A+ Solution ACCT/504 Final Exam

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


 Student Answer: Shared control, tax advantages, increased skills, and resources 


  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



 Points Received:5 of 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



 Points Received:5 of 5 






 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?


 Student Answer: $43,000 








 Instructor Explanation:Chapter 3, page 129



 Points Received:5 of 5 






 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



 Points Received:5 of 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?


 Student Answer: FIFO 




  The average cost method 


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

 Instructor Explanation:Chapter 6, page 292



 Points Received:5 of 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?


 Student Answer: $48,000 








 Instructor Explanation:Chapter 9, page 455



 Points Received:5 of 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 _____.


 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



 Points Received:5 of 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 _____.


 Student Answer: $120,000 








 Instructor Explanation:Chapter 12, page 636



 Points Received:5 of 5 






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


 Student Answer: nonlinear analysis 


  vertical analysis 


  trend analysis 


  common-size analysis 


 Instructor Explanation:Chapter 13, page 694



 Points Received:5 of 5 






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


 Student Answer: Industry averages 








 Instructor Explanation:Chapter 13, page 693



 Points Received:5 of 5 






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


 Student Answer: net sales 


  salary and wages expense in a previous year 


  gross profit 


  net income 


 Instructor Explanation:Chapter 13, page 698



 Points Received:5 of 5 






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


 Student Answer: solvency 



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 Instructor Explanation:Chapter 13, page 70



 Points Received:5 of 5 






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


 Student Answer: net income 


  dividend paid to preferred stock, if any 


  leverage (debt-to-assets ratio) 


  All of the above 


 Instructor Explanation:Chapter 13, page 715



 Points Received:5 of 5 






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


 Student Answer: compounding 






  None of the above 


 Instructor Explanation:Chapter 10, page 514



 Points Received:5 of 5 





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