Sample Midterm

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GBA 521

Multiple Choice
Identify the choice that best completes the statement or answers the question.

__C__1.Raymond Corporation reported the following information for the year ended December 31, 2012:

| Net income| $ 10,000|
| Dividends| 6,000|
| Retained earnings at December 31, 2012| 25,000|

What was the economic effect of the payment of Raymond’s dividends? a.| The dividend reduced net income for 2012.|
b.| The dividend should be equal to net income if the company’s accounting equation is in balance.| c.| The dividends reduce total retained earnings for the year.| d.| The dividends must be paid whenever Raymond Corp. reports net income.|

__B__2.If a company has $152,000 of revenues, declares and pays $55,000 in dividends, and has net income of $89,000, how much were expenses for the year? a.| $ 8,000|
b.| $ 63,000|
c.| $144,000|
d.| Unable to determine the amount due to incomplete information.|

__C__3.T. Price Company has assets of $350,000, liabilities of $130,000, and retained earnings of $180,000. How much is total owners’ equity? a.| $ 40,000| c.| $ 220,000|
b.| $ 170,000| d.| $ 350,000|

___B_4.The preparation of financial statements requires that the information be understandable a.| Only to CPAs.|
b.| To those willing to spend the time to understand it.| c.| Only to those who take an accounting course.|
d.| Only to financial analysts and brokers.|

__D__5.Which set of items below are current assets?
a.| Accounts receivable, net income, inventory, and dividends| b.| Cash, accounts receivable, capital stock, and sales|
c.| Net income, cash, office supplies, and inventory|
d.| Cash, accounts receivable, inventory, and office supplies|

__B__6.For several years, Malcom Corporation has had a current ratio that was consistent with other companies in its industry. For the most recent year, Malcom’s current ratio was significantly higher than that for the industry. What is the best possible explanation for this situation? a.| The other companies in the industry were not as profitable.| b.| Malcom’s liquidity has improved or is not leveraging financial resources effectively.| c.| Malcom has less property, plant and equipment than other companies.| d.| Malcom has too much debt.|

__D__7.Daniel, Inc. earned $600,000 profit during 2012. On which financial statement(s) will you find the dollar amount of the profit earned by the company? a.| Balance sheet and income statement|

b.| Income statement only|
c.| Statement of retained earnings only|
d.| Income statement and statement of retained earnings|

Garage Solutions
Garage Solutions began operations on January 2, 2012, with an investment of $50,000 by each of its two stockholders. Net income for its first year of business was $240,000. Garage Solutions paid a total of $100,000 in dividends to its stockholders during the year.

__B__8.Read the information about Garage Solutions. If the company’s revenues were $500,000 for the year ended December 31, 2012, how much were total expenses? a.| $160,000| c.| $640,000|

b.| $260,000| d.| $740,000|

__B__9.Which one of the following sections is least likely to be found in a corporate annual report? a.| Notes to the Financial Statements| c.| Report of the Independent Accountants| b.| Forecasts of Cash Flows and Earnings| d.| Management’s Discussion and Analysis|

Smithers Country Club
Use the selected accounts for Smithers Country Club presented below to answer the following question(s).

CASH| | ACCOUNTS RECEIVABLE|
8/1 Balance| 6,000| | | 8/2| 1,800| | 8/7| 900|
8/3| 500| | | | | | | |
8/5| 400| | | | | | | |
8/7| 900| | | | | | | |

| DEPOSITS RECEIVED IN ADVANCE|

(A Liability Account)| | SALES |
| | | 8/3| 500| | | | | 8/2|...
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