FIN 474 Final | Course Paper

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Which of the following are used to determine cash flows from financing activities?

A) Short-term debt, Accrued Liabilities, Common Stock, and Notes Payable

B) Long-term debt, Common Stock, and Retained Earnings

C) Short-term debt, Accrued Liabilities, Retained Earnings, and Bonds Payable

D) Long-term debt, Notes Payable, Interest Expense, and Bonds Payable

On December 31, 2015, Newco borrowed $100,000 from First National Bank, and

signed a 12% note payable due in two years. Interest on the note is due at maturity.

Required:

Part a. Prepare the journal entry to record the borrowing transaction.

Part b. Describe how the note should be reported on Newco’s classified balance sheets

at December 31, 2015 and December 31, 2016.

Part c. Prepare the required adjusting entry on December 31, 2016.

Part d. Prepare the journal entry to record the payment of the interest on December 31,

2017.

Part e. Prepare the journal entry to record the payment of the note on December 31,

2017.

Your company has 500 units in inventory that were purchased for $12 each. These units

have a current market value of $15 each. Your supplier has just announced a price

increase to $16.50 that will go into effect at the beginning of next year. Management

should:

A) make no adjustments to the inventory account.

B) adjust the inventory account using the lower of the recent market values, which is

$15.

C) adjust the inventory account using the cost, which is $12.00.

D) adjust the inventory account using the average of the recent market values, which is

$14.50.

Choose the appropriate letter to match the description of the business activity with the

category.

BUSINESS ACTIVITY

1) ____ The purchase of a new line of assembly equipment

2) ____ Company payment of a dividend

3) ____ The purchase of office supplies

4) ____ The purchase of advertising time by the company

5) ____ The building of a new factory

6) ____ Company repayment of a bank loan

CATEGORY

A. Operating activity

B. Investing activity

C. Financing activity

Wheeling Inc. uses the aging of accounts receivable method. Its estimate of

uncollectible receivables resulting from the aging analysis equals $5,000. At the end of

the year, the balance of Accounts Receivable is $100,000 and the unadjusted debit

balance of the Allowance for Doubtful Accounts is $500. Credit sales during the year

totaled $150,000. What is the estimated Bad Debt Expense for the current year?

A) $4,500

B) $5,000

C) $5,500

D) $7,000

If a company’s P/E ratio suddenly decreases:

A) you should sell the stock as soon as possible.

B) you should buy more of the stock to increase your average gain.

C) the company probably announced higher earnings forecasts.

D) the market must have reacted to some bad news that is expected to affect the

company in the future.

Sales tax collected by a company is normally reported as:

A) a current liability.

B) income tax expense.

C) an asset.

D) an operating expense.

Which of the following statements is not correct?

A) An “A” rating is the best credit rating a company can earn.

B) Credit ratings below BB are called “junk.”

C) A credit rating agency indicates a company’s ability to pay its debts on a timely

basis.

D) Standard and Poor’s, Fitch, and Moody’s are the names of credit rating agencies.

Groucho, Harpo, and Chico go into partnership on January 1, 2015. Groucho

contributes $90,000, Harpo $70,000, and Chico $40,000 to a business called Marx

Brothers’ Partnership. On a monthly basis, each partner is allocated income and is

allowed to receive cash from the business in proportion to the capital they provided.

Assume that Groucho receives $2,700 cash per month.

Required:

Part a. Prepare the journal entry for the initial investment.

Part b. Determine the monthly distribution amounts for each of the three partners.

Part c. Prepare the journal entry that would be made in one month for the monthly

distribution.

Part d. Prepare the journal entry for the allocation of an annual net income of $84,000.

For purposes of this journal entry, assume Sales Revenue totaled $116,000 and that all

expenses, totaling $32,000, were recorded in a single account called Operating

Expenses.

Part e. Prepare the journal entry to close the Drawings accounts at the end of the year.

Part f. Prepare a Statement of Partners’ Equity (assume no additional investments

made).

Which of the following would overstate a company’s net income?

A) Counting shipments of customers’ orders as revenue before payment has been

received.

B) Shipping goods to customers without receiving orders from those customers, and

recording the transactions as revenue.

C) Accruing liabilities for marketing expenses before they are incurred.

D) Making an accrual adjusting entry for interest earned on a bond investment.

Which of the following statements about a corporation is not correct?

A) A corporation is a separate legal entity.

B) A corporation has easy transferability of ownership.

C) A corporation may have the ability to raise large amounts of capital.

D) A corporation’s owners have unlimited liability.