Accounting 400 Exam

Topics: Balance sheet, Generally Accepted Accounting Principles, Income statement Pages: 8 (1718 words) Published: August 23, 2013
ACC/400
Final Exam

Name: _____________

|Part |I |II |III |Total | |Points |20 |60 |20 |100 | |Score | | | | |

Part I – 20pts
Multiple Choice: (2 pt each)

1. The best definition of assets is the(D)
a. cash owned by the company.
b. collections of resources belonging to the company and the claims on these resources. c. Owners’ investment in the business.
d. resources belonging to a company have future benefit to the company.

2. Liabilities(B)
a.are future economic benefits.
b.are debts and obligations.
c.possess service potential.
d.are things of value owned by a business.

3. Notes to the financial statements (B)
a. are optional.
b. help clarify information presented in the financial statements. c. are generally brief and few in number.
d. need not be read in detail if an unqualified opinion accompanies the financial statements. 4. The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)(A) a. account payable.

b. account receivable.
c. revenue.
d. expense.

5. An income statement(D)
a.summarizes the changes in retained earnings for a specific period of time. b.reports the changes in assets, liabilities, and stockholders’ equity over a period of time. c.reports the assets, liabilities, and stockholders’ equity at a specific date. d.presents the revenues and expenses for a specific period of time.

6. Which of the following financial statements is concerned with the company at a point in time? (A) a.Balance sheet.
b.Income statement.
c.Retained Earnings statement.
d.Statement of cash flows.

7. Payments to stockholders are called(c)
a.expenses.
b.liabilities.
c.dividends.
d.distributions.

8. The discontinued operations section of the income statement refers to(D) a.discontinuance of a product line.
b.the income or loss on products that have been completed and sold. c.obsolete equipment and discontinued inventory items. d.the disposal of a significant segment of a business.

Use the following information for questions 9-10.

The following amounts were taken from the financial statements of Alien Company:

2007 2006
Current liabilities$280,000$220,000
Long-term liabilities800,000600,000
Interest Expense100,00050,000
Income tax expense120,00058,000
Net income300,000170,000
Net cash provided by operating activity480,000270,000

9. The times interest earned ratio for 2007 is(D)
a.3.0 times.
b.4.8 times.
c.4.0 times.
d.5.2 times.

10.The cash debt coverage ratio for 2007 is(A)
a.50.5%.
b.44.4%.
c.31.6%.
d.62.5%.

Part II – 60pts
Problems

11. Selected data taken from the 2006 financial statements of trading card company Bottoms Company, Inc. are as follows (in millions). 10pts

Net sales$295.9
Current liabilities, February 28, 200539.5
Current liabilities, February 28, 200647.5
Net cash provided by operating activities23.0
Total liabilities, February 28, 200564.2
Total liabilities, February 28, 200671.2
Capital expenditures2.6
Cash dividends6.5

Instructions
Compute these ratios at February 28, 2006:
(a)Current cash debt coverage ratio
(b)Cash debt coverage ratio
(c)Free cash flow

Provide a brief interpretation of your results.

(A) Current cash debt coverage ratio: Net cash by operating activities
Average current liabilities

23.0= 23.0= .528
39.5+47.5/2 43.5

The Bottoms company, Inc is able to pay...
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