Practice Final, Fall 2, 2018 , with answers and new tax law PDF

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Summary

Introduces students to the accounting and financial information environment of the firm. Presents information including (1) financial accounting, (2) auditing and assurance, (3) management accounting, and (4) tax accounting. Includes current real-world examples taken from the popular business press....

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A100 Final Exam Fall 2, 2018 - Second Eight Weeks

Exam Version 01 Fill in the information below. Write clearly: Name (print): IU User Name: Class Day & Time: Course Section #:

This answer key has been updated for changes in the new tax law. There are 34 multiple-choice questions on this exam. Be sure your exam is complete. You have two hours to finish the exam. For each question, select the best answer from among the alternatives provided. In ordet ot receive credit for your answers, you must use pencil on the machine-readable answer sheet provided. Answers on the exam itself will not be considered in grading the exam. Fill in (and bubble) the following sections on the left side of the Scantron: Name (Last, first, middle initial) User name Version (01, 02, 03, or 04) Section number (The proctor will provide this to you) You may not have notes, scrap paper, or calculators other than Sharp EL-233S (or EL-233SB) with you while taking this exam. No pencil boxes or cases are allowed. Phones and smart watches must be put away and kept out of sight during the exam. You may have with you during the exam only your ID, pencils and an eraser, and the A100-approved calculator. When you complete the exam, place your answer sheet behind your exam and turn both the exam and the answer sheet in to the exam proctor as you leave the room. NO EXAM MATERIALS MAY LEAVE THIS ROOM. Failure to turn in all exam materials or having other materials while taking the test is a violation of the Honor Code. Your signature below indicates you have read and will follow the above instructions:

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1 Woodburn Co. produces a product which it sells for $8 apiece. Woodburn's variable cost per unit is $4, and its fixed cost per unit is $3 when it produces and sells 4,000 units. How much does Woodburn need in total sales dollars to earn $40,000 net income? a $104,000 b $40,000 c $320,000 d $160,000 e None of the

2 Ballantine, Inc. has a contract to sell 200 motors to a customer. Ballantine's total variable cost is $8,000, and its total fixed cost is $4,000. Now, Ballantine's customer has cancelled 40 units. What is the cost per unit of the remaining 160 motors? a $75 b $48 c $65 d $60 e None of the

3 Swain, Inc. produces a product which it sells for $25 apiece. When the company is producing 8,000 units, its variable cost per unit is $10, and its fixed cost per unit is $12. When the company's net income is $40,000, how much are its total variable costs? a $98,000 b $92,400 c $90,667 d $96,400 e None of the

4 a b c d e

Which of the following is classified as a period cost of a manufacturing company? Insurance on the factory Direct materials used in production The salary of the factory supervisor Salary of the CEO of the company More than one of the above is a period cost.

5 Myers Company produces a product which it sells for $16 apiece. The variable cost of the product is $4, and the total fixed cost is $40,000. How many units does Myers need to see to earn $2 net income per unit? b 4,000 c 3,333 a 3,000 d 3,500 e None of the

6 a b c d e

Which of the following is true? The contribution margin per unit stays the same. The contribution margin must always equal the total fixed cost. The contribution margin per unit increases as the number of units produced increases. Total fixed costs varies as the number of units varies. Variable cost per unit varies with the level of production.

7 Wells Company had the following information for 2018: Sales price per unit $48 Variable cost per unit $30 Total fixed costs $22,000 Net Income $12,000 How many units did Wells sell during 2018? a 1,825 b 1,425 c 1,555

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d 1,889

e 1,600

8 During 2018 Sycamore produced and sold a product that, when the company was selling 5,000 units, the variable cost per unit was $18, the fixed cost per unit was $6, and the net income per unit was $6. What will be Sycamore's expected net income next year if it can sell 8,000 units? a $48,000 b $66,000 c $52,000 d $62,667 e None of the

9 a b c d e

Which of the following is a characteristic of managerial accounting? These reports are produced to be distributed outside of the company. It is based on either GAAP or IFRS, depending on where the company is located. It is governed by the SEC for all companies in the US. Accrual-based accounting must be used when managerial accounting reports are produced. None of the above.

10 Franklin, Inc. is considering purchasing a piece of equipment for $20,000. Franklin expects this equipment would last for 10 years and then by worthless. Franklin is in the 25% tax rate and expects that the equipment would generate $5,000 net income before taxes. What is Franklin's expected after-tax cash flow on this equipment? a $3,750 b $1,750 c $5,250 d $5,750 e None of the

11 During 2018 Poplars Co. had taxable income of $48,000. Poplars had total entertainment expenses of $10,000, a penalty of $4,000, federal income tax expense of $8,000, and an exclusion of $2,000. How much was Poplars' net income for 2018? a $28,000 b $63,000 c $31,000 d $33,000 e None of the Under the provisions of the new tax law, the answer to question #11 would be choice a, $28,000. (See the scan of my work.) Use the following tax table to answer questions 12 and 13: If Taxable Income is: Over: $0 $50,000 $75,000 $100,000

But not over: $50,000 $75,000 $100,000 $335,000

The Tax is: This Plus Of the amount Amount: this %: over: $0 15% $0 $7,500 25% $50,000 $13,750 34% $75,000 $22,250 39% $100,000

The tax schedule shown above is not used in the new tax law. The tax rate is now a flat rate of 21%. 12 Maurer, Inc. had the following information on its 2018 financial statement: Sales $126,000 Cost of goods sold ($46,000) Gross profit $80,000 Salaries ($28,000) Rent ($14,000) Penalties ($2,000) Entertainment ($9,000) Federal income tax ? Net income ?

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14 a b c d e

What was Maurer's net income for 2018? $32,300 b $30,600 c $21,975 d $22,950 e None of the Under the provisions of the new tax law, the correct answer to question #12 is $19,020. (See the scan of my work.) Hodge Co. had gross income realized of $260,000, deductions of $140,000, credits of $4,000, and an exclusion of $5,000. How much was Hodge's tax expense? $23,490 b $24,100 c $26,050 d $28,100 e None of the Under the provisions of the new tax law, the correct answer to question #13 is $20,150. (See the scan of my work.) Which of the following is the most complete list of businesses subject to double taxation? Regular corporations Both regular corporations and S corporations Proprietorships, partnerships, S corporations, and limited-liability companies Regular corporations, S corporations, and limited-liability companies Proprietorships and partnerships

15 a b c d e

Which of the following is the best opinion an auditor can give on a company's financial statements? Exceptional Not bad Unmodified Modified Good

16 a b c d e

Which of the following is included in Sarbanes-Oxley? The lead auditors must rotate every year. The PCAOB must review every audit before it is published. The completed audit opinion now must go first to the CEO of the company. The auditors must retain their workpapers for at least seven years. The external auditors have oversight of the internal auditing department.

a

13 a

17 Which of the following is an example of an "assurance service" provided by a public accounting firm: a Audit of financial statements b Preparation of a tax return c Investigation of a fraud d Tax planning e Consultation about information technology

18 a b c d e

Which of the following is true regarding unearned revenue? Both assets and revenue are increased when it is received. Both liailities and revenue are increased when it is earned. Operating cash inflows are increased when it is earned. Assets are not changed when it is received. Both assets and liabilities are increased when it is received.

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19 If your bookkeeper forgot to record the end-of-the-period adjustment for interest associated with your note payable, which of the following would be the result on your annual financial statements? a Both expenses and liabilities are overstated. b Expenses are overstated and liabilities are understated. c Expenses are understated and net income is overstated. d Liabilities are overstated and expenses are understated. e Both liabilities and net income are overstated.

20 Wildermuth Company began 2018 with a total of $92,000 in stockholders' equity, and $148,000 in total assets. Wildermuth had gone into business in 2015 when it issued $30,000 in common stock. No more stock has been issued since that time. During 2018 Wildermuth earned $35,000 in net income and paid $22,000 in dividends, and at the end of 2019 had $155,000 in total assets. What was Wildermuth's debt-to-equity ratio for 2018? a 0.774 b 0.609 c 0.476 d 0.538 e None of the

21 Luddy bought inventory on account on October 14, 2018. On October 31, Luddy paid for the inventory. On November 1, 2018, Luddy sold the inventory on account, and on November 16, Luddy received payment from its customer. On what date does Luddy record the inventory as an expense? a October 14 b November 1 c November 16 d October 31 e None of the above

Use the following information to answer questions 22 through 24: Beck, Inc. borrowed $40,000 on April 1, 2017. Beck will make no payments on this loan until April 1, 2019, and at that time, Beck will pay $43,600. 22 How much will Beck show as interest expense on its 2018 annual financial statements? a $1,800 b $1,350 c $3,150 d $450

e None of the

23 How much will Beck show as interest payable on its 2018 annual financial statements? a $3,150 b $450 c $1,800 d $1,350

e None of the

24 When Beck pays off this loan on April 1, 2019, how will this payment be shown on its 2019 statement of cash flows? a $43,600 as a financing cash outflow b $40,000 as a financing cash outflow, $3,600 as an operating cash outflow c $40,000 as an operating cash outflow, $3,600 as a financing cash outflow d $40,000 as a financing cash outflow, and the payment for interest is not shown on this statement e $40,000 as a financing cash outflow, $3,600 as an investing cash outflow

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25 a b c d e

Which of the following accounts is classified as a current asset on the balance sheet? Common stock Note payable Interest expense Equipment Inventory

Use the following information to answer questions 26 through 34: (Answer each question independently. The balance sheets are as of the end of each year.) 2017 2018 2017 Cash $2,600 $4,100 Accounts payable $14,000 Accounts receivable $9,000 $14,100 Utilities payable $2,800 Inventory $18,000 $22,300 Wages payable $14,500 Prepaid insurance $7,100 $16,700 Notes payable $28,000 Equipment $51,000 $51,000 Interest payable $1,700 Accum. depreciation ($12,100) ($13,900) Common stock $10,000 Land $14,000 $9,500 Retained earnings $18,600 $89,600 $103,800 $89,600

2018 $6,300 $900 $7,200 $39,000 $2,700 $10,000 $37,700 $103,800

26 How much were financing cash flows during 2018 if $8,000 was paid in dividends? a $11,000 b $38,100 c $3,000 d ($8,000)

e None of the

27 How much were total sales during 2018 if $92,000 was collected in cash? a $97,100 b $86,900 c $93,500 d $90,500

e None of the

28 How much was the return on equity for 2018 if $12,000 was paid in dividends during the year? a 25.2% b 31.5% c 65.2% d 110.5%

e 81.5%

29 How much was cost of goods sold during 2018 if $41,000 was paid for inventory? a $36,700 b $45,300 c $29,000 d $33,300

e None of the

30 During 2018 the company sold a segment of land for $9,000, which had been purchased in a prior year, and this was a gain of $2,000. How much did the company pay for additional land during 2018? a $6,500 b $2,500 c $4,500 d $7,500 e None of the

31 How much was the gain or loss on the sale of land during 2018 if land that had been purchased in a prior year was sold for $6,000, and an additional plot was purchased in 2018 for $3,500? a ($2,000) b $8,000 c $4,500 d $2,500 e None of the

32 How much was cost of goods sold during 2018 if $91,000 of inventory was purchased? a $95,300 b $91,000 c $90,200 d $86,700

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e None of the

33 How much was the current ratio at December 31, 2018 if prepaid insurance was always paid only three months in advance and the note and interest were not due until 2020? a 2.81 b 3.97 c 1.85 d 2.05 e None of the

34 How much was "net income from operations" during 2018 if $14,000 was paid in dividends, and a a segment of land was sold for $9,000, which was a $4,000 gain? a $33,100 b $37,100 c $4,000 d $29,100 e None of the

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