DOC PREVIEW
Mizzou ACCTCY 2037 - Accounting 2037 Blank Exam 2 Fall 2012

This preview shows page 1-2 out of 7 pages.

Save
View full document
View full document
Premium Document
Do you want full access? Go Premium and unlock all 7 pages.
Access to all documents
Download any document
Ad free experience
View full document
Premium Document
Do you want full access? Go Premium and unlock all 7 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 7 pages.
Access to all documents
Download any document
Ad free experience

Unformatted text preview:

Accounting 2037 Exam 2 with answers Fall 2012Completion [2 pts each] Complete each sentence or statement with one of the phrases below.Possible Answers:Amortization average rate of return capital budgeting capital lease capital rationingCompound interest conservatism contract rate depletion depreciationDouble declining balance FIFO FOB destination FOB shipping point functionalGoodwill lessee lessor leverage LIFOMarket rate moving average mutually exclusive net present value operating leasePayback periodic system perpetual system physical retail priceSpecific ID method sum of the years digits sunk costs underestimation yield1. The _____________ is a method that may be used to estimate the amount of inventory held by a merchandising company.2. The ______________ period is the length of time required for a return of the initial investment.3. __________________is the term similar to “depreciation” used for intangible assets.4. The ___________is the market rate at which bonds are issued.5. Under the _________ cost flow assumption, the company includes the latest costs in the cost of goods sold as it sells the products, leaving the earliest costs in ending inventory.True/False [2 pts each]6. Straight line, double-declining balance, and sum of the years digits are all examples of accelerated depreciation methods. 7. A large company can usually issue bonds at the risk-free rate of interest, whereas a smaller company willhave to include a risk premium.8. In a period of rising prices, cost of goods sold is lower under LIFO than FIFO, resulting in higher net income.9. Sunk costs are costs incurred prior to the capital expenditure proposal under consideration, and as such are relevant to the capital expenditure proposal.10. Compound interest is interest that accrues on both the principal and earned interest.Multiple choice [2 pts each]Identify the letter of the choice that best completes the statement or answers the question.11. The book value of an asset is itsa. Cost - depreciation expenseb. Fair market value - costc. Cost - accumulated depreciationd. Fair market value – depreciation expense12. The method of depreciation that is most appropriate when the asset is likely to produce equal benefits over its life is:a. Accelerated depreciation methodsb. Straight-line methodc. Units of production methodd. None of the above13. If a company uses FOB destination, ownership is transferred when:a. The purchasing company places the orderb. The goods are shipped from the sellerc. The purchasing company pays for the goodsd. The goods arrive at the place of delivery14. A series of equal, periodic cash flows is termed a(n):a. Lump sumb. Factorc. Annuityd. Present value15. To determine the current cash equivalent of $1 in the future, which table should be used?a. Present value of an annuityb. Present value of $1 (lump sum)c. Future value of $1 (lump sumd. None of the aboveProblem 1 [14 points] On January 1, 2011 Tract Company buys a building for $800,000. The building has an estimated life of 20 years and an estimated residual value of $80,000. After using the asset for 2 years, on January 1, 2013 it sells the asset for $750,000.Required:(1) Compute the depreciation expense for each year if Tract uses the straight line method.(2) Compute the depreciation expense for 2011 and 2012 if Tract uses the double-declining balance method.(3) Using the double-declining depreciation, compute the gain or loss that Tract would record on the sale and state if it is a gain or loss.(4) Which depreciation method do companies use for tax purposes?Problem 2 [14 points] The JP Company is considering a proposal that would require a $50,000 investment in a piece of equipment. Working capital investment required is $10,000. Net cash inflows from the project are as follows:Year 1 $20,000Year 4 $10,000Year 2 0 Year 5 15,000Year 3 20,000 Year 6 20,000In addition to the above cash flows, in Year 4 the company will need to upgrade the equipment at a cost of $20,000 and the residual value of the equipment at the end of Year 6 is expected to be $15,000.Required:a) If JP’s cost of capital is 8%, compute the project’s net present value and state whether the project should be accepted or not.b) What would happen to the NPV if the cost of capital increases?Problem 3 [14 points] On January 1, 2013 Mary borrows $100,000 to go to college. The debt has an interest rate of 6%. Payments do not take place until after graduation 4 years later. At that time, the amount owed will be paid off with semi-annual payments over 10 years.1) Since the $100,000 loan is incurring interest at 6%, calculate the amount owed at the time of graduation (January 1, 2017, 4 years after the loan is made)?2) Calculate the amount of each payment.3) Determine how much of the first semi-annual payment (June 30, 2017, is interest and how much is principal.4) Determine how much of the second semi-annual payment (December 31, 2017) is interest and how much is principal.Problem 4 [14 pts] On June 30, 2010, the Quin Merchandising Company’s main warehouse was destroyed by fire. A review of the company’s accounting records, and a physical count of inventory held at the company’s store, provided the following information:Inventory, January 1, 2010 $ 36,190Sales through June 30, 2010 295,000Sales returns through June 30, 2010 15,000Purchases through June 30, 2010 240,000Purchases returns through June 30, 20126,190a) If Quin had an average gross profit rate of 40% in previous years, what is the estimated amount of inventory lost in the fire on June 30?b) What is the C/G/S?c) What is the gross profit?Problem 5 [14 pts] On January 1, 2009, LK Corporation issued zero-coupon, 5-year bonds with a face value of $1,000,000. The bonds were sold to yield 5%.Required:a) At what price would the zero-coupon bonds be sold on January 1, 2009?b) What would be the book value of these bonds on December 31, 2010 (after 2 years)?c) What would be the book value of these bonds on December 31, 2013 (after 5


View Full Document

Mizzou ACCTCY 2037 - Accounting 2037 Blank Exam 2 Fall 2012

Download Accounting 2037 Blank Exam 2 Fall 2012
Our administrator received your request to download this document. We will send you the file to your email shortly.
Loading Unlocking...
Login

Join to view Accounting 2037 Blank Exam 2 Fall 2012 and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Accounting 2037 Blank Exam 2 Fall 2012 2 2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?