# A+ Solution ACCT/504 Final Exam

1.Question :(TCO A) A corporation has which of the following sets of characteristics?

Simple to set up and maintains control with the founder

Easier to transfer ownership and raise funds, no personal liability for stockholders

Harder to raise funds and gives owner control

Instructor Explanation:Chapter 1, pages 4 and 5

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

Student Answer: the most common form of distribution is a cash dividend

the Dividends account will be increased with a credit

the Retained Earnings account will be directly increased with a debit

the Dividends account will be decreased with a debit

Instructor Explanation:Chapter 3, page 114

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

Cash                          \$10,000

Prepaid insurance           1,000

Accounts receivable        5,000

Accounts payable           4,000

Notes payable                6,000

Common stock               2,000

Dividends                       1,000

Revenues                     30,000

Expenses                     25,000

What did Kerner Company show as total credits?

\$41,000

\$42,000

\$44,000

Instructor Explanation:Chapter 3, page 129

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

Student Answer: when they are incurred, whether or not cash is paid

when they are incurred and paid at the same time

if they are paid before they are incurred

if they are paid after they are incurred

Instructor Explanation:Chapter 4, page 167

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?

LIFO

The average cost method

Income tax expense for the period will be the same under all assumptions.

Instructor Explanation:Chapter 6, page 292

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?

\$52,500

\$49,500

\$43,500

Instructor Explanation:Chapter 9, page 455

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 _____.

Student Answer: debit to Cash of \$500,000

credit to Discount on Bonds Payable for \$20,000

credit to Bonds Payable for \$480,000

debit to Cash for \$480,000

Instructor Explanation:Chapter 10, page 517

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 _____.

\$125,000

\$155,000

\$115,000

Instructor Explanation:Chapter 12, page 636

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

vertical analysis

trend analysis

common-size analysis

Instructor Explanation:Chapter 13, page 694

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

Intercompany

Intracompany

Interregional

Instructor Explanation:Chapter 13, page 693

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

salary and wages expense in a previous year

gross profit

net income

Instructor Explanation:Chapter 13, page 698

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

liquidity

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marketability

profitability

Instructor Explanation:Chapter 13, page 70

13.Question :(TCO F) Return on common stockholder’s equity ratio is affected by _____.

dividend paid to preferred stock, if any

leverage (debt-to-assets ratio)

All of the above

Instructor Explanation:Chapter 13, page 715

14.Question :(TCO G) To calculate the market value of a bond, we need to use the time-value-of-money concept called _____.

extrapolation

discounting

None of the above

Instructor Explanation:Chapter 10, page 514