Intermediate Accounting1

| June 10, 2016

Question
ACCOUNTING INFORMATION SYSTEMS 1
1. Cal Farms reported supplies expense of $2,000,000 this year. The supplies.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account decreased by $200,000 during the year to an ending balance of $400,000. What was the cost of supplies the Cal Farms purchased during the year?

A.$1,600,000

B.$2,200,000

C.$1,800,000

D.$2,400,000

2. Listed below are.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account balances (in $millions) taken from the records of Symphony Stores. All of these are permanent accounts, except the last two that have yet to be closed. The installment receivables are current. Symphony uses a perpetual inventory system.

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What is the amount of working capital for Symphony?

A.$98

B.$113

C.$143

D.$128

3. On December 31, 2011, the end of Larry’s Used.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>Cars first year of operations, the accounts receivable was $53,600. The company estimates that $1,200 of the year-end receivables will not be collected. Accounts receivable in the 2011 balance sheet will be valued at

A.$53,600.

B.$54,800.

C.$52,400.

D.$1,200.

4. In its first year of operations, Best Corp. had income before.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>tax of $500,000. Best made income tax payments totaling $210,000 during the year and has an income tax rate of 40%. What was Best’s net income for the year?

A.$294,000

B.$290,000

C.$300,000

D.$306,000

5. Yummy Foods purchased a two-year fire and extended coverage.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>insurance policy on August 1, 2011, and charged the $4,200 premium to Insurance expense. At its December 31, 2011, year-end, Yummy Foods would record which of the following adjusting entries?

a.

Insurance expense

875

 Prepaid insurance

875

b.

Prepaid insurance

875

 Insurance expense

875

c.

Insurance expense

875

Prepaid insurance

3,325

 Insurance payable

4,200

d.

Prepaid insurance

3,325

 Insurance expense

3,325

A.Option b

B.Option d

C.Option c

D.Option a

6. Janson Corporation Co.’s trial balance included the following.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account balances at December 31, 2011:

Accounts payable

$25,000

Bond payable, due 2020

22,000

Salaries payable

16,000

Note payable, due 2012

20,000

Note payable, due 2016

40,000

What amount should be included in the.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>current liability section of Janson’s December 31, 2011, balance sheet?

A.$41,000

B.$101,000

C.$61,000

D.$63,000

7. On June 1, Royal Corp. began operating a service company with an initial cash investment by shareholders of $2,000,000. The company provided $6,400,000 of services in June and received full payment in July. Royal also incurred expenses of $3,000,000 in June that were paid in August. During June, Royal paid its shareholders cash dividends of $1,000,000. What was the company’s income before income taxes for the two months ended July 31 under the following methods of.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>accounting?

  

Cash Basis

Accrual Basis

a.

$3,400,000

$3,400,000

b.

$5,400,000

$2,400,000

c.

$6,400,000

$3,400,000

d.

$6,400,000

$2,400,000

A.Option c

B.Option b

C.Option a

D.Option d

8. Temporary accounts would not include

A.cost of goods sold.

B.depreciation expense.

C.salaries payable.

D.supplies expense.

9. On November 1, 2011, Tim’s Toys borrows $30,000,000 at 9% to finance the holiday sales season. The note is for a six-month term and both principal and interest are payable at maturity. What should be the balance of interest payable for the.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>loan as of December 31, 2011?

A.$1,350,000.

B.$112,500.

C.$450,000.

D.$225,000.

10. A cause-and-effect relationship is implicit in the

A.historical cost principle.

B.going concern assumption.

C.matching principle.

D.realization principle.

11. The mostlikely important flaw leading to the demise of the APB was the perceived lack of

A.importance.

B.competence.

C.independence.

D.confidence.

12. An example of a contra.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account is

A.sales revenue.

B.accounts receivable.

C.depreciation expense.

D.accumulated depreciation.

13. Janson Corporation Co.’s trial balance included the following.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account balances at December 31, 2011:

Accounts receivable

$12,000

Inventories

40,000

Patent

12,000

Investments

30,000

Prepaid.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>insurance

6,000

Note receivable, due 2014

50,000

Investments consist of treasury bills that were purchased in November and mature in January. Prepaid insurance is for the next two years. What amount should be included in the.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>current asset section of Janson’s December 31, 2011, balance sheet?

A.$135,000

B.$55,000

C.$88.000

D.$85,000

14. In its first year of operations Best Corp. had income before.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>tax of $500,000. Best made income tax payments totaling $210,000 during the year and has an income tax rate of 40%. What was Best’s net income for the year?

A.$290,000

B.$306,000

C.$294,000

D.$300,000

15. Based on recent financial statement data for Harmony Health Foods, Inc. (HHF), shown below, HHF’s debt-to-equity ratio is (rounded)

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A.0.53.

B.0.75.

C.1.13.

16. Pat’s Custom.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>Tuxedo Shop maintains its records on the cash basis. During this past year Pat’s collected $42,000 in tailoring fees, and paid $14,000 in expenses. Depreciation expense totaled $2,000. Accounts receivable increased $1,500, supplies increased $4,000, and accrued liabilities increased $2,500. Pat’s accrual basis net income would be

A.$29,000.

B.$23,000.

C.$18,000.

D.$34,000.

17. SFAC No.5 focuses on

A.objectives of financial reporting.

B.qualitative characteristics of accounting information.

C.elements of financial statements.

D.recognition and measurement concepts in accounting.

18. Which of the following was the first private sector entity that set.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>accounting standards in the United States?

A.AICPA

B.Committee on Accounting Procedure

C.Accounting Principles Board

D.Financial Accounting Standards Board

19. Dave’s Duds reported cost of goods sold of $2,000,000 this year. The inventory.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account increased by $200,000 during the year to an ending balance of $400,000. What was the cost of merchandise that Dave purchased during the year?

A.$1,800,000

B.$1,600,000

C.$2,400,000

D.$2,200,000

20. Ace Bonding Company purchased merchandise inventory on.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account. The inventory costs $2,000 and is expected to sell for $3,000. Indicate how Ace should record the purchase by selecting one of the options listed below.

a.

Inventory

2,000

 Accounts payable

2,000

b.

Cost of goods sold

2,000

Deferred revenue

1,000

 Sales in advance

3,000

c.

Cost of goods sold

2,000

 Inventory payable

2,000

d.

Cost of goods sold

2,000

Profit

1,000

 Sales payable

3,000

A.Option b

B.Option a

C.Option d

D.Option c

21. Listed below are.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account balances (in $millions) taken from the records of Symphony Stores. All of these are permanent accounts, except the last two that have yet to be closed. The installment receivables are current. Symphony uses a perpetual inventory system.

.0/msohtmlclip1/01/clip_image001.gif” alt=”https://my.pennfoster.com/exams/images/061500NR_Q16-19.gif”>

What would Symphony report as total assets?

A.$2,338

B.$2,318

C.$2,303

D.$2,323

22. The full disclosure principle requires a balance between

A.relevance and cost effectiveness.

B.timeliness and predictive value.

C.comparability and consistency.

D.reliability and neutrality.

23. Based on recent financial statement data for Harmony Health Foods, Inc. (HHF), shown below, HHF’s times interest earned ratio is (rounded):

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A.3.47

B.2.47.

C.1.73.

24. Listed below are.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account balances (in $millions) taken from the records of Symphony Stores. All of these are permanent accounts, except the last two that have yet to be closed. The installment receivables are current. Symphony uses a perpetual inventory system.

.0/msohtmlclip1/01/clip_image001.gif” alt=”https://my.pennfoster.com/exams/images/061500NR_Q16-19.gif”>

What would Symphony report as total.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>current assets?

A.$843

B.$838

C.$1,696

D.$823

25. In its first year of operations Acme Corp. had income before.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>tax of $400,000. Acme made income tax payments totaling $150,000 during the year and has an income tax rate of 40%. What would be the balance in income tax payable at the end of the year?

A.$10,000 debit.

B.$150,000 credit.

C.$160,000 credit.

D.$10,000 credit

ACCOUNTING INFORMATION SYSTEMS 2
1. Cendant Corporation’s results for the year ended December 31, 2011, include the following material items:

Sales revenue

$6,200,000

Cost of goods sold

3,800,000

Selling and administrative expenses

1,300,000

Loss on sale of investments

200,000

Loss on discontinued operations

500,000

Loss on expropriation (unusual and infrequent event)

800,000

Restructuring costs

80,000

Overstatement of amortization expense in 2010
 caused by mathematical error

60,000

Cendant Corporation’s income from continuing operations before income.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>taxes for 2011 is

A.$900,000.

B.$880,000.

C.$820,000.

D.$320,000.

2. Reliable Enterprises sells distressed merchandise on extended.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>credit terms. Collections on these sales aren’t reasonably assured and bad debt losses can’t be reasonably predicted. It’s unlikely that repossessed merchandise will be in salable condition. Therefore, Reliable uses the cost recovery method. Merchandise costing $30,000 was sold for $55,000 in 2010. Collections on this sale were $20,000 in 2010, $15,000 in 2011, and $20,000 in 2012.

In its 2010 year-end balance sheet, Reliable would report installment receivables (net) of

A.$20,000.

B.25,909.

C.$35,000.

D.$10,000.

3. On October 28, 2011, Mercedes Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2011, the end of the company’s fiscal year. The division’s loss from operations for 2011 was $2,000,000.
The division’s book value and fair value less cost to sell on December 31 were $3,000,000 and $3,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2011.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>income statement?

A.$500,000 gain included in continuing operations and a $2,000,000 loss from discontinued operations

B.$2,000,000 loss

C.None

D.$2,500,000 loss

4. Lake Power.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>Sports sells jet skis and other powered recreational equipment. Customers pay 1/3 of the sales price of a jet ski when they initially purchase the ski, and then pay another 1/3 each year for the next two years. Because Lake has little information about collectibility of these receivables, they use the installment methodfor revenue recognition. In 2010 Lake began operations and sold jet skis with a total price of $900,000 that cost Lake $450,000. Lake collected $300,000 in 2010, $300,000 in 2011, and $300,000 in 2012 associated with those sales. In 2011 Lake sold jet skis with a total price of $1,500,000 that cost Lake $900,000. Lake collected $500,000 in 2011, $400,000 in 2012, and $400,000 in 2013 associated with those sales. In 2013 Lake also repossessed $200,000 of jet skis that were sold in 2011. Those jet skis had a fair value of $75,000 at the time they were repossessed.
In 2013, Lake would record a loss on repossession of

A.$120,000.

B.$80,000.

C.$200,000.

D.$45,000.

5. Chancellor Ltd. sells an asset with a $1 million fair value to Sophie Inc. Sophie agrees to make 6 equal payments, one year apart, commencing on the date of sale. The payments include principal and 6% annual interest. Compute the annual payments.

A.$191,852

B.$166,651

C.$203,351

D.$135,252

6. Elmore Co. purchased an offset press on January 1, 2008, at a cost of $120,000. The press had an estimated eight-year life with no residual value. Elmore uses straight-line depreciation. At January 1, 2011, Elmore estimated that the press would have only three more years of remaining life with no residual value. For 2011, Elmore would report depreciation of

A.$25,000.

B.$20,000.

C.$30,000.

D.$15,000.

7. First Financial Auto.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>Loan Department wishes to know the payment required at the first of each month on a $10,500, 48-month, 11% auto loan. To determine this amount, First Financial would

A.Multiply $10,500 by the present value of an ordinary annuity of 1.

B.Divide $10,500 by the present value of an annuity due of 1.

C.Multiply $10,500 by the present value of 1.

D.Divide $10,500 by the future value of an ordinary annuity of 1.

8. Present and future value tables of $1 at 3% are presented below:

.0/msohtmlclip1/01/clip_image004.jpg” alt=”https://my.pennfoster.com/exams/images/061501NR_Q23.gif”>

Shane wants to invest money in a 6% CD.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account that compounds semiannually. Shane would like the account to have a balance of $100,000 four years from now. How much must Shane deposit to accomplish his goal?

A.$22,510

B.$25,336

C.$88,849

D.$78,941

9. Lake Power.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>Sports sells jet skis and other powered recreational equipment. Customers pay 1/3 of the sales price of a jet ski when they initially purchase the ski, and then pay another 1/3 each year for the next two years. Because Lake has little information about collectibility of these receivables, they use the installment methodfor revenue recognition. In 2010 Lake began operations and sold jet skis with a total price of $900,000 that cost Lake $450,000. Lake collected $300,000 in 2010, $300,000 in 2011, and $300,000 in 2012 associated with those sales. In 2011 Lake sold jet skis with a total price of $1,500,000 that cost Lake $900,000. Lake collected $500,000 in 2011, $400,000 in 2012, and $400,000 in 2013 associated with those sales. In 2013 Lake also repossessed $200,000 of jet skis that were sold in 2011. Those jet skis had a fair value of $75,000 at the time they were repossessed.
In 2010, Lake would recognize realized gross profit of

A.$0.

B.$150,000.

C.$300,000.

D.$450,000.

10. Freda’s Florist reported the following before-.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>tax income statement items for the year ended December 31, 2011:

Operating income

$250,000

Extraordinary gain

$70,000

All income statement items are subject to a 40% income tax rate. In its 2011 income statement, Freda’s separately stated income tax expense and total income tax expense would be

A.$100,000 and $128,000, respectively.

B.$128,000 and $100,000, respectively.

C.$128,000 and $128,000, respectively.

D.$100,000 and $100,000, respectively.

11. Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay 1/3 of the sales price of a jet ski when they initially purchase the ski, and then pay another 1/3 each year for the next two years. Because Lake has little information about collectibility of these receivables, they use the installment methodfor revenue recognition. In 2010 Lake began operations and sold jet skis with a total price of $900,000 that cost Lake $450,000. Lake collected $300,000 in 2010, $300,000 in 2011, and $300,000 in 2012 associated with those sales. In 2011 Lake sold jet skis with a total price of $1,500,000 that cost Lake $900,000. Lake collected $500,000 in 2011, $400,000 in 2012, and $400,000 in 2013 associated with those sales. In 2013 Lake also repossessed $200,000 of jet skis that were sold in 2011. Those jet skis had a fair value of $75,000 at the time they were repossessed.
In its December 31, 2011,.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>balance sheet, Lake would report

A.installment receivables (net) of $900,000.

B.deferred gross profit of $700,000.

C.deferred gross profit of $1,050,000.

D.installment receivables (net) of $750,000.

12. Quaker State Inc. offers a new employee a lump sum signing bonus at the date of.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>employment. Alternatively, the employee can take $8,000 at the date of employment plus $20,000 at the end of each of his first three years of service. Assuming the employee’s time value of money is 10% annually, what lump sum at employment date would make him indifferent between the two options?

A.$57,737

B.$23,026

C.$8,000

D.$62,711

13. On May 1, Foxtrot Co. agreed to sell the assets of its Footwear Division to Albanese Inc. for $80 million. The sale was.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>completed on December 31, 2011.
The following additional facts pertain to the transaction:
* The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations.
* The book value of Footwear’s assets totaled $48 million on the date of the sale.
* Footwear’s operating income was a pretax loss of $10 million in 2011.
* Foxtrot’s income tax rate is 40%.
Suppose that the Footwear Division’s assets had not been sold by December 31, 2011, but were considered held for sale. Assume that the fair value of these assets at December 31 was $80 million. In the 2011 income statement for Foxtrot Co., under discontinued operations it would report a

A.16% gain.

B.$6 million loss

C.$10 million loss

D.$13.2 million income

14. Indiana Co. began a construction project in 2011 that will provide it $150 million when it is.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>completed in 2013. During 2011, Indiana incurred $36 million of costs and estimates an additional $84 million of costs to complete the project.
Using the percentage-of-completion method, Indiana recognized _______ on the project in 2011.

A.$36 million loss

B.$6 million loss

C.$9 gross profit

D.no gross profit or loss

15. Lucia Ltd. reported net.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>income of $135,000 for the year ended December 31, 2011. January 1 balances in accounts receivable and accounts payable were $29,000 and $26,000 respectively. Year-end balances in these accounts were $30,000 and $24,000, respectively. Assuming that all relevant information has been presented, Lucia’s cash flows from operating activities would be

A.$136,000.

B.$134,000.

C.$132,000.

D.$138,000

16. Fenland Co. plans to retire $100 million in bonds in five years, so it wishes to create a fund by making equal investments at the beginning of each year during that period in an.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account it expects to earn 8% annually. What amount does Fenland need to invest each year?

A.$17,045,650

B.15,783,077

C.$23,190,400

D.The amount can’t be determined from the given information.

17. Shady Lane’s income tax payable.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account decreased from $14 million to $12 million during 2011. If its income tax expense was $80 million, what would be shown as an operating cash flow under the direct method?

A.A cash outflow of $80 million

B.A cash outflow of $82 million

C.A cash outflow of $12 million

D.A cash outflow of $78 million

18. Misty Company reported the following before-tax items during the.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>current year:

Sales

$600

Operating expenses

250

Restructuring charges

20

Extraordinary loss

50

Misty’s effective tax rate is 40%.
What would be Misty’s net income for the current year?

A.$112

B.$148

C.$168

D.$198

19. Reliable Enterprises sells distressed merchandise on extended.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>credit terms. Collections on these sales aren’t reasonably assured and bad debt losses can’t be reasonably predicted. It’s unlikely that repossessed merchandise will be in salable condition. Therefore, Reliable uses the cost recovery method. Merchandise costing $30,000 was sold for $55,000 in 2010. Collections on this sale were $20,000 in 2010, $15,000 in 2011, and $20,000 in 2012.

In 2010, Reliable would recognize gross profit of

A.$8,090.

B.$25,000.

C.$0.

D.$8,333.

20. On October 28, 2011,.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>Mercedes Company committed to a plan to sell a division that qualified as a component of the entity according to GAAP regarding discontinued operations and was properly classified as held for sale on December 31, 2011, the end of the company’s fiscal year. The division’s loss from operations for 2011 was $2,000,000.
The division’s book value and fair value less cost to sell on December 31 were $3,000,000 and $2,500,000, respectively. What before-tax amount(s) should Mercedes report as loss on discontinued operations in its 2011 income statement?

A.None

B.$2,500,000 loss

C.$500,000 impairment loss included in continuing operations and a $2,000,000 loss from discontinued operations

D.$2,000,000 loss

21. Indiana Co. began a construction project in 2011 that will provide it $150 million when it is.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>completed in 2013. During 2011, Indiana incurred $36 million of costs and estimates an additional $84 million of costs to complete the project.
In 2012, Indiana incurred costs of $58.5 million and estimated an additional $40.5 million in costs to complete the project. Using the percentage-of-completion method, Indiana recognized _______ on the project in 2012.

A.$1.5 million gross profit

B.$6 million gross profit

C.$15 million gross profit

D.$13.5 million gross profit

22. On May 1, Foxtrot Co. agreed to sell the assets of its Footwear Division to Albanese Inc. for $80 million. The sale was.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>completed on December 31, 2011.
The following additional facts pertain to the transaction:
* The Footwear Division qualifies as a component of the entity according to GAAP regarding discontinued operations.
* The book value of Footwear’s assets totaled $48 million on the date of the sale.
* Footwear’s operating income was a pretax loss of $10 million in 2011.
* Foxtrot’s income tax rate is 40%.
Suppose that the Footwear Division’s assets had not been sold by December 31, 2011, but were considered held for sale. Assume that the fair value of these assets at December 31 was $40 million. In the 2011 income statement for Foxtrot Co., it would report a loss from discontinued operations of

A.$3 million loss

B.$18 million loss

C.$10.8 million loss

D.$10 million loss

23. Misty Company reported the following before-tax items during the.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>current year:

Sales

$600

Operating expenses

250

Restructuring charges

20

Extraordinary loss

50

Misty’s effective tax rate is 40%.

What would be Misty’s income before extraordinary item(s)?

A.$198

B.$210

C.$360

D.$330

24. Kunkle Company wishes to earn 20% annually on its investments. If it makes an investment that equals or exceeds that rate, it considers it a success. Assume that it invests $2 million and gets $500,000 in return at the end of each year for xyears. What is the minimum value of xfor which it will consider the investment a success? Assume that it can’t invest for fractional parts of a year.

A.7 years

B.6 years

C.9 years

D.4 years

25. Hong Kong Clothiers reported revenue of $5,000,000 for its year ended December 31, 2011. Accounts receivable at December 31, 2010 and 2011, were $320,000 and $355,000, respectively. Using the direct method for reporting.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>cash flows from operating activities, Hong Kong Clothiers would report cash collected from customers of

A.$4,965,000.

B.$5,035,000.

C.$5,045,000.

D.$5,000,000.

ECONOMIC RESOURCES 1

1. Alliance Software began 2011 with accounts receivable of $115,000. All sales are made on.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>credit. Sales and cash collections from customers for the year were $780,000 and $700,000, respectively. Cost of goods sold for the year was $450,000. What was Alliance’s receivables turnover ratio (rounded) for 2011?

A.6.78

B.2.90

C.5.03

D.4.00

2. Chez Fred Bakery estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts receivable. During 2011, Chez Fred’s credit sales and collections were $125,000 and $131,000, respectively. What was the balance of accounts receivable on January 1, 2011, if $180 in accounts receivable were written off during 2011 and if the allowance.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account had a balance of $750 on 12/31/11?

A.$31,000

B.$5,820

C.$31,180

D.138,000

3. Data below for the year ended December 31, 2011, relates to Houdini Inc. Houdini started business January 1, 2011, and uses the LIFO retail method to estimate ending inventory.

Cost

Retail

Beginning inventory

 $66,000

 $104,000

Net purchases

280,000

420,000

Net markups

20,000

Net markdowns

40,000

Net sales

375,000

.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>Current period cost-to-retail percentage is

A.63.6%.

B.63.5%.

C.68.7%.

D.70.0%.

4. Sullivan Corporation has determined its year-end inventory on a FIFO basis to be $500,000. Information pertaining to that inventory is as follows:

Selling price

 $520,000

Disposal costs

30,000

Normal profit margin

60,000

.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>Replacement cost

440,000

What should be the carrying value of Sullivan’s inventory?

A.$490,000

B.$440,000

C.$430,000

D.$500,000

5. Ramen, Inc., adopted dollar-value LIFO (DVL) as of January 1, 2011, when it had a cost inventory of $600,000. Its inventory as of December 31, 2011, was $667,800 at year-end costs and the cost index was 1.06. What was DVL inventory on December 31, 2011?

A.$667,800

B.$631,800

C.$636,000

D.$630,000

6. Cashmere Soap Corporation had the following items listed in its trial balance at 12/31/11:

Currency and coins

 $ 650

Balance in checking.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>account

2,600

Customer checks waiting to be deposited

1,200

Treasury bills, purchased on 11/1/11,
 mature on 4/30/12

3,000

Marketable equity securities

10,200

Commercial paper, purchased on 11/1/11,
 mature on 1/30/12

5,000

What amount will Cashmere Soap include in its year-end balance sheet as cash and cash equivalents?

A.$9,450

B.$12,450

C.$19,650

D.$7,450

7. On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available:

Sales, January 1 through July 8

 $700,000

Inventory, January 1

130,000

Purchases, January 1 through July 8

640,000

Gross profit ratio

30%

What is the estimated inventory on July 8 immediately prior to the fire?

A.$192,000

B.$280,000

C.$490,000

D.$510,000

8. Baker Inc. acquired equipment from the manufacturer on 10/1/11 and gave a noninterest-bearing note in exchange. Baker is obligated to pay $918,000 on 4/1/12 to satisfy the obligation in full. If Baker accrued interest of $9,000 on the note in its 2011 year-end financial statements, what is its imputed annual.pennfoster.com/StudentLMS/Student/Exams/Random.aspx” title=”Powered by Text-Enhance”>interest rate?

A.4%

B.5%

C.6%

D.2%

9. False Value Hardware began 2011 with a credit balance of $32,000 in the allowance for sales re

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