THE 2015 Fall Accounting Tribe

The Final Battle

Version D (Write this on top left of answer sheet above your name)

Rules:Same as always - No cheating

If you write your answers large next to the questions on the exam, you will get a 0.

______________________________________

Name (Print)

________________________ PID

Instructor (circle)

Dr. Kirch Mrs. Freeland Ms. Keifer

______________________________ Days & Time of your class

Pledge: By signing my name below, I am promising that: 1) The work I complete is my own, 2) I did not and will not give aid to others, 3) I will not share any information about the examination with those who are taking it later, and 4) I will report any others that I observe violating these rules.

Signature __________________________________________________________________

Multiple Choice (5 points each)

1) A “capital lease” is really

A. A temporary rental of somethingB. A better lease than a non-capital leaseC. A purchase of the assetD. A current assetE. A purchase of a net present value

2) When a business issues bonds for cash, which of the following occurs?

A. A revenue account increases and an asset account increases B. An asset account increases and a liability account decreases C. An expense account increases and an asset account decreasesD. An asset account decreases and a liability account increasesE. An asset account increases and a liability account increases

3) If beginning Rent Payable is $6,000 and the Company paid 15 months’ rent of $15,000 (and continues to rent the space through year-end), the ending financial statements would include

A. Rent Payable of $15,000B. Rent Payable of $ 3,000C. Prepaid Rent of $15,000D. Rent Expense of $3,000.E. None of the above

4) Darby purchased a new machine on January 1, for $210,000. Darby paid $10,000 down

with the rest payable in 5 equal annual payments, beginning in one year, which include interest at 10%. The amount of each payment would be:

A. $ 40,000 + interestB. $ 26,379.75C. $ 55,397.47D. $ 52,759.50E. Cannot be determined from information given

5) You want to have $100 in the bank in ten years, bank pays interest at 10% compounded semi-annually, how much do you need to put in today?

A. $ 38.55B. $ 37.69 C. $ 14.86 D. $ 10.00

E. none of these 6) Anna Bella’s Dress Shoppe, had a fire. The entire inventory was lost. The owners are

putting together a claim for the insurance company. Sales this year were $1,000,000 up until the fire. Last year’s sales were $2,000,000. The average markup percentage is 100%. The inventory at the beginning of the year was $300,000 (at cost). Anna owed suppliers $200,000 last year. The company had purchased $600,000 of dresses this year (at cost) up until the date of the fire.

How much can Anna Bella’s claim as lost during the fire?

A. $ 440,000B. $ 400,000C. $ 240,000D. $ 362,220E. $ 640,000

7) CoJo Co. issues 2,000 shares of $10 par value stock for $80,000, the credit to “Paid-in capital” would be

A. $ 60,000 B. $ 80,000C. $ 78,000D. $ 2,000E. None of these

8) Josh will sell you a Goalie for $20,000 (must not be a very good Goalie!). The deal is 10% down and the rest payable in four equal annual payments that include interest at 2%. You called the bank and they said that they would charge you 10% for a similar loan. How much are the payments if you take Josh’s deal?

A. $ 5,252.48B. $ 2,626.24C. $ 5,000.00 + interestD. $ 2,374.18E. $ 4,727.23

9) Still on Josh - How much are you really paying for the Goalie under Josh’s deal?

A. $ 14,984.68B. $ 16,649.64C. $ 18,649.64D. $ 16,984.68E. Some other number

Use the following information for questions 10-24. BE SURE YOUR CALCULATOR IS SET TO AT LEAST 4 DIGITS PAST THE DECIMAL! (2nd Format, 4, Enter)

BobKat Enterprises, Inc. Income Statement

For the Year Ended December 31, 2015

Sales $ 900,000 Cost of Goods Sold 400,000Gross Margin 500,000 Operating Expenses

Wage Expense $250,000 Rent Expense 36,000 Depreciation Expense 30,000 Bad Debt Expense 18,000

Total Operating Expenses 334,000Operating Income 166,000

Other Revenues & <Expenses> Interest Expense < 16,000>Taxable Income 150,000 Tax Expense 45,000 Net Income $ 105,000

EPS $ 1.95

BobKat Enterprises, Inc.Balance SheetDecember 31,

2015 2014 2015 2014 Assets Liabilities

Current Assets Current LiabilitiesCash $ 140,000 $ 170,000 Accounts Payable $ 78,000 $ 149,000 Accounts Receivable 80,000 85,000 Wages payable 9,000 8,000Less: Allowance for Interest Payable 3,000 5,000 Doubtful Accounts (10,000) (5,000) Taxes Payable 12,000 10,000Net Accounts Receivable 70,000 80,000 Total Current Liabilities 102,000 172,000Inventory 90,000 70,000 Total Current Assets 300,000 320,000 Long-Term DebtProperty and Equipment Note Payable 100,000 100,000 Equipment 420,000 340,000 Total Liabilities 202,000 272,000 Less: Accumulated Depreciation ( 90,000) ( 60,000) Owners’ EquityNet Property & Equipment 330,000 280,000 Common Stock ($1 per share) 60,000 50,000Other Assets Retained Earnings 378,000 288,000Security Deposit 10,000 10,000 Total Owners’ Equity 438,000 338,000

Total Liabilities andTotal Assets $ 640,000 $ 610,000 Owners’ Equity $ 640,000 $ 610,000

The paragraph prior to question 10 is part of this problem. Some of the equipment was acquired on June 30, 2015 by exchanging 5,000 shares of common stock worth $5,000. The additional shares of common stock were issued on September 30, 2015. The Note Payable is interest only at 10% and will be paid in 2020. The company did not sell any equipment during the year. The retained earnings balance for both years is after all closing entries have been made.

10) At December 31, 2015, the current ratio was approximately

A. 3.56B. 2.94C. 6.27D. 1.86E. some other number

11) At December 31, 2015 the book value per share was approximately

A. $ 7.30B. $ 6.30C. $ 7.52D. $ 10.00E. some other number

12) For 2015, the return on assets was approximately

A. 22.58%B. 33.87%C. 16.80%D. 16.41%E. some other number

13) For 2015, return on equity was approximately

A. 27.06%B. 31.53%C. 23.97%D. 16.41%E. some other number

14) At December 31, 2015, the Debt to Equity Ratio was approximately

A. 22.83% B. 37.92% C. 46.12%D. 31.56 % E. None of the above

15) At December 31, 2015, the stock price was $ 39 per share. The Price Earnings Ratio was approximately

A. 26 B. 40 C. 20 D. 10 E. None of the above

16) At December 31, 2015, the inventory turn was approximately

A. 4.44B. 5.00C. 5.71D. 10.00E. 11.25

17) How much in dividends did the company pay during the year?

A. $ -0-B. $ 15,000C. $ 20,000D. $ 30,000E. Unable to determine from information given

18) What was the Cash Flow from Operating Activities for the year?

A. $ 215,000B. $ 25,000C. $ 80,000D. $ 55,000E. Some other number

19) What was the Cash Flow from (used by) Investing Activities for the year?

A. $ 2,000B. ($75,000)C. ($80,000)D. ($68,000)E. Some other number

20) What was the Cash Flow from Financing Activities for the year?

A. ($ 10,000)B. ($ 35,000)C. ($ 15,000)D. $ 15,000E. Some other number

21) At December 31, 2015, the acid test (quick) ratio was approximately

A. 3.56B. 2.06C. 2.10D. 1.86E. some other number

22) The Supplemental Cash Flow section will include a statement:

A. describing the exchange of common stock for cash.B. describing the exchange of common stock for equipment.C. describing the exchange of cash for a note payable.D. both A and CE. none of the above.

23) In the Supplemental Cash Flow section, how much will “Cash paid for taxes” be?

A. $ 45,000B. $ 43,000C. $ 55,000D. $ 57,000E. Some other number

24) In the Supplemental Cash Flow section, how much will “Cash paid for interest” be?

A. $ 16,000B. $ 21,000C. $ 18,000D. $ 14,000E. Some other number

25) At December 31, 2015, Johnson Co. stock price was $ 30 per share. If the EPS was $5. The Current (Earnings) Yield was approximately

A. 10.90% B. 15.48% C. 6.00% D. 16.67% E. None of the above

Use the following information for the next three questions

Page Co. is introducing a new product expected to sell for $20 and to have variable costs of $12. Page expects to sell 30,000 units per year. Making the product requires machinery that costs $600,000 that will last for 10 years (no salvage value). Making the product will increase fixed cash operating costs by $50,000 per year. The tax rate is 30% and the required rate of return is 16%.

26) The net present value of the proposed project is

A. $ 28,319.57B. $ 129,817.35

C. ($ 160,176.30)D. $ 910,000.00E. none of these

27) The payback on the project is approximately

A. 4 yearsB. 3 yearsC. 5 yearsD. 2 yearsE. 6 years

28) If you assume the after tax cash flow is $120,000 per year, the approximate IRR of the project is:

A. 15.10%B. 8.10 %C. 10.10%D. you need more information to solve thisE. some other answer that is not here

29) Baker Company bought a new pickup for $50,000 to use in their business. They estimate the truck will be useful for 5 years and then will be worth $5,000. If Baker uses the straight-line method of depreciation, how much would depreciation expense be for the fourth year?

A. $ 6,000B. $ 7,000

C. $ 18,000 D. $ 9,000 E. $ 10,000

30) Melton Co. issues 5,000 shares of $1 par value stock for $100,000. The credit to “common stock” would be

A. $ 98,000 B. $ 105,000C. $ 95,000D. $ 5,000E. None of these

31) “Current Portion of Long-Term Debt” is

A. the total payment on a loan due in the next 12 monthsB. an example of a significant non-cash investing and financing transactionC. the principal payment which is due on a loan in the next 12 months D. subtracted from current assets to get the book value of the long-term debtE. None of these

Use the following data to answer the next three questions:

On January 1, 2015, Kylie’s Plumbing, Inc. declared a $2.00 per share dividend payable on February 1, to holders of record on January 15. Before the dividend was declared, the company had 100,000 shares of $10 par value stock outstanding.

32) On the date of declaration, the journal entry to record the dividend would include

A. a credit to Retained Earnings of $ 200,000.B. a credit to Cash of $ 200,000.C. a credit to Dividends Payable of $ 200,000.D. There would be no journal entry on this date.E. None of the above

33) On the date of record, the journal entry would include a

A. credit to Dividends Payable of $200,000.B. credit to Common Stock of $200,000.C. debit to Dividends Payable of $200,000.D. There would be no journal entry on this date.E. None of these is correct.

34) On the date of payment, the journal entry would include a

A. credit to Dividends Payable of $200,000.B. credit to Common Stock of $200,000.C. debit to Dividends Payable of $200,000.D. There would be no journal entry on this date.E. None of these is correct.

35) Probel Corp has a beginning balance on January 1, 2015 in Accounts Receivable of $200,000 and a beginning credit balance in the Allowance for Doubtful Accounts of $4,000. During 2015, Probel sold $1,000,000 of goods on credit and collected $800,000. If Probel estimates that 2% of their ending accounts receivable will eventually not be collected, the adjusting journal entry for the Bad Debt Expense will include a credit to Allowance for Doubtful Accounts of

A. $ 16,000B. $ 4,000C. $ 8,000D. $ 6,980E. $ none of these

36) Susie Corporation is buying all the assets and assuming all the liabilities of John’s Barbeque Company. The following information is available for John’s at the date of the purchase:

Accounts Receivable 250,000 Accounts payable 150,000Inventory 100,000 Note Payable 100,000Land 300,000 Common Stock 200,000

Retained Earnings 400,000

The accounts receivable are worth $200,000, the inventory is worth $75,000 and the land is worth $500,000. The Accounts Payable are worth book value. Additionally, the Note Payable debt is payable interest only at 10% per year for the next 5 years and then the principal is due. The current interest rate for similar debt is 12%. Susie will pay $650,000 for John’s. How much of the purchase price will Susie debit to goodwill?

A. $ 125,000.00B. $ 129,804.45C. $ 117,790.45D. $ 120,196.45E. Some other number which is not here

37) A method of calculating interest which puts more interest to the beginning payments is:

A. a ponzie schemeB. an aging scheduleC. Simple interest

D. The rule of 78s E. Some other thing

38) Spacely Company sells sprockets for $25. The following is the projected income statement for 2015. Variable costs are the cost of the sprockets, $10 each, plus a 10% sales commission paid to the worker.

Sales $200,000 Cost of Goods Sold 80,000 Gross Margin 120,000 Operating Expenses Salaries and Commissions 50,000

Rent 24,000 Other Fixed Expenses 8,750

Total Operating Expenses 82,750 Net Income $ 37,250 For Spacely, the number of sprockets he needs to sell to break even are

A. 5,517B. 4,220C. 6,620D. 5,020E. none of these

 39)Still Spacely, the sales (in dollars) of sprockets necessary to make $150,000 per year is

approximately:

A. $405,500B. $350,000C. $425,500D. $500,000E. none of these

40) A 7-year, $1,000,000 zero coupon bond is priced to yield 9%. The amount theissuing company will receive when it is issued is:

A. $ 543,933.74B. $ 1,000,000.00C. $ 621,921.32D. $ 547,034.24E. None of the above

41) If the above zero bond was sold on January 1, 2015, the interest expense for

2016 (the second year) would be

A. $ 49,233.08B. $ 53,664.06C. $ 53,359.90D. $ 60,173.77E. Some other number

Use the following information for the next 6 questions. Jetson’s Dynamics makes scooters. The company has three models of scooters, the Astro, the Elroy and the Rosie. The controller has prepared the following estimates for next year. (All projections are on a per scooter basis).

Astro Elroy Rosie

Selling Price $120 $150 $300Variable costs 60 90 120

Estimated sales are: Astro, $48,000,000, Elroy $60,000,000, and Rosie, $12,000,000.

Estimated fixed costs are $ 17,600,000.

42)The estimated weighted average contribution margin is

A. 46.0%B. $36.00 C. $26.00 D. 54.0%

E. none of these

43)The sales needed to make $5,000,000 are:

A. $ 18,518,518.52B. $ 30,000,000.00 C. $ 49,130,434.78 D. $ 32,608,695.65

E. None of the above

44)The number of units of Astro sold at break-even are approximately:

A. 127,536B. 163,768C. 60,620D. 66,667E. none of these

45) What will happen to total profit if Jetson drops Rosie?

A. Profits will decrease by $4,800,000B. Profits will decrease by $7,200,000 C. The Fixed costs will decrease by $1,000,000 D. The Fixed Costs will increase by $1,000,000

E. none of these

46) Jetson believes they can increase the sales of Elroy by 5,000 units by spending $20,000 on additional advertising. If they do this and the sales do increase as planned, what will be the effect on profits?

A. Profits will increase by $300,000B. Profits will increase by $340,000

C. Profits will increase by $320,000D. Profits will increase by $280,000

E. none of these

47) Go back to the last question. What will be the effect on profits if Jetson spends the $20,000 on advertising and the sales of Elroy increases 5,000 units, but the sales of Rosie decreases by 1,000 units?

A. Profits will increase by $100,000B. Profits will decrease by $100,000

C. Profits will increase by $140,000 D. Profits will decrease by $140,000

E. none of these

48) Treasury Stock is a(an)

A. expense accountB. liability accountC. owners’ equity accountD. revenue accountE. asset account

49) Morgan Company had wages payable at the beginning of the year of $10,000. During the year, her company paid cash for wages of $80,000 and at the end of the year she owed wages of $12,000. Her income statement for the year will show wage expense of

A. $ 80,000B. $ 82,000C. $ 78,000D. $ 88,000E. $ 86,000

50) Which of the following changes describes the declaration of $1,000 in cash dividends payable next month?

A. Assets and owners' equity increase by $1,000B. Assets and owners' equity decrease by $1,000C. Liabilities increase and owners’ equity increases by $1,000D. Liabilities increase and owners’ equity decreases by $ 1,000

E. No changes in total assets, liabilities, or owners' equity

51) Acme’s variable costs are 60% of revenue. If fixed costs are $150,000, what is the breakeven point in dollars?

A. $ 60,000B. $ 90,000C. $ 250,000D. $ 375,000E. none of these

52) The thing the brain wants most is:

A. sexB. to learnC. to survive D. to be in controlE. None of these

53)Annabella Co. issued a 10-year, $100,000 face, 8% coupon rate bond to yield 10%. The journal entry to record the issuance of the bond would include:

A. A credit to interest payable of $8,771.09 B. A debit to cash of $100,000.00 C. A credit to premium on bonds payable of $ 12,289.13 D. A credit to bonds payable of $ 87,710.87 E. A debit to bond discount of $12,289.13

54) For Annabella Co.’s bonds, if they were issued the first day of 2014 (8% face priced to yield 10%) and the first year’s interest was paid on December 31, 2014, the entry to record that interest would include:

A. A credit to cash of $ 8,771.09 B. A debit to interest expense of $10,000.00 C. A credit to bond discount of $ 8,771.09 D. A credit to cash for $ 8,000.00 E. A debit to interest payable of $4,385.54

55) The common set of accounting rules used in the US is known as:

A. The World Wide Financial Standards B. GAAPC. IFRS

D. The Commonality InitiativeE. International Generally Accepted Accounting Principles

56) According to the article “What It Takes to be Great”, the best people in any field

A. devote the most hours to “deliberate practice”B. need about 28 years of hard work to become world-classC. start with some natural talentD. none of these are true E. A and B are true

57) Mrs. Freeland has had enough! She is going into the business of renting bicycles. Sheis thinking about purchasing 10 bikes for $200 each. She expects the bikes to last four years and then be worth $5 each. She will rent them out for $2 per day. She expects the bikes to be rented 60% of the time. Ignoring taxes (she says she won’t pay them!!) and assuming she wants to make 20% on her money, which of the following statements is true?

A. If she does this, the present value of the project shows she will earn more than 20%B. If she does this, she will be earning less than 20%C. She will be earning exactly 20% on her investmentD. Her payback is indeterminableE. The net present value of the project is $500

58)If an investment has a positive NPV, A. its IRR is greater than its required return

B. its required rate of return is greater than its IRR C. its IRR is positive

D. its required rate of return is positiveE. None of the above

59) If Megan deposits $1,000 in a bank account that pays 4% compounded quarterly, how much will she have in 6 years?

A. $ 787.57B. $ 390.12C. $ 942.05D. $ 1,269.73E. None of the above

60) Calculating the payback for an investment project requires knowing

A. The life of the project B. The required rate of return C. The annual cash flows of the project D. A and B E. None of these is correct