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ACC 102 Midterm Review Questions

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ACC 102 Midterm Review Questions
smjackson7
Quiz by smjackson7, updated more than 1 year ago
smjackson7
Created by smjackson7 over 10 years ago
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Question 1

Question
When compound interest is used, interest accumulates less quickly than when simple interest is used.
Answer
  • True
  • False

Question 2

Question
The annual interest earned on an amount deposited into a bank account will be the same each year when compound interest is used.
Answer
  • True
  • False

Question 3

Question
An ordinary annuity is a series of equal payments made at the end of equal intervals of time.
Answer
  • True
  • False

Question 4

Question
In a deferred payment arrangement, interest is charged only if it is stated.
Answer
  • True
  • False

Question 5

Question
If the net present value of a proposed investment is negative, it means that the investment should not be made.
Answer
  • True
  • False

Question 6

Question
* Assets purchased under a deferred payment plan should be recorded at the future value of the installment payments.
Answer
  • True
  • False

Question 7

Question
Decision makers rely on the future values, rather than on the present values, of future cash flows.
Answer
  • True
  • False

Question 8

Question
Use this information to answer the following question: Periods Future Value of $1 at 12% Future Value of Ordinary Annuity of $1 at (1) 1.120 1.000 (2) 1.254 2.120 (3) 1.405 3.374 A deposit of $2,000 made at the beginning of period 1 would grow to how much at the end of three years?
Answer
  • $2,240.00
  • $2,810.00
  • $2,508.00
  • $6,748.00

Question 9

Question
Which of the following phrases is NOT descriptive of an ordinary annuity?
Answer
  • Payments made at the beginning of equal periods of time
  • Both present and future value can be calculated
  • Compound interest assumed
  • Series of equal payments

Question 10

Question
The higher the interest rate assumed, the
Answer
  • higher the present value of an ordinary annuity.
  • more one must deposit today to accumulate to a desired sum.
  • lower the future value of a sum invested in the bank today.
  • lower the present value of a sum due in the future.

Question 11

Question
Heidi wishes to deposit an amount into her savings account that will enable her to withdraw $800 per year for the next four years. She should deposit $800, multiplied by the
Answer
  • present value of a single sum factor.
  • present value of an ordinary annuity factor.
  • future value of a single sum factor.
  • future value of an ordinary annuity factor.

Question 12

Question
First City Bank computes interest semiannually. If the interest rate is currently 6% per annum, the amount deposited today should be multiplied by which future value factor to calculate the amount that will accumulate by the end of 10 years?
Answer
  • 20 periods at 12%
  • 20 periods at 3%
  • 10 periods at 6%
  • 10 periods at 3%

Question 13

Question
* A company purchases an asset on a deferred payment plan, ultimately paying $10,000. On the payment date, the company would
Answer
  • credit Cash for less than $10,000.
  • debit Interest Expense for the imputed amount.
  • debit the asset account for $10,000.
  • debit Accounts Payable for $10,000.

Question 14

Question
SHORT ANSWER! - (LOOK AT TABLES!) --What is the present value of receiving $1,000 at the end of each year for 6 years, assuming 7% interest compounded annually?--- --What amount must be deposited at the bank today to grow to $300 in 5 years, assuming 14% interest compounded semiannually?--
Answer
  • 1,000 x 4.67 = $4,767 --- 300 x .508 = $152.40
  • Do the math!!

Question 15

Question
Extraordinary gains/losses are a component of income from operations.
Answer
  • True
  • False

Question 16

Question
A gain on the sale of an asset is a component of income from operations.
Answer
  • True
  • False

Question 17

Question
The quality of a company's earnings is affected by the accounting estimates chosen by the company's management.
Answer
  • True
  • False

Question 18

Question
If the amount of income taxes expense exceeds the amount of actual income taxes payable for a year, the difference is recorded by a debit to a balance sheet account called Deferred Income Taxes.
Answer
  • True
  • False

Question 19

Question
Discontinued operations and extraordinary items should be reported in the financial statements of "net of tax."
Answer
  • True
  • False

Question 20

Question
Gains and losses caused by the passage of a new law should be classified as extraordinary on the income statement.
Answer
  • True
  • False

Question 21

Question
A business with 100,000 shares of stock outstanding for three months would use a weighted-average 25,000 shares in its EPS calculation.
Answer
  • True
  • False

Question 22

Question
A company with convertible bonds is considered to have a complex capital structure.
Answer
  • True
  • False

Question 23

Question
A debit balance in the Retained Earnings account is referred to as a deficit.
Answer
  • True
  • False

Question 24

Question
A synonymous phrase for retained earnings is accumulated earnings.
Answer
  • True
  • False

Question 25

Question
When common stock is originally issued, its market value per share should approximate its par or stated value per share.
Answer
  • True
  • False

Question 26

Question
Par value or stated value is arbitrarily set when stock is authorized.
Answer
  • True
  • False

Question 27

Question
Which of the following is not a component of income from operations?
Answer
  • costs and expenses
  • write-downs of assets
  • extraordinary losses
  • restructuring

Question 28

Question
When alternative acceptable accounting methods exist, a better quality of earnings generally is produced from selecting an accounting method that has the effect of reporting the
Answer
  • lowest amount of future earnings
  • greatest amount of retained earnings currently
  • lowest amount of current earnings
  • greatest amount of assets currently

Question 29

Question
Which of the following is analyzed when a financial statement reader is looking at the nature of nonoperating items?
Answer
  • discontinued operations
  • interest expense
  • interest revenue
  • cost of goods sold

Question 30

Question
An excess of income taxes expense over income taxes payable will result in recording a
Answer
  • debit to Deferred Income Taxes
  • debit to Income Taxes Payable
  • credit to Deferred Income Taxes
  • credit to Prior Period Adjustment

Question 31

Question
Because noncash investing and financing transactions do not affect cash, they should be excluded from the statement of cash flows.
Answer
  • True
  • False

Question 32

Question
The payment of taxes would be included in the operating activities section of the statement of cash flows.
Answer
  • True
  • False

Question 33

Question
The payment of taxes would be included in the operating activities section of the statement of cash flows.
Answer
  • True
  • False

Question 34

Question
A U.S. treasury bill with an original maturity of one year or less is considered cash equivalent.
Answer
  • True
  • False

Question 35

Question
The primary purpose of the statement of cash flows is to provide information about a company's investing and financing activities during an accounting period.
Answer
  • True
  • False

Question 36

Question
A negative free cash flow indicates that the company has met all its planned cash commitments and has cash available to reduce debit or expand.
Answer
  • True
  • False

Question 37

Question
A decrease in the balance of merchandising inventory is added to net income when calculating net cash flows from operating activities using the indirect method.
Answer
  • True
  • False

Question 38

Question
Cash inflows and outflows are not netted in the investing activities section of the statement of cash flows but are separately disclosed to give the reader full information.
Answer
  • True
  • False

Question 39

Question
Dividends paid are reflected in the financing activities section of the statement of cash flows.
Answer
  • True
  • False

Question 40

Question
The net income for the period would appear in the cash flows from financing activities section of a statement of cash flows prepared using the indirect method.
Answer
  • True
  • False

Question 41

Question
A schedule of noncash investing and financing activities is not required when a statement of cash flows is prepared using the indirect method.
Answer
  • True
  • False

Question 42

Question
Cash equivalents do not include
Answer
  • U.S. treasury bills
  • money market accounts
  • marketable securities
  • commercial paper

Question 43

Question
Management would not use the statement of cash flows to
Answer
  • access the liquidity of the business
  • determine dividend policy
  • evaluate the effects of major policy decisions involving investments and financing
  • determine the financial position of the company

Question 44

Question
A Corporation engaged in the transaction: Declared and issued a stock dividend. Indicate which section, if any, each transaction would appear in, or relate to, on a statement of cash flows.
Answer
  • financing activities section
  • operating activities section
  • does not represent a cash flow
  • investing activities section

Question 45

Question
The direct method of preparing a statement of cash flows
Answer
  • is the overwhelming choice of most companies
  • begins with net income in the operating activities section
  • is more difficult to understand than the indirect method for the average reader
  • will produce more the same net figure as the indirect method

Question 46

Question
The calculation of free cash flow could include all of the following except:
Answer
  • cash purchase of plant assets
  • net cash flows from operating activities
  • net income
  • dividends paid

Question 47

Question
Per the Sarbanes-Oxley Act of 2002, public corporations must establish a compensation committee to determine how its top executives will be compensated.
Answer
  • True
  • False

Question 48

Question
Liquidity is the ability to earn a satisfactory net income
Answer
  • True
  • False

Question 49

Question
Investors, creditors and customers are considered external users of financial statements.
Answer
  • True
  • False

Question 50

Question
The analysis of risk and return is important to both investors and creditors.
Answer
  • True
  • False

Question 51

Question
A limitation of using industry norms in financial performance evaluation is that some companies in the same industry may not be comparable.
Answer
  • True
  • False

Question 52

Question
A 20% change in net sales will result in a 20% change in net income.
Answer
  • True
  • False

Question 53

Question
Vertical analysis is the same as common-size analysis
Answer
  • True
  • False

Question 54

Question
It is possible for horizontal analysis to indicate a decrease in revenues from one year to another and an increase in net income.
Answer
  • True
  • False

Question 55

Question
A primary purpose of vertical analysis is to observe trends over a 5 year period.
Answer
  • True
  • False

Question 56

Question
Ration analysis is useful only if the ratio states a meaningful relationship between two numbers.
Answer
  • True
  • False

Question 57

Question
Executive officers' compensation is typically comprised of all of the following except:
Answer
  • inventive bonuses
  • declared dividends
  • stock option awards
  • annual base salaries

Question 58

Question
Which of the following is the least useful in evaluating a relationship as either favorable or unfavorable?
Answer
  • past and current performances company
  • industry averages
  • past performance of the company
  • rule-of-thumb measures

Question 59

Question
Dun & Bradstreet publishes
Answer
  • data on average ratios and relationships
  • credit ratings of companies
  • data on industry norms
  • all of these

Question 60

Question
One of the best places to look for early signs of change in a company's profitability is the
Answer
  • annual report sent to the SEC (10K)
  • year-end financial statement
  • interim financial statement
  • annual report sent to stockholders

Question 61

Question
Horizontal analysis of comparative financial statements include the
Answer
  • development of common-size statements
  • calculation of dollar amount changes and percentage changes from the previous to the current year
  • calculation of the percentage of net sales for each listed
  • calculation of liquidity ratios

Question 62

Question
A company with $50,000 in current assets, $25,000 in quick assets, and $30,000 in current liabilities makes a payment of a $1,500 current debt. As a result of this transaction, the current ratio and quick ratio will
Answer
  • both decrease
  • increase and decrease, respectively
  • both increase
  • remain the same and decrease, respectively

Question 63

Question
A high receivable turnover indicates that
Answer
  • many customers are defaulting on their debts
  • a large proportion of the company's sales is on credit
  • the company's inventory is moving very quickly
  • customers are making payments very quickly

Question 64

Question
The higher the debit to equity ratio, the great the financial risk the company is taking
Answer
  • True
  • False

Question 65

Question
* When a monthly mortgage payment is made and recorded, the debit to Mortgage Payable represents the reduction in the principal balance
Answer
  • True
  • False

Question 66

Question
A capital lease is the lease of property, plant or equipment that is in effect an installment purchase
Answer
  • True
  • False

Question 67

Question
Bondholders are creditors of the issuing corporation
Answer
  • True
  • False

Question 68

Question
Secured bonds are also known as debentures
Answer
  • True
  • False

Question 69

Question
An $80,000 bond issue priced at 97-3/4 is sold for $78,200.
Answer
  • True
  • False

Question 70

Question
The par value of a bond is equal to its face value
Answer
  • True
  • False

Question 71

Question
It is the bondholder rather than the issuer who may exercise the call feature of a callable bond.
Answer
  • True
  • False

Question 72

Question
The entry to record the issuance of bonds between interest payment dates will include a debit to Bond Interest Expense.
Answer
  • True
  • False

Question 73

Question
A company with income before income taxes of $94,000 and $20,000 in interest expense, has an interest coverage ratio of
Answer
  • 5.7 times
  • 4.7 times
  • 3.7 times
  • 6.7 times

Question 74

Question
If bonds are issued at a premium the face interest rate is
Answer
  • lower than the market rate of interest
  • higher than the market rate of interest
  • too low to attract investors
  • adjusted to higher effective rate of interest

Question 75

Question
Ten $1000 bonds issued at 99.75 on the interest date result in a debit to the Cash account for
Answer
  • $990.75
  • $9,907.50
  • $997.50
  • $9,975.00

Question 76

Question
A Corporation issued $100,000 of 20-year, 6% bonds at 98 on one of its semiannual interest dates. The straight-line method amortization is to be used. What is the total interest cost of the bonds?
Answer
  • $120,000
  • $122,000
  • $118,000
  • $117,500

Question 77

Question
*Short Answer!* A corporation has a 7% $600,000 bond issue that originally was issued 5 years ago. There are now ten years remaining on the bond issue, and the market interest rate is 12%. Interest is paid semiannually. Calculate the current market value of the bond issue, using the present value tables.
Answer
  • Single Amount Table 3 M arket F ace M arket Annuity/Semi annuity - Series Amount Table 4
  • Be sure to use tables!

Question 78

Question
The P/E (price/earnings) ratio is a measure of investors' confidence in a company's future.
Answer
  • True
  • False

Question 79

Question
Stockholders elect the board of directors which appoints the officers of a corporation.
Answer
  • True
  • False

Question 80

Question
The board of directors carries out the day-to-day operations of a corporation.
Answer
  • True
  • False

Question 81

Question
The board of directors carries out the day-to-day operations of a corporation.
Answer
  • True
  • False

Question 82

Question
The liability of a stockholder is usually limited to the stockholders' investment in the corporation.
Answer
  • True
  • False

Question 83

Question
The declaration of a cash dividend causes an increase in a corporation's liabilities at the date of record.
Answer
  • True
  • False

Question 84

Question
No entry is required on the date of record for a cash dividend.
Answer
  • True
  • False

Question 85

Question
Stock options are often granted by a corporation to management personnel as a means of additional compensation to and motivation of employees.
Answer
  • True
  • False

Question 86

Question
The stockholders' equity in a corporation consists of capital contributed by a stockholders and retained earnings.
Answer
  • True
  • False

Question 87

Question
Retained earnings consist of a pool of funds to be distributed to stockholders.
Answer
  • True
  • False

Question 88

Question
The cost of treasury stock is deducted from total Contributed Capital and Retained Earnings in determining total stockholders' equity.
Answer
  • True
  • False

Question 89

Question
Dividends yield equals
Answer
  • market price per share divided by dividends per share
  • net income divided by dividends per share
  • dividends per share divided by net income
  • dividends per share divided by market price per share

Question 90

Question
A disadvantage of the corporate form of business is
Answer
  • centralized authority and responsbility
  • its status as a separate legal entity
  • government regulation
  • continuous existence

Question 91

Question
Par value
Answer
  • is established for a share of stock after it is issued
  • is the legal capital established for a share of stock
  • represents what a share of stock is worth
  • represents the original selling price for a share of stock

Question 92

Question
The Board of Directors of B Corporation declared a cash dividend on January 18th, 2011, to be paid on February 18th, 2011, to shareholders holding the stock on February 2nd, 2011. Given these facts, the date February 2nd, 2011 is referred to as the
Answer
  • date of declaration
  • date of payment
  • ex-dividend date
  • date of record

Question 93

Question
All of the following are stockholders' equity accounts except
Answer
  • Treasury Stock
  • Preferred Stock
  • Retained Earnings
  • Dividends Payable

Question 94

Question
Any act that lies beyond the authority of a corporation to perform is an ultra vires act.
Answer
  • True
  • False

Question 95

Question
When stock is sold at par you...
Answer
  • Debit Cash / Credit Par Value
  • Debit Par Value / Credit Cash

Question 96

Question
A corporation set up perfectly is considered....
Answer
  • Dejeur
  • Defactor

Question 97

Question
A corporation set up with mistakes is....
Answer
  • Defacto
  • Dejeur

Question 98

Question
Name the accounts in the Income Statement
Answer
  • Do it!
  • XXOXOJOIJOSIJDOISJ

Question 99

Question
Contributed Capital includes all of these EXCEPT
Answer
  • Common & Preferred Stock
  • Retained Earnings
  • Paid in Capital in Excess
  • Treasury Stock

Question 100

Question
A fraudulent dividend declaration is considered an act of....
Answer
  • Piercing the Corporate Veil
  • Deferred Income Tax
  • Defacto
  • Ultra vire

Question 101

Question
No journal entry is required on
Answer
  • Date of Declaration
  • Date of Record
  • Date of Payment
  • Date of Issuance

Question 102

Question
A Bondholder is a Debter
Answer
  • True
  • False

Question 103

Question
Interest Formula =
Answer
  • Principal x Rate x Time
  • Income before Taxes + Interest Expense / Interest Expense
  • Current Assets / Current Liabilities
  • Dividends per share / Market $ per share

Question 104

Question
What measures how much a risk a company represents
Answer
  • Interest Cover Ratio
  • Debt to Equity Ratio
  • Dividends Yield Ratio
  • Return on Equity Ratio
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