The ex2 mean is 70 but that included the 12 pts for the omitted question.

The posted scores include 12 pts for that question, and the real mean is (70-12)/88 or 66, about the same as ex1. Curve: the low cutoffs for ABCD grades are 88 76 55 46. For example, a score of 80 is in the B range. To determine your estimated grade to this point in the course, add the low cutoffs for the 2 exams so far. That sum is 176 152 110 92 for ABCD. Then compare the sum of your 2 exams. Where that sum falls is your rough grade right now. For example, if the sum of your 2 exam scores is 160, then you are in the B range at this point. Note that I do give +/- grades at the end of the semester.

First name_________________ Last name _______________________ ACCY 113 / EXAM 2 / f11 100 pts
Instructions: y Place your name on your scantron and your exam booklet. y There are 15 multiple choice questions @ 4 pts each; and three open-ended questions totaling 40 pts. There is no penalty for guessing. y Do all your work in the exam booklet. y Place your answers to the multiple choice questions on your scantron, and your answers to the open-ended questions in the exam booklet (show your work for open-ended). y Mark your scantron lightly and erase completely. y Do not leave carbon in more than one scantron slot per question. y Assume a calendar fiscal year (Dec. 31) in all cases. y Please do not look at other exams.

MULTIPLE CHOICE Mark the best answer on your scantron. Mark lightly and erase completely. (15 questions each worth 4 pts) 1. The purchase of treasury stock is a. an investing cash outflow *b. a financing cash outflow c. an operating cash outflow d. both an operating cash outflow and a reconciling item e. both a financing cash flow and a reconciling item 2. A firm uses the percentage of completion method. How would collections on accounts receivable be classified in the direct method statement of cash flows? *a. operating cash flow b. investing cash flow c. financing cash flow

d. reconciling item e. not reported in the SCF 3. Choose the correct statement about the direct and indirect SCF formats. a. the reconciliation of net income and net operating cash flow is required only for the indirect method *b. the reconciliation of net income and net operating cash flow is required for both methods c. the operating activity section of the direct method is the reconciliation of net income and net operating cash flow d. the change in wages payable for the year is an operating cash flow only for the indirect method e. wage expense is an operating cash flow only for the direct method 4. Find the one item that is an investing cash flow. a. purchase of an investment in US Treasury obligations classified by the purchaser as a cash equivalent b. retirement of a note payable c. collection of interest on an investment in bonds *d. collection of a nontrade note receivable 5. The statement of cash flows and the income statement are closely related. Assume that a firm has positive net income for a year. You know nothing else about the firm. Choose the most correct statement about net cash flow from operations for the same year. a. it is positive b. it is greater than net income *c. it may be greater than net income d. it cannot be zero e. it is less than net income 6. Which of the following is not found in the statement of cash flows? a. payment to retire the principal amount of a loan b. collections on accounts receivable c. change in prepaid rent for the year *d. rent expense 7. Which of the following is not classified as an operating cash flow? a. Interest received b. Interest paid c. Dividends received *d. Dividends paid e. Payments to suppliers

8. A firms CGS for the year is $44,000. Inventories decreased $2,000 for the year and accounts payable increased $3,000 for the year. Provide the complete set of line items to be reported for the direct method SCF. a. O: (43,000); R: (2,000); R: 3,000 b. O: (49,000); R: 2,000; R: 3,000 c. R: 2,000; R: 3,000 *d. O: (39,000); R: 2,000; R: 3,000 pmts = 44 2 3 = 39 both Rs are if bad, add

9. A firm borrowed $10,000 from a financial institution on 3/1/x4 and signed a 6%, 6-month simple interest note calling for interest and principal to be paid all in one lump sum at maturity. The firm complied with the note terms. Choose the complete reporting for this information on 20x4s direct method statement of cash flows. a. F: loan proceeds 10,000; F: loan payments (10,000) b. O: interest payments (300) *c. O: interest payments (300); F: loan proceeds 10,000; F: loan payments (10,000) d. F: loan proceeds 10,000; F: loan payments (10,300) 10. Which item is not a reconciling item. a. gain on sale of investment b. change in installment accounts receivable *c. change in notes payable to banks classified as a current liability d. change in interest receivable 11. Which of the following investments could be classified as a cash equivalent for a firm other than the Coca-Cola Company? *a. investment in Coca-Cola Company commercial paper b. investment in Coca-Cola Company common stock c. accounts receivable from Coca-Cola Company d. investment in Coca-Cola Company bonds purchased when there were 10 years and 2 months remaining in the bond term 12. Choose the correct statement about deferred tax liabilities (DTL). *a. a DTL meets the GAAP definition of a liability b. a DTL is a legal liability c. the ending DTL balance is a present value d. the ending DTL balance for 20x3 is due early 20x4 13. The amount of income tax expense reported for a year a. is the amount of tax due for the year b. the tax liability for the year

c. taxable income for the year multiplied by the tax rate d. pretax accounting income for the year multiplied by the tax rate *e. the amount of tax ultimately payable on the years transactions 14. The following 5 items are relevant to a firms year-end tax position, and each represents a difference in reporting between books and tax. depreciation depletion dividends qualifying for exclusion unearned revenue prepaids Choose the correct number of differences in each category. Temporary; Nontemporary (permanent) a. 4; 1 *b. 3; 2 c. 2; 3 d. 4; 2 e. 2; 2 temp = depreciation, unearned revenue, prepaids nontemp = depletion, dividends 15. A firm has $45,000 of pretax income for the year and no beginning deferred tax balances. During the year the firm received a $10,000 advance from a customer for service to be provided by the firm beginning the next year. The tax rate is 30%. Income tax expense for the year is a. 16,500 *b. 13,500 c. 19,500 d. 3,000 e. 55,000 Income tax expense DTA 10,000(.30) Taxable income 13,500 3,000 16,500

10,000(.30) (45,000 + 10,000)(.30)

SIMULATION The last 3 questions require a written response. Place your answer in the space provided. Show your work. 16. (20 pts) From the following income statement, comparative balance sheets and additional information for the current year for GCo., prepare the direct method SCF including reconciliation.
Service revenue Wage expense Depreciation exp Net income 1,200 (500) (70) 630

Cash AR Equip Acc dep Tot. assets

Beg End 100 530 400 300 700 900 (100) (130) 1,100 1,600 60 80 400 1,060 1,600

Wages payable 40 Dividends payable 30 Common stock 300 Retained earnings 730 Total L + OE 1,100

Additional information: equipment costing $100 and which had been depreciated $40 was disposed of for $60.

GCo SCF For the year ended 12/31/xx Operating Activities Collections from customers 1,300 1,200 rev + 100 AR decrease Wage payments (480) 500 exp 20 wage pay increase NCF-op 820 Investing Activities Proceeds from sale of equip 60 Purchase equipment (300) 200 chg in equip + 100 cost of equip sold NCF-investing (240) Financing Activities Issue stock Dividends paid NCF-financing Change in cash for year Cash, beg Cash, end

100 100 chg in common stock acct * (250) (150) 430 100 530

* RE increased 330 but income was 630 so declared divs were 300 but div payable increased 50 so paid divs were 250 Reconciliation Net income

630

AR decrease Wage pay incr Deprec exp NCF-op

100 20 70 820

17. (8 pts) Provide the OIFR line items and amounts for a SCF for the following two items. (A. ) A firm requires advance payment from customers before it provides service. From the income statement: service revenue for Year 2 is $3,000. From BS: Unearned revenue Year 1 Year 2 $400 $700

O: Collections from customers 3,300 R: increase in unearned revenue 300 (B.) A warehouse was destroyed by a tornado in Year 2; the firm correctly recorded the casualty and insurance proceeds as follows: Cash 20,000 Acc dep 50,000 Building Extraordinary gain

60,000 10,000

I: insurance proceeds from casualty insurance 20,000 R: extraordinary gain on insurance proceeds (10,000)

18. (12 pts) A firm began operations in the current year and reported $200,000 of common revenues less expenses for the year (this amount is the same for both books and tax). In addition, the firm prepaid $12,000 of rent and recognized $6,000 of rent expense. It also paid $1,000 of insurance premiums for a life insurance policy on the CEO of the firmthe firm is the beneficiary. The tax rate is 30%. Provide the tax accrual journal entry for the current year.

income tax expense

58,200

DTL (12000 - 6000).30 income tax payable (200000 12000)(.30)

1,800 56,400