Download ACCT 201 Pre-Quiz #2 (Ch. 3 and 4) PROFESSOR FARINA

ACCT 201 Pre-Quiz #2 (Ch. 3 and 4) - PROFESSOR FARINA
Name: ___________________________________________________________________________
Instruction: for true-false or multiple choice questions, circle the letter of the best answer.
For matching questions, place the letter of the best answer in the space provided.
CHAPTER 3
1. The balance sheet reports a company's financial position at a point in time.
True False
2. Intangible assets usually are reported in the balance sheet as current assets.
True False
3. Accrued salaries and wages in a balance sheet represent salary and wages that have been earned by
employees but not yet paid.
True False
4. Payment terms, interest rates, and other details of long-term liabilities usually are reported in disclosure
notes.
True False
5. Subsequent events are significant developments that take place after a firm's year-end, and after the financial
statements are issued.
True False
For #6 through 10: Listed below are ten terms followed by a list of phrases that describe or characterize five of
the terms. Match each phrase with the correct term placing the letter designating the best term in the space
provided by the phrase.
Terms:
A. Accrued liabilities
B. Current liabilities
C. Intangible asset
D. Liquidity
E. Long-term solvency
F. Notes receivable
G. Qualified opinion
H. Proxy statement
I. Times interest earned ratio
J. Unqualified opinion
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6. ____ Will be satisfied in the next year or the operating cycle, whichever is longer.
7. ____ Presented fairly in conformity with GAAP.
8. ____ The larger the better from a debt holder's perspective.
9. ____ Supported by a negotiable instrument.
10. ____ Expenses incurred but not yet paid.
Multiple-choice: Circle the letter of the best answer.
11. Janson Corporation Co.'s trial balance included the following account balances at December 31, 2010:
Investments consist of treasury bills that were purchased in November and mature in January. Prepaid insurance
is for the next two years. What amount should be included in the current asset section of Janson's December 31,
2010, balance sheet?
A. $ 88.000.
B. $ 85,000.
C. $ 55,000.
D. $135,000.
12. A subsequent event for an entity with a December 31, 2016, year-end would not include:
A. A change in the estimated useful lives of equipment in January 2017.
B. An issuance of bonds in January 2017.
C. An acquisition of another company in January 2017.
D. A major uncertainty at December 31, resolved in January 2017.
13. The quick ratio is:
A. The liquidity ratio divided by the equity ratio.
B. Current assets minus inventory divided by current liabilities minus accounts payable.
C. Current assets minus inventory and prepaid items divided by current liabilities.
D. Cash divided by accounts payable.
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14. Which of the following would be disclosed in the summary of significant accounting policies disclosure
note?
A.
B.
C.
D.
15. Which of the following is never a current liability account?
A. Accrued payroll
B. Dividends payable
C. Prepaid rent
D. Subscriptions collected in advance
16. Which of the following would be disclosed in the summary of significant accounting policies disclosure
note?
a.
b.
c.
d.
Composition of
Long-term debt
No
Yes
Yes
No
Depreciation
Method
Yes
No
Yes
No
Recent financial statement data for Harmony Health Foods (HHF) Inc. is shown below.
Current liabilities
$ 180
Income before interest and
taxes
$
125
10% Bonds, long-term
360
Interest expense
36
Total liabilities
540
Income before tax
89
Income tax
27
Net income
$ 62
Shareholders' equity
Capital stock
200
Retained earnings
280
Total shareholders' equity
480
Total liabilities and equity
$1,020
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17. HHF's debt to equity ratio is (rounded):
a.
0.75.
b.
1.13.
c.
0.53.
d.
1.80.
18. When a company pays a bill from a plumber for previous services on account:
a. Its debt to equity ratio will decrease
b. Its acid-test ratio does not change
c. Its current ratio does not change
d. Its return on shareholders’ equity will decrease
CHAPTER FOUR
19. Material restructuring costs are reported as an element of income from continuing operations.
True False
20. In a statement of cash flows prepared under International Financial Reporting Standards, interst paid is most
often classified as a financing cash flow.
True False
21. Changes in accounting estimates require disclosure of their effects, if material, on current year net income
and EPS but do not require restatement of prior years' financial statements.
True False
22. Comprehensive income reports an expanded version of income to include four types of gains and losses not
included in traditional income statements.
True False
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For #20 through #24: Listed below are ten terms followed by a list of phrases that describe or characterize five
of the terms. Match each phrase with the correct term placing the letter designating the best term in the space
provided by the phrase.
Terms:
A. Change in accounting estimate
B. Income from discontinued operations
C. Income from continuing operations
D. Intraperiod tax allocation
E. Matching principle
F. Operating activities (income statement)
G. Prior period adjustment
H. Provision for income tax
I. Taxable income
J. Transitory earnings
23. _____ Also known as income tax expense.
24. _____ From transactions or events that are not likely to occur in the foreseeable future.
25. _____ Associates tax with income statement items.
26. _____ Used as the base for computing taxes currently payable.
27. _____ Made to correct a material error.
28. Each of the following would be reported as items of other comprehensive income except:
A. Foreign currency translation gains
B. Unrealized gains on available for sale securities.
C. Deferred gains from derivatives.
D. Gains from sale of equipment.
29. When a company sells land for cash and recognizes a $25,000 gain:
A. Its acid-test ratio decreases.
B. Its current ratio decreases.
C. Its debt to equity ratio decreases.
D. None of the above.
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For #30 and #31: Misty Company reported the following before-tax items during the current year:
Sales
Operating expenses
$600
250
Restructuring charges
20
Loss on discontinued operations
50
Misty's effective tax rate is 40%.
30. What is Misty's income from continuing operations?
A. $198.
B. $210.
C. $330.
D. $360.
31. What is Misty's net income for the current year?
A. $148.
B. $168.
C. $112.
D. None of the amounts given are correct.
32. A voluntary change in accounting principle is accounted for by:
A. A cumulative effect on income in the year of the change.
B. A retrospective reporting of all comparative financial statements shown.
C. A prior period adjustment.
D. A separate line component of income.
33. A change in depreciation method is accounted for by retrospectively revising prior years' financial
statements.
True False
34. Cash flows from investing do not include cash flows from:
A. Lending money to another corporation.
B. The sale of equipment.
C. Borrowing.
D. The purchase of other corporation's securities.
35. Cash flows from financing activities include:
A. Interest received.
B. Interest paid.
C. Dividends received.
D. Dividends paid.
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36. Which of the following is added to net income as an adjustment under the indirect method of preparing the
statement of cash flows?
A. Salaries payable decrease.
B. Gain on sale of land.
C. Loss on sale of equipment.
D. Accounts receivable increase.
37. Shively Mfg. Co. sold for $18,000 equipment that cost $40,000 and had a book value of $30,000. Shively
would report:
A. Operating cash inflows of $18,000.
B. Operating cash inflows of $8,000.
C. Financing cash inflows of $18,000.
D. Investing cash inflows of $18,000.
38. Lucia Ltd. reported net income of $135,000 for the year ended December 31, 2009. January 1 balances in
accounts receivable and accounts payable were $29,000 and $26,000 respectively. Year-end balances in these
accounts were $30,000 and $24,000, respectively. Assuming that all relevant information has been presented,
Lucia's cash flows from operating activities would be:
A. $132,000.
B. $134,000.
C. $136,000.
D. $138,000.
39. On August 1, 2016, Rocket Retailers adopted a plan to discontinue its catalog sales division, which qualifies
as a separate component of the business according to GAAP regarding discontinued operations. The disposal
of the division was expected to be concluded by June 30, 2017. On January 31, 2017, Rocket's fiscal year-end,
the following information relative to the discontinued division was accumulated:
Operating loss Feb. 1, 2016–Jan. 31, 2017
$115,000
Estimated operating losses, Feb. 1–June 30, 2017
80,000
Impairment of division assets at Jan. 31, 2017
10,000
In its income statement for the year ended January 31, 2017, Rocket would report a before-tax loss on
discontinued operations of:
a. $115,000.
b. $195,000.
c. $ 65,000.
d. $125,000.
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40.
Howard Co.'s 2016 income from continuing operations before income taxes was $280,000. Howard Co.
reported before-tax income on discontinued operations of $50,000. All tax items are subject to a 40% tax
rate. In its income statement for 2016, Howard Co. would show the following line-item amounts for net
income and income tax expense:
a. $198,000 and $112,000.
b. $230,000 and $92,000.
c. $330,000 and $132,000.
d. $198,000 and $79,000.
41. PROBLEM
Bernardo Paint Company had the following income statement items for the year ended December
31, 2016 ($ in 000s):
Net sales
Interest income
Interest expense
$ 19,000
210
370
Cost of goods sold
$ 11,000
Selling and administrative expenses
Restructuring costs
2,600
900
In addition, during the year the company completed the disposal of its plastics business and
incurred a loss from operations of $1.7 million and a gain on disposal of the component’s assets of
$2.2 million. 400,000 shares of common stock were outstanding throughout 2016. Income tax
expense has not yet been recorded. The income tax rate is 40% on all items of income (loss).
Required:
Prepare a multiple-step income statement for 2016, including EPS disclosures. Round EPS to two
decimal places.
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