Topic A Question - Gral 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 Answer B A A&C A A B A D B A D B B A C D B A C B A B C C C A D D C A * Some problems are expected with these answers.

Questions Case 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Answer C B C D B D* C B* B C* D B* B* (or D) B* (or d) D B C A B D

6 Questions Mid term 1 (Lab 2 question 1) Courtland Corp. had the following transactions in April: a. Sold instruments to customers for $6,000; received $1,200 in cash and the rest on account. b. Determined that the cost of the instruments sold was $4,200. c. Purchased $3,000 of new instruments inventory; paid $1,200 in cash and the rest on account. d. Paid $300 in wages for the month. e. Received a $300 bill for utilities that will be paid in May. f. Received $2,000 from customers as deposits on orders of new instruments to be sold to customers in May. You may complete the following statements to help you answer the questions: Cash Basis Income Statement Revenues Cash Sales Customer Deposits Expenses Inventory Purchases Wages Paid Utilities Expense Net Income Cash Basis Income Statement: The cash sales should be $1,200 The customer deposits should be $2,000 The inventory purchases should be $1,200 The wages paid should be $300, The utilities expense should be &0 The net income should be $1,700 Cash Basis Income Statement Revenues Cash Sales 1,200 Customer Deposits 2,000 Accrual Basis Income Statement: The sales to customers should be $6,000, The cost of sales should be $4,200 The wages expense should be $300 The utilities expense should be $300 The net income should be $1,200 Accrual Basis Income Statement Revenues Sales to customers Expenses Cost of sales Wages expense Utilities expense Net Income

Accrual Basis Income Statement Revenues Sales to customers 6,000 Expenses

Expenses Inventory Purchases 1,200 Wages Paid 300 Utilities Expense 0 Net Income 1,700 1) The cash sales should be: A. $6,000 B. $1,200 C. $2,000 D. $3,200 Correct answer B $1,200 2) The inventory purchases should be: A. $1,200 B. $3,000 C. $4,200 D. Not enough data to answer Correct answer A $1,200 3) The utilities expense paid should be: A. $0 B. $150 C. $300 D. Not enough data to answer Correct answers A $0 or C $300 4) The sales to customers should be: A. $6,000 B. $1,200 C. $2,000 D. $3,200 Correct answer A $6,000

Cost of sales Wages expense Utilities expense Net Income

4,200 300 300 1,200

5) The net income reported in the accrual basis income statement should be: A. $1,200 B. $1,400

C. $1,700 D. $2,000 Correct answer A $1,200 6) Will the cash basis net income always be greater than the accrual basis net income? A. Yes only if using Canadian GAAP B. No regardless of standards used, Canadian GAAP or IFRS C. Yes only if using IFRS D. Not enough data to answer Correct answer B: cash basis net income can be greater or smaller than the accrual basis net income, it all depends on the transactions of the period.

2 Questions Mid term 1 (Lab 4 question 2) 7) Choose the term that best matches the following description: At year-end, wages payable of $3,600 had not been recorded or paid. A. Accrued Expense B. Accrued Revenue C. Deferred Expense D. Deferred Revenue The correct answer is A: Accrued Expense 8) Choose the term that best matches the following description: At year-end, service revenue of $2,000 was collected in cash but was not yet earned. A. Accrued Expense B. Accrued Revenue C. Deferred Expense D. Deferred Revenue The correct answer is D: Deferred Revenue

2 Questions Mid term 1 (DVD Questions: 8, 11, 16, 17, 1 and 3) 9) You are interviewing for the position of Manager of Accounting for a mediumsized import/export business. The owner of the business explains that the present Manager of Accountings salary is not fixed but instead is based on the

businesss profits. The owner explains this practice is consistent with the way the managers of all departments in the business are paid. You observe that continuing such an arrangement is likely to A. align managers interests with the owners and ensure the most accurate financial reporting B. increase the risk of reported earnings not presenting fairly the results of operations C. violate matching D. be illegal The correct answer is B 10) Choosing to combine the cost of paper clips with other office products in a single account for financial reporting purposes is an example of A. Materiality B. compliance with regulatory requirements C. Convenience D. Consistency The correct answer is A

3 Questions Mid term 2 (Lyryx lab 5 Question 1) The following transactions were selected from among those completed by The Grayson Group in 2011: April 3: Sold 37 Stereos to Jack for $3,000; terms 3/10, n/30. April 6: Jack paid in full the amount due for the purchase on April 3. April 13: Sold two Matresses to George, who charged the $500 sales amount on her credit card. The credit card company charges The Grayson Group a 2% credit card fee. April 17: Sold 10 Desks to Susan for $2,000; terms 2/10, n/30. May 12: Susan returned 5 of the items purchased on April 17; the item was defective, and credit was given to the customer. May 15: Susan paid the account balance in full. Assume that sales discounts and credit card fees (discounts) are treated as contra revenues; compute the following values to achieve the net sales for the two months ended May 31: Sales Revenue Less: Sales returns and allowances Sales discount Credit card fees (discounts)

Net sales Solution: Sales Revenue Less: Sales returns and allowances Sales discount Credit card discounts Net sales 5,500 (1,000) ( 90) ( 10) 4,400

11) The sales revenue amount should be: A. $500 B. $2,000 C. $3,000 D. $5,500 The correct answer is D: $5,500 12) The sales discounts amount should be: A. $40 B. $90 C. $130 D. Cannot be calculated with the data provided The correct answer is B: $90 13) The credit card discounts amount should be: A. $0 B. $10 C. $20 D. Cannot be calculated with the data provided The correct answer is B: $10

3 Questions Mid term 2 (Lyryx lab 5 Question 6) 14) Choose the term that best matches the following description: The expense associated with estimated uncollectable accounts receivable. A. Bad debt Expense B. Allowance Method C. Percentage of Credit Sales Method

D. Sales Returns and Allowances Correct answer A: Bad Debt Expense 15) Choose the term that best matches the following description: Bases bad debt expense on the historical perspective of credit sales that result in bad debts A. Bad debt Expense B. Allowance Method C. Percentage of Credit Sales Method D. Sales Returns and Allowances The correct answer is C: 'Percentage of Credit Sales Method' 16) Choose the term that best matches the following description: A cash discount offered to encourage prompt payment of an account receivable A. Installment Method B. Percentage of Completion Method C. Completed Contract Method D. Sales (or Cash) Discount The correct answer is D: 'Sales (or Cash) Discount'

2 Questions Mid term 2 (Lyryx lab 8 Question 6) 17) If the contract rate on the bond is 7% and the market interest rate at the time of sale is 6%, then the bond will sell at: A. Par B. Premium C. Discount D. Unable to answer with the data provided The correct answer is B: Premium 18) If the contract rate on the bond is 7% and the market interest rate at the time of sale is 7%, then the bond will sell at: A. Par B. Premium C. Discount D. Unable to answer with the data provided

The correct answer is A: par

2 Questions Mid term 2 (Lyryx lab 9 Question 2) Bentley Inc. showed the following shareholders' equity as at December 31, 2011. In addition, the following information was known: a. The preferred shares had sold for an average price of $15. b. The common shares had sold for an average price of $6. c. Retained earnings at December 31, 2010, was $460,000. During 2011, net income earned was $700,000. The board of directors declared a total cash dividend of $335,000. Use this information to complete the shareholders' equity below. Bentley Inc. Shareholders Equity December 31, 2011 Contributed Capital: Common shares; unlimited shares authorized; _______ shares issued and outstanding!!.. Preferred shares, $1.50 non-cumulative; 250,000 shares authorized; 190,000 shares issues and outstanding !!!!!!!!!!!!!!! Total contributed Capital!!!!!!!!!!! Retained Earnings!!!!!!!!!!!!!!!.. Total Shareholders equity!!!!!!!!!!!!. 19) The number of common shares issued should be: A. less than 250,000 B. between 250,000 and 300,000 C. more than 300,000 D. There is not enough data to answer The correct answer is C: 325,000 shares 20) The contributed capital from preferred shares should be: A. less than $2,000,000 B. between $2,000,000 and $3,500,000 C. more than $3,500,000 D. There is not enough data to answer

$5,625,000

The correct answer is B: $2,850,000

3 Questions - after Mid term 2 (Lyryx lab 11 Question 7) The records at the end of May 2011 for JenCo showed the following for a particular kind of merchandise: Inventory, April 30, 2011, at FIFO: 20 units @ $12 = $240 Inventory, April 30, 2011, at Weighted-Average: 20 units @ $8 = $160 Transactions Units Unit Cost Total Cost Purchase, May 9, 2011 50 $15 $750 Purchase, May 20, 2011 42 $17 $714 Sale, May 21, 2011 90 Sale, May 27, 2011 7 21) Compute the inventory turnover ratio under the FIFO costing method and a periodic inventory system (round to two decimal places). A. 5.85 times B. 7.45 times C. 5.85 days D. 7.45 days The correct answer is A: 5.85 times per year Inventory Turnover Ratio = Cost of Goods Sold* Average Inventory = $1,704 - $255 = ($240 + $255) / 2 $1,449 = 5.85 $247.5

Cost of Goods Sold* = = ( Beginning Inventory + (Purchases during the period) ) - Ending Inventory = ( $240 + ($750 + $714) ) - (15 units " $17) = $1,704 - $255 = $1,449

22) Compute the inventory turnover ratio under the Weighted-Average costing method and a periodic inventory system (round to two decimal places). A. 5.85 times

B. 7.45 times C. 5.85 days D. 7.45 days The correct answer is B: 7.45 times per year Inventory Cost of Goods Sold* Turnover Ratio = Average Inventory $1,406.50 = (160 + 217.50) / 2 = $188.75 $1,406.50 = 7.45

Cost of Goods Sold* is calculated using the table: Units Unit Cost Total Cost Cost of Goods Sold 20 $8 $160 + 50 $15 $750 70 $13 $910 + 42 $17 $714 112 $14.50 $1,624 - 90 $14.50 $1,305 1,305 22 $14.50 $319 7 $14.50 $101.50 + $101.50 15 $14.50 $217.50 $1,406.50

23) Which costing method of those allowed by Canadian GAAP is the more accurate indicator of the liquidity of inventory? A. FIFO B. LIFO C. Weighted-Average D. Allowance The correct answer is C: Weighted-Average

3 Questions after Mid term 2 (Lyryx lab 10 Question 3) During 2011 Ludwig Inc. reported amortization expense of $15,000. All purchases and sales are on account. Net income for 2011 was $50,000. The account balances for the noncash current assets and current liabilities of Ludwig

Inc. are as follows : Accounts Receivable Inventory Prepaid Expenses Accounts Payable Salaries Payable December 31st 2011 $15,000 $74,500 $63,000 $61,000 $44,000 December 31st 2010 $33,500 $63,000 $48,000 $37,000 $66,500

Step 1: Prepare the operations section of the statement of cash flows for the year ended December 31st, 2011

Step 2: answer the following questions 24) The cash flow statement prepared by you in Step 1 could be done following the: A. Percentage of Completion Method B. Direct Method only C. Indirect Method only D. Allowance Method only Correct answer is C: Indirect method 25) The change in prepaid expenses should be: A. Not included in the cash flow statement because it does not imply an outflow of cash. B. Included as a positive cash flow C. Included as a negative cash flow D. Not enough data to prepare the operations section of the Cash Flow statement Correct answer is C

26) The net cash flow from operating activities is: A. more than $50,000 B. less than $50,000 but positive C. negative D. Not enough data to calculate it. Correct answer is A: $58,500 Net Income Add Amortization Expense Decrease in accounts receivable Increase in inventory Increase in prepaid expenses Increase in accounts payable Decrease in salaries payable Net cash flow from operating activities $ 50,000 $ 15,000 $ 18,500 ($11,500) ($15,000) 24,000 ($22,500) $ 58,500

27) The change in net cash flow from financing activities is: A. Positive B. Negative C. The same as Net Income D. Not enough data to calculate it. Correct answer is D

1 Question after Mid term 2 (Lyryx lab 10 Question 3) 28) Losses realized on the sale of capital assets should be: A. Not included in the cash flow statement because it does not imply an outflow of cash. B. Included as a positive amount in the operations section of the statement of cash flows C. Included as a positive amount in the financing section of the statement of cash flows D. Included as a positive amount in the investment section of the statement of cash flows Correct answer is D

3 Questions after Mid term 2 (Lyryx lab 11 Question 6) 29) Ratios that measure a company's ability to meet its currently maturing obligations. A. Tests of Profitability B. Tests of solvency C. Test of liquidity D. Component Percentage Correct answer C: Test of liquidity 30) Compare income with one or more primary activities. A. Tests of Profitability B. Tests of solvency C. Test of liquidity D. Component Percentage Correct answer A: Tests of Profitability

Minicase - 20 Questions (Lab 2 question 1 is the basis)

Spin Master Toys has been operating for a few days since December 29th 2010. At the start of 2011, its income statement accounts had zero balances and its balance sheet account balances were as follows: Dec 31st 2010 $4,400 $28,000 $1,300 $7,800 $6,600 $36,000 $8,100 $2,800 $37,000 0 $16,800 $19,400

Bank Accounts Receivables Supplies Equipment Land Building Accounts Payable Deferred Revenue (deposits) Note Payable (due in 3 days) Interest payable Share Capital Retained earnings

The following events occurred during January 2011. 1. Received a $350 deposit (cheque) from a customer for repair of merchandise. 2. Rented a part of the building to a bicycle repair shop; received a cheque of$150 for rent in January 3. Performed consulting services for a client who paid with a $14,200 cheque 4. Received $5,400 from customers as payment on their accounts relating to services provided last year. 5. Received an electric and gas utility bill for $500 to be paid in February 6. Ordered $700 in supplies. 7. Paid $2,100 on account to suppliers (cheque #1). 8. Received a $500 tool (for use in the business) from the major shareholder in exchange for shares on January 30th 9. Paid $9,200 in wages to employees for work in January (cheque #2). 10. Declared and paid a cash dividend of $2,100 (cheque #4). 11. Received and paid for the supplies ordered in 6 (Cheque #3). 12. Received on January 31 the bank statement for the month. The account was opened in December 31st with an initial deposit of $4,400. The balance in the bank statement reported $11,865 including $20 of bank fees for maintaining the account open, a $15 fee for a NSF cheque of $350, an automatic payment of $100 for the phone line of Spin Master Toys. It was noted that the cheque of the rent as well as the cheque of the dividends were not included in the bank statement as of January 31st. Additional data: the expected useful life of the equipment bought on December 31st 2010 is 5 years (no residual value). The useful life of the building bought on December 25th 2010 is 30 years (residual value of $3,600). The interest of the note payable is 12%, the note was issues on December 30th 2010. Supplies available at January 31st were $500. Use the following pages to do your calculations. It is advisable that you perform the following steps: a. Bank reconciliation b. Journalize and post all transactions and adjustments c. Prepare the income statement d. Prepare the balance sheet e. Prepare the cash flow statement f. Calculate all relevant ratios

31) The unadjusted bank account balance in the books of Spin Master Toys as of January 31st is: A. $4,400 B. $9,915 C. $10,400 D. $11,865 Answer is C: $10,400 32) The adjusted bank account balance in the books of Spin Master Toys as of January 31st is: A. $4,400 B. $9,915 C. $10,400 D. $11,865 Answer is B: $9,915 33) When doing the bank reconciliation the bank fees of $20 and $15 should: A. not be included because they were accounted for in the bank statement B. added to the balance of the unadjusted bank account in the companys books C. deducted from the balance of the unadjusted bank account in the companys books D. this data is irrelevant for the bank reconciliation Answer is C 34) The adjusted balance of accounts receivables in the books of Spin Master Toys as of January 31st is: A. $28,350 B. $28,000 C. $22,600 D. $22,950 Answer is D: $22,950 35) The adjusted balance of building net of accumulated depreciation in the books of Spin Master Toys as of January 31st is: A. $36,000 B. $35,910 C. $35,900

D. $34,800 Answer is B: $35,910 36) The adjusted balance of accounts payable in the books of Spin Master Toys as of January 31st is: A. $10,200 B. $8,100 C. $6,500 D. $6,000 Answer is D: $6,000 Or $43,870 if note payable is transformed into an AP 37) The adjusted balance of retained earnings in the books of Spin Master Toys as of January 31st is: A. $17,300 B. $19,400 C. $19,725 D. $21,825 Answer is C: $19,725 and includes dividends paid and net income for the period 38) The adjusted balance of interest payable in the books of Spin Master Toys as of January 31st is: A. $0 B. $370 C. $740 D. $4,440 Answer is B: $370 Or $12 if only 3 days are considered and the NP is transformed into an AP 39) Total sales revenues for the month of January were: A. $0 B. $14,200 C. $14,350 D. Not enough data provided to calculate it Answer is B: $14,200 because the rent of $150 is other income, not revenue 40) Total adjusted expenses for the month of January were: A. $0

B. $9,700 C. $11,925 D. $14,025 Answer is C: $11,925 Or $11,567 if interest on the note payable is calculated for 3 days only 41) Total depreciation expense for the month of January were: A. Not enough data provided to calculate it B. $90 C. $130 D. $220 Answer is D: $90 + $130 42) The net income for the month of January was: A. 2,795 B. 2,425 C. 695 D. 325 Answer is B: $2,425 Or $2,783 if interest calculated on 3 days only 43) Net cash from operations generated during the month of January was: A. $8,100 B. $7,615 C. $5,515 D. Not enough data provided to calculate it Answer is B: $7,615 Or D if the note payable is paid in day 3 44) Net increase or decrease of cash during the month of January was: A. $2,100 B. $5,515 C. $7,615 D. Not enough data provided to calculate it Answer is B: $5,515 Or D if the note payable is paid in day 3 45) The cash flow statement prepared by you could be done following the: A. Direct Method B. Indirect Method C. The Cash T account method

D. A and B Correct answer is D: Direct and Indirect methods can be used 46) Total return on assets at January 31st 2011 was: A. Above 3.5% B. between 3% and 3.5% C. Below 3% D. Not enough data provided to calculate it Correct answer is B: 3.32% 47) Return on Common Equity at January 31st 2011 was: A. Above 20% B. between 15% and 20% C. Below 15% D. Not enough data provided to calculate it Correct answer is C: 14.22% 48) The quick ratio at January 31st 2011 was: A. Above 3.30 B. between 2.00 and 3.30 C. Below 2.00 D. Not enough data provided to calculate it Correct answer is A: 3.41 49) The accounts receivable turnover at January 31st 2011 was: A. Above 2.00 B. between 1.50 and 2.00 C. Below 1.50 D. Not enough data provided to calculate it Correct answer is B: 1.60 50) The dividend yield at January 31st 2011 was: A. Above 5.00 B. between 3.50 and 5.00 C. Below 3.50 D. Not enough data provided to calculate it

Correct answer is D

Cheat-sheet of ratios for Financial Statement Analysis Total Return on Assets ROA = Operating Income / Average Total Assets Return on Common Equity Return on CSE = Net Income - Preferred. Div. Requirement / Ave. Common S/E Return on Sales R on S = Net Income / Net Sales Earnings Per Share EPS = Net Income - Pref. Div. Requirement / Weighted Ave. # of Com. Shares Price Earnings Ratio P/E = Market price of common share / Earnings per common share Dividend Yield DY = Dividends per common share / Market price of common share Equity Ratio ER = Common S/E / Total Assets Bond Interest Coverage BIC = Operating Income / Annual Bond Interest Preferred Dividend Coverage PDC = Operating Income / (Ann. Bond Interest + Pref. Div. Requ.) Current Ratio CR = Current Assets / Current Liabilities Quick Ratio QR= (Cash + Temp. Investments. + A/R) / Current Liabilities Inventory Turnover ITO = Cost of Goods Sold / Average Inventory

Accounts Receivable Turnover ARTO = Trade Receivables / Sales