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More Introduction to Financial Accounting Week 01 Quiz Answers

Quiz : Homework #1

Q1. At what point are companies required to recognize Bad Debt Expense for tax reporting purposes?

• After an account is more than 90 days past due
• One hour before an IRS audit
• As a period-end adjusting entry
• At the point the account is written-off
• At the same time each individual sale is recorded

Q2. Which of the following transactions do not involve cash? (check all that apply)

• Write-offs of Accounts Receivable
• Sales on account
• Recording Bad Debt expense
• Collections from customers
• Recoveries of cash from accounts previously written-off

Q3. A company’s customers owe it a total of $10,000 on 12/31/2012. On the same date, the company has an Allowance for Doubtful Accounts of $1,000. How much cash does the company expect to collect from customers that owe it money as of 12/31/2012?

• $10,000
• $1,000
• $9,000
• $0
• $11,000

Q4. A company had credit sales of $500,000 during the third quarter of 2013. It had to write-off $300 of accounts as uncollectible during the quarter, and had no recoveries. Its balance in Allowance for Doubtful Accounts was $2,000 at the beginning of the quarter. Based on historical experience and trends in the economy, the company expects that 1% of its credit sales will ultimately be uncollectible in the future. How much Bad Debt Expense should the company report for the third quarter of 2013?

• $300
• $7,000
• $2,000
• $5,000
• $20

Q5. A company had a balance in Gross Accounts Receivable of $200,000 on 12/31/2011. The balance in Gross Accounts Receivable was $300,000 on 12/31/2012. During 2012, the company had to write-off $10,000 of accounts as uncollectible, and had no recoveries. Its Bad Debt Expense was $20,000 during 2012. Total sales were $1,000,000 during 2012, all of which were credit sales. How much cash did the company collect from customers during 2012?

• $1,000,000
• $890,000
• $900,000
• $880,000
• $870,000

Q6. Which of the following accounts are part of Inventory for manufacturing firms? (check all that apply)=

• Finished Goods
• Raw Materials
• Work in Process
• Accumulated Depreciation
• Cost of Goods Sold

Q7. A manufacturing company had a balance in Finished Goods inventory of $200,000 on 12/31/2011. During 2012, the company transferred $1,000,000 of costs from Work in Process to Finished Goods. A count of inventory at the end of the year revealed a balance in Finished Goods of $400,000 at 12/31/2012. What was Cost of Goods Sold during 2012?

• $1,000,000
• $200,000
• $400,000
• $800,000
• $1,200,000

Q8. A company that sells transmogrifiers uses FIFO for its inventory accounting. It had 100 transmogrifiers in Inventory on 12/31/2011 with a total cost of $160,000. The company bought 50 transmogrifiers costing $90,000 on 3/3/12; another 50 transmogrifiers costing $100,000 on 6/6/12; and another 100 transmogrifiers costing $250,000 on 9/9/12. During 2012, the company sold 175 transmogrifiers. What was Cost of Goods Sold during 2012?

• $250,000
• $160,000
• $260,000
• $300,000
• $350,000

Q9. A company that sells flux capacitors uses LIFO for its inventory accounting. It had 100 flux capacitors in Inventory on 12/31/2011 with a total cost of $100,000. The company bought 50 flux capacitors costing $55,000 on 3/3/12; another 50 flux capacitors costing $65,000 on 6/6/12; and another 100 flux capacitors costing $140,000 on 9/9/12. During 2012, the company sold 150 flux capacitors. What was the balance in Inventory on 12/31/2012?

• $155,000
• $205,000
• $140,000
• $100,000
• $180,000

Q10. Which of the following are true? (check all that apply)

• Companies that use LIFO for tax purposes in the US must use LIFO for their financial statements
• LIFO Cost of Goods Sold is greater than FIFO Cost of Goods Sold when input prices are rising
• Companies with perishable inventory (e.g., food products) must use the FIFO method
• If the replacement cost of inventory is higher than the historical cost, companies must use replacement cost on the balance sheet
• US companies can choose to use LIFO for all of their inventory, even it is in a non-US subsidiary

More Introduction to Financial Accounting Week 02 Quiz Answers

Quiz : Homework #2

Q1. Which of the following assets would be depreciated over its useful life? (check all that apply)

• Patents
• Goodwill
• Equipment
• Land
• Buildings

Q2. At the end of the quarter, a company made an adjusting entry to recognize $1000 of interest costs that have been incurred this quarter in constructing a new piece of production equipment.

What is the correct journal entry?

• Dr. Equipment            1000

     Cr. Interest Payable            1000

• Dr. Work in Process            1000

     Cr. Interest Payable            1000

• Dr. Interest Expense            1000

     Cr. Interest Payable            1000

• Dr. Interest Expense            1000

     Cr. Cash                              1000

• No entry is needed.

Q3. A company spent $5000 to install a new theft-detection system in its headquarters. Management wasn’t sure whether this cost should be capitalized to the Buildings account or expensed immediately. The CFO flipped a coin, it came up heads, so the company capitalized the costs.

Which of the following would be increased because the CFO is capitalizing these costs instead of expensing them immediately? (check all that apply)

(Hint: Do the journal entries for both capitalizing and expensing and use the differences to answer the question)

• Buildings
• Cash from Operations
• Total Stockholders’ Equity
• Maintenance Expense
• Cash from Investing Activities

Q4. A company has a building that it originally bought for $500,000. As of 12/31/2012, there is $100,000 of Accumulated Depreciation on the building (it was being straight-line depreciated over 20 years with $100,000 salvage value). On 1/1/2013, the company decides to change the remaining useful life to 5 years (starting now) with a $200,000 salvage value.

What will be the depreciation on the building in 2013?

• $20,000
• $40,000
• $15,000
• $60,000
• $30,000

Q5. A company has a building that it originally bought for $100,000. As of 9/9/2012, there is $40,000 of Accumulated Depreciation on the building. On 9/9/2012, the company sells the building for $50,000.

How will this transaction show up on the income statement?

• It will not affect the income statement
• Loss on sale of Building of $10,000
• Loss on sale of Building of $50,000
• Gain on sale of Building of $10,000
• Gain on sale of Building of $50,000

Q6. Which of the following assets would be amortized over their useful lives after they are acquired? (check all that apply)

• Customer Lists
• Buildings
• Brand name
• Patents
• Goodwill

Q7. Which of the following items would be included in the Goodwill asset? (check all that apply)

• Brand name
• Customer Lists
• Trademarks
• Synergies
• Patents

Q8. Which of the following items would increase Net Income for Marketable Securities accounted for under the Available-for-Sale method? (check all that apply)

• Unrealized gains
• Realized losses
• Unrealized losses
• Cash dividends received
• Realized gains

Q9. A company has shares in 3M Company stock that it originally bought for $100,000. On 3/31/2013, this investment was valued at $130,000 on the balance sheet. On 4/4/2013, the company sells the stock for $110,000. The company accounts for this investment using the Available-for-Sale method

How will this transaction show up on the income statement?

• Loss on sale of Investments of $20,000
• Gain on sale of Investments of $20,000
• It will not affect the income statement
• Loss on sale of Investments of $10,000
• Gain on sale of Investments of $10,000

Q10. Which of the following items would increase Cash Flow from Investing Activities? (check all that apply)

• Realized gain on an Investment accounted for using the Trading Securities method
• Realized gain on an Investment accounted for using the Available-for-Sale method
• Unrealized gain on an Investment accounted for using the Trading Securities method
• Realized gain on an Investment accounted for using the Held-to-Maturity method
• Unrealized gain on an Investment accounted for using the Available-for-Sale method

More Introduction to Financial Accounting Week 03 Quiz Answers

Quiz : Homework #3

Q1. How much money would you have had to invest on 1/1/2010 in a savings account that yields 1% interest (compounded annually) to have $100 on 1/1/2013?

• $98.00
• $97.00
• $100.00
• $97.06
• $98.03

Q2. Which of the following changes would increase the present value of a future payment? (check all that apply)

• Increase in the interest rate
• Decrease in the interest rate
• Increase in the amount of the payment
• Decrease in the number of years until the future payment is received
• Increase in the number of years until the future payment is received

Q3. If you invested $100 in a savings bond that yields 4% interest (compounded quarterly) on 1/1/2010, how much would the savings bond be worth on 1/1/2011?

• $101.00
• $104.06
• $108.00
• $104.00
• $116.99

Q4. Using the examples from the videos, which of these types of loans require that some principal be repaid prior to maturity (i.e., before the end of the loan period)? (check all that apply)

• Zero-coupon bond
• Bank loan
• Mortgage loan
• Capital lease
• Coupon bond

Q5. A company issues a 5-year, 4% coupon bond with a face value of $100,000. The effective market interest rate at the time of issuance is 2%. What are the proceeds from issuing the bond?

• $100,000
• $128,414
• $109,471
• $109,427
• $83,778

Q6. On 6/30/12, a company recorded a journal entry for the coupon payment on its bond. As part of the journal entry, the company debited bonds payable. Which of the following is true regarding this journal entry? (check all that apply)

• The coupon rate is greater than the effective rate
• The bond was issued at a discount
• The company credited Cash
• The company debited Interest Expense
• The proceeds of the bond were less than the face value

Q7. On 6/30/12, a company paid $96,000 to retire a bond before maturity. The company recorded a $6,000 gain as part of the transaction. Which of the following must be true regarding this transaction? (check all that apply)

• The face value of the bond was $102,000
• The company paid less than the current market value of the bond to retire it.
• The face value of the bond was $96,000
• The market interest rate had decreased since the bond was issued
• The market interest rate had increased since the bond was issued

Q8. Which of these items related to bonds would be added back in the Operating section of the SCF under the indirect method? (check all that apply)

• Unrealized loss on bonds under the fair value option
• Loss on bond retirement
• Gain on bond retirement
• Amortization of bond discount
• Amortization of bond premium

Q9. Which of these contractual terms would lead a company to account for a lease contract under the capital lease method? (check all that apply)

• The present value of the lease payments is $91,000. The truck could be bought today for $100,000 cash.
• The IRS requires a capital lease method for tax purposes for this contract
• Ownership stays with the lessor at the end of the lease
• The lease runs for 5 years on a truck that is expected to have a 6 year life
• The lessee can buy the truck at its current market value at the end of the lease

Q10. Which of the following statements is true about lease accounting methods? (check all that apply)

• Capital leases lead to lower Cash from Operations than Operating leases
• Capital leases have higher expenses than operating leases in the first year of the contract
• Capital leases lead to a higher Cash from Investing Activities than Operating leases
• Capital leases lead to a lower Return on Assets ratio than Operating leases
• Capital leases have higher total expenses than operating leases over the life of the contract

More Introduction to Financial Accounting Week 04 Quiz Answers

Quiz : Homework #4

Q1. A company has Taxable Income of $70,000 and Pre-tax Income of $80,000 during fiscal year 2012. The statutory tax rate is 35.0% and the effective tax rate is 30%

What is Income Tax Payable for 2012?

• $28,000
• $10,000
• $24,000
• $21,000
• $24,500

Q2. Which of the following cause the effective tax rate to not equal the statutory tax rate for a US company? (check all that apply)

• Non-US taxes
• Research tax credits
• Bad debt expense
• Unearned revenue
• Depreciation expense

Q3. Which of the following are true about Deferred Tax Liabilities? (check all that apply)

• In the future, tax rules require smaller expenses than GAAP
• Initially, tax rules require bigger expenses than GAAP
• Initially, tax rules require smaller expenses than GAAP
• They represent an obligation to make higher tax payments in the future
• In the future, tax rules require bigger expenses than GAAP

Q4. A company has a temporary difference due to depreciation. For fiscal year 2012, its Income Tax Expense is $15,000 and its Taxable Income is $10,000. The statutory tax rate is 35%

What is the correct journal entry for recording 2012 Income Tax Expense and Income Tax Payable?

• Dr. Income Tax Expense            15,000

Dr. Deferred Tax Assets            85,000

     Cr. Income Tax Payable            100,000

• Dr. Income Tax Expense            15,000

     Cr. Income Tax Payable            15,000

• Dr. Income Tax Expense            15,000

     Cr. Deferred Tax Liabilities            11,500

     Cr. Income Tax Payable                  3,500

• Dr. Income Tax Expense            15,000

     Cr. Deferred Tax Assets            11,500

     Cr. Income Tax Payable              3,500

• Dr. Income Tax Expense            15,000

Dr. Deferred Tax Liabilities         85,000

     Cr. Income Tax Payable            100,000

Q5. A company has a temporary difference due to doubtful accounts (i.e., bad debt expense). For fiscal year 2012, its Income Tax Payable was $10,000 greater than its Income Tax Expense.

What happened to deferred taxes in 2012?

• There was no effect on Deferred Tax Assets or Deferred Tax Liabilities
• Deferred Tax Assets increased by $10,000
• Deferred Tax Liabilities increased by $10,000
• Deferred Tax Liabilities decreased by $10,000
• Deferred Tax Assets decreased by $10,000

Q6. A company has a Deferred Tax Asset of $35,000. Now, the government has just changed the statutory tax rate from 35% to 30% effective immediately.

What is the correct journal entry to record the impact of this tax rate change?

• Dr. Income Tax Expense            5000

     Cr. Deferred Tax Assets           5000

• Dr. Income Tax Expense            5000

     Cr. Income Tax Payable           5000

• Dr. Deferred Tax Assets            5000

     Cr. Income Tax Payable           5000

• Dr. Income Tax Payable            5000

     Cr. Deferred Tax Assets           5000

• Dr. Deferred Tax Assets            5000

     Cr. Income Tax Expense           5000

Q7. A company had zero Taxable Income in 2010, Taxable Income of $20,000 in 2011, and a Net Operating Loss (NOL) of $40,000 in 2012. This is the company’s first-ever NOL. The company thinks that it is more likely than not that it will have taxable income in the future before the tax loss carryforward would expire. The statutory tax rate is 35.0%.

What is the amount of the Deferred Tax Asset for NOLs at the end of 2012?

• $40,000
• $14,000
• $20,000
• $0
• $7,000

Q8. A company had total Deferred Tax Assets related to NOLs of $35,000. It also had a Valuation Allowance of $10,000 due to the NOLs in the Faroe Islands. Now, the company thinks that it is more likely than not that it will be able to use the NOLs in the Faroe Islands. The statutory tax rate is 42.0% in the Faroe Islands.

How will the change to the “more likely than not” determination for the Faroe Islands affect Net Income?

• Increase Net Income by $10,000
• Increase Net Income by $4,200
• There is no effect on Net Income
• Decrease Net Income by $10,000
• Decrease Net Income by $4,200

Q9. After preparing a preliminary version of its financial statements, a company found that it made a mistake in computing straight-line depreciation on the books. The company needed to reduce Depreciation Expense on its books by $100,000.

Which of the following would be increased by this change? (check all that apply)

• Deferred Tax Liabilities
• Deferred Tax Assets
• Cash flow from Operations
• Income Tax Payable
• Income Tax Expense

Q10. A company purchased a marketable security for $10,000 on 3/3/2013. On 3/30/2013, the company prepared its financial statements and marked the security to its market value, which was $17,500. The security was sold on 4/30/2013 for $15,000. The company used the Available-for-Sale method to account for the security. The statutory tax rate is 35%.

What was the effect of the sale of the security on Income Tax Payable on 4/30/2013?

• $875 decrease in Income Tax Payable
• $875 increase in Income Tax Payable
• There was no effect on Income Tax Payable
• $1,750 decrease in Income Tax Payable
• $1,750 increase in Income Tax Payable

More Introduction to Financial Accounting Week 05 Quiz Answers

Quiz : Homework #5

Q1. A company has 500,000 shares authorized, 100,000 shares issued, and 10,000 shares in Treasury Stock. How many shares are outstanding?

• 400,000
• 100,000
• 490,000
• 90,000
• 10,000

Q2. In June 2013, a company repurchased 10,000 shares of stock at a price of $10 per share. In July 2013, the company sold 5,000 of those treasury shares for $8 per share. What is the correct journal entry for the July 2013 sale of the treasury shares?

• Dr. Cash                       40,000

     Cr. Treasury Stock            40,000

• Dr. Cash                       50,000

     Cr. Treasury Stock            50,000

• Dr. Cash                       40,000

Dr. APIC                       10,000

     Cr. Treasury Stock            50,000

• Dr. Cash                       40,000

     Cr. APIC                              40,000

• Dr. Cash                       40,000

Dr. Loss on sale           10,000

     Cr. Treasury Stock            50,000

Q3. A company has 360,000 shares authorized, 120,000 shares issued, and 80,000 shares outstanding. It declares cash dividends of $1 per share. How much cash will the company pay for dividends?

• $360,000
• $240,000
• $80,000
• $120,000
• $40,000

Q4. A company has 360,000 shares authorized, 200,000 shares issued, and 100,000 shares outstanding. The par value of its stock is $1 per share. The company does a 2-for-1 stock split. What is the balance in its Common Stock account after the split?

• $300,000
• $50,000
• $100,000
• $400,000
• $200,000

Q5. Which of the following is true about Accumulated Other Comprehensive Income (AOCI)? (check all that apply)

• AOCI is the name used for “Retained Earnings” in Europe under EU Directive 135.1(a).3(c).6
• AOCI is not permitted under IFRS
• AOCI keeps unrealized losses off of the balance sheet
• AOCI can have a debit balance or a credit balance
• AOCI items are carried net of tax

Q6. On 1/1/2013, a company grants 1,000 options to its CEO with an exercise price of $60 as compensation. The options vest after three years and expire after 10 years. The stock price is $60 on the grant date. The fair value of the options is $30 per share at the grant date.

How much compensation expense for stock options will the company recognize in fiscal year 2013?

• $30,000
• $0
• $10,000
• $15,000
• $20,000

Q7. On 5/5/2018, a CEO exercised 100 options to buy a company’s stock at the $50 exercise price. The market price of the company’s stock is $80 on that day. A company reissues treasury stock that originally cost $70 per share to provide the shares to the CEO.

What is the correct journal entry for the May 2018 exercise of the stock options?

• Dr. Cash                       5,000

Dr. APIC                        2,000

     Cr. Treasury Stock            7,000

• Dr. Cash                       5,000

Dr. APIC                        2,000

     Cr. Common Stock            7,000

• Dr. Cash                       8,000

     Cr. APIC                             1,000

     Cr. Treasury Stock            7,000

• Dr. Cash                       8,000

     Cr. APIC                             1,000

     Cr. Common Stock            7,000

• Dr. Cash                       5,000

Dr. Loss on sale           2,000

     Cr. Treasury Stock              7,000

Q8. For the year ended 12/31/2013, a company reported Net Income of $100,000. On 1/1/2013, the company had 20,000 common shares outstanding and 20,000 preferred shares outstanding. The company issued 8,000 common shares on 9/30/2013; thus common shares outstanding was 28,000 for the last three months of 2013. The company paid $4,000 of preferred dividends and $7,000 of common dividends during 2013.

What is the company’s Basic EPS for 2013?

• $2.00
• $4.00
• $4.36
• $5.00
• $4.05

Q9. A company’s current stock price is $35. Which of the following securities would cause Diluted EPS to be different than Basic EPS? (check all that apply)

• Preferred stock that pays $10 dividends per share per year
• Convertible debt that reduces EPS if converted
• Vested stock options with an exercise price of $40
• Vested stock options with an exercise price of $30
• Convertible debt that increases EPS if converted

Q10. Which of the following is true about stock-based compensation? (check all that apply)

• Companies receive a tax deduction when employees exercise stock options
• Stock-based compensation expense must be added back in the Operating section of SCF under the indirect method
• Stock-based compensation expense is adjusted based on movements in stock price after the exercise date
• The fair value of an option grant is always greater than the strike price of the option grant
• Stock-based compensation expense is always reported as part of Selling, General, and Administrative (SG&A) expense

More Introduction to Financial Accounting Week 06 Quiz Answers

Quiz : Final Exam, Part 1

Q1. During fiscal year 2012, Byrd Inc. wrote-off $8,000 of customer accounts as uncollectible.

Which of the following items would be decreased by these write-offs? (check all that apply)

• Accounts Receivable
• Allowance for Doubtful Accounts
• Net Income
• Bad Debt Expense
• Cash flow from Operations

Q2. During fiscal year 2012, Virchow Inc.recorded $10,000 of depreciation on a piece of factory equipment used to manufacture cricket bats.

Which of the following items would be increased by this depreciation entry? (check all that apply)

• Cost of Goods Sold
• Current Assets
• Net Property, Plant, and Equipment
• Work in Process Inventory
• Accumulated Depreciation

Q3. Sanborn Inc. is a new manufacturing company founded on February 2, 2012. The company had to choose between the LIFO and FIFO methods for its inventory. Inventory costs were rising during 2012, so the company decided to use the LIFO method.

Which of the following items would be decreased by the choice of LIFO (compared to what would have happened if they chose to use FIFO)? (check all that apply)

• Cost of Goods Sold
• Inventory
• Cash Taxes Paid
• Net Income
• Accounts Payable

Q4. Romanova Inc. decides to sell an old piece of equipment and receives $5,000 cash for it. The original cost of the equipment was $50,000 and it had accumulated depreciation of $47,000 associated with it.

Which of the following items would be increased by the sale of the old equipment? (check all that apply)

• Total Assets
• Cash from Investing Activities
• Gain on Sale
• Cash from Operating Activities
• Net Income

Q5. In 2010,Chesley Inc. acquired Corrigan Ltd. in a hostile takeover. However, the expected synergies never materialized. In 2013, Chesley decided to write-off $45 million of Goodwill on the financial statements to recognize that the Goodwill had become impaired.

Which of the following items would be decreased by the impairment of Goodwill? (check all that apply)

• Goodwill
• Net Income
• Accumulated Other Comprehensive Income
• Cash from Operating Activities
• Cash from Investing Activities

Q6. In January 2013, Pennington Bancorp acquired $100,000 of marketable securities and classified them as Available for Sale. On March 31, 2013, Pennington prepared its 10-Q and marked the securities down to their market value of $85,000. On April 4, 2013, Pennington sold the securities for $93,000 cash.

Which of the following items would be increased by the sale of the marketable securities? (check all that apply)

• Cash from Investing Activities
• Net Income
• Accumulated Other Comprehensive Income
• Marketable Securities
• Cash from Financing Activities

Q7. On January 1, 2012, Chan Enterprises borrowed $100,000 from a bank on a three-year mortgage with an interest rate of 5% per year. On December 30, 2012, Chan paid the bank $36,721. Chan uses US GAAP to prepare its financial statements.

Which of the following items would be decreased by the mortgage payment? (check all that apply)

• Cash from Financing Activities
• Net Income
• Cash from Operating Activities
• Mortgage Payable
• Cash from Investing Activities

Q8. On January 1, 2013, Jones Inc. issued a $100,000 face value bond for proceeds of $97,654. On June 30, 2013, Jones sent checks to the bondholders for the first coupon payment on the bond.

Which of the following items would be increased by the coupon payment transaction? (check all that apply)

• Interest Expense
• Bonds Payable
• Cash from Operating Activities
• Cash from Financing Activities
• Cash from Investing Activities

Q9. In March 2012, Yoshiro Inc.. decided to retire an outstanding bond issue before maturity. The coupon rate on the bond issue was 5%. The bond was issued in 2011 at an effective interest rate of 6%. On the day Yoshiro retired the bond issue, the market interest rate was 4%.

Which of the following items would be decreased by the bond retirement transaction? (check all that apply)

• Cash from Financing Activities
• Cash from Operating Activities
• Net Income
• Bonds Payable
• Cash from Investing Activities

Q10. During fiscal year 2012, Dioubate Cie earned $10,000 of interest revenue on an investment in a tax-free municipal bond.

Which of the following items would be increased by the municipal bond revenue? (check all that apply)

• Pre-Tax Income
• Income Tax Expense
• Taxable Income
• Income Tax Payable
• Deferred Tax Liabilities

Q11. At the end of December 2013, Rosenfeld Co. had $10,000 of Deferred Tax Assets related to its Allowance for Doubtful Accounts. In response to low public approval ratings (and after a particularly boisterous holiday party), the US Congress passed a law to reduce the Federal Statutory Tax Rate from 35% to 20% on December 31, 2013. As a US company, Rosenfeld had to immediately adjust the balance of its DTAs based on the new law.

Which of the following items would be decreased by the entry to adjust the balance in Deferred Tax Assets? (check all that apply)

• Income Tax Payable
• Income Tax Expense
• Net Income
• Cash from Operating Activities
• Deferred Tax Assets

Q12. Due to years of poor management, Shao Inc. had $350 million in Deferred Tax Assets due to NOL carryforwards in its various subsidiaries around the world. At the end of 2012, Shao had a Valuation Allowance of $280 million related to these DTAs. In January 2013, Shao hired Dakota Jordan to take over the Liechtenstein subsidiary, which quickly returned to profitability. At the end of 2013, Shao decided that it was “more likely than not” that the Liechtenstein subsidiary would be profitable enough to use the NOLs in Liechtenstein by 2014 and made the appropriate adjustment to the Valuation Allowance.

Which of the following items would be increased by the adjustment to the Valuation Allowance? (check all that apply)

• Total Assets
• Income Taxes Payable
• Net Income
• Cash from Operating Activities
• Income Tax Expense

Q13. On November 12, 2013, Berube Co. repurchased 10,000 shares of its own stock at a price of $20 per share. Berube had originally issued the stock in 2010 at a price of $15 per share.

Which of the following items would be decreased by the stock repurchase transaction? (check all that apply)

• Total Shareholders’ Equity
• Total Assets
• Cash from Financing Activities
• Total Liabilities
• Accumulated Other Comprehensive Income

Q14. On September 26, 2013, Vu Industries announced a 3-for-1 common stock split.

Which of the following items would be increased by the stock split? (check all that apply)

• Cash from Financing Activities
• Par Value
• Shares Outstanding
• Cash from Investing Activities
• Shares Issued

Q15. On January 1, 2011, Paul Co. granted its CEO, Valerie Paul, 1,000 stock options with an exercise price of $30 per share as compensation. The options vest over four years and expire after 10 years. The stock price on the grant date was $30 and the fair value of the option grant was $10 per share. On December 31, 2012, Paul Co. recorded a journal entry related to this option grant.

Which of the following items would be decreased by the December 31, 2012 journal entry? (check all that apply)

• Net Income
• Additional Paid in Capital
• Accumulated Other Comprehensive Income
• Cash from Operating Activities
• Cash from Financing Activities

Quiz : Final Exam, Part 2

Q1. Srivastava Co.’s Balance Sheet had the following line item:

		12/31/2012		12/31/2011
Accounts Receivable, net of allowances of $200 and $150, respectively		$4,900		$4,100

What percentage of gross accounts receivable does Srivastava expect to be uncollectable as of 12/31/2012?

• 3.92%
• 4.08%
• 3.66%
• 3.53%
• 4.01%

Q2. Samo Co. incurred the following costs during the quarter:

Raw materials used in production		$32,000
Marketing materials used by sales staff		$14,000
Wages of factory workers		$91,000
Salaries of sales staff		$291,000
Depreciation on factory and production equipment		$52,000
Depreciation on headquarters building		$32,000
Manufacturing overhead		$72,000

How much of these costs would have been recorded in Samo’s Work in Process Inventory account during the quarter?

• $552,000
• $188,000
• $195,000
• $247,000
• $279,000

Q3. The Seliger Company has a building that it originally bought for $100,000. As of December 31, 2012, there is $10,000 of Accumulated Depreciation on the building (it was being straight-line depreciated over 10 years with no salvage value). On January 1, 2013, Seliger decides to change the remaining useful life to 5 years (starting now) with a $50,000 salvage value.

What will be the depreciation on the building in 2013?

• $13,000
• $20,000
• $10,000
• $8,000
• $12,500

Q4. Richbourg Inc.’s Marketable Securities footnote had the following line items:

Marketable Securities at Dec 31, 2012		Amortized Cost		Fair Value
Total Trading Securities		$900		$1,000
Total Available-for-Sale Securities		$4,000		$3,500
Total Held-to-Maturity Securities		$1,000		$1,200
Total		$5,900		$5,700

What is the book value of Marketable Securities on Richbourg’s Balance Sheet at December 31, 2012?

• $5,800
• $5,900
• $6,100
• $5,500
• $5,700

Q5. On January 1, 2012, Fei Corp. issued a 3-year, 5% coupon, $100,000 face value bond. The bond was priced at an effective interest rate of 8%, yielding proceeds of $92,137. This is the first and only bond that Fei has ever issued.

Fei’s Statement of Cash Flows for fiscal year 2012 had the following line items:

		2012		2011
Net Income		$11,500		$10,350
Depreciation		$25,478		$23,675
Amortization of Bond Discount		$2,418		$0

What was Fei’s Interest Expense on the bond during fiscal year 2012?

• $2,418
• $8,000
• $7,371
• $7,418
• $5,000

Q6. On January 1, 2012, Singhai Ltd. signed a three-year lease on a delivery truck. The lease requires annual payments of $29,103, which are due at the end of each year. Singhai’s managers computed the present value of the lease payments as $75,000 using an effective interest rate of 8%. Singhai had to use capital lease accounting treatment for the truck.

What was the total expense related to this lease during the fiscal year ended December 31, 2012?

• $31,000
• $29,103
• $25,000
• $6,000
• $0

Q7. Pearsall Telecom had the following lines in its Income Taxes footnote:

Deferred Tax Liabilities		12/31/2012		12/31/2011
Insurance Receivables		$(60)		$(63)
Depreciation		$(858)		$(745)
Other		$(808)		$(883)
Total Deferred Tax Liabilities		$(1,726)		$(1,691)

Pearsall Telecom had the following lines in its Statement of Cash Flows:

		2012		2011
Net Income		$4,511		$4,357
Depreciation		$1,288		$1,236

Pearsall Telecom is a US company with a 35% Federal Statutory Tax Rate. What was Pearsall Telecom’s depreciation expense for tax purposes in fiscal year 2012?

• $1,288
• $1,175
• $965
• $1,611
• $1,401

Q8. After completing its preliminary financial statements for 2012, Cannon Inc. found a mistake in computing its straight-line Depreciation Expense. After fixing the mistake, Cannon’s Depreciation Expense was now $10,000 higher. Cannon is a US company with a 35% Federal Statutory Tax Rate.

How did the $10,000 increase in Depreciation Expense affect Net Income for 2012?

• Net Income dropped by $6,500
• Net Income dropped by $3,500
• Net Income increased by $10,000
• Net Income increased by $3,500
• Net Income dropped by $10,000

Q9. Permyakova Inc.’s Balance Sheet had the following line items:

Shareholders’ Equity		12/31/2012		12/31/2011
Common Stock, par value $1 per share		$300,000		$300,000
(Shares Issued: 300,000 in 2012 and 300,000 in 2011;
Shares Outstanding: 250,000 in 2012 and 220,000 in 2011)
Additional Paid in Capital		$1,750,500		$1,750,500
Retained Earnings		$10,321,123		$8,675,309
Treasury Stock		$(550,000)		$(800,000)
Total		$11,821,623		$9,925,809

What was the average price per share paid by Permyakova to acquire all of the treasury shares held as of December 31, 2012?

• $11.00
• $10.00
• $10.50
• $10.38
• Not enough information

Q10. For the year ended 12/31/2013, Anonymous Corp. reported Net Income of $100,000, including $10,000 of Interest Expense on convertible debt. Anonymous had 10,000 common shares outstanding throughout 2013. Anonymous paid $4,000 of preferred dividends during 2013. Anonymous’ convertible debt is convertible into 2,000 shares of common stock. Anonymous is a US company with a 35% Federal Statutory Tax Rate.

What is Anonymous Corp.’s Diluted EPS for fiscal year 2013?

• $7.46
• $8.83
• $7.17
• $8.29
• $8.54

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