First Midterm
SOLUTIONS Introductory Financial Accounting Midterm Exam Professor Yanfeng Xue
Note: 1. You have 90 minutes to finish this exam. The total score for this exam is 100 points. Please use your time wisely. 2. Please show your work because I do give partial credit. 3. If you cannot remember the name of a particular account, do your best at guessing and at least indicate the type of the account (asset, retained earnings, etc.) 4. Good luck!
Name: __________________________________________________
1
Problem 1. Fill in the blanks (5 Points). a. The three sections of statement of cash flows are (3 Points):
Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities
b. The name of the organization that writes the U.S. GAAP is (2 Points): FASB (Financial Accounting Standard Board)
c.
Bright Horizon Corporation reported the current ratio and debt ratio as following as of October 31st 2012 (current ratio is current assets divided by current liabilities and debt ratio is total liabilities divided by total assets): (6 Points) Current ratio = $5000/$4000 = 1.25 Debt ratio = $6000/$12000 = 0.5
Will the following transactions improve or hurt the company’s current and debt ratios? Answer: Note that a higher current ratio and a lower debt ratio are more desirable for the firm because they indicate lower risk. 1) Issued new common stock of $1000 for cash. Cash goes up and shareholders’ equity goes up. Current ratio is improved and debt ratio is improved. 2) Received customer payments in advance for $500. The transaction increases both the current assets (cash) and current
Note: 1. You have 90 minutes to finish this exam. The total score for this exam is 100 points. Please use your time wisely. 2. Please show your work because I do give partial credit. 3. If you cannot remember the name of a particular account, do your best at guessing and at least indicate the type of the account (asset, retained earnings, etc.) 4. Good luck!
Name: __________________________________________________
1
Problem 1. Fill in the blanks (5 Points). a. The three sections of statement of cash flows are (3 Points):
Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities
b. The name of the organization that writes the U.S. GAAP is (2 Points): FASB (Financial Accounting Standard Board)
c.
Bright Horizon Corporation reported the current ratio and debt ratio as following as of October 31st 2012 (current ratio is current assets divided by current liabilities and debt ratio is total liabilities divided by total assets): (6 Points) Current ratio = $5000/$4000 = 1.25 Debt ratio = $6000/$12000 = 0.5
Will the following transactions improve or hurt the company’s current and debt ratios? Answer: Note that a higher current ratio and a lower debt ratio are more desirable for the firm because they indicate lower risk. 1) Issued new common stock of $1000 for cash. Cash goes up and shareholders’ equity goes up. Current ratio is improved and debt ratio is improved. 2) Received customer payments in advance for $500. The transaction increases both the current assets (cash) and current