A200 Student Name ___________________________Exam 1 Student ID Number ______________________Version A Class Day & Time _______________________100 Points possible 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 $ 14,000 Interest income $ 7,000Administrative expenses 37,000 Interest expense 35,000Cost of sales 415,000 Merchandise inventory 50,000Dividends 2,200 Sales 852,000Income tax expense 64,000 Selling expenses 96,000What is Stern’s 2008 net income?a. $209,800 c. $212,000b. $223,800 d. $226,0002. The rules that govern preparation of financial statements are:a. accounting periodicity principlesb. financial statement standardsc. income tax rules and regulations d. generally accepted accounting principles3. The Sarbanes-Oxley Act (SOX) requires that businesses:a. prove that they are profitableb. report on the effectiveness of their internal control proceduresc. show a postive net cash flowd. report on each of their new product offerings4. The purpose of an internal control system is to: a. Assure that the company makes a profitb. Guarantee that no fraud will take placec. Protect the company’s assetsd. Prepare the company’s financial statements5.On July 1, Laramie Company borrowed $25,000 from Third National Bank. This transaction:a. increases assets and increases liabilitiesb. decreases assets and decreases equityc. increases liabilities and decreases equityd. increases assets and decreases liabilities6. 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 c. deferred revenue adjustmentb. accrued expense adjustment d. deferred expense adjustment7. When a company increases revenue, it also always:a. decreases retained earnings c. increases capital stockb. increases retained earnings d. increases liabilities8. When a company increases expenses, it also always:a. increases assets c. decreases liabilitiesb. decreases equity d. increases dividends9. On 12-31-08 after year-end adjustment, Raptor Corporation’s accounts related to equipment show:Accumulated depreciation on equipment $ 215,000Depreciation expense 43,000Equipment 625,000What is the book value (carrying value) of Raptor’s equipment?a. $410,000 c. $453,000b. $367,000 d. $625,00010. 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 c. LLC (limited liability company)b. partnership d. proprietorship11. 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 $4,200b. decrease cash $4,200 and increase utilities payable $4,200c. increase cash $4,200 and decrease utilities expense $4,200d. decrease cash $4,200 and decrease utilities payable $4,20012. 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. paying dividends to stockholdersb. earning significant amounts of revenuec. issuing capital stock to public investorsd. purchasing long-term (fixed) assets14. Which of the following is an example of a procedure specifically targeting internal control over cash disbursements (payments)?a. preparation of timely balance sheets showing cash balancesb. invoices for cash receipts requiring authorization of the receiptc. open cash drawers allowing easy payment of cashd. vouchers requiring authorization payment of cashThe following applies to questions 15 and 16: Anderson Company’s 2008 statement of cash flows shows the following:Net cash flows from operating activities $589,500Net cash flows from investing activities (302,000)Net cash flows from financing activities 125,750Anderson’s beginning cash balance was $97,500.15. What is Anderson’s ending cash balance?a. $589,500 c. $687,000b. $510,750 d. $413,25016. Anderson’s net cash outflow from investing activities means that:a. the company used cash to pay dividends to stockholders in 2008.b. the company used cash to pay off debt in 2008.c. the company used cash to purchase long-term (fixed) assets in 2008.d. the company used cash for depreciation of long-term (fixed) assets in 200817. 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) c. $829.77 cash short (other income)b. $829.77 cash short (other expense) 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 bethe balance in the Prepaid Insurance account after adjustment?a. $123,600 c. $113,300b. $118,450 d. $ 61,80019. Which of the following group of accounts are all assets?a. Cash, Accounts Payable, Buildingsb. Accounts Receivable, Revenue, Cashc. Prepaid Expenses, Buildings, Patentsd. Unearned Revenues, Prepaid Expenses, Cash20. A company’s internal stakeholders are:a. creditors and stockholdersb. stockholders and managersc. employees and managersd. customers and creditors21. Costs incurred in the process of generating revenue are called:a. retained earnings c. dividendsb. liabilities d. expensesThe 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 $ 15,000 Equipment $ 195,000Accumulated depreciation, equipment 46,000 Fees earned 150,800Capital stock 100,000 Notes payable due 2017 50,000Cash 26,600 Operating expenses 115,000Depreciation expense 8,000 Retained earnings ?Dividends 3,200 Unearned fees 16,00022. On its 2008 income statement, what will be Murphy’s net income?a. $27,800 c.