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ACCT 304 DeVry Final Exam April 2016

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ACCT 304 DeVry Final Exam April 2016

Question 1. 1. (TCO 1) CPAs are licensed by (Points : 6)

the AICPA.

the SEC.

the federal government.

state governments.

Question 2. 2. (TCO 1) The International Accounting Standards Board (Points : 6)

was the predecessor to the IASC.

can overrule the FASB when their policies disagree.

promotes the use of high-quality, understandable global accounting standards.

has its headquarters in Geneva.

Question 3. 3. (TCO 2) SFAC No. 5 focuses on (Points : 6)

objectives of financial reporting.

qualitative characteristics of accounting information.

recognition and measurement concepts in accounting.

elements of financial statements.

Question 4. 4. (TCO 2) Enhancing qualitative characteristics of accounting information include (Points : 6)

relevance and comparability.

comparability and timeliness.

understandability and relevance.

neutrality and consistency.

Question 5. 5. (TCO 3) Incurring an expense for advertising on an account would be recorded by (Points : 6)

debiting liabilities.

crediting assets.

debiting an expense.

debiting assets.

Question 6. 6. (TCO 3) Adjusting entries are primarily needed for (Points : 6)

cash basis accounting.

accrual accounting.

current value accounting.

manual accounting systems.

Question 7. 7. (TCO 4) Current assets include cash and all other assets expected to become cash or be consumed (Points : 6)

within 1 year.

within 1 operating cycle.

within 1 year or 1 operating cycle, whichever is shorter.

within 1 year or 1 operating cycle, whichever is longer.

Question 8. 8. (TCO 4) Notes payable(‘s) (Points : 6)

is a current liability account.

usually has a debit balance.

is a noncurrent liability account.

classification cannot be determined without additional information.

Question 9. 9. (TCO 5) The distinction between operating and nonoperating income relates to (Points : 6)

continuity of income.

principal activities of the reporting entity.

consistency of income stream.

reliability of measurements.

Question 10. 10. (TCO 5) On May 1, Foxtrot Co. agreed to sell the assets of its Footwear Division to Albanese Inc. for $80 million. The sale was completed on December 31, 2012. The following additional facts pertain to the transaction:

· The Footwear Division qualifies as a component of the entity, according to GAAP, regarding discontinued operations.

· The book value of Footwear’s assets totaled $48 million on the date of the sale.

· Footwear’s operating income was a pre-tax loss of $10 million in 2012.

· Foxtrot’s income tax rate is 40%.

In the 2012 income statement for Foxtrot Co., it would report (Points : 6)

income (loss) on its total operations for the year without separation.

income (loss) on its continuing operation only.

income (loss) from its continuing and discontinued operations separately.

income and gains separately from losses.

Question 11. 11. (TCO 8) When using the gross profit method to estimate ending inventory, it is not necessary to know (Points : 6)

beginning inventory.

net purchases.

cost of goods sold.

net sales.

Page 2

Question 1. 1.(TCO 5) The FASB’s stated preference for reporting operating cash flows is the (Points : 6)

indirect method.

direct method.

working capital method.

all financial resources method.

Question 2. 2.(TCO 5) Merchandise sold FOB shipping point indicates that (Points : 6)

the seller pays the freight.

the buyer holds title after the merchandise leaves the seller’s location.

the common carrier holds title until the merchandise is delivered.

the sale is not consummated until the merchandise reaches the point to which it is being shipped.

Question 3. 3.(TCO 5) Todd Sweeney is an artist who sells his work under consignment. (He displays his work in local barbershops, and customers buy the work there.) Sweeney recently transferred a painting to a local barbershop. The rationale for adoption of the percentage-of-completion method is that (Points : 6)

results are more conservative.

it provides a measure of periodic accomplishment.

it is a better match with legal ownership.

it results in a lower income tax.

Question 4. 4.(TCO 6) Reba wishes to know how much money would be in her savings account if she deposits a given sum in an account and leaves it there at 6% interest for five years. She should use a table for the (Points : 6)

future value of an ordinary annuity of 1.

future value of 1.

future value of an annuity of 1.

present value of an annuity due of 1.

Question 5. 5.(TCO 6) Yamaha Inc. hires a new chief financial officer and promises to pay him a lump-sum bonus four years after he joins the company. The new CFO insists that the company invest an amount of money at the beginning of each year in a 7% fixed rate investment fund to ensure that the bonus will be available. To determine the amount that must be invested each year, a computation must be made using the formula for (Points : 6)

the future value of a deferred annuity.

the future value of an ordinary annuity.

the future value of an annuity due.

None of the above

Question 6. 6.(TCO 7) Compensating balances represent (Points : 6)

funds in a bank account that cannot be spent.

balances in a payroll checking account.

accounts that are subject to bank service charges.

accounts on which banks pay interest, such as NOW accounts.

Question 7. 7.(TCO 7) Oswego Clay Pipe Company sold $46,000 of pipe to Southeast Water District #45 on April 12 of the current year with terms 1/15, n/60. Oswego uses the gross method of accounting for cash discounts. What entry would Oswego make on June 10, assuming the customer made the correct payment on that date? (Points : 6)

Cash 46460
Accounts Receivable 45540
Discounts Receivable 460
Cash 46000
Accounts Receivable 45540
Interest Revenue 460
Cash 46000
Accounts Receivable 46000
Cash 46460
Accounts Receivable 46000
Interest Revenue 460

Question 8. 8.(TCO 8) In a perpetual inventory system, the cost of inventory sold is (Points : 6)

debited to accounts receivable.

credited to cost of goods sold.

debited to cost of goods sold.

not recorded at the time.

Question 9. 9.(TCO 5) The statement of cash flows reports cash flows from the activities of (Points : 6)

operating, purchasing, and investing.

borrowing, paying, and investing.

financing, investing, and operating.

using, investing, and financing.

Question 10. 10.(TCO 8) Under the retail inventory method, (Points : 6)

a company measures inventory on its balance sheet by converting retail prices to cost.

a company measures inventory on its balance sheet at current selling prices.

a company measures inventory on its balance sheet on a LIFO basis.

None of the above

Question 11. 11.(TCO 8) During periods when costs are rising and inventory quantities are stable, ending inventory will be (Points : 6)

higher under LIFO than FIFO.

lower under average cost than LIFO.

higher under average cost than FIFO.

higher under FIFO than LIFO.

Page 3

Question 1. 1. (TCO 8) Fulbright Corp. uses the periodic inventory system. During its first year of operation, Fulbright made the following purchases (listed in chronological order of acquisition):

· 40 units at $100

· 70 units at $80

· 170 units at $60

Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year. What is the ending inventory using the LIFO method? (Points : 15)

Question 2. 2. (TCO 5) What is an accrued liability? Please provide two examples. (Points : 28)

Question 3. 3. (TCO 7) A company’s investment in receivables is affected by several related variables. Give an example of this interrelationship. (Points : 25)

Question 4. 4. (TCO 8) A company purchases inventory during the year in four batches, with unit and price amounts shown below:

Batch 1 – 9,500 units @ $2.10 per unit

Batch 2 – 4,300 units @ $2.08 per unit

Batch 3 – 3,600 units @ $2.04 per unit

Batch 4 – 7,200 units @ $2.01 per unit

10,800 units were sold after Batch 2 was purchased, while 3,400 units were sold after Batch 3 was purchased. Required:

-1. Calculate cost of goods sold and ending inventory under the FIFO method, using the perpetual inventory system.

-2. Calculate cost of goods sold and ending inventory under the FIFO method, using the periodic inventory system. (Points : 25)

Question 5. 5. (TCO 4) You are reviewing the December 31, 2012 financial statements of Ellie’s Antiques who is considering an initial public offering of its shares. The following items come to your attention: (Points : 25)