Generally Accepted Accounting Principles and Wally World

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PRACTICE EXAM 1 Multiple Choice. Circle the best answer. Use the following information to answer questions 1 and 2. Aristotle Corporation reports the following information for the current year: Net income Dividends paid on common stock Interest expense paid on bonds payable Dividends paid on preferred stock 400,000,000 120,000,000 20,000,000 30,000,000

Aristotle had 20 million shares outstanding from January 1 – June 30 of the current calendar year. On July 1, Aristotle issued another 20 million shares. 1. (2 points) What number should Aristotle use as the numerator in its basic earnings per share calculation? a. b. c. d. e. f. g. $400 million $280 million $260 million $230 million $350 million $370 million $250 million

2. (2 points) What amount should Aristotle report as basic earnings per share? a. $18.50 b. $9.25 c. $12.33 d. $8.33 e.$12.50 f. $ 6.25 g. None of the above.

1

Use the following information for questions 3-5: Jill Accardo, M.D. maintains the accounting records of Accardo Clinic on a cash basis. During calendar year 2007, Dr. Accardo collected $152,000 from her patients and paid $55,000 in operating expenses. In the preceding year (2006), the clinic purchased a laser costing $36,000 that has a useful life of 3 years and no salvage value. The laser is depreciated using the straight-line method. At January 1, 2007 and December 31, 2007, Accardo Clinic had accounts receivable, unearned service revenue, accrued expenses and prepaid expenses as follows:

Accounts Receivable Unearned Service Revenue Accrued Expenses Prepaid Expenses

January 1 December 31 change                 8,900                 7,200        (1,700)                 6,500                 4,200        (2,300)                 4,200                 1,800        (2,400)                 5,800                 4,800        (1,000)

3. (4 points) What is the amount of Accardo’s net income on a cash basis for the year? a. b. c. d. e. $97,000 $85,000 $152,000 $140,000 none of the above

4. (4 points) What is the amount of Accardo’s revenues reported on an accrual basis for the year? a. $97,000 b. $152,600 c. $148,000 d. $155,400 e. $152,000 f. $151,400

5. (4 points) What is the amount of Accardo’s expenses reported on an accrual basis for the year? a. $55,00 b. $64,600 c. $53,600 d.$63,600 e.$70,400 f. none of the above

($65,600) 2

I.

Below is the trial balance of Platteville Golf Club as of December 31, 2007 after all cash receipts and payments are posted. Debit             15,000             13,000               3,000            350,000            120,000             38,400            150,000             70,000            100,000            300,000             82,000            200,000               8,100             15,400             18,000             42,000             80,000             24,000            815,000 Credit

Cash Accounts Receivable Allowance for Doubtful Accounts Prepaid Insurance Land Buildings Accumulated Depreciation of Buildings Equipment Accumulated Depreciation of Equipment Note Payable Common Stock Retained Earnings Dues Revenue Greens Fee Revenue Rental Revenue Insurance Expense Utilities Expense Salaries Expense Maintenance Expense

              1,100

           815,000

From the trial balance and information given in each numbered item below, prepare adjusting entries required for the year ended December 31, 2007. Below your journal entry, indicate the effect of the entry on Total Assets, Total Liabilities, Total Equity, Net Income and Cash Flow during the period. For example, if the journal entry increases Total Assets and Total Liabilities by $10,000, but has no effect on Equity, Income or Cash Flow, you would enter: Change in Total Assets +10,000 Change in Total Liabilities +10,000 Change in Total Equity Net Income for the period Cash Flow for the period

3

1. At December 31, it is estimated that 10 % of accounts receivable will be uncollectible (5 points) Debit Credit...
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