete disclosure exceed
the benefits
b. is violated when important financial information is buried in the notes to the financial
statements
c. is demonstrated by the use of supplementary information presenting the effects of changing
prices
d. requires that the financial statements be consistent and comparable - ANS-c. is demonstrated
by the use of supplementary information presenting the effects of changing prices
\At Ruth Company, events and transactions during 2017 included the following. The tax rate for
all items is 30%.
(1) Depreciable for 2015 was found to be understated by
$120,000
(2) A strike by the employees of a supplier resulted in a loss
of $100,000
(3) The inventory at December 31, 2015 was overstated by
$160,000
(4) A disposal of a component of the business resulted in a
$2,000,000 loss
The effect of these events and transactions on 2017 net income would be:
a. ($70,500)
b. ($1,470,000)
c. ($1,554,000)
d. ($1,666,000) - ANS-b. ($1,470,000)
\Benedict Corporation reports the following information:
Net Income $750,000
Dividends on Common Stock $210,000
Dividends on Preferred Stock $90,000
Weighted Average Common Shares Outstanding 250,000
Benedict should report earnings per share of:
a. $1.80
b. $2.16
c. $2.64
d. $3.00 - ANS-c. $2.64
\Financial information exhibits the characteristic of consistency when:
a. expenses are reposted as charges against revenue in the period in which they are paid
b. companies apply the same accounting treatment to similar events, from period to period
c. extraordinary gains and losses are not included on the income statement
