Devry ACT304 midterm exam 2016

1. (TCO 1) Which of the following has the authority to set accounting standards in the United States? (Points : 5)

FASB

IRS

SEC

AICPA

Question 2. 2. (TCO 2) The conceptual framework's qualitative characteristic of faithful representation includes (Points : 5)

predictive value.

neutrality.

confirmatory value.

timeliness.

Question 3. 3. (TCO 3) High Seas Ships sold a 40-foot yacht for $750,000, receiving a $50,000 down payment and an 8% note for the balance. The journal entry to record this sale would include a (Points : 5)

credit to cash.

debit to cash discount.

debit to note receivable.

credit to note receivable.

Question 4. 4. (TCO 3) The adjusting entry required when amounts previously recorded as unearned revenues are earned includes (Points : 5)

a debit to a liability.

a debit to an asset.

a credit to a liability.

a credit to an asset.

Question 5. 5. (TCO 3) Temporary accounts would not include (Points : 5)

salaries payable.

depreciation expense.

supplies expense.

cost of goods sold.

Question 6. 6. (TCO 4) Noncurrent assets include: (Points : 5)

inventory held for sale.

prepaid rent.

accounts receivable.

land held for a possible future plant site.

Question 7. 7. (TCO 4) The current ratio is given by (Points : 5)

current assets divided by non-current assets.

current assets divided by total assets.

current assets divided by current liabilities.

current assets divided by total liabilities.

Question 8. 8. (TCO 5) Popson Inc. incurred a material loss which was not unusual in character but was clearly an infrequent occurrence. This loss should be reported as (Points : 5)

an extraordinary loss.

a separate line item between income from continuing operations and income from discontinued operations.

a separate line item within income from continuing operations.

a separate line item in the retained earnings statement.

Question 9. 9. (TCO 5) On June 1, 2013, Romano Inc. changed the estimated useful life of its office equipment from 20 to 12 years. This change would be accounted for (Points : 5)

prospectively.

retrospectively.

as an accounting error.

None of the above

Question 10. 10. (TCO 5) Cash flows from investing activities do not include (Points : 5)

proceeds from issuing bonds.

payment for the purchase of equipment.

proceeds from the sale of marketable securities.

cash outflows from acquiring land.

Question 11. 11. (TCO 5) The Maytag Corporation's income statement includes income from continuing operations, a loss from discontinued operations, and extraordinary items. Earnings-per-share information would be provided for (Points : 5)

net income only.

income from continuing operations and net income only.

income from continuing operations, loss from discontinued operations, and net income only.

income from continuing operations, loss from discontinued operations, extraordinary items, and net income.

Question 12. 12. (TCO 5) In a statement of cash flows prepared under International Financial Reporting Standards, each of the following items is typically classified as a financing cash flow except (Points : 5)

interest paid.

dividends paid.

proceeds from the issuance of long-term debt.

dividends received.

Question 13. 13. (TCO 4) Which is a shareholders' equity account in the balance sheet? (Points : 5)

Accumulated depreciation

Paid-in capital

Dividends payable

Marketable securities

Question 14. 14. (TCO 4) External decision makers would not look primarily to financial accounting information to assist them in making decisions on (Points : 5)

capital budgeting.

departmental budgeting.

selecting stocks.

mergers and acquisitions.

Page 2

Question 1. 1. (TCO 5) Misty Company reported the following before-tax items during the current year:

• Sales - $600

• Operating expenses - $250

• Restructuring charges - $20

• Extraordinary loss - $50

Misty's effective tax rate is 40%, and there were 1,000 shares of common stock outstanding.

What would be Misty's net income for the current year? (Points : 15)

Question 2. 2. (TCO 4) Listed below are account balances (in millions of dollars) taken from the records of Symphony Stores. All of these are permanent accounts, except the last two that have yet to be closed. The installment receivables are current. Symphony uses a perpetual inventory system.

Debit Credit

Accounts receivable-trade 680

Building and equipment 920

Cash-checking34

Installment receivables 50

Interest receivable 30

Inventory 16

Land 150

Note receivable (long-term) 450

Petty cash funds 5

Prepaid expenses (for coming year) 20

Supplies 8

Trademark 40

Accounts payable-trade 560

Accumulated depreciation 80

Additional paid-in capital, common 485

Allowance for uncollectable accounts 20

Cash dividends payable 30

Common stock, at par 15

Income tax payable 65

Notes payable (long-term) 800

Retained earnings 48

Unearned revenues 40

Cash dividends declared-common 120

Income summary 380

TOTALS 2523 2523

What would Symphony report as total current assets? Hint: Don t forget the contra assets. (Points : 15)

Page 3

Question 1. 1. (TCO 4) Briefly explain the purpose of the disclosure note on significant accounting policies. Provide two examples of what might be found in this note. (Points : 20)

Question 2. 2. (TCO 2) What are the key provisions of the Public Company Accounting Reform and Investor Protection (Sarbanes-Oxley) Act of 2002? (Points : 25)

Question 3. 3. (TCO 5) What is the purpose of the statement of cash flows? List the three major categories of cash flows, and give an example of a cash transaction for each category. (Points : 25)

Question 4. 4. (TCO 3) What is the difference between permanent accounts and temporary accounts, and why does an accounting system have both types of accounts? (Points : 25)