devry ACCT504 Final Exam 100% Answers

(TCO A) A corporation has which of the following advantages? (Points : 5)

Reduced taxes

Simple to set up

Limited liability for stockholders

Owner maintains control

Question 2.2. (TCO A) Dividends flow through which one of the following statements? (Points : 5)

The Balance Sheet

The Statement of Retained Earnings

The Income Statement

None of the above

Question 3.3. (TCOs A and B) Below is a partial list of account balances for LBJ Company.

Cash

$12,000

Prepaid rent

1,300

Accounts receivable

7,000

Accounts payable

5,000

Notes payable

9,000

Common stock

22,000

Dividends

2,000

Revenues

45,000

Expenses

35,000

What did LBJ Company show as total debits? (Points : 5)

$57,300

$81,000

$55,300

$56,000

Question 4.4. (TCO B and E) Under cash-basis accounting, which of the following transactions would not be recorded? (Points : 5)

Cash sales to customers

Payments to vendors

Sales on account

Payroll payments to employees

Question 5.5. (TCO D) If ending inventory of the current year is understated (Points : 5)

Cost of goods sold for the current year will be understated

Gross profit for the current year will be unaffected

Gross profit for the current year will be understated

Net income for the current year will be overstated

Question 6.6. (TCO A and E) Equipment was purchased for $27,000. Freight charges amounted to $1,000 and there was a cost of $5,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $5,000 salvage value at the end of its 7-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)

$4,714

$4,000

$3,857

$3,285

Question 7.7. (TCOs D and G) When the market rate of interest exceeds the stated rate of interest on the bond, the bond will require _____. (Points : 5)

a debit to Discount on Bonds Payable

a credit to Premium on Bonds Payable

a debit to Loss on Bonds Payable

a credit to Gain on Bonds Payable

Question 8.8. (TCO C) Which inventory accounting system does not require a physical count of the inventory at the year end? (Points : 5)

Periodic inventory system

Perpetual inventory system

Specific Identification

None of the above

Question 9.9. (TCO F) Horizontal analysis is also known as _____. (Points : 5)

ratio analysis

vertical analysis

common-size analysis

trend analysis

Question 10.10. (TCO F) When performing a common-size balance sheet, the 100% figure is _____. (Points : 5)

net sales

total liabilities

total assets

total equity

Question 11.11. (TCO F) Ratios are most useful in expressing _____. (Points : 5)

cause-and-effect relationships

the relationships between numbers

the delta between numbers

the root cause of the problem

Question 12.12. (TCO F) Creditors are usually most concerned with analyzing _____. (Points : 5)

the company stock price

turnover

liquidity

profitability

Question 13.13. (TCO F) Shareholders are usually most interested in evaluating _____. (Points : 5)

profitability

leverage

turnover

the ability to pay debts as they come due

Question 14.14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

multiply the stated rate times the bond’s face value

calculate the present value of the principal only

calculate the present value of both the principal and the interest

calculate the present value of the interest only

1. TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report.

Income Taxes Payable $471

Short-term Investments and Marketable Securities 8,109

Cash 8,442

Other non-current Liabilities 10,449

Common Stock 1,760

Receivables 4,812

Other Current Assets 2,973

Long-term Investments 10,448

Other Non-current Assets 3,585

Property, Plant and Equipment 23,486

Trademarks 6,527

Other Intangible Assets 20,810

Allowance for Doubtful Accounts 53

Accumulated Depreciation 9,010

Accounts Payable 8,680

Short Term Notes Payable 17,874

Prepaid Expenses 2,781

Other Current Liabilities 796

Long-Term Liabilities 14,736

Paid-in-Capital in Excess of Par Value 11,379

Retained Earnings 55,038

Inventories 3,264

Treasury Stock 35,009

Other information taken from the Annual Report.

Sales Revenue for 2012 $48,017

Cost of Goods Sold for 2012 19,053

Net Income for 2012 9,019

Inventory Balance on 12/31/11 3,092

Net Accounts Receivable Balance on 12/31/11 4,920

Total Assets on 12/31/11 79,974

Equity Balance on 12/31/11 31,921

Required: 1: Using the information provided above, prepare a multiple-step income statement.

2: Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings and results.

(Points : 36)

45. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the two questions below.

Cash flow from operating activities In millions In millions

For the year ended 2012 For the year ended 2011

Net (loss) earnings $(12,650) $7,074

Depreciation and amortization 5,095 4,984

Impairment of goodwill and purchased intangible assets 18,035 885

Stock-based compensation expense 635 685

Provision for doubtful accounts 142 81

Provision for inventory 277 217

Restructuring charges 2,266 645

Deferred taxes on earnings (711) 166

Excess tax benefit from stock-based competition (12) (163)

Other, net 265 (46)

Accounts and financing receivables 1,269 (227)

Inventory 890 (1,252)

Accounts payable (1,414) 275

Taxes on earnings (320) 610

Restructuring (840) (1,002)

Other assets and liabilities (2,356) (293)

Net cash provided by operating activities 10,571 12,639

Cash flows from investing activities:

Investment in property, plant, and equipment (3,706) (4,539)

Proceeds from sale of property, plant, and equipment 617 999

Purchases of available-for-sale securities and other investments (972) (96)

Maturities and sales of available-for-sale securities and other investment 662 68

Payments in connection with business acquisitions, net of cash acquired (141) (10,480)

Proceeds from business divestiture, net 87 89

Net cash used in investing activities (3,453) (13,959)

Cash flow from financing activities:

(Payments) issuance of commercial paper and notes payable, net (2,775) (1,270)

Issuance of debt 5,154 11,942

Payment of debt (4,333) (2,336)

Issuance of common stock under employee stock plans 716 896

Repurchase of common stock (1,619) (10,117)

Excess tax benefit from stock-based compensation 12 163

Cash dividends paid (1,015) (844)

Net cash used in financing activities (3,860) (1,566)

Increase (decrease) in cash and cash equivalents 3,258 (2,886)

Cash and cash equivalents at beginning of period 8,043 10,929

Cash and cash equivalents at end of period $11,301 $8,043

Required: 1: Please calculate the percentage increase or decrease in cash for the total line of the operating, investing, and financing sections bolded above and explain the major reasons for the increase or decrease for each of these sections. 2: Please calculate the free cash flow for 2012 and explain the meaning of this ratio. (Points : 36)

5. TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.

Ratio Name Johnson & Johnson Pfizer

Profit margin 16.1% 24.7%

Inventory turnover ratio 3.1 1.7

Average collection period 59.4 days 69.1 days

Cash debt coverage ratio .27 .16

Debt to Total assets 46.6% 127.5%

Required: 1: Please explain the meaning of each of the Pfizer ratios above. 2: Please state which company performed better for each ratio. (Points : 36)