1) The following data is available for one of the products sold by Wild Optics
Company, which uses the periodic inventory system:
At the end of December, Wild Optics had 25 units on hand. The 75 units sold created
revenue of $13 each. Determine the amounts for the December 31 ending inventory, the
cost of goods sold for December, and the gross margin for December for each of the
inventory costing methods listed below.
Ending Inventory Cost of Goods Sold Gross Profit
a. Weightedaverage
b. FIFO
c. LIFO
2) Duggard Transport Company
On January 1, 2013, Duggard Transport Company purchased a ship for $2,000,000. It
has a ten-year useful life and a residual value of $50,000. The company uses the
double-declining-balance method.
What was the book value of the ship for Duggard Transport at the end of the useful life?
A.$ -0-
B.$ 50,000
C.$214,400
D.Need more information to determine this answer.
3) Barker Corp. began operations on November 30, 2014, and immediately paid
$48,000 for 6 months rent in advance for rental of a parking lot for the period beginning
December 1, 2014. Barkers accounting period ends on December 31, 2014. Indicate
how much will be reported for each of the following accounts on Barkers financial
statements for the period ending December 31, 2014. If the amount reported is zero,
indicate so by writing $0, and explain why zero is the appropriate amount.
A) Rent Expense
B) Rent Payable
C) Rent revenue
D) Prepaid Rent
4) During 2014, Wimbrow Images reported $60,000 of net income and generated
$80,000 of cash from operations. During the year, Wimbrow Images paid $15,000 to
purchase a new delivery truck and also paid dividends in the amount of $30,000.
Wimbrow Images borrowed $40,000 cash from the bank. At the beginning of the year,
cash amounted to $50,000.
A) Prepare a statement of cash flows for the year ended December 31, 2014.
B) How much more cash does Wimbrow Images have available at the end of the year
than at the beginning?
C) Why is there a difference between net income and cash flows from operations?
5) The following analysis is based on information obtained from 2012 financial
statements of Lake Company, River Corporation, and Ocean Company.
6) Items should be reported as part of the company’s “inventory” if they are
A.Purchased from a creditor, although not paid for by year end
B.Held in anticipation of an increase in market value
C.Determined to be part of cost of goods sold
D.Sold during the period
7) Which one of the following statements regarding the application of the lower of cost
or market method is true?
A.Generally, market value is greater than replacement cost
B.When the lower of cost or market method is used, inventories are valued at selling
price
C.The lower of cost or market method is most commonly applied on a total inventory
basis because it is a more conservative approach
D.The lower of cost or market method is an exception to the historical cost principle
8) The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
If you must calculate the present value of an amount at 8% compounded quarterly for 2
years, then the interest factor used in the calculation is
A.8% for two periods
B.2% for eight periods
C.the interest factor for 8% for two periods divided by 4
D.twice that for one period at 8% multiplied by 2
9) Klein Corp. acquired land by issuing its common stock. How should this transaction
be disclosed when a statement of cash flows is prepared?
A.In a supplemental schedule of noncash investing and financing activities or in a note
B.The acquisition of land should be reported as an investing activity and the issuance of
the stock as a financing activity
C.Using the master T-account approach
D.The transaction does not need to be disclosed
10) Which of the following is least useful in evaluating a company’s financial
statements?
A.Comparison with government economic data for the economy as a whole
B.Comparison with other companies in the same industry
C.Comparison of the company’s current period data with accounting data from 5 years
ago
D.Comparison of the companys current period data with that of the last year
11) Read the information for Wood Company. What are Woods current liabilities?
A.$ 45,000
B.$ 120,000
C.$ 195,000
D.$ 225,000
12) Hopper, Inc.
Use the information from Hopper Inc. to answer the following question(s).
Read the information about Hopper, Inc. Which ratio are you able to calculate given
only the information provided by Hopper?
A.Profit margin
B.Current ratio
C.Working capital
D.Gross profit percentage
13) Which of the following terms characterizes the time period between the investment
of cash in merchandise and the collection of cash from the sale of that merchandise?
A.Operating cycle
B.Natural business year
C.Accounting period
D.Fiscal period
14) The solution to this problem requires time value of money calculations. Reference
to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
A company will have to pay a $50,000 liability in 4 years. How much must be
deposited now into a bank account earning 8% compounded semiannually to fully fund
the future payment?
A.$34,000
B.$35,500
C.$36,523
D.$36,550
15) If a company issues $5 par value common stock,
A.$5 per share is presented in the common stock account on the balance sheet
B.the minimum selling price is $5
C.the shareholders will receive $5 in dividends
D.liabilities are increased as a result of the transaction
16) On May 31, 2014, Essex Corp. purchased a 120-day, 6% certificate of deposit for
$60,000. The CD was redeemed on September 28, 2014. Identify and analyze the
effects of the following transactions on Essexs books:
a. The purchase of the CD.
b. The accrual of interest adjustment for interest earned through June 30, the end of the
companys fiscal year.
c. The redemption of the CD. Assume 360 days in a year.
17) A bank loaned $62 million to Apex Corporation to finance the construction of a new
distribution warehouse. In which section of Apexs statement of cash flows would you
be able to determine whether the company repaid any portion of the debt during the
year?
A.Operating Activities
B.Investing Activities
C.Financing Activities
D.Profit Activities