Devry ACCT504 final exam 2017

Question 3. 3.(TCO H) ABC Corporation purchased 5, $1,000, 6% bonds of Langley Corporation when the market rate of interest was 8%. Interest is paid semiannually on the bonds, and the bonds mature in 5 years.

Instructions:
Compute the total price paid by ABC Corporation for the bonds showing your calculation for the present value of the principal and the present value of the interest payments.

Present value tables (Exhibit 8-14 and Exhibit 8-15) are available on pages 452 and 453 of your Harrison, Horngren, and Thomas textbook. NOTE: Be sure you review the PV Tables completely to ensure you find the correct period and interest rate for the calculation. (Points : 20)

Question 4. 4.(TCO A) The following items are taken from the financial statements of PQR Company for 2013:

Instructions:

(1) Create a classified balance sheet in good form for the year ended 2013. (30 points)

(2) Calculate the current ratio and debt ratio and explain your findings. (6 points) (Points : 36)

Question 5. 5.(TCO B) The Alpha Company gathered the following condensed data for the year ended December 31, 2014:

Instructions:
(1) Prepare a multiple-step income statement for the year ended December 31, 2014. (30 points)

(2) Compute the gross margin percentage and net profit margin ratio. Alpha Company’s assets at the beginning of the year were $1,500,000, and the assets were $1,400,000 at the end of the year. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings. (6 points) (Points : 36)

Question 6. 6.(TCO C) This is a 2-part question.

Part 1) Please indicate which section of the statement of cash flows should contain each of the following items, and whether each item would result in an inflow or outflow of cash. The sections are Operating, Investing, and Financing. (30 points)

(a) Sold a building at book value
(b) Decrease in inventory
(c) Purchased land with cash
(d) Depreciation of property, plant, and equipment
(e) Issuance of common stock

Part 2) Please explain how to calculate free cash flow, and also explain why some investors have more faith in investing based on free cash flow rather than reported net income. (6 points) (Points : 36)

Question 7. 7.(TCO F) This is a 2-part question.

Part 1) Journalize the adjusting entries below at year-end December 31, XXXX. Please share your supporting calculations for the adjusting entries requiring computations.

(a) The unadjusted balance of the Supplies account is $2,200. The total cost of supplies remaining is $1,000.
(b) Accrued Service Revenue of $9,000.
(c) Equipment was purchased at the beginning of the year for $45,000. The equipment’s useful life is 5 years, and the residual value is $5,000. Record the depreciation for this year.
(d) The weekly payroll is $25,000. Employees are owed for 3 days of a 5-day work week.
(e) Beginning unearned service revenue is $7,500, and ending unearned service revenue is $3,500.
(f) The business has interest expense of $750 that is due in January.
(30 points)

Part 2) Calculate the overall overstatement or understatement of net income if the above adjusting entries were not made. Please share your work. (6 points) (Points : 36)

Question 8. 8.(TCO G) Please review the following 6 ratios for Johnson Company and Lee Enterprises for the year ended 2014, and address the 2 questions below.

Instructions: This is a 2-part question.

(1) Explain the meaning of each of the Johnson Company ratios above. (18 points)
(2) State which company performed better for each ratio. (18 points) (Points : 36)