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ACC 102 Midterm Review Questions

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ACC 102 Midterm Review Questions
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Pregunta 1

Pregunta
When compound interest is used, interest accumulates less quickly than when simple interest is used.
Respuesta
  • True
  • False

Pregunta 2

Pregunta
The annual interest earned on an amount deposited into a bank account will be the same each year when compound interest is used.
Respuesta
  • True
  • False

Pregunta 3

Pregunta
An ordinary annuity is a series of equal payments made at the end of equal intervals of time.
Respuesta
  • True
  • False

Pregunta 4

Pregunta
In a deferred payment arrangement, interest is charged only if it is stated.
Respuesta
  • True
  • False

Pregunta 5

Pregunta
If the net present value of a proposed investment is negative, it means that the investment should not be made.
Respuesta
  • True
  • False

Pregunta 6

Pregunta
* Assets purchased under a deferred payment plan should be recorded at the future value of the installment payments.
Respuesta
  • True
  • False

Pregunta 7

Pregunta
Decision makers rely on the future values, rather than on the present values, of future cash flows.
Respuesta
  • True
  • False

Pregunta 8

Pregunta
Use this information to answer the following question: Periods Future Value of $1 at 12% Future Value of Ordinary Annuity of $1 at (1) 1.120 1.000 (2) 1.254 2.120 (3) 1.405 3.374 A deposit of $2,000 made at the beginning of period 1 would grow to how much at the end of three years?
Respuesta
  • $2,240.00
  • $2,810.00
  • $2,508.00
  • $6,748.00

Pregunta 9

Pregunta
Which of the following phrases is NOT descriptive of an ordinary annuity?
Respuesta
  • Payments made at the beginning of equal periods of time
  • Both present and future value can be calculated
  • Compound interest assumed
  • Series of equal payments

Pregunta 10

Pregunta
The higher the interest rate assumed, the
Respuesta
  • higher the present value of an ordinary annuity.
  • more one must deposit today to accumulate to a desired sum.
  • lower the future value of a sum invested in the bank today.
  • lower the present value of a sum due in the future.

Pregunta 11

Pregunta
Heidi wishes to deposit an amount into her savings account that will enable her to withdraw $800 per year for the next four years. She should deposit $800, multiplied by the
Respuesta
  • present value of a single sum factor.
  • present value of an ordinary annuity factor.
  • future value of a single sum factor.
  • future value of an ordinary annuity factor.

Pregunta 12

Pregunta
First City Bank computes interest semiannually. If the interest rate is currently 6% per annum, the amount deposited today should be multiplied by which future value factor to calculate the amount that will accumulate by the end of 10 years?
Respuesta
  • 20 periods at 12%
  • 20 periods at 3%
  • 10 periods at 6%
  • 10 periods at 3%

Pregunta 13

Pregunta
* A company purchases an asset on a deferred payment plan, ultimately paying $10,000. On the payment date, the company would
Respuesta
  • credit Cash for less than $10,000.
  • debit Interest Expense for the imputed amount.
  • debit the asset account for $10,000.
  • debit Accounts Payable for $10,000.

Pregunta 14

Pregunta
SHORT ANSWER! - (LOOK AT TABLES!) --What is the present value of receiving $1,000 at the end of each year for 6 years, assuming 7% interest compounded annually?--- --What amount must be deposited at the bank today to grow to $300 in 5 years, assuming 14% interest compounded semiannually?--
Respuesta
  • 1,000 x 4.67 = $4,767 --- 300 x .508 = $152.40
  • Do the math!!

Pregunta 15

Pregunta
Extraordinary gains/losses are a component of income from operations.
Respuesta
  • True
  • False

Pregunta 16

Pregunta
A gain on the sale of an asset is a component of income from operations.
Respuesta
  • True
  • False

Pregunta 17

Pregunta
The quality of a company's earnings is affected by the accounting estimates chosen by the company's management.
Respuesta
  • True
  • False

Pregunta 18

Pregunta
If the amount of income taxes expense exceeds the amount of actual income taxes payable for a year, the difference is recorded by a debit to a balance sheet account called Deferred Income Taxes.
Respuesta
  • True
  • False

Pregunta 19

Pregunta
Discontinued operations and extraordinary items should be reported in the financial statements of "net of tax."
Respuesta
  • True
  • False

Pregunta 20

Pregunta
Gains and losses caused by the passage of a new law should be classified as extraordinary on the income statement.
Respuesta
  • True
  • False

Pregunta 21

Pregunta
A business with 100,000 shares of stock outstanding for three months would use a weighted-average 25,000 shares in its EPS calculation.
Respuesta
  • True
  • False

Pregunta 22

Pregunta
A company with convertible bonds is considered to have a complex capital structure.
Respuesta
  • True
  • False

Pregunta 23

Pregunta
A debit balance in the Retained Earnings account is referred to as a deficit.
Respuesta
  • True
  • False

Pregunta 24

Pregunta
A synonymous phrase for retained earnings is accumulated earnings.
Respuesta
  • True
  • False

Pregunta 25

Pregunta
When common stock is originally issued, its market value per share should approximate its par or stated value per share.
Respuesta
  • True
  • False

Pregunta 26

Pregunta
Par value or stated value is arbitrarily set when stock is authorized.
Respuesta
  • True
  • False

Pregunta 27

Pregunta
Which of the following is not a component of income from operations?
Respuesta
  • costs and expenses
  • write-downs of assets
  • extraordinary losses
  • restructuring

Pregunta 28

Pregunta
When alternative acceptable accounting methods exist, a better quality of earnings generally is produced from selecting an accounting method that has the effect of reporting the
Respuesta
  • lowest amount of future earnings
  • greatest amount of retained earnings currently
  • lowest amount of current earnings
  • greatest amount of assets currently

Pregunta 29

Pregunta
Which of the following is analyzed when a financial statement reader is looking at the nature of nonoperating items?
Respuesta
  • discontinued operations
  • interest expense
  • interest revenue
  • cost of goods sold

Pregunta 30

Pregunta
An excess of income taxes expense over income taxes payable will result in recording a
Respuesta
  • debit to Deferred Income Taxes
  • debit to Income Taxes Payable
  • credit to Deferred Income Taxes
  • credit to Prior Period Adjustment

Pregunta 31

Pregunta
Because noncash investing and financing transactions do not affect cash, they should be excluded from the statement of cash flows.
Respuesta
  • True
  • False

Pregunta 32

Pregunta
The payment of taxes would be included in the operating activities section of the statement of cash flows.
Respuesta
  • True
  • False

Pregunta 33

Pregunta
The payment of taxes would be included in the operating activities section of the statement of cash flows.
Respuesta
  • True
  • False

Pregunta 34

Pregunta
A U.S. treasury bill with an original maturity of one year or less is considered cash equivalent.
Respuesta
  • True
  • False

Pregunta 35

Pregunta
The primary purpose of the statement of cash flows is to provide information about a company's investing and financing activities during an accounting period.
Respuesta
  • True
  • False

Pregunta 36

Pregunta
A negative free cash flow indicates that the company has met all its planned cash commitments and has cash available to reduce debit or expand.
Respuesta
  • True
  • False

Pregunta 37

Pregunta
A decrease in the balance of merchandising inventory is added to net income when calculating net cash flows from operating activities using the indirect method.
Respuesta
  • True
  • False

Pregunta 38

Pregunta
Cash inflows and outflows are not netted in the investing activities section of the statement of cash flows but are separately disclosed to give the reader full information.
Respuesta
  • True
  • False

Pregunta 39

Pregunta
Dividends paid are reflected in the financing activities section of the statement of cash flows.
Respuesta
  • True
  • False

Pregunta 40

Pregunta
The net income for the period would appear in the cash flows from financing activities section of a statement of cash flows prepared using the indirect method.
Respuesta
  • True
  • False

Pregunta 41

Pregunta
A schedule of noncash investing and financing activities is not required when a statement of cash flows is prepared using the indirect method.
Respuesta
  • True
  • False

Pregunta 42

Pregunta
Cash equivalents do not include
Respuesta
  • U.S. treasury bills
  • money market accounts
  • marketable securities
  • commercial paper

Pregunta 43

Pregunta
Management would not use the statement of cash flows to
Respuesta
  • access the liquidity of the business
  • determine dividend policy
  • evaluate the effects of major policy decisions involving investments and financing
  • determine the financial position of the company

Pregunta 44

Pregunta
A Corporation engaged in the transaction: Declared and issued a stock dividend. Indicate which section, if any, each transaction would appear in, or relate to, on a statement of cash flows.
Respuesta
  • financing activities section
  • operating activities section
  • does not represent a cash flow
  • investing activities section

Pregunta 45

Pregunta
The direct method of preparing a statement of cash flows
Respuesta
  • is the overwhelming choice of most companies
  • begins with net income in the operating activities section
  • is more difficult to understand than the indirect method for the average reader
  • will produce more the same net figure as the indirect method

Pregunta 46

Pregunta
The calculation of free cash flow could include all of the following except:
Respuesta
  • cash purchase of plant assets
  • net cash flows from operating activities
  • net income
  • dividends paid

Pregunta 47

Pregunta
Per the Sarbanes-Oxley Act of 2002, public corporations must establish a compensation committee to determine how its top executives will be compensated.
Respuesta
  • True
  • False

Pregunta 48

Pregunta
Liquidity is the ability to earn a satisfactory net income
Respuesta
  • True
  • False

Pregunta 49

Pregunta
Investors, creditors and customers are considered external users of financial statements.
Respuesta
  • True
  • False

Pregunta 50

Pregunta
The analysis of risk and return is important to both investors and creditors.
Respuesta
  • True
  • False

Pregunta 51

Pregunta
A limitation of using industry norms in financial performance evaluation is that some companies in the same industry may not be comparable.
Respuesta
  • True
  • False

Pregunta 52

Pregunta
A 20% change in net sales will result in a 20% change in net income.
Respuesta
  • True
  • False

Pregunta 53

Pregunta
Vertical analysis is the same as common-size analysis
Respuesta
  • True
  • False

Pregunta 54

Pregunta
It is possible for horizontal analysis to indicate a decrease in revenues from one year to another and an increase in net income.
Respuesta
  • True
  • False

Pregunta 55

Pregunta
A primary purpose of vertical analysis is to observe trends over a 5 year period.
Respuesta
  • True
  • False

Pregunta 56

Pregunta
Ration analysis is useful only if the ratio states a meaningful relationship between two numbers.
Respuesta
  • True
  • False

Pregunta 57

Pregunta
Executive officers' compensation is typically comprised of all of the following except:
Respuesta
  • inventive bonuses
  • declared dividends
  • stock option awards
  • annual base salaries

Pregunta 58

Pregunta
Which of the following is the least useful in evaluating a relationship as either favorable or unfavorable?
Respuesta
  • past and current performances company
  • industry averages
  • past performance of the company
  • rule-of-thumb measures

Pregunta 59

Pregunta
Dun & Bradstreet publishes
Respuesta
  • data on average ratios and relationships
  • credit ratings of companies
  • data on industry norms
  • all of these

Pregunta 60

Pregunta
One of the best places to look for early signs of change in a company's profitability is the
Respuesta
  • annual report sent to the SEC (10K)
  • year-end financial statement
  • interim financial statement
  • annual report sent to stockholders

Pregunta 61

Pregunta
Horizontal analysis of comparative financial statements include the
Respuesta
  • development of common-size statements
  • calculation of dollar amount changes and percentage changes from the previous to the current year
  • calculation of the percentage of net sales for each listed
  • calculation of liquidity ratios

Pregunta 62

Pregunta
A company with $50,000 in current assets, $25,000 in quick assets, and $30,000 in current liabilities makes a payment of a $1,500 current debt. As a result of this transaction, the current ratio and quick ratio will
Respuesta
  • both decrease
  • increase and decrease, respectively
  • both increase
  • remain the same and decrease, respectively

Pregunta 63

Pregunta
A high receivable turnover indicates that
Respuesta
  • many customers are defaulting on their debts
  • a large proportion of the company's sales is on credit
  • the company's inventory is moving very quickly
  • customers are making payments very quickly

Pregunta 64

Pregunta
The higher the debit to equity ratio, the great the financial risk the company is taking
Respuesta
  • True
  • False

Pregunta 65

Pregunta
* When a monthly mortgage payment is made and recorded, the debit to Mortgage Payable represents the reduction in the principal balance
Respuesta
  • True
  • False

Pregunta 66

Pregunta
A capital lease is the lease of property, plant or equipment that is in effect an installment purchase
Respuesta
  • True
  • False

Pregunta 67

Pregunta
Bondholders are creditors of the issuing corporation
Respuesta
  • True
  • False

Pregunta 68

Pregunta
Secured bonds are also known as debentures
Respuesta
  • True
  • False

Pregunta 69

Pregunta
An $80,000 bond issue priced at 97-3/4 is sold for $78,200.
Respuesta
  • True
  • False

Pregunta 70

Pregunta
The par value of a bond is equal to its face value
Respuesta
  • True
  • False

Pregunta 71

Pregunta
It is the bondholder rather than the issuer who may exercise the call feature of a callable bond.
Respuesta
  • True
  • False

Pregunta 72

Pregunta
The entry to record the issuance of bonds between interest payment dates will include a debit to Bond Interest Expense.
Respuesta
  • True
  • False

Pregunta 73

Pregunta
A company with income before income taxes of $94,000 and $20,000 in interest expense, has an interest coverage ratio of
Respuesta
  • 5.7 times
  • 4.7 times
  • 3.7 times
  • 6.7 times

Pregunta 74

Pregunta
If bonds are issued at a premium the face interest rate is
Respuesta
  • lower than the market rate of interest
  • higher than the market rate of interest
  • too low to attract investors
  • adjusted to higher effective rate of interest

Pregunta 75

Pregunta
Ten $1000 bonds issued at 99.75 on the interest date result in a debit to the Cash account for
Respuesta
  • $990.75
  • $9,907.50
  • $997.50
  • $9,975.00

Pregunta 76

Pregunta
A Corporation issued $100,000 of 20-year, 6% bonds at 98 on one of its semiannual interest dates. The straight-line method amortization is to be used. What is the total interest cost of the bonds?
Respuesta
  • $120,000
  • $122,000
  • $118,000
  • $117,500

Pregunta 77

Pregunta
*Short Answer!* A corporation has a 7% $600,000 bond issue that originally was issued 5 years ago. There are now ten years remaining on the bond issue, and the market interest rate is 12%. Interest is paid semiannually. Calculate the current market value of the bond issue, using the present value tables.
Respuesta
  • Single Amount Table 3 M arket F ace M arket Annuity/Semi annuity - Series Amount Table 4
  • Be sure to use tables!

Pregunta 78

Pregunta
The P/E (price/earnings) ratio is a measure of investors' confidence in a company's future.
Respuesta
  • True
  • False

Pregunta 79

Pregunta
Stockholders elect the board of directors which appoints the officers of a corporation.
Respuesta
  • True
  • False

Pregunta 80

Pregunta
The board of directors carries out the day-to-day operations of a corporation.
Respuesta
  • True
  • False

Pregunta 81

Pregunta
The board of directors carries out the day-to-day operations of a corporation.
Respuesta
  • True
  • False

Pregunta 82

Pregunta
The liability of a stockholder is usually limited to the stockholders' investment in the corporation.
Respuesta
  • True
  • False

Pregunta 83

Pregunta
The declaration of a cash dividend causes an increase in a corporation's liabilities at the date of record.
Respuesta
  • True
  • False

Pregunta 84

Pregunta
No entry is required on the date of record for a cash dividend.
Respuesta
  • True
  • False

Pregunta 85

Pregunta
Stock options are often granted by a corporation to management personnel as a means of additional compensation to and motivation of employees.
Respuesta
  • True
  • False

Pregunta 86

Pregunta
The stockholders' equity in a corporation consists of capital contributed by a stockholders and retained earnings.
Respuesta
  • True
  • False

Pregunta 87

Pregunta
Retained earnings consist of a pool of funds to be distributed to stockholders.
Respuesta
  • True
  • False

Pregunta 88

Pregunta
The cost of treasury stock is deducted from total Contributed Capital and Retained Earnings in determining total stockholders' equity.
Respuesta
  • True
  • False

Pregunta 89

Pregunta
Dividends yield equals
Respuesta
  • market price per share divided by dividends per share
  • net income divided by dividends per share
  • dividends per share divided by net income
  • dividends per share divided by market price per share

Pregunta 90

Pregunta
A disadvantage of the corporate form of business is
Respuesta
  • centralized authority and responsbility
  • its status as a separate legal entity
  • government regulation
  • continuous existence

Pregunta 91

Pregunta
Par value
Respuesta
  • is established for a share of stock after it is issued
  • is the legal capital established for a share of stock
  • represents what a share of stock is worth
  • represents the original selling price for a share of stock

Pregunta 92

Pregunta
The Board of Directors of B Corporation declared a cash dividend on January 18th, 2011, to be paid on February 18th, 2011, to shareholders holding the stock on February 2nd, 2011. Given these facts, the date February 2nd, 2011 is referred to as the
Respuesta
  • date of declaration
  • date of payment
  • ex-dividend date
  • date of record

Pregunta 93

Pregunta
All of the following are stockholders' equity accounts except
Respuesta
  • Treasury Stock
  • Preferred Stock
  • Retained Earnings
  • Dividends Payable

Pregunta 94

Pregunta
Any act that lies beyond the authority of a corporation to perform is an ultra vires act.
Respuesta
  • True
  • False

Pregunta 95

Pregunta
When stock is sold at par you...
Respuesta
  • Debit Cash / Credit Par Value
  • Debit Par Value / Credit Cash

Pregunta 96

Pregunta
A corporation set up perfectly is considered....
Respuesta
  • Dejeur
  • Defactor

Pregunta 97

Pregunta
A corporation set up with mistakes is....
Respuesta
  • Defacto
  • Dejeur

Pregunta 98

Pregunta
Name the accounts in the Income Statement
Respuesta
  • Do it!
  • XXOXOJOIJOSIJDOISJ

Pregunta 99

Pregunta
Contributed Capital includes all of these EXCEPT
Respuesta
  • Common & Preferred Stock
  • Retained Earnings
  • Paid in Capital in Excess
  • Treasury Stock

Pregunta 100

Pregunta
A fraudulent dividend declaration is considered an act of....
Respuesta
  • Piercing the Corporate Veil
  • Deferred Income Tax
  • Defacto
  • Ultra vire

Pregunta 101

Pregunta
No journal entry is required on
Respuesta
  • Date of Declaration
  • Date of Record
  • Date of Payment
  • Date of Issuance

Pregunta 102

Pregunta
A Bondholder is a Debter
Respuesta
  • True
  • False

Pregunta 103

Pregunta
Interest Formula =
Respuesta
  • Principal x Rate x Time
  • Income before Taxes + Interest Expense / Interest Expense
  • Current Assets / Current Liabilities
  • Dividends per share / Market $ per share

Pregunta 104

Pregunta
What measures how much a risk a company represents
Respuesta
  • Interest Cover Ratio
  • Debt to Equity Ratio
  • Dividends Yield Ratio
  • Return on Equity Ratio
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