BMGT 220 FINAL EXAMINATION December 17, 2011 PRINT YOUR NAME:_____________________________________________________ MULTIPLE CHOICE QUESTIONS: Identify the

letter of the choice (A,B,C or D) that best completes the statement or answers the question, and darken the corresponding bubble on the Scantron sheet. ____ 1.

A corporation purchased a $40,000 delivery truck by paying 4,000 cash and signing a $36,000 note payable. Immediately prior to this transaction the corporation had liabilities of $52,000, and owners equity $23,000. What is the total amount of the corporations assets after this transaction has been recorded? A. $115,000 B. $111,000 C. $ 79,000 D. $ 71,000 On November 30, Ravens Company had Accounts Receivable of $65,140. During the month of December, the company received total payments of $76,380 from credit customers. The December 31 Accounts Receivable balance was $43,160. What was the amount of credit sales during December? A. $ 98,360. B. $ 186,680. C. $ 54,400. D. $ 31,920. Collegiate Fitness Centers have 15,000 members whose monthly dues are $30 each. The company does not send individual bills to customers, who have until the 10th day of the month following the month of service to pay their monthly dues. On December 31, 2011, the companys records show that 7,000 customers have already paid their December dues, and the payments were properly recorded. The adjusting entry to be recorded on December 31 will include: A. A credit to Membership Revenue of $210,000 B. A credit to Membership Revenue of $450,000 C. A debit to Accounts Receivable of $240,000 D. A debit to Accounts Receivable of $210,000 Tony Company purchased $8,500 of merchandise on September 25 on terms of 1/10, n30. On September 27, Tony returned defective merchandise worth $700, and received full credit. The invoice was paid in full on September 30. Tonys journal entry on September 30 will include: A. A credit to merchandise inventory for $700. B. A debit to accounts payable for $7,800. C. A credit to Merchandise Inventory for $85. D. A credit to cash for $8,415 Terps Company discovered in 2011 that it had overstated the inventory balance for Dec 31, 2009 by $50,000. They had (incorrectly) reported Net Income to be $350,000 for 2009, and $450,000 for 2010. What should be the corrected Net Incomes for 2009 and 2010? 2009 Net Income 2010 Net Income A. $300,000 $400,000 B. $400,000 $500,000 C. $400,000 $400,000 D. $300,000 $500,000

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A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable $ 245,000 debit Allowance for doubtful accounts $ 300 credit Net Sales $ 900,000 credit All sales are made on credit. Based on past experience, the company estimates 0.5% of credit sales to be uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared? A. $4,200 B. $4,800 C. $45,000 D. $4,500 Evans Company placed a machine in service on January 1, 2007. The machine cost $100,000, and was depreciated using the straight-line method with an estimated salvage value of $20,000 and a useful life of 10 years. The companys accounting period ends on December 31. On September 30, 2011, the machine was sold for $65,000 cash. Determine the gain or loss on the sale of the machine. A. A gain of $2,000 B. A loss of $2,000 C. A loss of $3,000 D. A gain of $3,000 Empire Machinery acquired a new machine on January 1, 2005 at a cost of $50,000, which was estimated to have a useful life of 10 years, and a salvage value of $20,000. Straight-line depreciation was used. On January 1, 2011, management decided that the estimate of useful life had been too long and that the machinery would have to be disposed of at the same salvage value after only two more years. Under this revised estimate, calculate the depreciation expense for the year 2011. A. $10,000 B. $6,000 C. $5,000 D. $6,250 Bonds usually sell at a premium when A. Investors are willing to invest in the bonds at the stated interest rate B. The market rate of interest is lower than the stated interest rate C. The market rate of interest is higher than the stated interest rate D. The bond issuer expects a gain when the bonds are retired Bonds will always fall into all but which one of the following categories? A. Callable or convertible B. Term or serial C. Registered or bearer D. Secured or unsecured A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to $252,000, what is the amount of the sales taxes owed to the taxing agency? A. $240,000 B. $252,000 C. $12,600 D. $12,000

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Assume the following tax rates for 2011: FICA for Social Security rate : 6.2% FICA for Medicare rate: 1.45% Federal Income Tax rate: 28% State Income Tax rate: 8% Federal Unemployment tax rate: 0.8% State Unemployment tax rate: 5.4% Assume that an employee earned $5,900 in January 2011. The employer's Payroll Tax Expense for this employee in January 2011 is: A. $817.15 B. $2,914.15 C. $1,289.15 D. $2,575.35 A $50,000 bond with a carrying value of $52,000 was called at 107 and retired. In recording the retirement, the issuing company should record A. A $1,500 gain B. A $1,500 loss C. A $2,000 gain D. A $3,500 loss Hershner Company received proceeds of $188,500 on 10-year, 8% bonds issued on January 1, 2011. The bonds have a face value of $200,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Determine the total cost of borrowing for Hershner Company. A. $160,000 B. $171,500 C. $148,500 D. $188,500 When cash dividends are declared in one fiscal year and paid in the next fiscal year, the liability for the dividend should be recorded as of the: A. Date of declaration. B. Last day of the fiscal year. C. Date of record. D. Date of payment. In September 2011, Microsoft Corporation declared cash dividends of $1,682 million to be paid in December 2011. What effect did the December transaction have on Microsofts accounts? A. Decreased assets and liabilities B. Decreased assets and shareholders' equity C. Increased liabilities and decreased shareholders' equity D. Decreased liabilities and increased shareholders' equity On October 1, 2011, Chief Corporation declared and issued a 10% stock dividend. Prior to this date, Chief had 40,000 shares of common stock outstanding with a $5 par value. The market value of Chief Corporation common stock on the date of declaration was $10 per share. As a result of this dividend, Chief's retained earnings will: A. Decrease by $20,000. B. Decrease by $40,000. C. Increase by $20,000. D. Increase by $40,000.

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Poodle Corporation was organized on January 3, 2011. During 2011, Poodle had the following transactions relating to shareholders' equity: Issued 30,000 shares of $5 par preferred stock at $7 per share. Issued 20,000 shares of $1 par common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. What is total paid-in capital at the end of 2011? A. $420,000. B. $370,000. C. $470,000. D. $170,000. Beagle Corporation has 20,000 shares of $10 par common stock outstanding and 10,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock outstanding. Dividends have not been paid for the past two years. This year, a $300,000 dividend will be paid. What are the dividends payable in the current year? A. $6 per share for preferred stockholders, and $12 per share to common stockholders B. $18 per share for preferred stockholders, and $6 per share to common stockholders C. $12 per share for preferred stockholders, and $12 per share to common stockholders D. $24 per share for preferred stockholders, and $3 per share to common stockholders On January 1, 2011, Southwestern Corporation had 1,000,000 shares of $1 par common stock outstanding. In the year 2011, the company completed the treasury stock transactions listed below. February 2: Purchased 70,000 shares at $12 per share. March 9: Sold 20,000 shares at $14 per share. May 17: Sold 25,000 shares at $8 per share. The transaction on May 17 will: A. Credit Cash $200,000 B. Credit Paid-in-Capital from Treasury Stock $40,000 C. Debit Retained Earnings $60,000 D. Debit Treasury Stock $300,000 Which of the following categories of investments excludes equity securities? A. Securities available for sale. B. Consolidating securities. C. Held-to-maturity securities. D. Trading securities. In which of the following intercorporate investment classifications are unrealized gains in marketable securities reflected in the income statement of the investor company? A. Equity method securities B. Held to Maturity securities C. Trading securities D. Available-for-sale securities On January 1, 2011, Winrow Company purchased fifty 6% Johnston Company bonds for $50,000 cash plus brokerage fees of $500. Interest on the bonds are paid semiannually on July 1 and January 1. Winrows journal entry on July 1 will include a A. debit to Interest Receivable for $1,500. B. credit to Interest Revenue for $1,500. C. credit to Interest Revenue for $1,515. D. credit to Interest Revenue for $3,000.

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Boulter, Inc. began business on January 1, 2011. At the end of December 2011, Boulter had the following investments in equity securities: Trading Available for Sale Cost $60,000 $110,000 Market Value 54,000 107,500 All declines in value are deemed to be temporary in nature. How should the corresponding losses be reflected in the financial statements at December 31, 2011? Income Separate Component of Shareholders' Equity A. $8,500 $0 B. $0 $8,500 C. $6,000 $2,500 D. $2,500 $6,000 On January 1, 2011, Reston Company purchased 25% of Ace Corp.'s common stock. During the year 2011, Ace Company reported a net income of $450,000, and paid total cash dividends of $80,000. Reston Companys balance in its Investments in Ace Corp Stock on December 31 was $720,000. How much did Reston pay for its 25% interest in Ace? A. $812,500 B. $562,500 C. $627,500 D. $687,500 Tolan Company purchased 60, 6% Irick Company bonds for $60,000 cash plus brokerage fees of $600. Interest is payable semiannually on July 1 and January 1. If 30 of the securities are sold on July 1 for $32,000 less $300 brokerage fees, Tolan Companys Gain on Sale of Debt Investments is: A. $3,200. B. $1,700. C. $2,300. D. $1,400. With reference to the reporting of net cash flow from operating activities, which method do most companies use and why? A. Indirect method because the FASB has expressed a preference for the Indirect Method B. Direct method because it is based on the accrual basis of accounting C. Direct method because it requires a supplemental indirect method section D. Indirect method because it is less expensive to prepare Which of the following statements is false for a cash flow statement prepared under the indirect method? A. Cash proceeds from sale of the equipment would be reported as a cash inflow under investing activities. B. Cash paid to pay back the principal amount of a note payable would be reported as a cash outflow under financing activities. C. Depreciation expense would be added to net income in the operating activities section. D. The gain on the sale of the equipment would be added to net income in the operating activities section. A company sold some of its used equipment with a book value of $52,000 for $47,000. The indirect method statement of cash flows will reflect a cash inflow in the investing activities section of: A. $47,000 and a deduction of $5,000 in the operating activities section B. $47,000 and an addition of $5,000 in the operating activities section C. $52,000 and an addition of $5,000 in the operating activities section D. $52,000 and a deduction of $5,000 in the operating activities section

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ABC Company prepares a statement of cash flows. In 2011, ABC Company had net income of $45,000. In addition, the following information is available: Gain on sale of land $16,000 Decrease in inventories 10,000 Amortization of patents 4,000 Increase in prepaid expenses 3,000 Determine the net cash provided by operating activities for ABC Company in 2011. A. $46,000 B. $72,000 C. $40,000 D. $50,000 Fleming Company provided the following information on selected transactions during 2011: Dividends in cash paid to preferred stockholders Loans made to other corporations Proceeds from issuing bonds Proceeds from issuing preferred stock Proceeds from sale of equipment Purchases of inventories Purchase of land by issuing bonds Purchase of treasury stock $ 150,000 750,000 900,000 1,050,000 450,000 1,200,000 300,000 600,000

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The net cash provided (used) by investing activities during 2011 is A. $(900,000). B. $(300,000). C. $150,000. D. $450,000. The net cash provided (used) by financing activities during 2011 is A. $(1,650,000). B. $1,800,000. C. $1,500,000. D. $1,200,000.

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ANSWER SECTION 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. B C C B D D D B B A D A B B A A B B B C C C B C C D D D B C B D