GAAP Principles and Financial Statements from ACCT2010 Past Exam

(ACCT2010)[2018](f)final~=plva3l^_72581.pdf downloaded by cykim from http://petergao.net/ustpastpaper/down.php?course=ACCT2010&id=15 at 2019-10-07 01:03:30. Academic use within HKUST only.
Part 1: Multiple Choice Questions (30 points, 2 points each)
1. The acronym GAAP stands for

A) Government audited accounting pronouncements
B) Generally accepted accounting principles
C) Government authorized accountant principles
D) Generally acceptable authorized pronouncements
E) None of the above is correct
2. The basic financial statements prepared for external users include all of the following
except
A) the balance sheet.
B) the income statement.
C) the sales statement.
D) the statement of cash flows.
E) the statement of stockholder’s equity.
3. Which of the following statements best describes the relationship between net income
for the period and the ending balance in retained earnings?
A) Net income for the period increases the ending balance of retained earnings.
B) Retained earnings at the end of the period increase the amount of net income.
C) Net income for the period reduces the ending balance of retained earnings.
D) Net income for the period has no effect on the ending balance of retained
earnings.
E) None of the above is the correct order
4. Two basic accounting principles determine when revenues and expenses are to be
recorded under accrual basis accounting. They are
A) Revenue recognition and matching principles
B) Revenue recognition and measurement principles
C) Historical cost and matching principles
D) Matching principle and full disclosure principle
E) None of the above
5. Assuming the allowance method for bad debts is used, when a customer’s uncollectible
account is written off, a debit should be made to
A) Bad debt expense
B) Sales revenue
C) Allowance for doubtful accounts
D) Accounts receivable
1
6. When prices are rising

A) LIFO will result in lower net income and a higher inventory valuation than
will FIFO.
B) FIFO will result in higher net income and a higher inventory valuation than
will LIFO.
C) LIFO will result in higher net income and lower inventory valuation than will
FIFO.
D) FIFO will result in lower net income and a lower inventory valuation than
will LIFO.
E) None of the above is correct.
7. Lauer Corporation uses the periodic inventory system and the following information
about their laptop computer is available. What was ending inventory and cost of goods
sold on 12/31 under the LIFO cost flow assumption?
Date Transaction # of units Cost per unit
1/1 Beginning balance 100 $ 800
5/5 Purchase 200 $ 900
8/10 Purchase 300 $ 1,000
10/15 Purchase 200 $ 1,050
12/10 Sale 750
COGS Ending Inventory

A) 700,000 70,000
B) 714,000 56,000
C) 725,000 45,000
D) 730,000 40,000
8. On January 1, 2009, Chambers Shipping Company acquires shipping equipment at a

cost of $ 80,000 with an estimated useful life of 8 years and an estimated salvage value
of $ 10,000. The company uses the double-declining balance method of depreciation.
What will be the net book value of the asset on December 31, 2009?
A) $52,500
B) $60,000
C) $62,600
D) $70,000
9. Which of the following is a disadvantage of issuing bonds to the corporation?

A) The required interest payment due at maturity
B) The liquid nature of the bonds makes them attractive to investors who may
not want to hold them to maturity
C) The large principal payment due at maturity
D) The required dividend payments to bondholders each period.
2
10. Miranda Company borrowed $100,000 cash on September 1, 2009, and signed a one-
year 6% (annual interest rate), interest-bearing note payable. The required adjusting
entry at the end of the accounting period, December 31, 2009, would be
A) Interest expense 2,000
Interest payable 2,000
B) Interest expense 6,000

Interest payable 6,000
C) Notes payable 100,000

Interest expense 6,000
Cash 106,000
D) Interest payable 2,000

Interest expense 2,000
11. A stock dividend

A) is accounted for in exactly the same manner as a stock split.
B) increases the number of shares outstanding and involves a pro rata reduction
in the par value per share
C) increases the total stockholders’ equity
D) results in a transfer of retained earnings to contributed capital.
E) results in a transfer of retained earnings to contributed capital and also
increases the number of shares outstanding and involves a pro rata reduction
in the par value per share.
12. Slickers, Inc. had the following shares outstanding during 2008:
(a) Preferred stock, 7%, $50 par value, cumulative, 1,000 shares with dividends in
arrears for 2006 and 2007.
(b) Common stock, $100 par value, 2,000 shares.
(c) The company did not pay any dividend for past two years (2006 and 2007)
Total dividends declared in 2008 were $50,000. The total amount of dividends to
which the preferred stockholders are entitled is
A) $ 3,500
B) $ 7,000
C) $10,500
D) $12,000
E) $39,500
3
13. Which of the following would not be a cash flow from financing activities?
A) Repayment of principal on a long-term note payable.
B) Borrowing on a long-term note payable.
C) Issuance of common stock
D) Collection of a cash dividend.
E) None of the above is a cash flow from financing activities.
14. Which of the following is true?

A) Cash paid to repurchase treasury stock is an investing cash outflow.
B) Cash paid for dividend is an operating cash outflow.
C) Cash paid to acquire a patent is an investing cash outflow.
D) Cash paid to acquire stock in another company is a financing outflow.
15. During 2009, Burich Co. reported short-term borrowings of $2,500,000, long-term
borrowings of $6,800,000, repayments of long-term borrowings of $3,500,000,
interest payments of $780,000, repurchase of treasury shares of $500,000 and
declared a cash dividend of $1,100,000. The dividend will be paid in 2010. Net cash
flow from financing activities for 2009 equals?
A) $5,300,000 net cash inflow
B) $4,200,000 net cash inflow
C) $4,520,000 net cash inflow
D) $3,420,000 net cash inflow
4
Part II: Accounting for Bonds Payable (20 points total)

On January 1, 2009, Hurley Inc. issued a 5-year bond with face value of $1,000,000. The
bond carries an 8% annual interest rate and pays interests annually. The market interest
rate at the time the bonds were issued was 6%. (Round to the nearest dollar)
Present Value of $1 Table Present Value of $1 Annuity

n 5% 6% 7% 8% n 5% 6% 7% 8%
1 0.9524 0.9434 0.9346 0.9259 1 0.9524 0.9434 0.9346 0.9259
2 009070 0.8900 0.8734 0.8573 2 1.8594 1.8334 1.8080 1.7833
3 0.8638 0.8396 0.8163 0.7938 3 2.7232 2.6730 2.6243 2.5771
4 0.8227 0.7921 0.7629 0.7350 4 3.5460 3.6451 3.3872 3.3121
5 0.7835 0.7473 0.7130 0.6806 5 4.3295 4.2124 4.1002 3.9927
Required:
1) What is the amount of interest payment that the company will pay to the bondholders
each year? (2 pts)
2) Calculate the proceeds from the bond issue (i.e., selling price of the bond). (5 pts)
3) Prepare the journal entry for the issuance of the bond on January 1, 2009. (4 pts)
4) What is the amount of interest expense that the company should record on its book for
the first year (i.e., year of 2009) and the book value of the bond at December 31,
2009? Prepare the journal entry for the company’s first interest payment made on
December 31, 2009 under the effective-interest rate method. (9 pts)
(a) Interest Expense for 2009 = _____________________________
(b) Book Value of the bond at the end of 2009 = _____________________________
(c) Journal Entry for the first interest payment
5
Part III: Accounting for Stockholders’ Equity (30 points total)

On January 1, 2009, the stockholders’ equity section of the balance sheet of Arden Hills
Shoe Company is as follows:
Preferred Stock (Par value $10 per share, 100,000 shares authorized, $ 100,000
10,000 issued and outstanding)
Additional Paid in Capital ---- Preferred stock 45,000
Common Stock (Par value $1 per share, 1,500,000 shares authorized, 50,000
50,000 shares issued, 50,000 shares outstanding)
Additional Paid in Capital ---- Common stock 950,000
Retained Earnings 1,200,000
Total shareholders’ equity $2,345,000
The following events occurred during the year 2009.
a) On January 23, 2009, Arden Hills Shoe Company issued 10,000 shares of common
stock with a issuing price of $22 per share, $1 par value.
b) On April 18, 2009, Arden Hills repurchased 8,000 shares of common stock with cash
from the open market. The total cost is $ 168,000.
c) The stock price of common stock rose to $27 per share on August 6, 2009. Arden
Hills Shoe Company sold 5000 shares of the treasury stock.
d) On November 1, 2009, the board of directors declared cash dividends of $ 70,000.
Dividends were to be paid on January 2, 2010 for shares on record as of December 1,
2009. The dividend rate for preferred stock is 10% of its par value; preferred stock is
non-cumulative. The rest would be paid to common shareholders. (only need the
journal entry for the declaration of cash dividend on November 1, 2009).
e) On December 10, 2009, Arden Hills sold the remaining treasury stock (i.e., 3000
shares) at $19 cash per share.
f) On December 20, 2009, Arden Hills Shoe Company declared a 40% stock dividend to
common stockholders. This stock dividend is classified as large stock dividend. The
market value of common stock was $20 at the declaration of the stock dividend and
the par value was $1.
Required:
1) Prepare journal entries for above 6 transactions. Write “No entry” if no entry is
necessary. Be sure to delineate between preferred dividends and common dividends.
(24pts)
6
Date Accounts Debits Credits

01/23/2009
04/18/2009
8/06/2009
11/01/2009
12/10/2009
12/20/2009
2) For the cash dividends announced on November 1, 2009, how much is dividend per
share to common shareholders? (3pts)
3) If the net income for 2009 is $ 200,000, what is the ending balance of retained
earnings at December 31, 2009? (3pts)
7
Part IV: Balance Sheet and Income Statement (30 points)

Mounds View, Inc., had the following alphabetical list of accounts taken from its
adjusted trial balance at December 31, 2009:
Accounts Payable $18,000
Accounts Receivable, gross 24,600
Allowance for doubtful accounts 3,000
Accounts Receivable, net 21,600
Accumulated Depreciation-Building 31,440
Additional-Paid-in-Capital
36,000
(i.e., Capital in excess of par)
Advertising Expense 15,360
Building 120,000
Common Stock 39,000
Cash 18,000
Cost of Goods Sold 67,800
Depreciation Expense 2,400
Insurance Expense 4,560
Interest Payable 2,280
Inventory of Merchandise 30,000
Land 36,000
Prepaid Insurance 5,520
Rent Revenue 3,000
Retained Earnings (January 1, 2009) 69,600
Salaries Expense 57,600
Salaries Payable 5,520
Sales 186,000
Sales Returns and Allowances 6,000
Supplies 1,440
Supplies Expense 2,400
Treasury Stock 3,000
Unearned Rent Revenue 840
8
Required:
1) What is the amount of current liabilities? (5pts)
2) What is the amount of current assets? What is the amount of non-current assets? (9pts)
3) What is the amount of net income? What is the amount of gross profit? (Ignore income
taxes) (11pts)
4) What is the amount of total shareholders’ equity? (Hint: first, you need to calculate the
ending balance of retained earnings) (5pts)
9
Part V: Statement of Cash Flows (40 points)

New Brighton Inc.’s comparative balance sheets are presented below:
Dec. 31, 2009 Jan. 1, 2009 Change
Cash $ 1,608 $ 1,074 534 Incr
Accounts Receivable 2,838 3,156 318 Decr
Merchandise Inventory 3,624 3,012 612 Incr
Land 3,890 1,782 2,108 Incr
Buildings and Equipment 28,638 26,034 2,604 Incr
Less: Accumulated Depreciation 13,092 11,922 1,170 Incr
Total Assets $27,506 $23,136
Accounts Payable $ 1,674 $ 1,236 438 Incr

Salaries Payable 870 822 48 Incr
Other Short-term Payables 228 320 92 Decr
Long Term Debt – US Bank 8,058 7,714 344 Incr
Long Term Notes Payable 1,012 0 1,012 Incr
Contributed Capital 6,112 5,016 1,096 Incr
Retained Earnings 9,552 8,028 1,524 Incr
Total Liabilities and Owners’ Equity $27,506 $23,136
Additional information includes the following:
a) Dividends declared and paid during the year were $500.
b) New Brighton Inc. sold equipment for $120. The machine originally
cost $600 with accumulated depreciation of $510.
c) The company acquired land worth of $2,108 in 2009 by issuing stock
in the amount of $1,096 and issuing a long-term note payable for
$1,012.
d) Other short-term payables are related to operating activities.
Required:
1. Compute the Net Income of New Brighton Inc. in 2009 (Hint: Consider change in
retained earnings). (3 pts)
2. How much gain or loss did the company record for the sale of equipment? Prepare
the journal entry for the sale of the equipment. (6 pts)
3. How much depreciation expense did the company recognize in 2009? (Hint: use
T-accounts for Building & Equipment and Accumulated Depreciation) (4 pts)
10
4. Did the company purchase new buildings or equipment in 2009? If so, what was
the amount of new purchase? (Hint: use T-accounts for Building & Equipment
and Accumulated Depreciation) (4 pts)
5. Prepare the complete Statement of Cash flow using the indirect method (You
should complete the three sections of the statement). Include noncash investing
and/or financing activities in the footnotes. (23 pts)
11

GAAP Principles and Financial Statements from ACCT2010 Past Exam

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

GAAP Principles and Financial Statements from ACCT2010 Past Exam

Încărcat de

Drepturi de autor:

Formate disponibile

(ACCT2010)[2018](f)final~=plva3l^_72581.pdf downloaded by cykim from http://petergao.net/ustpastpaper/down.php?course=ACCT2010&id=15 at 2019-10-07 01:03:30. Academic use within HKUST only.

Part 1: Multiple Choice Questions (30 points, 2 points each)

1. The acronym GAAP stands for

6. When prices are rising

COGS Ending Inventory

8. On January 1, 2009, Chambers Shipping Company acquires shipping equipment at a

9. Which of the following is a disadvantage of issuing bonds to the corporation?

B) Interest expense 6,000

C) Notes payable 100,000

D) Interest payable 2,000

11. A stock dividend

14. Which of the following is true?

Part II: Accounting for Bonds Payable (20 points total)

Present Value of $1 Table Present Value of $1 Annuity

(a) Interest Expense for 2009 = _____________________________

(b) Book Value of the bond at the end of 2009 = _____________________________

(c) Journal Entry for the first interest payment

Part III: Accounting for Stockholders’ Equity (30 points total)

Date Accounts Debits Credits

Part IV: Balance Sheet and Income Statement (30 points)

1) What is the amount of current liabilities? (5pts)

Part V: Statement of Cash Flows (40 points)

Accounts Payable $ 1,674 $ 1,236 438 Incr

S-ar putea să vă placă și