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ACCT 504 Accounting and Finance, Managerial Use and Analysis


Week 8 Final Exam Set 1


1. Question: (TCO A) An advantage of the corporate form of business is that _____. (Points : 5)

2. Question: (TCO A) When a corporation distributes a dividend, _____. (Points : 5)

3. Question: (TCOs A, B) Below is a partial list of account balances for Denton Company:

4. Question: (TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____. (Points : 5)

5. Question: (TCO D) In a period of increasing prices, which inventory cost flow assumption will result in the lowest amount of income tax expense? (Points : 5)

6. Question: (TCOs A, E) Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)

7. Question: (TCOs D, G) Lopez Corporation issues 500 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 96. The journal entry to record the issuance will show a _____. (Points : 5)

8. Question: (TCO C) Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)

9. Question: (TCO F) Which one of the following is not a tool in financial statement analysis? (Points : 5)

10. Question: (TCO F) In vertical analysis, the base amount for studying salary and wages expense is generally _____. (Points : 5)

11. Question: (TCO F) Ratios are most useful in identifying _____. (Points : 5)

12. Question: (TCO F) A common measure of liquidity is _____. (Points : 5)

13. Question: (TCO F) Return-on-assets ratio is most closely related to _____. (Points : 5)

14. Question: (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

15. Question: (TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report:…………Required: Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.

2. Using the Balance Sheet from your answer above calculate; Current Ratio, Days in Inventory, Average Collection Period, Return on Assets Ratio, Debt to Total Assets and Return on common stockholders’ equity ratio. (Make sure to show all your work)

16. Question: TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013:……Required: Using the information provided above: 1. Prepare a multiple-step income statement 2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results. (Points : 36)

17. Question: (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:………Required:1) Please calculate the percentage increase or decrease in cash for the operating, investing, and financing sections and explain the major reasons for the increase or decrease for each of these sections.2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio. (Points : 36)

18. Question: (TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”………Required: a. Go for it carries significant electronics inventory in a competitive environment where prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales. b. Go for it has a large investment in warehouse equipment including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: Straight line (SL) or double declining balance (DDB)? (Points : 36)

19. Question: (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below…………Required: 1) Please explain the meaning of each of the Pfizer ratios above. 2) Please state which company performed better for each ratio. (Points : 36)

Final Exam Set 2

Page 1

1. Question: (TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5)

2. Question: (TCO A) When a corporation distributes a dividend, _____. (Points : 5)

3. Question: (TCOs A, B) Below is a partial list of account balances for Cerner Company: (Points : 5)

4. Question: (TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____. (Points : 5)

5. Question: (TCO D) Three companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)

6. Question: (TCOs A, E) Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)

7. Question: (TCOs D, G) Mendez Corporation issues 2,000 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 103. The journal entry to record the issuance will show a _____. (Points : 5)

8. Question: (TCO C) Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)

9. Question: (TCO F) One variation of the horizontal analysis is known as _____. (Points : 5)

10. Question: (TCO F) In a common-size balance sheet, the 100% figure is _____. (Points : 5)

11. Question: (TCO F) In vertical analysis, the base amount for studying salary and wages expense is generally _____. (Points : 5)

12. Question: (TCO F) A common measure of profitability is the _____. (Points : 5)

13. Question: (TCO F) Return-on-assets ratio is most closely related to _____. (Points : 5)

14. Question: (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

Page 2

1. Question: (TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report: Required: 1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.

2. Using the Balance Sheet from your answer above calculate; Current Ratio, Days in Inventory, Average Collection Period, Return on Assets Ratio, Debt to Total Assets and Return on common stockholders’ equity ratio. (Make sure to show all your work) (Points : 36)

3. Question: (TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013: Required:Using the information provided above: 1. Prepare a multiple-step income statement 2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results. (Points : 36)

4. Question: (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below: Required: 1) Please calculate the percentage increase or decrease in cash for the operating, investing, and financing sections and explain the major reasons for the increase or decrease for each of these sections. 2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio. (Points : 36)

5. Question: (TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”…………(Points : 36)

6. Question: (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below…………….Required: 1) Please explain the meaning of each of the Pfizer ratios above. 2) Please state which company performed better for each ratio. (Points : 36)

Final Exam Set 3

Page 1

1. Question: (TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5)

2. Question: (TCO A) When a corporation distributes a dividend, _____. (Points : 5)

3. Question: (TCOs A, B) Below is a partial list of account balances for Cerner Company: (Points : 5)

4. Question: (TCOs B, E) Using accrual accounting, expenses are recorded and reported only _____. (Points : 5)

5. Question: (TCO D) Three companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)

6. Question: (TCOs A, E) Equipment with a cost of $192,000 has an estimated salvage value of $18,000 and an estimated life of 4 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours? (Points : 5)

7. Question: (TCOs D, G) Joyce Corporation issues 1,000 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 102. The journal entry to record the issuance will show a _____. (Points : 5)

8. Question: (TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $240,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)

9. Question: (TCO F) One variation of the horizontal analysis is known as _____. (Points : 5)

10. Question: (TCO F) Comparisons of data within a company are an example of the following comparative basis. (Points : 5)

11. Question: (TCO F) Which one of the following is not a characteristic generally evaluated in ratio analysis? (Points : 5)

12. Question: (TCO F) Short-term creditors are usually most interested in assessing _____. (Points : 5)

13. Question: (TCO F) Long-term creditors are usually most interested in evaluating _____. (Points : 5)

14. Question: (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

Page 2

1. Question: (TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report:…………… Required:1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.

2. Using the Balance Sheet from your answer above calculate; Current Ratio, Days in Inventory, Average Collection Period, Return on Assets Ratio, Debt to Total Assets and Return on common stockholders’ equity ratio. (Make sure to show all your work) (Points : 36)

2. Question: (TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013:………….. Required:Using the information provided above: 1. Prepare a multiple-step income statement2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results. (Points : 36)

3. Question: (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:…………. Required: 1) Please calculate the percentage increase or decrease in cash for the operating, investing, and financing sections and explain the major reasons for the increase or decrease for each of these sections. 2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio. (Points : 36)

4. Question: (TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”

5. Question: (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below……………. Required:1) Please explain the meaning of each of the Pfizer ratios above. 2) Please state which company performed better for each ratio. (Points : 36)



ACCT 504 (Accounting and Finance, Managerial Use and Analysis)

Final Exam Set 4

1. (TCO A) Which of the following is an advantage of the sole proprietorship relative to the corporate form of business organization? (Points : 5)

2. (TCO A) Dividends _____. (Points : 5)

3. (TCOs A, B) Below is a partial list of account balances for LBJ Company:

Cash $15,000

Prepaid insurance 5,000

Accounts receivable 2,500

Accounts payable 3,000

Notes payable 6,000

Common stock 10,000

Dividends 500

Revenues 15,000

Expenses 13,000

What did LBJ Company show as total debits? (Points : 5)

4. (TCOs B, E) Why is the accrual basis of accounting preferred by GAAP? (Points : 5)

5. (TCO D) In a period of increasing prices, which inventory cost flow assumption will result in the highest amount of net income?(Points : 5)

6. (TCOs A, E) Equipment was purchased for $75,000 on January 1, 2011. Freight charges of $3,200 were incurred and there was a cost of $6,000 for installation. It is estimated the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense for 2011 using the straight-line method will be _____. (Points : 5)

7. (TCO D,G) Payne Corporation issues 100 twenty-year, 6%, $1,000 bonds dated July 1, 2010, at 94. The journal entry to record the issuance will show a _____. (Points : 5)

8. (TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $100,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $1,000,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)

9. (TCO F) If you are making comparisons within a company to detect changes in financial relationships and significant trends, you are performing what type of analysis? (Points : 5)

10. (TCO F) The formula for performing horizontal analysis is _____. (Points : 5)

11. (TCO F) Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time _____.(Points : 5)

12. (TCO F) A common measure of liquidity is _____. (Points : 5)

13. (TCO F) Short-term creditors would be most interested in which of the following ratios? (Points : 5)

14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

1. (TCO A) Use the following partial financial statement information below to calculate the liquidity and profitability ratios. This information can be used to correctly solve each of the ratios below.

Average common shares outstanding 35,000 Current liabilities $25,000

Capital expenditures $20,000 Net income $50,000

Cash provided by operations $77,000 Net sales $100,000

Preferred stock dividends paid $30,000 Total liabilities $50,000

Current assets $20,000 Total assets $80,000

Instructions: Compute the following.

a) Current ratio

b) Working capital

c) Earnings per share

d) Debt-to-total-assets ratio

e) Free cash flow

2. (TCO D) The Oxford Company has budgeted sales revenues as follows.

Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit, with 60% paid in the month of purchase and 40% in the month following purchase. Budgeted inventory purchases are $260,000 in October, $180,000 in November, and $84,000 in December.

Other budgeted cash receipts include (a) the sale of plant assets for $49,400 in November and (b) the sale of new common stock for $67,400 in December. Other budgeted cash disbursements include (a) operating expenses of $27,000 each month, (b) selling and administrative expenses of $50,000 each month, (c) dividends of $76,000 to be paid in November, and (d) purchase of equipment for $24,000 cash in December.

The company has a cash balance of $40,000 at the beginning of December and wishes to maintain a minimum cash balance of $40,000 at the end of each month. An open line of credit is available at the bank and carries an annual interest rate of 12%. Assume that all borrowing is done on the first day of the month in which financing is needed and that all repayments are made on the last day of the month in which excess cash is available. Also assume that $14,000 of financing was obtained on November 1.

Requirements: Use this information to prepare a schedule of expected cash payments for purchases of inventory for the months of November and December only.

This question does not require creation of an entire cash budget so please only create the schedule that is asked for in the question because otherwise you will be wasting valuable time.

3. (TCOs B, E) The following items are taken from the financial statements of Lansing Company for 2010.

4. (TCO D) Your friend James has hired you to evaluate the following internal control procedures.

5. (TCOs D, E) Please prepare the following journal entries. Indicate which account should be debited with the abbreviation DR in front of the account name and which account should be credited with the abbreviation CR in front of the account name along with the dollar amount of the debit and credit.

6. (TCO C) Please indicate which section of the statement of cash flows should contain each of the following items and whether each item would result in an inflow or outflow of cash. The sections are Operating, Investing, and Financing.

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