ADMS 3585 Study Guide - Midterm Guide: Cash Cash, Income Tax, Accounts Receivable

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purplerabbit559

24 Oct 2015

School

York University

Department

Administrative Studies

Course

ADMS 3585

Professor

Sung Kwon

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Document Summary

Midterm examination (key) blue version: mc answer (30 @ 2 = 60 points) 1. (a) 2. (d) 3. (b) 4. (c) 5. (c) 6. (a) 7. (d) 8. (d) 9. (d) 10. (a) (,000,000 total estimated cost) = ,000. Conceptual framework (10 points) (a) 4 points (1 point each) Advantages of a principles based approach: decisions are based on the conceptual framework so they should be consistent, flexibility allows for making decisions about new or unusual transactions based on principles. Allows accountants to use their professional expertise and professional judgement. Disadvantages of a principles based approach: flexibility may result in reduced comparability between different firms, flexibility may be abused and bias may creep into decisions. (b) 6 points (0. 5 point each) 6. c: h, a, b, e, k, i. Loss from operations (net of tax recovery of. Gain on sale of assets (net of taxes of ,500) Subtract 0. 25 point for each wrong line item (account or amount)

Related Questions

URGET! Please help!

ACC 2301 Project 3 Budget Exercise

Bobcat Printing makes custom t---shirts and other promotionalproducts for student organizations and businesses. It is beginningits first year of operations and needs to plan for its firstquarter of operations. They would like to maximize their profits,and understand that accurate budgeting can help achieve that goal.The budgets will be prepared based on the followinginformation:

a. Sales are budgeted at $20,000 for Month 1, $25,000 for Month2, and $27,000 for Month 3. All sales will be done on account.Company does not expect to have any cash sales.

b. Sales are collected 60% in the month of the sale, and 40% inthe month following the sale.

c. Cost of Goods Sold is budgeted at 45% of Sales.

d. Monthly selling, general, and administrative expenses are asfollows: donations are 10% of sales; advertising is 3% of sales;miscellaneous is 1% of sales; and rent is $5,000 per month. AllSG&A expenses are paid in the month they are incurred.

e.Sincealloftheordersarecustommade,noinventoryiskeptonhandattheendofthemonth.

f. Inventory purchases are paid in full in the month followingthe purchase.

g. Bobcat Printing is planning to purchase a building in Month 3for $6,000 in cash.

h.Theywouldliketomaintainaminimumcashbalanceof$2,500attheendofeachmonth.Thecompanyhasanagreementwithalocalbankthatallowsthemtoborrow,withatotallineof credit of $20,000. The interest rate on these loans is 1% permonth (12% annual). They would as far as able, repay the loan onthe last day of the month when it has enough cash to pay the fullbalance and maintain an adequate ending cash balance.

i. Theownermakesadrawof$3,000everymonth.(Note:soleproprietorsandpartnerships take ownerâs draws, while stockholders receivedividends). Based upon the information provided, complete theoperating budgets provided in the excel template, and answer thequestions in TRACS. When making calculations always round up (forexample: 33 Ã 7% = 2.31, round up to 3.00).

Check Figures:
Gross Margin = $39,600
Total assets = $19,300
Ending Retained Earnings = $5,507

21. What is the projected interest expense for the first quarterof operations? A.$34 B. $19 C. $13. D. $170

22. What is the projected total owner's equity for the firstquarter of operations? A. $2,973 B. $5,507 C. $14,507 D.$12,000

23. What is the projected ending cash balance for the firstquarter of operations? A. $3,846 B. $2,500 C. $0 D. $12,846

24. What is the projected accounts receivables balance for thefirst quarter of operations? A. $27,000 B. $10,800 C. $12,000 D.$13,500

25. What is the projected account payable for the first quarterof operations? A. $12,150 B. $20,250 C. $0 D. $9,100

26. What is the projected interest payable for the first quarterof operations? A. $19 B. $34 C. $0 D. $13

27. What is the projected net cash flow from operatingactivities for the first quarter of operations? A. $12,000 B.$10,800 C. $22,800 D. $15,857

28. What is the projected net cash flow for investing activitiesfor the first quarter of operations? A. ($9,000) B. ($6,000) C.$9,000 D. $6,000

29. What is the projected cash flow from financing activitiesfor the first quarter of operations? A. ($2,500) B. ($7,357) C.$7,357 D. $9,000 E. ($9,000)

emeraldlion250

1.The concept that an item is not large enough to influence the users of a financial statement is

A, cost effectiveness

b. Materiality

c. reliability

d. relvance

e. none

2. The quality that allows quantitative assessment of the similarities and differences among enterprises is known as

a.comparability

b. consistency

c. reliability

d. relevance

e. none

3. Profit margin and asset turnover can be combined to create

a. return on assets

b return on equity

c. earnings per share

d. price earnings ratio

e. none

4.which of the following increases cash

a. issuance to long term debt

b. acquisition of property plant and equipment

c. payment of divdends

d decrease in short term debt

e. none

5. if a company pays out more than the income tax incurred as shown in the income tax liability decrease, the effect on cash is a

a. decrease

b. increase

c.no effect

d. none of the above

6. which of the following increases cash

a. increase in inventory

b. increase in accounts receivable

c. increase in the accounts payable

d. none

7.Grayson is saving for a used car. He needs $14,000. How much he invest at 3% annual interest rate to have $ 14,000 in two years? Round to the nearest dollar.

a. 12,983

b.12,417

c. 13,720

d. 13.196*

e, none

8.ellen fetter invested $5,000 in a savings account that paid 5% interest compounded annually. She kept the account for three years. At the end of the three years, ellen will have approimentely

a. $6,103

b. $5,444

c.5,414

d.5,788*

e. none

9. Which of the following is a snapshot of the financial position of a company

a. Balance sheet

B.income statement

C. statement of retained earnings

D. cash flow statement

e. none

10.which of the following rations is not useful for comparison purposes?

a. return on assets

b. price earnings ratio

c. return on equity

d. earnings per share

e. none*

11.elsie Jackson is saving for a down payment on a condo. She needs 20,000. How much must she invest in a savings account that pays 5% annually to have the 20,000 in 8years? Round to the nearest dollar.

a. 13,206

b $12,983

c. 13,616

d. 13,537

e. none

12.which of the following is added to net income to calculate cash flow?

a. depreciation

b. increase in accounts receivable

c. increase in inventory

D. decrease in accounts payable

e. none

13. which of the following increase cash?

a.issuance of long term debt

b. acquisition of property plant and equipment

c. payment of divdends

d. decrease in short term debt

e. none

14. profit margin and asset turnover can be combined to create

a. return on assets

b. return on equity

c. earnings per share

d. price earnings ratio

e. none

15.Bart is saving for college. He needs 20,000 for the first year. How much must he invest at a 5% annual interest rate to have 20,000 in five years? Round to the nearest dollar?

a. 14.982

b.15,016

c.15,023

d 15,671

e none

16.which of the following are added to net income to determine cash flow from operating activities?

a. depreciation

b. amortization

c. both a and b*

d. gain on asset sale

e. none

17. which of the following ratios is coverage ratio

a. return on assets

b. return on equity

c. earnings per share

d. times interest earned

e. none

18. ellis industries is a large, multinational company located in the us. Ellisâs financial statements are in us dollars. This GAAP is known as

a. monetary concept

b. economic entity

c.conservatism

d. matching

e. none

19.ginger Ellison invested $10,000 in a bank account at offshore bank. The account pays 3% interest compounded annually. How much will Ginger have in five years? Round to the nearest dollar?

a. 11,593

b. 11,108

c. 10,213

d. 12,619

e. none

20.which ratio is wall streetâs favorite

Inventory turnover

B. receivables turnover

Current

D. price- earnings*

E. none

21. ginger Ellison invested $10,000 in a bank account at offshore bank. The account pays 3% interest compounded annually. How much will Ginger have in five years? Round to the nearest dollar?

a. 11,593

b. 11,108

c. 10,213

d. 12,619

e. none

22.information that can make a difference to the decision at hand is considered to be

a. a reliable

b. a comparable

c. relevant

d. understandable

c. none

23. Blackson incorporated signed a 3 year lease for the building that blackson occupies and paid the first 6 months in advance. The account that should be debited is

a. prepaid expenses

b. cash

c. building

d. accounts payable

e. none

24.right-hand entries increase

a. asset accounts

b owners equity accounts

c. liabilities

d. both b and c

e. none

25.The quality that ensures that information is reasonably free from error is

a. reliability

b. relevant

c. understandability

d. consistent

e. none

26. a customer pays on an account receivable. The account that should be credited is

a. inventory

b. cash

c. accounts payable

d. accounts receivable

e. none

27. which of the following ratios measures liquidity?

a. current

b. payout

c. gross margin

d. asset turnover

e. none

28. Jesse Ellis invested $4,000 in a savings account that paid 6% interest compounded annually for 6 years. At the end of 6 years, Jesse will have approximately.

A. 5,103

b. $5,674

c. 5,506

d.4,903

e.none

29. which of the following is not a functional area of accounting?

a. Managerial accounting

b. tax accounting

c.economic accounting*

d. financial accounting

e. none

30.John Vincent invested $10,000 in a savings account. The account pays 4,5% annual interest. John will have much in the account at the end of 10 years? Round to the nearest dollar.

a. 15,530

b. 14,984

c. 16,010

d. 16,311

e none

31.capital stock is a part of which of the following accounts?

a. ownersâ equity

b. liabilities

c. current assets

d. long term assets

e. none

32.The stock market values a company based on which of the following accounts?

a. assets

b. liabilities

c. capital stock

d. retained earnings*

e none

33. The following accounts are listed in order of liquidity

a. current assets

b. current liabilities

c. both a and b

d. long term assets

e. none

34. When shares are sold from one shareholder to another in the open market: the following accounts is impacted

a. capital stock

b. retained earnings

c. long term liabilities

d. current assets

e. none*

35. The accounts that reflects the amount the owners have invested in the business is

a. capital stock

b. retained earnings

c. long term liablilties

d. long term assets

d. none

36. Karen Quigley is saving for new car. The car cost $22,000. How much must Karen invest in a savings account that pays 4% annually to have the $22,000 in three years? Round to the nearest dollar.

a. 20,147

b. 19,107

c. 19,558

d.19,328

e. none

37. Agr corporation signed a two-yr lease for the building that the company occupies. The account that should be debited is

a. prepaid expense

b.cash

c. accounts payable

d. building

e. none

38. left-hand entries DECREASE

a. asset accounts

b. liability accounts

c. ownerâs equity accounts

d. both b and c*

e.none

39. which of the following is a source of cash? (question 42 different choices)

a. issuance of long-term debt

b. increase in inventories

c. decrease in accounts payable

d. increase in accounts receivable

e. none

REPEAT Different choice 40. which of the following increases cash?

Issuance of long-term debt

Acquition of property plant and equipment

Cpaymentof divdends

D. decrease in short term debt

none

41.The ratio that shows how much in excess of current earnings investors are willing to pay for company stock is.

A payout

b.current

c, price-earnings*

d.return on equity

e none

42. which of the following is a source of cash?

A increase in accounts recievable

b. increase in inventories

c. increase in accounts payable

d. none*

43. A gain on the sale of an asset is subtracted from net income to determine cash flow from operating activities because of

a. double counting

b. asset sales require a basis

c. losses are cash flow neutral *

d. none

44. which of the following is an expense allocation scheme?

a. cost of goods sold

b. amortization

c. Depreciation

D. Band C*

e. none

45.The account that reflects the amount the owners have invested in the business is

a. capital stock

b. retained earnings

c. long term liabilies

d. long term asset

e. none

46. which of the following statements represents a flow concept?

a. balance sheet

b. income statement*

c. statement of retained earnings

d. inventory statement

e. none

47. left- hand entries INCREASE

a. asset accounts

b. liability accounts

c. ownersâ equity accounts

D. both B and C

e. none

48.which of the following ratios measures operating performance?

a. price-earnings

b. current

c. receivable turnover*

d. operating cycle

e. none

49. credit sales increase

a. cash

b. land

c. ownersâ equity

d. accounts payable

e. none*

50.Projecting inventory levels for next year would be an example of

a. financial accounting

b managerial accounting*

c. tax accounting

d. none

51. investments representing long term holdings of securities would appear on the balance sheet as

a. long term liabilities

b long-term asset

c. capital stock

d. retained earnings

e. none*

52. which organization is recognized today as the authoritative voice of accounting rules and principles?

a. sec

b. aICPA

c.FASB *

d.AAA

e. none

53. which account below would be credited to record this transaction: purchase merchandise for resale on credit

a. inventory

b. cash

c. accounts payable *

d.accounts receivable

e. none

54. Formis, Inc. estimates the useful life of each asset purchased and depreciates the asset over the useful life. This GAAP is known as

a. Monetary concept

b. economic entity

c. going concern

d. matching*

e. none

55. which of the following is one gauge of the companyâs ability to meet its short-term obilgations?

a. gross margin

b. asset turnover

c. profit margin

d. working capital*

e. none

Question 18

1. Which of the following does an efficient portfolio do?

1. Maximizes risk for a given return.

2. Minimizes risk for a given return.

3. Maximizes return for a given level of risk.

4. Minimizes return for a given level of risk.

	a.	1 and 3.
	b.	1 and 4.
	c.	2 and 3.
	d.	2 and 4.

3 points

Question 19

1. The security market line does not:

	a.	Indicate the relationship between risk and return.
	b.	Relate the market return and beta to a stock's return.
	c.	Identify the optimal portfolio for the investor.
	d.	Use beta coefficients as a measure of risk.

3 points

Question 20

1. Mutual funds ____ realized capital gains and income (for example, dividends received):

	a.	Retain.
	b.	Reinvest.
	c.	Distribute.
	d.	Distribute or reinvest.

2 points

Question 21

1. An index fund limits its portfolio to:

	a.	High quality securities.
	b.	Stocks that respond to changes in the consumer price index.
	c.	Stocks included in an aggregate measure of stock prices.
	d.	Stocks of firms in a particular industry.

2 points

Question 22

1. Mutual funds with beta coefficients greater than 1.0:

	a.	Have outperformed the market.
	b.	Have underperformed the market.
	c.	Have more systematic risk than the market.
	d.	Have less systematic risk than the market.

3 points

Question 23

1. Which of the following will tend to cause a stock's price to fall?

1. The firms beta declines.

2. The firms beta increases.

3. The risk-free rate declines.

4. The risk-free rate increases.

	a.	1 and 3.
	b.	1 and 4.
	c.	2 and 3.
	d.	2 and 4.

2 points

Question 24

1. The use of P/E ratios to select stocks suggests that:

	a.	High P/E stocks should be purchased.
	b.	Low P/E ratio stocks are overvalued.
	c.	A stock should be purchased if it is selling near its historic low P/E.
	d.	A stock should be purchased if it is selling near its historic high P/E.

2 points

Question 25

1. What does the efficient market hypothesis require?

1. Financial markets to be competitive.

2. Prices to adjust rapidly.

3. Prices of undervalued securities to fall.

	a.	1 and 2.
	b.	1 and 3.
	c.	2 and 3.
	d.	All of these choices.

3 points

Question 26

1. Which of the following does the strong form of the efficient market hypothesis suggest?

1. Inside information will not lead to superior investment results.

2. Inside information will lead to superior investment results.

3. Studying financial statements will not lead to superior investment results.

4. Studying financial statements will lead to superior investment results.

	a.	1 and 3.
	b.	1 and 4.
	c.	2 and 3.
	d.	2 and 4.

3 points

Question 27

1. Which of the following is the least broad-based measure of stock prices?

	a.	NASDAQ market index.
	b.	Dow Jones industrial average.
	c.	S&P 500 stock index.
	d.	AMEX market value index.

3 points

Question 28

1. What is dollar-cost averaging?

	a.	Periodically buying a round lot of stock.
	b.	Periodically investing a specified dollar amount in a stock.
	c.	A means to increase the average cost basis.
	d.	A means to ensure a positive return.

2 points

Question 29

1. Stock dividends cause:

	a.	The price of a share of stock to rise.
	b.	The price of a share of stock to fall.
	c.	The value of the firm to rise.
	d.	The value of the firm to fall.

2 points

Question 30

1. Which of the following occurs when a stock has a two-for-one split?

	a.	The price of the stock doubles.
	b.	The firm's assets increase.
	c.	The firm's liabilities decrease.
	d.	The par value of the stock is reduced.

3 points

Question 31

1. Dividend reinvestment plans offer which of the following advantages?

1. Deferment of federal income taxes.

2. A convenient means to accumulate shares.

3. Dollar-cost averaging.

	a.	1 and 2.
	b.	1 and 3.
	c.	2 and 3.
	d.	2.

3 points

Question 32

1. When the Federal Reserve seeks to expand the money supply, it:

	a.	Sells securities.
	b.	Buy securities.
	c.	Runs a deficit.
	d.	Runs a surplus.

2 points

Question 33

1. The sum of cash, currency, and demand deposits is:

	a.	M1.
	b.	M2.
	c.	M3.
	d.	M4.

3 points

Question 34

1. If the Federal Reserve lowers the target federal funds rate:

	a.	The discount rate rises.
	b.	Liquidity in the banking system is increased.
	c.	Security prices fall.
	d.	Required reserves are also decreased.

3 points

Question 35

1. The anticipation of inflation suggests that the investor should:

	a.	Buy bonds.
	b.	Anticipate higher interest rates.
	c.	Avoid real estate investments.
	d.	Sell stocks of gold companies.

3 points

Question 36

1. The current ratio is unaffected by:

	a.	Using cash to pay a dividend.
	b.	The collection of an account receivable.
	c.	Selling inventory for a profit.
	d.	Selling bonds and using the funds to finance inventory.

2 points

Question 37

1. Which of the following are true as the debt ratio increases?

1. Fewer assets are debt financed.

2. More assets are debt financed.

3. The ratio of debt equity increases.

4. The ratio of debt equity decreases.

	a.	1 and 3.
	b.	1 and 4.
	c.	2 and 3.
	d.	2 and 4.

2 points

Question 38

1. The technical approach suggests that future stock prices are forecasted by:

	a.	Past stock rates.
	b.	Financial ratios.
	c.	Accounting statements.
	d.	Monetary policy.

2 points

Question 39

1. The Dogs of the Dow strategy:

	a.	Forecasts the direction of the Dow Jones averages.
	b.	Suggests buying the Dow stocks with the highest dividend yields.
	c.	Outperforms the S&P 500.
	d.	Suggests buying the lowest-priced Dow stocks.

3 points

Question 40

1. Behavioral finance combines aspects from which two fields in an attempt to identify human traits that affect investment decisions?

	a.	Accounting and finance.
	b.	Finance and psychology.
	c.	Physics and finance.
	d.	Finance and marketing.

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ADMS 3585 Study Guide - Midterm Guide: Cash Cash, Income Tax, Accounts Receivable

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