ACG 3173 Exam 1 Questions and Answers
Question 1
The following Office Supplies account information is available for Avocado Company.
Beginning balance: $2000
Office Supplies expensed: 8000
Ending balance: 1000
From the above information, calculate the amount of office supplies purchased.
Correct Answer
Ending balance: 1000
Add: Office Supplies expensed: 8000
= 9000
Less: beginning balance - 2000
= 9000 - 2000
= $7000
Question 2
Apricot Corporation has 14,000 shares of 12%, $104 par noncumulative preferred
stock outstanding and 26,000 shares of no-par common stock outstanding. At the
end of the current year, the corporation declares a dividend of $220,000.
What is the dividend per share for preferred stock and for common stock?
Correct Answer
The dividend per share of preferred stock
= $104 × 12%
= $12.48 per share × 14,000
The dividend per share of common stock
= ($220,000 - $174,720)
= $45,,000 shares
= $1.74
The dividend per share is $12.48 to preferred stock and $1.74 to common stock.
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,Question 3
Grapefruit Services started the year with total assets of $90,000 and total liabilities of
$40,000. The company is a sole proprietorship. The revenues and the expenses for the
year amounted to $130,000 and $50,000, respectively. During the year, there were no
new capital contributions and the owner withdrew $40,000.
What is the amount of owner's equity at the end of the year?
Correct Answer
Owner, Capital, Ending Balance = Owner, Capital (Beg. Balance) - Owner,
Withdrawals + Revenues - Expenses
= (90000 - 40000) - 40000 + 130000 - 50000
= 90,000
Question 4
Lime Company signed a three-year note payable for $48,000 at 13% annual interest.
What is the interest expense for Year 1 if the note was signed on August 1, Year 1?
Correct Answer
Interest Expense: ($48,000 × 13% × 5/12)
$2600
Question 5
The Allowance for Doubtful Accounts has a credit balance of $9500 before the
adjusting entry for bad debts expense. After analyzing the accounts in the accounts
receivable subsidiary ledger using the aging-of- receivables method, the company's
management estimates that uncollectible accounts will be $18,000.
What will be the amount of Bad Debts Expense reported on the income statement?
Correct Answer
Estimate of uncollectible accounts - Credit balance of the Allowance for Bad Debts
= 18,000 - 9500
$8500
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, Question 6
Orange Corp. uses the indirect method to prepare its statement of cash flows. Refer
to the following information for the year:
1. Long-Term Notes Payable, beginning balance, $81,000
2. Long-Term Notes Payable, ending balance, $75,000
3. Common Stock, beginning balance, $3600
4. Common Stock, ending balance, $27,000
5. Retained Earnings, beginning balance, $78,000
6. Retained Earnings, ending balance, $119,000
7. Treasury Stock, beginning balance, $6000
8. Treasury Stock, ending balance, $10,100
9. No stock was retired
.10. No treasury stock was sold.
11. During the year, the company repaid $38,000 of long-term notes payable.
12. During the year, the company borrowed $32,000 on new long-term notes payable.
13. Net income for the year was $51,000
.14. Assume all dividends declared during the year were paid.
What is the net cash provided by financing activities?
Correct Answer
Long-term Notes Payable repaid: (38,000)
Long-term Notes Payable borrowed: 32,000
Issued Common Stock: 23,400
Dividends paid: ($78,000 + $51,000 - $119,000) (10,000)
Purchased Treasury Stock: (4100)
Net Cash from Financing Activities: $3300
Question 7
On November 1, Year 1, Banana Corporation issued $335,000 of eight-year bonds
with a stated rate of 15% at par. Interest payments occur each April 30 and October
31. On December 31, Year 1, Banana Corporation made an adjusting entry to accrue
interest at year-end.
What is the amount of Interest Expense that will be recorded on December 31, Year 1?
Correct Answer
335,000 × 15% × 2/12
$8375
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Question 1
The following Office Supplies account information is available for Avocado Company.
Beginning balance: $2000
Office Supplies expensed: 8000
Ending balance: 1000
From the above information, calculate the amount of office supplies purchased.
Correct Answer
Ending balance: 1000
Add: Office Supplies expensed: 8000
= 9000
Less: beginning balance - 2000
= 9000 - 2000
= $7000
Question 2
Apricot Corporation has 14,000 shares of 12%, $104 par noncumulative preferred
stock outstanding and 26,000 shares of no-par common stock outstanding. At the
end of the current year, the corporation declares a dividend of $220,000.
What is the dividend per share for preferred stock and for common stock?
Correct Answer
The dividend per share of preferred stock
= $104 × 12%
= $12.48 per share × 14,000
The dividend per share of common stock
= ($220,000 - $174,720)
= $45,,000 shares
= $1.74
The dividend per share is $12.48 to preferred stock and $1.74 to common stock.
Page 1 of 19
,Question 3
Grapefruit Services started the year with total assets of $90,000 and total liabilities of
$40,000. The company is a sole proprietorship. The revenues and the expenses for the
year amounted to $130,000 and $50,000, respectively. During the year, there were no
new capital contributions and the owner withdrew $40,000.
What is the amount of owner's equity at the end of the year?
Correct Answer
Owner, Capital, Ending Balance = Owner, Capital (Beg. Balance) - Owner,
Withdrawals + Revenues - Expenses
= (90000 - 40000) - 40000 + 130000 - 50000
= 90,000
Question 4
Lime Company signed a three-year note payable for $48,000 at 13% annual interest.
What is the interest expense for Year 1 if the note was signed on August 1, Year 1?
Correct Answer
Interest Expense: ($48,000 × 13% × 5/12)
$2600
Question 5
The Allowance for Doubtful Accounts has a credit balance of $9500 before the
adjusting entry for bad debts expense. After analyzing the accounts in the accounts
receivable subsidiary ledger using the aging-of- receivables method, the company's
management estimates that uncollectible accounts will be $18,000.
What will be the amount of Bad Debts Expense reported on the income statement?
Correct Answer
Estimate of uncollectible accounts - Credit balance of the Allowance for Bad Debts
= 18,000 - 9500
$8500
Page 2 of 19
, Question 6
Orange Corp. uses the indirect method to prepare its statement of cash flows. Refer
to the following information for the year:
1. Long-Term Notes Payable, beginning balance, $81,000
2. Long-Term Notes Payable, ending balance, $75,000
3. Common Stock, beginning balance, $3600
4. Common Stock, ending balance, $27,000
5. Retained Earnings, beginning balance, $78,000
6. Retained Earnings, ending balance, $119,000
7. Treasury Stock, beginning balance, $6000
8. Treasury Stock, ending balance, $10,100
9. No stock was retired
.10. No treasury stock was sold.
11. During the year, the company repaid $38,000 of long-term notes payable.
12. During the year, the company borrowed $32,000 on new long-term notes payable.
13. Net income for the year was $51,000
.14. Assume all dividends declared during the year were paid.
What is the net cash provided by financing activities?
Correct Answer
Long-term Notes Payable repaid: (38,000)
Long-term Notes Payable borrowed: 32,000
Issued Common Stock: 23,400
Dividends paid: ($78,000 + $51,000 - $119,000) (10,000)
Purchased Treasury Stock: (4100)
Net Cash from Financing Activities: $3300
Question 7
On November 1, Year 1, Banana Corporation issued $335,000 of eight-year bonds
with a stated rate of 15% at par. Interest payments occur each April 30 and October
31. On December 31, Year 1, Banana Corporation made an adjusting entry to accrue
interest at year-end.
What is the amount of Interest Expense that will be recorded on December 31, Year 1?
Correct Answer
335,000 × 15% × 2/12
$8375
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