acc549 module 4 midterm exam latest 2017

Midterm exam Question 1 Listed below are several qualitative characteristics. Label the characteristic (or characteristics) that align with each statement.a. Understandabilityb. Usefulness for decision makingc. Relevanced. Reliabilitye. Predictivef. Feedback valueg. Timelyh. Verifiablei. Representational faithfulnessj. Neutralityk. Comparabilityl. Materialitym. Benefits of information should exceed its cost___ 1. Two constraints included in the hierarchy.___ 2. For this quality the information needs to have predictive and feedback value and be timely.___ 3. These are the qualitative characteristics that are viewed as having the most importance.___ 4. SFAC No. 2 indicates that to be reliable the information needs to have these characteristics.___ 5. Interacts with relevance and reliability to contribute to the usefulness of information.___ 6. Two primary qualities that make accounting information useful for decision making.___ 7. For this quality the information must be verifiable subject to representational faithfulness and neutral.___ 8. SFAC No. 2 indicates that to be relevant the information needs to have these characteristics.Question 2 Listed below is information related to several adjusting entry situations. Assume that the accounting year ends on December 31.a. $3 000 paid for insurance on October 1 for a oneyear period (October 1 – September 30). This transaction was recorded as a debit to prepaid insurance ($3 000) and a credit to cash ($3 000).b. Interest on bonds payable in the amount of $500 has not been recorded at December 31.c. Rent expense in the amount of $1 200 was paid on November 1. This transaction was recorded as a debit to rent expense ($1 200) and a credit to cash ($1 200). This rent payment was for the period November 1 to January 31.Record the original entries and the adjusting entries using T-accountsQuestion 3 A partial list of accounts for Johnson and Clark in alphabetical order is presented below:Accounts PayableInterest ReceivableAccounts ReceivableInventory¾Ending BalanceAccrued Salaries PayableLandAccumulated Depreciation¾BuildingsLand Held for Future Plant SiteAccumulated Depreciation¾EquipmentLoss on Sale of EquipmentAdditional Paid-In Capital¾Common StockMarketable SecuritiesAllowance for Doubtful AccountsNoncontrolling InterestBank Loan (long-term)Notes Payable (long-term)Bonds PayableObligations on Long-Term LoansBuildingsPatentCash in BankPreferred StockCommission ExpensePremium on Bonds PayableCommon StockPrepaid ExpensesCurrent Portion of Long-Term DebtPurchasesEquipmentRetained EarningsFICA Taxes PayableSalesFranchiseSales Salaries ExpenseGoodwillTreasury StockInterest IncomeUnearned Rent RevenuePrepare a consolidated balance sheet in good format without monetary amounts for December 31 2012. Use the format Current Assets; Property Plant and Equipment; Investments; Intangibles; Current Liabilities; Long-Term Liabilities; and Stockholders’ Equity. Do not use the accounts not found on the balance sheet.Question 4 The following is a partial listing of accounts for Euisara Inc. for the year ended December 31 2012.Prepare a balance sheet in good format for December 31 2012.Finished Goods$ 9 718Current Maturities of Long-Term Debt1 257Accumulated Depreciation9 980Accounts Receivable24 190Sales Revenue127 260Treasury Stock251Prepaid Expenses2 199Deferred Taxes (long-term liability)8 506Interest Expense2 410Allowance for Doubtful Accounts915Retained Earnings18 951Raw Materials9 576Accounts Payable19 021Cash and Cash Equivalents8 527Sales Salaries Expense872Cost of Goods Sold82 471Investment in Unconsolidated Subsidiaries3 559Income Taxes Payable8 356Work In Process1 984Additional Paid-In Capital9 614Equipment41 905Long-Term Debt15 258Rent Income2 468Common Stock3 895Notes Payable (short-term)6 156Income Tax Expense2 461Question 5 The income statement for Lifeline Products in single-step format follows.Lifeline ProductsIncome StatementFor the Year Ended December 31 2012Revenues: Sales$3 000 000 Rent Income 14 000$3 014 000Costs and Expenses: Cost of Sales2 370 000 Selling and Administrative Expenses322 000 Interest Expense48 000 Loss on the Sale of Plant Assets 16 000$2 756 000 Income Before Taxes$ 258 000 Income Taxes 112 000 Net Income$ 146 000 Earnings per Share$ 7.30a. Convert the statement to multiple-step format.b. Recompute net income with the unusual loss removed.c. Why may net income with the unusual loss removed be preferable to use for trend analysis?d. Speculate on why this loss is not considered extraordinary or as a disposal of a segment.Question 6 Comparative income statements for 2012 and 2011 follow.20122011Sales$9 434 000$7 862 000Cost of Sales 7 075 400 5 660 640Gross Profit$2 358 600$2 201 360Operating Expenses 1 367 690 1 365 060Operating Income$ 990 910$ 836 300Interest Expense 157 500 126 000Earnings Before Tax$ 833 410$ 710 300Income Taxes 400 000 317 200Net Income$ 433 410$ 393 100a. Prepare a vertical common-size analysis of this statement for each year using sales as the base.b. Comment briefly on the changes between the two years based on the vertical common-size statement.Question 7 Bill’s Produce does 60 percent of its business during June July and August.For Year EndedFor Year EndedDecember 31 2012July 31 2012Net Sales$700 000$690 000Receivables less allowance for doubtful accounts:Beginning of period 45 000 80 000 (allowance January 1 $2 000; August 1 $3 000)End of period (allowance December 31 $3 000; 50 000 85 000 July 31 $3 500)a. Compute the days’ sales in receivables for July 31 2012 and December 31 2012 based on the data above.b. Compute the accounts receivable turnover for the period ended July 31 2012 and December 31 2012.c. Comment on the results from (a) and (b).