ACT 373 Midterm | Course Paper

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Select the term from the list below that matches each of the following six descriptions.

a. Interest

b. Maturity value

c. Principal

d. Payee

e. Discounting

f. Term

g. Recourse

h. Implicit

i. Maker

The difference between the principal amount of the note and its maturity value

Which of the following events (transactions) is an internal event for a business entity?

a. An accountant provides services for clients.

b. An accountant purchases computer equipment to maintain business records and

prepare legal documents.

c. Periodically, part of the cost of the computer equipment used by an accountant is

assigned to depreciation expenses.

d. An accountant receives cash payments from clients who were billed for services.

Use the following codes to indicate how the cash flow effect, if any, of each transaction

would be reported on a statement of cash flows if the operating activities section is

prepared using the direct method.

a. Inflow from operating activity

b. Outflow from operating activity

c. Inflow from investing activity

d. Outflow from investing activity

e. Inflow from financing activity

f. Outflow from financing activity

g. Noncash investing and financing activity

h. Not reported on statement of cash flows

Paid the cash dividends declared in (g) above.

Which of these is not an acceptable inventory costing method under IFRS?

a. FIFO

b. LIFO

c. Specific Identification

d. Average cost

Which of the following statements is false regarding the reasons for differing

accounting systems around the world?

a. Countries that have strong political and economic ties often share similar accounting

practices.

b. Canada and Mexico, two former British colonies, can trace their accounting roots to

those found in the United Kingdom.

c. The state of economic development typically mirrors the development stage of

accounting rules in countries.

d. In some less-developed countries of the world, where the forces of capitalism are less

prevalent, accounting standards have developed at a much slower pace than they have

in more advanced economies.

Comprehensive income is the increase in net assets resulting from all transactions

occurring during an accounting period except stockholders’ investments and dividends.

a. True

b. False

All of the following statements are true except :

a. International accounting standards are more flexible in allowing the use of fair

market values for intangible assets.

b. FASB standards require all research and development costs to be expensed.

c. IFRS requires all research and development costs to be expensed.

d. Under IFRS, fair market values for intangibles require an active market.

Which one of the following accounts most likely would appear on the income statement

of a merchandise company, but not on the income statement of a service company?

a. Cost of Goods Sold

b. Selling Expenses

c. Administrative Expenses

d. Income Tax Expense

The number of days’ sales in inventory is the same as a company’s accounting cycle.

a. True

b. False

When the market rate of interest is less than the face rate, then the bond issue will be

sold at a discount.

a. True

b. False

If the landlord has rent, then the tenant has rent.

a. revenue; revenue

b. revenue; expense

c. expense; revenue

d. expense; expense

Select the letter of the term each statement best describes.

a. authorized shares

b. issued shares

c. outstanding shares

d. par value

e. additional paid-in capital

f. retained earnings

g. cumulative feature

h. participating feature

i. callable stock

j. treasury stock

k. retirement of stock

l. dividend payout ratio

m. stock dividend

n. stock split

o. market value per share

p. convertible stock

q. book value per share

The number of shares issued less the number of shares held as treasury stock.

Quan uses a periodic inventory system. At the end of April, Quan had 20 units on hand.

If Quan, Inc. uses FIFO inventory costing, how much is cost of goods sold for April?

a. $230

b. $232

c. $240

d. $250

Which of the following statements does not present financial information based on the

accrual basis of accounting?

a. Balance Sheet

b. Income Statement

c. Statement of Retained Earnings

d. Statement of Cash Flows

Rent expense in Volusia Company’s 2016 income statement is $420,000. If Prepaid

Rent was $70,000 at December 31, 2015, and is $95,000 at December 31, 2016, the

cash paid for rent during 2016 is:

a. $480,000

b. $445,000

c. $395,000

d. $420,000

Aleve Company purchased inventory on credit. The effect of this transaction is that the

a. earnings per share decreased

b. working capital increased

c. debt-to-equity ratio increased

d. earnings per share increased

Craig Inc. purchased a truck on January 1, 2015 for $40,000. The truck had an

estimated life of six years and an estimated salvage value of $4,000. Craig uses the

straight-line method to depreciate the asset. On July 1, 2017, the truck was sold for

$14,000 cash. A. Determine the effect on the accounting equation upon recording the

depreciation for 2015. B. Show how the gain or loss on the sale of the asset would be

reported on Craig Inc.’s income statement.

Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1,

2015. The amounts below are related to the equipment purchase. Match the items below

and explain why each revenue expenditure is not capitalized.

a. This item should be included as part of the cost of the equipment.

b. This item should be considered a revenue expenditure.

During the installation, the equipment was damaged and repair costs of $2,000 were

incurred.

The cumulative feature of stock allows the firm to eliminate a class of stock by paying

the stockholders a specified amount.

a. True

b. False

Which of the following statements is generally considered desirable?

a. A large decrease in accounts receivable turnover ratio

b. A decrease in the number of days’ sales in receivables

c. An increase in sales along with a larger decrease in the gross profit ratio

d. A decrease in the cash flow from operations to current liabilities ratio

Select the best answer from the list below to complete statements 131-141 that follow.

The characteristic where each partner is personally liable for the debts of the

partnership is known as

_____________________.

In the following information from the 2015 annual reports of Focal Point Industries all

figures have been rounded to millions of dollars.

REQUIRED: (1) Explain what the amount “adjustment to LIFO” represents. What

effects has this “adjustment” had on Focal

Point Industries’ net earnings in 2014 and 2015? (2) What method of determining cash

flows from operating activities has Focal Point Industries used in preparing its

statement of cash flows? Explain your answer. (3) From 2014 to 2015, what change in

the inventory balance (increase or decrease) occurred in each year as a result of

operating activities? What was the effect on the company’s cash flow each year as a

result of the inventory change?

The left or debit side of a liability account is used to record.

Theof accounting is a system in which revenues are recognized when payments are

received and expenses are recognized when payments are made.

During the current period, Audix Corp. sold products to customers for a total of

$76,000. Due to defective products, customers were given $2,800 in refunds for

products that were returned and another $3,500 in reductions to their account balances.

Discounts in the amount of $5,500 were given for early payment of account

balances.REQUIRED:Prepare the Net Sales section of Audix’s income statement.