Acct 303 Stuyguide Exam1
Acct 303 Stuyguide Exam1 ACCT 303
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This 6 page Study Guide was uploaded by Levis Notetaker on Monday February 16, 2015. The Study Guide belongs to ACCT 303 at San Francisco State University taught by Yuji Shibuya in Winter2015. Since its upload, it has received 958 views. For similar materials see ACCOUNTING FINANCIAL ANALYSIS in Finance at San Francisco State University.
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Date Created: 02/16/15
1 A firm39s financial statements contain trends that give users insight into the firm39s A future market share 7Bposition within its industry ijprofitability productivity and liquidity current market price for common and preferred stock 2 The section of published reports of public companies that includes a description of the company39s business risks results of operations financial condition and future plans for the company is known as the A president s message B board of directors analysis C management representation letter 7 D management39s discussion and analysis 3 Investors who follow a fundamental analysis approach determine the value the company39s assets would yield if sold individualiy If Bfiestimate the value of a stock by assessing the amount timing and uncertainty of future cash flows that will accrue to the issuing company C assess the company39s ability to meet its debts related financial obligations D assess the company39s ability to raise additional cash by selling assets issuing stock or borrowing more 4 GAAP S goals are to ensure that financial statements A do not contain any representation that could jeopardize management are accurate and free from fraud C Clearly reflect the economic condition and performance of the company quot D provide stockholders all of the information they need to assess management39s performance One financial disclosure cost is the possibility that competitors may use the information to harm the company providing the disclosure All ofthe following disclosures might create a competitive disadvantage except A detailed information about company operations such as sales and cost figures for individual product lines B details about the company39s strategies plans and tactics C information about the company39s technological and managerial innovations Dinformation on the company39s level of spending on research and development 6 The real accounting issue in income recognition is the type of income recognized A BItiming of the recognition C basis of income recognition D quantity of income recognized 7 The matching princ ipie requires that expenses be recognized A when the costs are paid by the entity Spin the same period in which all the assets are used up 39 C in the same period in which the revenue generated by these expenses is recognized D in the same period in which the revenue generated by these expenses is received 8 A special onetime charge resulting from corporate restructurings would be reported on the income statement as aan extraordinary item shown net of tax VBT special item in continuing operations C special item in continuing operations shown net of tax D special item in discontinued operations shown net of tax 9 Royal Inc discovered that equipment purchased three years ago for 300000 will not last as long as originally estimated The firm was depreciating the equipment at the rate of 40000 per year with an estimated salvage value of 20000 New estimates indicate that the equipment will last a total of five years with no salvage value How much should Royal Inc record as depreciation in year four A 40000 3 if j i EZ 1L1J o a A v at lassoooo y v I a 90000 I D 120000 A Expenses increase owners39 equity and decrease liabilities Revenues decrease owners39 equity and increase liabilities 39 CFRevenues increase owners39 equity and expenses decrease owners39 equity ID Revenues decrease owners39 equity and expenses increase owners equity 11 Under the cost recovery method of revenue recognition A income is recognized on a proportionate basis as the cash is received from the sale R income is recognized when the cash received from the sale exceeds the cost ofthe product sold C income is recognized immediately D income is recognized when all ofthe cash has been received 12 Academic studies have found that actual earnings AIvfall randomly around the consensus estimate Btend to come in at or above the forecast almost never seem to beat estimates by a penny or two a share no matter what the economic conditions D rarely are close to analysts39 forecast earnings for the company 13 Conventional wisdom is that iffinvestors value a com pany39s stocllt based on sustainable operating earnings 8 investors focus on onetime special charges and writeoffs C big bath items adversely affect stock price D restructuring an organization causes bankruptcy 14 The Sacramento Farm completed the fall harvest with 50000 bushels of premium wheat The wheat cost 75000 from planting to harvest The market price of the wheat on the September day in Year 1 when it was placed in the silo was 250 per bushel and Sacramento sold 42000 bushels on the day Sacramento held the remaining 8000 bushels until February next year Year 2 when it sold the 8000 bushels for 300 per bushel Using the market price production method how much net revenue should Sacramehto recognize in Year 1 a 42000 s 39 y r B s50000 39 I 39 105000 03315000 15 Green Real Estate began operations on January 2 2011 and uses the installment sales method of accouhting for revenue recognition The following information is available for 2011 installment accounts receivable December 31 2011 400000 Gross profit on total 2011 sales ie total of realized and unrealized gross profit on 2011 sales 280000 Gross profit percentage on 2011 sales 30 For the year ended December 31 2011 calculate the amount of realized gross profit A 36000 B 84000 C 120000 D 160000 16 An analyst gathered the following information about a company whose scal year end is December 31 What would the company s basic earnings per share EPS for 2011 Net income from the year was 245 million Preferred stock dividends for 2 million were declared and paid for the year Common stock dividends of 45 million were paid for the year There were 12 million shares of common stock outstanding on January 1 2011 The company issued 4 million new shares of common stock on October 1 2011 The capital structure does not include any potentially dilutive convertible securities options warrants or other contingent securities so f 39 r LN y a l l q F i m x 239 7 v i we r l n o h t 5 1 K M L at r l 439 3 3 u l I 4 i r 1 f P1 v r 1 r l 7 f a r quot 1 7 d H 5 i 1 7 1 Lion Construction contracted to build an addition for 500000 Construction started in January 2011 and was completed in November 2012 Data relating to the contract are summarized below 2011 2012 Construction costs incurred during the year 290500 120000 Estimated additional cost to complete 124500 0 Cash collections 250000 250000 Calculate the gross profit that Lion reports in 2012 under the percentageofcompletion method a I r r J Vquot x I 3 L C 7 lt 7 r 39339 1 xi 1 I 5 1 J a E quot it 1quotquot 24quotng Ir J r I aquot u r x r quot xquot r 1quot i r r J ii a 3931 u L n Few A 1 i r u39 1 u 1 i 7 r i t f k 1 J Lil l lt3 r c quota a FingerL l l l l i 5 v u U 18 John Chu MD keeps his accounting records on the cash basis During 2011 Dr Chu collected 220000 in fees from his patients At December 31 2010 Dr Chu had accounts receivable of 30000 At December 31 2011 Dr Chu had accounts receivable of 35000 and had collected unearned fees of 8000 0n the accrual basis what was Dr Chu39s patient service revenue for 2011 L f I I 39 H fl a r Y e z 4 l I i l Qt c 3 l IL quot 19 On November 15 2011 Eaton Co sold a segment of its business for 2750000 The net book value of the segment at the time of its disposal was 2900000 Eaton had pretax operating income of 1750000 for 2011 which included 360000 earned by the discontinued segment prior to its disposal Assume Eaton39s tax rate is 30 Fill the blanks AlBCD of a partial income statement for Eaton Co for 2011 Income Statement for the Year Ended December 31 2011 Income from continuing operations before income tax A Income tax expense B Income from continuing operations 973000 Discontinued operations Operating income net of tax Loss on disposal of discontinued operations net of tax 105000 Net Income ID l E if 7 I l I K 1 i F 39 3 l I I I K g quotat if a o H quot1 i 3 e4 39 is Acct 303 Practice Assets Year 1 Year 2 Cash 100000 50000 i Accounts receivable net 50000 100000 4 Inventory 100000 250000 4 poem faxes Equipment net 300000 350000 39 0r Total assets 550000 me D 1 Liabilities and Egnitv 3quot j T 75 1 Accounts ayable 150000 100000 Income tages payable 80000 30000 7 x aym Bonds payable 100000 80000 EN 1770 1 Common stock 100000 200000 f Retained earnings 120000 240000 i 1 Total liabilities and Equity 550000 M 5 701 i A brief income statement for Year 2 shows the following Sales 900000 205 Cost of goods sold 500QQ 0 Operating expenses 100000 Depreciation 50000 Income tax expense 100000 750000 Net Income 1 How much cash did Kris collect from customers during Year 2 Assume all 2 How much cash did Kris gax to suppliers for inventory during Year 2 1 j on credit How much did Kris pay in dividends to shareholders in Year 2 How much did Kris pay in income taxes to the government in Year 39 What are Kris cash flows from operating activities for Year 239 i What are Kris39 cash flows from investing activities for Year 2 Newss What are Kris39 cash flows from nancing activities for Year 2 pp H96 v I x 151 U D C 5 39 9 A Wf e 3 i S s 5 Re Wand a r ezsr r 39 7 quot
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