A200 Exam 1 Version A 100 Points possible Student Name Student ID Number Class Day Time Instructor s Name FILL OUT THE ENTIRE HEADING ON THIS EXAM FILL OUT YOUR SCAN FORM AS YOUR INSTRUCTOR INDICATES MARK ON YOUR SCAN FORM THE BEST ANSWER TO EACH QUESTION ONLY THE ANSWERS YOU MARK ON YOUR SCAN FORM WILL BE GRADED 1 Stern Company reports the following selected account balances for 2008 Accounts receivable Administrative expenses Cost of sales Dividends Income tax expense 14 000 37 000 415 000 2 200 64 000 Interest income Interest expense Merchandise inventory Sales Selling expenses What is Stern s 2008 net income a 209 800 b 223 800 c 212 000 d 226 000 2 The rules that govern preparation of financial statements are a b c d accounting periodicity principles financial statement standards income tax rules and regulations generally accepted accounting principles 3 The Sarbanes Oxley Act SOX requires that businesses a b c d prove that they are profitable report on the effectiveness of their internal control procedures show a postive net cash flow report on each of their new product offerings 4 The purpose of an internal control system is to a b c d Assure that the company makes a profit Guarantee that no fraud will take place Protect the company s assets Prepare the company s financial statements 7 000 35 000 50 000 852 000 96 000 5 On July 1 Laramie Company borrowed 25 000 from Third National Bank This transaction a b c d increases assets and increases liabilities decreases assets and decreases equity increases liabilities and decreases equity increases assets and decreases liabilities 6 In an end of period adjustment Wuethrich Company increased wages expense and increased wages payable This is an example of a n a accrued revenue adjustment b accrued expense adjustment c deferred revenue adjustment d deferred expense adjustment 7 When a company increases revenue it also always a decreases retained earnings b increases retained earnings c increases capital stock d increases liabilities 8 When a company increases expenses it also always a increases assets b decreases equity c decreases liabilities d increases dividends 9 On 12 31 08 after year end adjustment Raptor Corporation s accounts related to equipment show Accumulated depreciation on equipment Depreciation expense Equipment 215 000 43 000 625 000 What is the book value carrying value of Raptor s equipment a 410 000 b 367 000 c 453 000 d 625 000 10 Garrison Company is owned by a single individual who is 100 liable for all business debt and is taxed on all business income What is Garrison s business form a corporation b partnership c LLC limited liability company d proprietorship 11 On June 5 Blettner Company paid 4 200 for utilities used and accrued in May Using accrual basis accounting this transaction would a decrease cash 4 200 and increase utilities expense 4 200 b decrease cash 4 200 and increase utilities payable 4 200 c increase cash 4 200 and decrease utilities expense 4 200 d decrease cash 4 200 and decrease utilities payable 4 200 12 Expenses can be defined as a assets consumed b services used in the process of generating revenues c costs that have been incurred during the normal course of business d all of these 13 One advantage of forming a business as a corporation is the ability to obtain large amounts of financial resources by a b c d paying dividends to stockholders earning significant amounts of revenue issuing capital stock to public investors purchasing long term fixed assets 14 Which of the following is an example of a procedure specifically targeting internal control over cash disbursements payments a b c d preparation of timely balance sheets showing cash balances invoices for cash receipts requiring authorization of the receipt open cash drawers allowing easy payment of cash vouchers requiring authorization payment of cash The following applies to questions 15 and 16 Anderson Company s 2008 statement of cash flows shows the following Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities 589 500 302 000 125 750 Anderson s beginning cash balance was 97 500 15 What is Anderson s ending cash balance a 589 500 b 510 750 c 687 000 d 413 250 16 Anderson s net cash outflow from investing activities means that a b c d the company used cash to pay dividends to stockholders in 2008 the company used cash to pay off debt in 2008 the company used cash to purchase long term fixed assets in 2008 the company used cash for depreciation of long term fixed assets in 2008 17 At the end of the business day Mills Company s manager checked the cash register Actual cash received from the day s sales was 23 480 97 Total sales indicated on the cash register tape were 22 651 20 The entry to record the day s sales will include a 829 77 cash over other income b 829 77 cash short other expense c 829 77 cash short other income d 829 77 cash over other expense 18 On 1 01 08 Mason Company paid 123 600 for a two year business insurance policy On 12 31 08 what will be the balance in the Prepaid Insurance account after adjustment a 123 600 b 118 450 c 113 300 d 61 800 19 Which of the following group of accounts are all assets a b c d Cash Accounts Payable Buildings Accounts Receivable Revenue Cash Prepaid Expenses Buildings Patents Unearned Revenues Prepaid Expenses Cash 20 A company s internal stakeholders are a b c d creditors and stockholders stockholders and managers employees and managers customers and creditors 21 Costs incurred in the process of generating revenue are called a retained earnings b liabilities c dividends d expenses The following applies to questions 22 and 23 On 12 31 08 the end of its first year of operations Murphy Corporation reports the following account balances Accounts receivable Accumulated depreciation equipment Capital stock Cash Depreciation expense Dividends 15 000 46 000 100 000 26 600 8 000 3 200 Equipment Fees earned Notes payable due 2017 Operating expenses Retained earnings Unearned fees 22 On its 2008 income statement what will be Murphy s net income a 27 800 b 24 500 c 42 800 d 39 500 23 On its 12 31 08 balance sheet what will be Murphy s total assets 195 000 150 800 50 000 115 000 16 000 a 341 400 b 290 600 c 441 400 d 190 600 24 Stark Corporation reports the following account balances on December 31 2008 Accounts receivable Accounts payable Accumulated depreciation building Building Capital stock Cash Depreciation expense 80 000 90