Practice Final, Fall 2, 2019 , with answers and new tax law PDF

Preview

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....

Description

A100 Final Exam Fall 2, 2019 - Second Eight Weeks

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

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:

Signature:

1

1 Mink Corporation produces a product which it sells for $16 a unit. When Mink sells 8,000 units of this product, its costs are 40% fixed and 60% variable. At this level of production, Mink is breaking even. How many units does Mink need to sell to earn net income of $10,000? a 9,563 b 6,375 c 9,200 d 9,334 e 9,000

2 Regent Company wants to earn at least $2 per unit for each unit it sells. Regent's variable cost per unit is $5, and its total fixed cost is $2,000. How many units does Regent need to sell if the sales price per unit is $8? a 1,000 b 1,667 c 1,800 d 2,000 e None of the

3 Riverside Inc. is losing money on its only product, which it sells for $20 apiece. The total fixed cost is $6,000, and the variable cost per unit is $14. How many units does Riverside need to sell to break even? a 1,200 b 1,000 c 2,400 d 2,000 e None of the

4 Broad Company sells its product for $60 per unit. When Broad earns $24,000 net income per year on this product, it is selling 5,600 units. Broad's total fixed costs are $188,800. What is Broad's variable cost per unit? a $22.00 b $33.71 c $38.00 d $41.00 e None of the

5 Dublin Co.'s sales price per unit is $25. When it sells 4,000 units, its variable cost per unit is $4, and its fixed costs per unit is $14. How much will Dublin's cost per unit be if it can increase its sales to 6,000 units? a $15.00 b $18.00 c $13.33 d $12.00 e None of the

6 Midland has a contract to sell 80 units at a sales price of $150 per unit. At this level of production, Midland's fixed costs are $45 per unit, and the variable costs are $30 per unit. Midland's customer has now cancelled 15 units and only wants to buy 65. How much net income (loss) will Midland earn on this contract? a $5,200 b $4,600 c $4,875 d $4,200 e None of the

7 Tremont Co. sells a product for $32 per unit. When it sells 12,000 units, its fixed cost per unit is $18, and its variable cost per unit is $8. What is Tremont's profit per unit if it sells 10,000 units next year? a $6.00 b $2.40 c $3.33 d $4.50 e None of the

8 a b c d

Which of the following costs would be classified as a period cost? Insurance on the factory Salary of the factory foremen Direct materials Salesmen's commissions

2

e Manufacturing overhead

9 Oakland manufactures men's shirts. At what point does the button on the shirt become an expense to Oakland? a When Oakland attaches the button to the shirt b When Oakland sells the shirt c When Oakland buys the buttons d When Oakland pays its supplier for the buttons e When the order is placed for the buttons.

10 On its income statement Westbelt Company reported net income of $15,000. Included in the calculation of net income was a total of $2,000 for business meals with clients, $3,000 in penalties, $4,000 for federal income taxes, and an exclusion of $1,000. How much is Westbelt's taxable income? a $8,000 b $6,000 c $22,000 d $24,000 e None of the

11 a b c d e

Which of the following types of businesses is subject to what is known as "double taxation"? Only regular corporations and S corporations Only proprietorships, partnerships and LLC's Only S corporations and LLC's Only regular corporations, S corporations, and LLC's Only regular corporations

12 a b c d e

Which of the following is true regarding the tax law? Credits are subtracted to arrive at taxable income. Federal income taxes are required to be deducted on the tax return. Income from a municipal bond is taxable as a type of revenue. All entertainment expenses are now fully deductible. None of the above are true.

13 Executives, Inc. had the following information on its most recent income statement: Sales $82,000 Cost of good sold ($38,000) Gross profit $44,000 Wages ($21,000) Rent ($4,000) Penalties ($1,000) Business meals with clients ($2,000) Taxes ? Net income ? How much was Executives' net income given that the company has a 21% tax rate? a $12,430 b $13,640 c $12,640 d $12,220

3

e None of the

14 Etna Company was considering buying a piece of equipment for $24,000. The equipment is expected to earn $8,000 net income before taxes. It is expected to have a 12-year life and then be worthless. What is the equipment's expected after-tax cash flow for the first year if the company's tax rate is 21%? a $8,320 b $7,040 c $4,740 d $6,740 e None of the

15 a b c d e

Which of the following is the best of the audit opinions? Qualified Disclaimer Unmodified Exceptional Accurate

16 a b c d e

Which of the following defines Section 302 in Sarbanes-Oxley? It holds management responsible for the financial statements. It requires an annual audit of internal controls. It puts restrictions on the loans that may be made to company executives. It requires the establishment of an audit committee on the company's board of directors. It requires an annual audit by PCAOB of the auditors.

17 a b c d e

Which of the following is classified as an "assurance service" by a public accounting firm? Tax return preparation Investigation of a fraud Information technology consulting Audit of financial statements None of the above are assurance services.

18 a b c d e

Which of the following is true of unearned revenue? Liabilities are decreased when it is received. Assets are increased when it is earned. Revenue is increased when it is earned. Liabilities are increased when it is earned. Assets are decreased when it is earned.

19 a b c d e

Which of the following transactions would increase total assets? Buying inventory on account Paying for prepaid insurance Selling land for the amount originally paid Earning unearned revenue None of the above would increase total assets.

20 Your bookkeeper made a mistake and forgot to record depreciation expense at the end of the year. Which of the following would be the result of that error? a Both assets and expenses would be understated.

4

b c d e

Assets would be overstated, and expenses would be understated. Both liabilities and net income would be overstated. Liabilities would be understated, and expenses would be overstated. Both expenses and net income would be understated.

Use the following information to answer questions 21 through 23: Highlander, Inc. borrowed $80,000 on November 1, 2019. Highlander will make no payments on this loan until November 1, 2022, and at that time, Highlander will owe $89,000. 21 How much will interest payable be on Highlander's annual financial statements at December 31, 2020? a $5,500 b $6,000 c $500 d $3,000 e None of the

22 How much will interest expense be on Highlander's annual financial statements at December 31, 2020? a $3,500 b $3,000 c $5,500 d $6,000 e None of the

23 When the loan is paid off in 2022, which of the following would correctly state the annual statement of cash flows? a $89,000 financing cash outflow b $89,000 operating cash outflow c $80,000 investing cash outflow; $9,000 financing cash outflow d $80,000 financing cash outflow; $9,000 investing cash outflow e $80,000 financing cash outflow; $9,000 operating cash outflow

24 Etna Company owned equipment which it had originally bought for $12,000. The equipment was expected to last six years and then be worthless. On its annual financial statements at December 31, 2019, Etna showed the net carrying value of the equipment to be $7,000. On what date did Etna buy the equipment? a July 1, 2016 b December 31, 2016 c December 31, 2017 d July 1, 2017 e None of the above

25 Main Co. started 2019 with assets of $26,000 and total stockholder's equity of $14,000. During 2019 Main earned $45,000 in net income and paid $48,000 in dividends. At December 31, 2019, Main had $31,000 in assets. What was Main's debt-to-equity ratio for 2019? a 1.82 b 0.86 c 1.45 d 1.28 e None of the

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.) 2018 2019 2018 Cash $600 $1,800 Accounts payable $2,500 Accounts receivable $2,300 $5,900 Utilities payable $1,700

5

2019 $2,900 $2,600

Inventory Prepaid insurance Equipment Accum. depreciation Land

$3,600 $1,100 $18,000 ($7,200) $4,000 $22,400

$5,100 $1,400 $18,000 ($9,000) $5,100 $28,300

Wages payable Notes payable Interest payable Common stock Retained earnings

26 How much was collected in cash during 2019 if sales were $88,000? a $86,800 b $89,200 c $91,600

$800 $8,000 $200 $4,000 $5,200 $22,400

d $84,400

$1,500 $5,000 $300 $4,000 $12,000 $28,300

e None of the

27 How much were investing cash flows if land purchased in a prior year for $3,000 was sold during 2019 for a $1,000 gain? a ($100) b $4,000 c $1,000 d ($4,100) e None of the

28 How much was cost of goods sold if $54,000 in inventory was purchased during 2019? a $52,100 b $52,900 c $52,500 d $55,500

e None of the

29 How much were operating cash flows if investing cash flows were $2,000 and financing cash flows were ($1,000) during 2019? a $2,000 b $1,200 c $200 d $2,200 e None of the

30 How much inventory was purchased during 2019 if $46,000 was paid to suppliers? a $45,600 b $47,500 c $44,500 d $46,400

e None of the

31 How much depreciation was recorded during 2019? a $9,000 b $0 c $7,200

e None of the

d $1,800

32 How much were financing cash flows if net income during 2019 was $15,000? a ($11,200) b ($3,000) c $12,000 d ($8,200)

e None of the

33 How much was the company's return on equity ratio during 2019 if net income was $12,000? a 75.0% b 95.2% c 139.5% d 41.3%

e None of the

34 How much was the current ratio at the end of 2019 if insurance was never purchased more than three months in advance and the note payable and interest payable were long term? a 1.75 b 1.15 c 0.88 d 1.83 e 2.03

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28...