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University of Phoenix ACC 421 Intermediate Accounting I Final Exam Instructor: Ana Machuca Student Name: Tom Collins

s Version 2009 Exam A 1D 16 C 2A 17 A 3B 18 D 4B 19 A 5A 20 C 6A 21 D 7C 22 A 8A 23 C 9A 24 A 10 B 25 A 11 B 26 C 12 B 27 B 13 B 28 B 14 D 29 B 15 A 30 C Please write all the answers in this answer sheet and submit for grading. Answers not included in this worksheet will not be graded.

1. Generally Accepted Accounting Principles include: 1) FASB Technical Bulletins, 2) APB Opinions, and 3) Widely-accepted industry practices. These three items rank from most authoritative to least authoritative as follows: a. 1, 2, 3. b. 1, 3, 2. c. 2, 1, 3. d. 2, 3, 1. 2. Financial accounting standard-setting in the United States a. can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic. b. is based solely on research and empirical findings. c. is a legalistic process based on rules promulgated by governmental agencies. d. is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable. 3. According to the FASB's conceptual framework, predictive value is an ingredient of Relevance Reliability a. Yes No b. Yes Yes c. No Yes d. No No 4. Under Statements of Financial Accounting Concepts, comprehensive income includes which of the following? Gains Gross Margin a. No No b. No Yes c. Yes No d. Yes Yes 5. According to the FASB's conceptual framework, the process of reporting an item in the financial statements of an entity is a. recognition. b. realization. c. allocation. d. matching. 6. On September 1, 2006, Lowe Co. issued a note payable to National Bank in the amount of $600,000, bearing interest at 12%, and payable in three equal annual principal payments of $200,000. On this date, the bank's prime rate was 11%. The first payment for interest and principal was made on September 1, 2007. At December 31, 2007, Lowe should record accrued interest payable of a. $24,000. b. $22,000. c. $16,000. d. $14,667.

7. In November and December 2007, Lane Co., a newly organized magazine publisher, received $90,000 for 1,000 three-year subscriptions at $30 per year, starting with the January 2008 issue. Lane included the entire $90,000 in its 2007 income tax return. What amount should Lane report in its 2007 income statement for subscriptions revenue? a. $0. b. $5,000. c. $30,000. d. $90,000. 8. Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. Colaw accrues salaries expense only at its December 31 year end. Data relating to salaries earned in December 2007 are as follows: Last payroll was paid on 12/26/07, for the 2-week period ended 12/26/07. Overtime pay earned in the 2-week period ended 12/26/07 was $10,000. Remaining work days in 2007 were December 29, 30, 31, on which days there was no overtime. The recurring biweekly salaries total $180,000. Assuming a five-day work week, Colaw should record a liability at December 31, 2007 for accrued salaries of a. b. c. d. $54,000. $64,000. $108,000. $118,000.

9. At December 31, 2007, Sues Boutique had 1,000 gift certificates outstanding, which had been sold to customers during 2007 for $50 each. Sues operates on a gross margin of 60% of its sales. What amount of revenue pertaining to the 1,000 outstanding gift certificates should be deferred at December 31, 2007? a. $0. b. $20,000. c. $30,000. d. $50,000.

Use the following information for questions 10 through 12: Hogan Corp.'s trial balance of income statement accounts for the year ended December 31, 2007 included the following: Debit Credit Sales $140,000 Cost of sales $ 50,000 Administrative expenses 25,000 Loss on sale of equipment 9,000 Commissions to salespersons 8,000 Interest revenue 5,000 Freight-out 3,000 Loss due to earthquake damage 12,000 Bad debt expense 3,000 Totals $110,000 $145,000 Other information: Hogan's income tax rate is 30%. Finished goods inventory: January 1, 2007 December 31, 2007 $80,000 70,000

On Hogan's multiple-step income statement for 2007, 10. Cost of goods manufactured is a. $63,000. b. $60,000. c. $43,000. d. $40,000. Income before extraordinary item is a. $64,000. b. $47,000. c. $32,900. d. $24,500. Extraordinary loss is a. $8,400. b. $12,000. c. $14,700. d. $21,000.

11.

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Use the following information for questions 13 through 15. The following trial balance of Scott Corp. at December 31, 2007 has been properly adjusted except for the income tax expense adjustment. Scott Corp. Trial Balance December 31, 2007 Dr. Cr. Cash $ 775,000 Accounts receivable (net) 2,695,000 Inventory 2,085,000 Property, plant, and equipment (net) 7,366,000 Accounts payable and accrued liabilities $ 1,701,000 Income taxes payable 654,000 Deferred income tax liability 85,000 Common stock 2,350,000 Additional paid-in capital 3,680,000 Retained earnings, 1/1/04 3,450,000 Net sales and other revenues 13,360,000 Costs and expenses 11,180,000 Income tax expenses 1,179,000 $25,280,000 $25,280,000 Other financial data for the year ended December 31, 2007: Included in accounts receivable is $1,200,000 due from a customer and payable in quarterly installments of $150,000. The last payment is due December 29, 2009. The balance in the Deferred Income Tax Liability account pertains to a temporary difference that arose in a prior year, of which $20,000 is classified as a current liability. During the year, estimated tax payments of $525,000 were charged to income tax expense. The current and future tax rate on all types of income is 30%. In Scott's December 31, 2007 balance sheet, 13. The current assets total is a. $6,080,000. b. $5,555,000. c. $5,405,000. d. $4,955,000. 14. The current liabilities total is a. $1,850,000. b. $1,915,000. c. $2,375,000. d. $2,440,000.

15. The final retained earnings balance is a. $4,451,000. b. $4,536,000. c. $4,976,000. d. $4,905,000.

16. On January 1, 2007, Nott Co. sold to Day Corp. $400,000 of its 10% bonds for $354,118 to yield 12%. Interest is payable semiannually on January 1 and July 1. What amount should Nott report as interest expense for the six months ended June 30, 2007? a. $17,706 b. $20,000 c. $21,247 d. $24,000

17. For which of the following transactions would the use of the present value of an ordinary annuity concept be appropriate in calculating the present value of the asset obtained or the liability owed at the date of incurrence? a. A capital lease is entered into with the initial lease payment due one month subsequent to the signing of the lease agreement. b. A capital lease is entered into with the initial lease payment due upon the signing of the lease agreement. c. A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 7%. d. A ten-year 8% bond is issued on January 2 with interest payable semiannually on January 2 and July 1 yielding 9%.

18. On December 30, 2007, Cey, Inc. purchased a machine from Frank Corp. in exchange for a noninterest-bearing note requiring eight payments of $50,000. The first payment was made on December 30, 2007, and the others are due annually on December 30. At date of issuance, the prevailing rate of interest for this type of note was 11%. Present value factors are as follows: Present Value of Ordinary Present Value of Period Annuity of 1 at 11% Annuity Due of 1 at 11% 7 4.712 5.231 8 5.146 5.712 On Cey's December 31, 2007 balance sheet, the net note payable to Frank is a. $235,600. b. $257,300. c. $261,775. d. $285,600.

19. Noland Constructors, Inc. has consistently used the percentage-of-completion method of recognizing income. In 2007, Noland started work on a $35,000,000 construction contract that was completed in 2008. The following information was taken from Noland's 2007 accounting records: Progress billings $11,000,000 Costs incurred 10,500,000 Collections 7,000,000 Estimated costs to complete 21,000,000 What amount of gross profit should Noland have recognized in 2007 on this contract? a. $3,500,000 b. $2,333,334 c. $1,750,000 d. $1,166,667

20. Neber Co., which began operations on January 1, 2007, appropriately uses the installment-sales method of accounting. The following information pertains to Neber's operations for the year 2007: Installment sales Regular sales Cost of installment sales Cost of regular sales General and administrative expenses Collections on installment sales $1,200,000 480,000 720,000 288,000 96,000 288,000

The deferred gross profit account in Neber's December 31, 2007 balance sheet should be a. $115,200. b. $192,000. c. $364,800. d. $480,000.

21. Alton, Inc. is a retailer of home appliances and offers a service contract on each appliance sold. Alton sells appliances on installment contracts, but all service contracts must be paid in full at the time of sale. Collections received for service contracts should be recorded as an increase in a a. deferred revenue account. b. sales contracts receivable valuation account. c. stockholders' valuation account. d. service revenue account.

Use the following information for questions 22 and 23. Kerwin Corp.'s transactions for the year ended December 31, 2008 included the following: Purchased real estate for $550,000 cash which was borrowed from a bank. Sold available-for-sale securities for $500,000. Paid dividends of $600,000. Issued 500 shares of common stock for $250,000. Purchased machinery and equipment for $125,000 cash. Paid $450,000 toward a bank loan. Reduced accounts receivable by $100,000. Increased accounts payable $200,000. 22. Kerwin's net cash used in investing activities for 2008 was a. $675,000. b. $375,000. c. $175,000. d. $50,000. 23. Kerwin's net cash used in financing activities for 2008 was a. $50,000. b. $250,000. c. $450,000. d. $500,000. 24. Bell Corp.'s comparative balance sheet at December 31, 2008 and 2007 reported accumulated depreciation balances of $800,000 and $600,000, respectively. Property with a cost of $50,000 and a carrying amount of $38,000 was the only property sold in 2008. Depreciation charged to operations in 2008 was a. $188,000. b. $200,000. c. $212,000. d. $224,000. 25. Walsh Co.'s prepaid insurance was $90,000 at December 31, 2008 and $45,000 at December 31, 2007. Insurance expense was $36,000 for 2008 and $27,000 for 2007. What amount of cash disbursements for insurance would be reported in Walsh's 2008 net cash provided by operating activities presented on a direct basis? a. $99,000. b. $81,000. c. $54,000. d. $36,000.

Use the following information for questions 26 through 30. The following data are provided: Cash Accounts receivable (net) Inventories Plant assets (net) Accounts payable Taxes payable Bonds payable 10% Preferred stock, $50 par Common stock, $10 par Paid-in capital Retained earnings Net credit sales Cost of goods sold Operating expenses Net income December 31 2008 2007 $ 375,000 $ 250,000 400,000 300,000 650,000 550,000 2,000,000 1,625,000 275,000 200,000 50,000 25,000 350,000 350,000 500,000 500,000 600,000 450,000 400,000 325,000 1,000,000 875,000 3,200,000 2,100,000 725,000 375,000

Additional information: Depreciation included in cost of goods sold and operating expenses is $305,000. On May 1, 2008, 15,000 shares of common stock were issued. The preferred stock is cumulative. The preferred dividends were not declared during 2008. 26. The receivables turnover for 2008 is a. 3,200 400. b. 2,100 400. c. 3,200 350. d. 2,100 350. 27. The inventory turnover for 2008 is a. 3,200 650. b. 2,100 650. c. 3,200 600. d. 2,100 600. 28. The profit margin on sales for 2008 is a. 1,100 3,200. b. 375 3,200. c. 1,100 2,100. d. 375 2,100. 29. The rate of return on common stock equity for 2008 is a. 375 1,800. b. 375 2,000. c. 325 1,800.

d. 325 2,000.

30. The book value per share of common stock at 12/31/08 is a. 1,950 60. b. 1,940 60. c. 1,950 55. d. 2,000 55.

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